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Kyocera 6-K 2011

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 2011

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 14, 2011


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, 2011 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


Table of Contents

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

     March 31, 2011     September 30, 2011  
     (Yen in millions)  

Current assets:

    

Cash and cash equivalents

   ¥ 273,471      ¥ 254,963   

Short-term investments in debt securities (Notes 4 and 5)

     44,012        45,145   

Other short-term investments (Note 4)

     201,817        182,170   

Trade receivables:

    

Notes

     19,536        15,911   

Accounts

     208,404        199,360   

Less allowances for doubtful accounts and sales returns

     (4,795     (4,300
  

 

 

   

 

 

 
     223,145        210,971   

Inventories (Note 6)

     232,899        254,491   

Advance payments

     72,207        69,845   

Deferred income taxes

     43,035        44,370   

Other current assets (Notes 5, 7 and 8)

     38,915        42,336   
  

 

 

   

 

 

 

Total current assets

     1,129,501        1,104,291   

Investments and advances:

    

Long-term investments in debt and equity securities (Notes 4 and 5)

     377,075        380,215   

Other long-term investments (Notes 4, 5 and 7)

     16,804        18,992   
  

 

 

   

 

 

 

Total investments and advances

     393,879        399,207   

Property, plant and equipment:

    

Land

     59,638        59,848   

Buildings

     288,992        290,972   

Machinery and equipment

     706,474        694,705   

Construction in progress

     7,227        12,594   

Less accumulated depreciation

     (814,577     (805,126
  

 

 

   

 

 

 

Total property, plant and equipment

     247,754        252,993   

Goodwill (Note 3)

     64,701        72,433   

Intangible assets (Note 3)

     42,160        44,100   

Other assets (Note 7)

     68,571        62,275   
  

 

 

   

 

 

 

Total assets

   ¥ 1,946,566      ¥ 1,935,299   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED BALANCE SHEETS (Unaudited)—(Continued)

 

     March 31, 2011     September 30, 2011  
     (Yen in millions)  

Current liabilities:

    

Short-term borrowings

   ¥ 7,852      ¥ 5,735   

Current portion of long-term debt (Note 5)

     10,687        10,285   

Trade notes and accounts payable

     101,265        92,190   

Other notes and accounts payable

     61,226        58,499   

Accrued payroll and bonus

     49,092        50,797   

Accrued income taxes

     18,069        20,993   

Other accrued liabilities

     24,337        22,116   

Other current liabilities (Notes 5 and 8)

     28,087        24,382   
  

 

 

   

 

 

 

Total current liabilities

     300,615        284,997   

Non-current liabilities:

    

Long-term debt (Note 5)

     24,538        21,019   

Accrued pension and severance liabilities (Note 9)

     28,924        26,134   

Deferred income taxes

     90,005        94,976   

Other non-current liabilities

     19,125        16,118   
  

 

 

   

 

 

 

Total non-current liabilities

     162,592        158,247   
  

 

 

   

 

 

 

Total liabilities

     463,207        443,244   

Commitments and contingencies (Note 11)

    

Kyocera Corporation shareholders’ equity:

    

Common stock

     115,703        115,703   

Additional paid-in capital

     162,336        162,475   

Retained earnings

     1,268,548        1,302,470   

Accumulated other comprehensive income (Note 8)

     (75,633     (99,209

Common stock in treasury, at cost

     (50,691     (51,219
  

 

 

   

 

 

 

Total Kyocera Corporation shareholders’ equity

     1,420,263        1,430,220   

Noncontrolling interests

     63,096        61,835   
  

 

 

   

 

 

 

Total equity (Note 12)

     1,483,359        1,492,055   
  

 

 

   

 

 

 

Total liabilities and equity

   ¥ 1,946,566      ¥ 1,935,299   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

     Six months ended September 30,  
                 2010                              2011               
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net sales (Note 8)

   ¥ 637,392      ¥ 604,268   

Cost of sales (Note 8)

     448,119        427,322   
  

 

 

   

 

 

 

Gross profit

     189,273        176,946   

Selling, general and administrative expenses (Notes 3 and 13)

     107,515        109,183   
  

 

 

   

 

 

 

Profit from operations

     81,758        67,763   

Other income (expenses):

    

Interest and dividend income

     6,511        7,011   

Interest expense (Note 8)

     (1,125     (1,016

Foreign currency transaction gains, net (Note 8)

     1,069        1,885   

Other, net (Note 5)

     1,280        (78
  

 

 

   

 

 

 

Total other income (expenses)

     7,735        7,802   
  

 

 

   

 

 

 

Income before income taxes

     89,493        75,565   

Income taxes (Note 10)

     23,670        24,838   
  

 

 

   

 

 

 

Net income

     65,823        50,727   

Net income attributable to noncontrolling interests

     (3,863     (3,959
  

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 61,960      ¥ 46,768   
  

 

 

   

 

 

 

Earnings per share (Note 15):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 337.62      ¥ 254.93   

Diluted

     337.62        254.93   

Average number of shares of common stock outstanding:

    

Basic

     183,519        183,457   

Diluted

     183,519        183,457   

 

The accompanying notes are an integral part of these statements.

 

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     Three months ended September 30,  
                 2010                              2011               
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net sales (Note 8)

   ¥ 324,217      ¥ 299,037   

Cost of sales (Note 8)

     229,377        211,431   
  

 

 

   

 

 

 

Gross profit

     94,840        87,606   

Selling, general and administrative expenses (Notes 3 and 13)

     53,685        53,156   
  

 

 

   

 

 

 

Profit from operations

     41,155        34,450   

Other income (expenses):

    

Interest and dividend income

     1,218        1,193   

Interest expense (Note 8)

     (553     (501

Foreign currency transaction gains, net (Note 8)

     1,342        548   

Other, net (Note 5)

     8        (47
  

 

 

   

 

 

 

Total other income (expenses)

     2,015        1,193   
  

 

 

   

 

 

 

Income before income taxes

     43,170        35,643   

Income taxes (Note 10)

     8,921        11,658   
  

 

 

   

 

 

 

Net income

     34,249        23,985   

Net income attributable to noncontrolling interests

     (2,182     (2,021
  

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 32,067      ¥ 21,964   
  

 

 

   

 

 

 

Earnings per share (Note 15):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 174.74      ¥ 119.73   

Diluted

     174.74        119.73   

Average number of shares of common stock outstanding:

    

Basic

     183,519        183,446   

Diluted

     183,519        183,446   

 

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,  
             2010                     2011          
     (Yen in millions)  

Cash flows from operating activities:

    

Net income

   ¥ 65,823      ¥ 50,727   

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

    

Depreciation and amortization

     33,191        34,393   

Provision for doubtful accounts and loss on bad debts

     1,089        225   

Write-down of inventories

     2,581        2,608   

Foreign currency adjustments

     995        (77

Change in assets and liabilities:

    

(Increase) decrease in receivables

     (28,460     1,634   

Increase in inventories

     (33,645     (36,086

Decrease in advance payments

     1,280        2,252   

Increase in other current assets

     (1,813     (9,005

Increase in notes and accounts payable

     39,313        8,216   

Increase in accrued income taxes

     8,179        3,493   

Increase (decrease) in other current liabilities

     1,328        (1,953

Decrease in other non-current liabilities

     (923     (2,993

Other, net

     (6,309     (1,525
  

 

 

   

 

 

 

Net cash provided by operating activities

     82,629        51,909   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Payments for purchases of available-for-sale securities

     (8,911     (3,010

Payments for purchases of held-to-maturity securities

     (37,697     (42,747

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

     7,820        15,343   

Proceeds from maturities of held-to-maturity securities

     26,155        28,606   

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

     (1,469     (20,780

Payments for purchases of property, plant and equipment

     (27,638     (33,301

Payments for purchases of intangible assets

     (4,714     (2,427

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

     154        487   

Acquisition of time deposits and certificate of deposits

     (174,583     (146,434

Withdrawal of time deposits and certificate of deposits

     139,921        162,102   

Other, net

     711        922   
  

 

 

   

 

 

 

Net cash used in investing activities

     (80,251     (41,239
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Decrease in short-term borrowings, net

     (516     (1,500

Proceeds from issuance of long-term debt

     5,578        4,516   

Payments of long-term debt

     (7,987     (7,019

Dividends paid (Note 12)

     (11,856     (13,882

Purchase of common stock in treasury

     (22     (530

Reissuance of common stock in treasury

     1        2   

Other, net

     (889     (923
  

 

 

   

 

 

 

Net cash used in financing activities

     (15,691     (19,336
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (12,234     (9,842
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (25,547     (18,508

Cash and cash equivalents at beginning of period

     313,126        273,471   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   ¥ 287,579      ¥ 254,963   
  

 

 

   

 

 

 

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) 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.

(3) 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.

(4) Lease accounting

Kyocera adopts ASC 840, “Leases.” Kyocera classifies a lease as an operating or a capital lease, and records all capital leases as an asset and an obligation.

 

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(5) 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.

(6) 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.

(7) 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.

(8) Stock issuance costs

Stock issuance costs, net of taxes 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 subsidiaries in which Kyocera has a controlling financial interest 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 condition 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.

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.”

 

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(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 receivables.

(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 with consideration given to the expected level of future warranty costs.

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 accounted for under ASC 305, “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 accounted for under ASC 830, “Foreign Currency Matters.” Translation adjustments result from the process of translating foreign currency denominated financial statements into 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) Allowance 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. In addition, when Kyocera determines it is unable to collect receivables, Kyocera directly write-off these receivables to expenses in the period incurred.

(6) Inventories

Inventories are accounted for under ASC 330, “Inventory.” 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 70% and 69% at March 31, 2011 and September 30, 2011, 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 59% and 62% at March 31, 2011 and September 30, 2011, 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.

(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 in accordance with ASC 325, “Investments—Other.”

Kyocera evaluates whether the declines in fair value of 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.

 

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Kyocera also reviews its investments accounted for by the equity method for impairment quarterly in accordance with ASC 323, “Investments—Equity Method and Joint Ventures.” 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

Property, plant and equipment are accounted for under ASC 360, “Property, Plant, and Equipment.” 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 gains 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 which are accounted for under ASC 360, “Property, Plant, and Equipment” 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 20 years

(10) Impairment of long-lived assets

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

Long-lived assets are considered to be impaired when the expected undiscounted cash flows 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.

 

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(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 to income. 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 income when the underlying transaction being hedged occurs.

Kyocera designates certain foreign currency forward contracts and interest rate swaps 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 income. 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 income 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 quarterly consolidated financial statements by fair value based on measurement method. Under the modified prospective method, Kyocera recognizes 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

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.

(14) Research and development expenses and advertising expenses

Research and development expenses, are accounted for under ASC 730, “Research and Development”, are charged to operations as incurred. Advertising expenses, are accounted for under ASC 720-35, “Other Expenses—Advertising Costs”, are charged to operations as incurred.

 

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(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

On April 1, 2011, Kyocera adopted the FASB’s Accounting Standards Update (ASU) No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” which addressed the accounting for multiple-deliverable arrangements to enable vender to account for products or services separately rather than as a combined unit. This accounting standard addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

On April 1, 2011, Kyocera adopted the FASB’s ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” This accounting standard modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

On April 1, 2011, Kyocera adopted the FASB’s ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations.” The amendments in this Update require a public entity that enters into business combination(s) to disclose revenue and earnings of the combined entity in the comparative financial statements as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. As this accounting standard is a provision for disclosure, the adoption of this accounting standard did not have an impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

(17) Recently issued accounting standards

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This accounting standard amends current U.S. GAAP to create more commonality with IFRSs by harmonizing definitions and disclosure requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. This accounting standard will be effective during interim and annual periods beginning after December 15, 2011. The adoption of this accounting standard is not expected to have material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” In presenting other comprehensive income and its components in financial statement, this accounting standard eliminates the current option which is to present the components of other comprehensive income as part of the statement of equity. This standard also requires reclassifications between other comprehensive income and net income to be disclosed on the face of financial statements. This accounting standard will be effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. As this accounting standard is a provision for presentation, the adoption of this accounting standard will not have an impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

 

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In September 2011, the FASB issued ASU No. 2011-08, “Testing Goodwill for Impairment.” This accounting standard permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. This accounting standard will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. As this accounting standard does not actually change how the impairment would be calculated, the adoption of this accounting standard will not have an impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

(18) Reclassifications

Certain reclassifications and format changes have been made to the consolidated balance sheets at March 31, 2011, the consolidated statements of income for six and three months ended September 30, 2010 and the consolidated statements of cash flows for six months ended September 30, 2010 to conform to the current presentation.

 

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3. BUSINESS COMBINATION

On July 11, 2011, Kyocera Fineceramics GmbH, a consolidated German subsidiary of Kyocera Corporation, acquired 100% of the outstanding common stock of Unimerco Group A/S, a Denmark-based industrial cutting tool manufacturing and sales company and made it a consolidated subsidiary with the aim of strengthening its cutting tool business. Unimerco Group A/S has changed its name to Kyocera Unimerco A/S on July 21, 2011.

Through this acquisition, Kyocera has expanded its sales sites throughout the principle parts of the European market and intends to increase sales of its product lines going forward. Furthermore, by adding Kyocera Unimerco A/S’s line of high-quality, high-precision, custom-made solid-type cutting tools to the Kyocera Group lineup, Kyocera will also be able to fully engage in the growing fields of cutting tools for aviation and wind power generation, as well as enter the woodworking market, thus expanding its business through the pursuit of synergies between the two companies.

The result of operation of the acquired business was included into Kyocera’s quarterly consolidated financial statements since the acquisition date. For segment reporting, it is reported in the Applied Ceramic Products Group.

Kyocera has used the acquisition method of accounting to record assets acquired and liabilities assumed in accordance with ASC 805, “Business Combinations.”

The allocation of fair value to the acquired assets and assumed liabilities in this business combination was completed during the three months ended September 30, 2011. The related assets and liabilities were recorded based upon their estimated fair values at the date of acquisition with the excess being allocated to goodwill as shown in the following table. Acquisition-related costs of ¥160 million were included in selling, general and administrative expenses in the consolidated statement of income for the six months ended September 30, 2011.

 

     July 11, 2011  
     (Yen in millions)  

Current assets

   ¥ 5,400   

Intangible assets

     7,691   

Other non-current assets

     4,765   
  

 

 

 

Total assets

     17,856   
  

 

 

 

Current liabilities

     1,810   

Non-current liabilities

     4,872   
  

 

 

 

Total liabilities

     6,682   
  

 

 

 

Total identified assets and liabilities

     11,174   
  

 

 

 

Purchase price (Cash)

     22,494   
  

 

 

 

Goodwill

   ¥ 11,320   
  

 

 

 

The total amount of goodwill is not expected to be deductible for tax purposes.

The pro forma results are not presented as the amounts were immaterial.

 

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Intangible assets that Kyocera recorded due to this acquisition are summarized as follows:

 

     July 11, 2011  
     (Yen in millions)  

Intangible assets subject to amortization:

  

Customer relationships

   ¥ 3,296   

Unpatented technologies

     2,735   

Trademarks

     1,318   

Others

     342   
  

 

 

 

Total

   ¥ 7,691   
  

 

 

 

The weighted average amortization periods for customer relationships, unpatented  technology and trademark are 20 years, 20 years and 10 years, respectively.

On August 31, 2011, Kyocera Mita India Pte. Ltd., a subsidiary of  Kyocera Mita Corporation, acquired information equipment sales business, related assets and liabilities from Kilburn Office Automation Ltd. to expand its sales channels in India. The result of operation of the acquired business was included into Kyocera’s quarterly consolidated financial statements since the acquisition date. For reporting segment, it is reported in the Information Equipment Group. The acquisition did not have a material impact on Kyocera’s consolidated results of operations, financial condition 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 March 31, 2011 and September 30, 2011, included in short-term investments in debt securities and in long-term investments in debt and equity securities are summarized as follows:

 

    March 31, 2011     September 30, 2011  
    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

  ¥ 271,874      ¥ 327,684      ¥ 57,151      ¥ 1,341      ¥ 269,686      ¥ 332,930      ¥ 64,862      ¥ 1,618   

Investment trusts

    3,454        3,590        225        89        3,446        2,965        110        591   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    275,328        331,274        57,376        1,430        273,132        335,895        64,972        2,209   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate bonds

    5,122        4,395        37        764        4,977        3,885        6        1,098   

Hybrid financial instruments

    11,976        11,976        —          —          1,995        1,995        —          —     

Government bonds and public bonds

    2,789        2,423        19        385        1,676        1,390        1        287   

Other debt securities

    563        554        32        41        459        433        29        55   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    20,450        19,348        88        1,190        9,107        7,703        36        1,440   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

    295,778        350,622        57,464        2,620        282,239        343,598        65,008        3,649   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Held-to-maturity securities:

               

Corporate bonds

    51,901        52,035        208        74        62,335        62,305        139        169   

Government bonds and public bonds

    18,264        18,189        6        81        19,427        19,432        17        12   

Others

    300        300        0        —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

    70,465        70,524        214        155        81,762        81,737        156        181   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 366,243      ¥ 421,146      ¥ 57,678      ¥ 2,775      ¥ 364,001      ¥ 425,335      ¥ 65,164      ¥ 3,830   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

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(2) Other investments

Kyocera holds time deposits and certificates of deposits which are due over three months to original maturity, non-marketable equity securities, long-term loans and investments in affiliates and unconsolidated subsidiaries. Carrying amounts of these investments at March 31, 2011 and September 30, 2011, included in other short-term investments and in other long-term investments, are summarized as follows:

 

     March 31, 2011      September 30, 2011  
     (Yen in millions)  

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

   ¥ 201,879       ¥ 184,202   

Non-marketable equity securities

     15,376         15,354   

Long-term loans

     147         134   

Investments in affiliates and unconsolidated subsidiaries

     1,219         1,472   
  

 

 

    

 

 

 

Total

   ¥ 218,621       ¥ 201,162   
  

 

 

    

 

 

 

 

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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

 

    March 31, 2011     September 30, 2011  
    Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  
    (Yen in millions)  

Current Assets:

               

Corporate bonds

  ¥ 630      ¥ 12      ¥ 6      ¥ 648      ¥ 658      ¥ 12      ¥ 0      ¥ 670   

Hybrid financial instruments

    —          11,976        —          11,976        —          1,995        —          1,995   

Other debt securities

    —          180        30        210        —          185        6        191   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    630        12,168        36        12,834        658        2,192        6        2,856   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign currency forward contracts

    —          331        —          331        —          6,659        —          6,659   

Currency swaps

    —          7        —          7        —          5        —          5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

    —          338        —          338        —          6,664        —          6,664   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    630        12,506        36        13,172        658        8,856        6        9,520   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Assets:

               

Marketable equity securities

    327,684        —          —          327,684        332,930        —          —          332,930   

Investment trusts

    331        3,259        —          3,590        291        2,674        —          2,965   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    328,015        3,259        —          331,274        333,221        2,674        —          335,895   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate bonds

    3,719        19        9        3,747        3,200        15        0        3,215   

Government bonds and public bonds

    2,423        —          —          2,423        1,390        —          —          1,390   

Other debt securities

    —          295        49        344        —          235        7        242   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    6,142        314        58        6,514        4,590        250        7        4,847   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current assets

    334,157        3,573        58        337,788        337,811        2,924        7        340,742   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  ¥ 334,787      ¥ 16,079      ¥ 94      ¥ 350,960      ¥ 338,469      ¥ 11,780      ¥ 13      ¥ 350,262   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current Liabilities:

               

Foreign currency forward contracts

  ¥ —        ¥ 3,626      ¥ —        ¥ 3,626      ¥ —        ¥ 264      ¥ —        ¥ 264   

Interest rate swaps

    —          20        —          20        —          34        —          34   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

    —          3,646        —          3,646        —          298        —          298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

  ¥ —        ¥ 3,646      ¥ —        ¥ 3,646      ¥ —        ¥ 298      ¥ —        ¥ 298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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 between Levels 1 and 2 for the six months ended September 30, 2010 and 2011.

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 8 to the Quarterly Consolidated Financial Statements.

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 ¥85 million and ¥16 million were recorded in other, net on the consolidated statements of income for the six months ended September 30, 2010 and 2011, respectively. Gains on hybrid financial instruments in the amount of ¥56 million and ¥2 million were recorded in other, net on the consolidated statements of income for the three months ended September 30, 2010 and 2011, respectively.

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, 2010 and 2011, and the three months ended September 30, 2010 and 2011.

 

     Six months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Balance at beginning of period

   ¥ 33      ¥ 94   

Total gains or losses (realized/unrealized)

    

Included in earnings (losses)

     —          —     

Included in other comprehensive income

     (3     (6

Purchase, issuance and settlements

     —          —     

Transfer in and/or out of Level 3

     (9     (75
  

 

 

   

 

 

 

Balance at end of period

   ¥ 21      ¥ 13   
  

 

 

   

 

 

 
     Three months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Balance at beginning of period

   ¥ 30      ¥ 15   

Total gains or losses (realized/unrealized)

    

Included in earnings (losses)

     —          —     

Included in other comprehensive income

     0        (2

Purchase, issuance and settlements

     —          —     

Transfer in and/or out of Level 3

     (9     —     
  

 

 

   

 

 

 

Balance at end of period

   ¥ 21      ¥ 13   
  

 

 

   

 

 

 

 

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Table of Contents

(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:

 

     March 31, 2011      September 30, 2011  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Yen in millions)  

Assets (a):

           

Short-term investments in debt securities

   ¥ 44,012       ¥ 44,054       ¥ 45,145       ¥ 45,129   

Long-term investments in debt and equity securities

     377,075         377,092         380,215         380,206   

Other long-term investments (excluding investments in affiliates and unconsolidated subsidiaries)

     15,585         15,585         17,520         17,527   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 436,672       ¥ 436,731       ¥ 442,880       ¥ 442,862   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities (b):

           

Long-term debt (including due within one year)

   ¥ 35,225       ¥ 35,332       ¥ 31,304       ¥ 31,387   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 35,225       ¥ 35,332       ¥ 31,304       ¥ 31,387   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 March 31, 2011 and September 30, 2011 were ¥15,363 million and ¥15,341 million, respectively.
(b) The fair value is estimated by discounting cash flows, using current interest rates for instruments with similar terms and remaining maturities.

Carrying amounts of cash and cash equivalents, other short-term investments, trade notes receivables, trade accounts receivables, short-term borrowings, trade notes and accounts payable, and other notes and accounts payable approximate fair values because of the short maturity of these instruments.

6. INVENTORIES

Inventories at March 31, 2011 and September 30, 2011 are as follows:

 

     March 31, 2011      September 30, 2011  
     (Yen in millions)  

Finished goods

   ¥ 111,487       ¥ 122,162   

Work in process

     47,388         46,084   

Raw materials and supplies

     74,024         86,245   
  

 

 

    

 

 

 

Total

   ¥ 232,899       ¥ 254,491   
  

 

 

    

 

 

 

 

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7. ALLOWANCE FOR DOUBTFUL ACCOUNTS

(1) Allowance for doubtful accounts that are deducted from the related receivables

Allowance for doubtful accounts that are deducted from the related receivables at March 31, 2011 and September 30, 2011 are as follows:

 

     March 31, 2011      September 30, 2011  
     (Yen in millions)  

Other current assets

   ¥ 619       ¥ 573   

Other long-term investments

   ¥ 329       ¥ 65   

Other assets

   ¥ 1,876       ¥ 1,666   

(2) Allowance for doubtful accounts related to lease receivables

Lease receivables represent capital leases which consist of sales-type leases. Most of the lease receivables are recognized at TA Triumph-Adler GmbH and its consolidated subsidiaries (TA), consolidated German subsidiaries of Kyocera Mita Corporation. These receivables typically have terms ranging from one year to seven years.

A reconciliation of the beginning and end amounts of allowance for doubtful accounts related to lease receivables are as follows:

TA estimates allowance for doubtful accounts related to lease receivables at the portfolio level.

 

     Six months ended September 30,  
             2010                     2011          
     (Yen in millions)  

Balance at beginning of period

   ¥ 571      ¥ 493   

Charged to costs or expenses, or charge-offs

     158        12   

Others*

     (49     (63
  

 

 

   

 

 

 

Balance at end of period

   ¥ 680      ¥ 442   
  

 

 

   

 

 

 

 

     Three months ended September 30,  
             2010                      2011          
     (Yen in millions)  

Balance at beginning of period

   ¥ 554       ¥ 554   

Charged to costs or expenses, or charge-offs

     92         (53

Others*

     34         (59
  

 

 

    

 

 

 

Balance at end of period

   ¥ 680       ¥ 442   
  

 

 

    

 

 

 

 

  * Others consist mainly of foreign currency translation.

The amounts of lease receivables less allowances for doubtful accounts at March 31, 2011 and September 30, 2011 were ¥34,369 million and ¥29,497 million, respectively, which are included in other current assets and other assets in the consolidated balance sheets.

 

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Table of Contents

8. 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 55% of Kyocera’s net sales are generated from overseas customers, which expose 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 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 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 (losses), net in the consolidated statement of income. Kyocera does not adopt hedge accounting for such derivatives.

 

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Table of Contents

The aggregate contractual amounts of derivative financial instruments at March 31, 2011 and September 30, 2011 are as follows:

 

September 30, 201 September 30, 201
     March 31, 2011      September 30, 2011  
     (Yen in millions)  

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 13,852       ¥ 12,399   

Interest rate swaps

     590         936   
  

 

 

    

 

 

 

Total

   ¥ 14,442       ¥ 13,335   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 144,006       ¥ 120,686   

Currency swaps

     226         180   
  

 

 

    

 

 

 

Total

   ¥ 144,232       ¥ 120,866   
  

 

 

    

 

 

 

Total derivatives

   ¥ 158,674       ¥ 134,201   
  

 

 

    

 

 

 

The location and fair value of derivative financial instruments in the consolidated balance sheets at March 31, 2011 and September 30, 2011 are as follows:

 

September 30, 201 September 30, 201 September 30, 201
    

Location

   March 31, 2011      September 30, 2011  
          (Yen in millions)  

Derivative Assets:

        

Derivatives designated as hedging instruments:

        

Foreign currency forward contracts

   Other current assets    ¥ 72       ¥ 183   
     

 

 

    

 

 

 

Total

      ¥ 72       ¥ 183   
     

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

        

Foreign currency forward contracts

   Other current assets    ¥ 259       ¥ 6,476   

Currency swaps

   Other current assets      7         5   
     

 

 

    

 

 

 

Total

      ¥ 266       ¥ 6,481   
     

 

 

    

 

 

 

Total derivatives

      ¥ 338       ¥ 6,664   
     

 

 

    

 

 

 

Derivative Liabilities:

        

Derivatives designated as hedging instruments:

        

Foreign currency forward contracts

   Other current liabilities    ¥ 117       ¥ 146   

Interest rate swaps

   Other current liabilities      20         34   
     

 

 

    

 

 

 

Total

      ¥ 137       ¥ 180   
     

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

        

Foreign currency forward contracts

   Other current liabilities    ¥ 3,509       ¥ 118   
     

 

 

    

 

 

 

Total

      ¥ 3,509       ¥ 118   
     

 

 

    

 

 

 

Total derivatives

      ¥ 3,646       ¥ 298   
     

 

 

    

 

 

 

 

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Table of Contents

The location and amount of derivative financial instruments in the comprehensive income for the six months ended September 30, 2010 and 2011 are as follows:

Derivatives designated as cash flow hedge:

Gains (losses) recognized in other comprehensive income

 

          Six months ended September 30,  
                    2010                          2011             
          (Yen in millions)  

Foreign currency forward contracts

   ¥ (41   ¥ 38   

Interest rate swaps

     11        (1
     

 

 

   

 

 

 

Total

   ¥ (30   ¥ 37   
     

 

 

   

 

 

 

 

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

 

  

          Six months ended September 30,  
    

Location

             2010                          2011             
          (Yen in millions)  

Foreign currency forward contracts

   Net sales    ¥ 9      ¥ (106

Foreign currency forward contracts

   Cost of sales      118        203   

Interest rate swaps

   Interest expense      10        9   
     

 

 

   

 

 

 

Total

      ¥ 137      ¥ 106   
     

 

 

   

 

 

 

 

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

 

  

          Six months ended September 30,  
    

Location

             2010                          2011             
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 5      ¥ 1   
     

 

 

   

 

 

 

Total

      ¥ 5      ¥ 1   
     

 

 

   

 

 

 

 

Derivatives not designated as hedging instruments:

 

Gains (losses) recognized in income

 

  

  

          Six months ended September 30,  
    

Location

             2010                          2011             
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (1   ¥ 9,608   

Currency swaps

   Foreign currency transaction gains, net      1        (2
     

 

 

   

 

 

 

Total

      ¥ 0      ¥ 9,606   
     

 

 

   

 

 

 

 

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Table of Contents

The location and amount of derivative financial instruments in the comprehensive income for the three months ended September 30, 2010 and 2011 are as follows:

Derivatives designated as cash flow hedge:

Gains (losses) recognized in other comprehensive income

 

          Three months ended September 30,  
                      2010                              2011               
          (Yen in millions)  

Foreign currency forward contracts

   ¥ (142   ¥ 24   

Interest rate swaps

     3        (4
     

 

 

   

 

 

 

Total

   ¥ (139   ¥ 20   
     

 

 

   

 

 

 

 

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

 

  

          Three months ended September 30,  
    

Location

   2010     2011  
          (Yen in millions)  

Foreign currency forward contracts

   Net sales    ¥ (99   ¥ (15

Foreign currency forward contracts

   Cost of sales      258        88   

Interest rate swaps

   Interest expense      5        4   
     

 

 

   

 

 

 

Total

      ¥ 164      ¥ 77   
     

 

 

   

 

 

 

 

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

 

  

          Three months ended September 30,  
    

Location

   2010     2011  
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 5      ¥ 0   
     

 

 

   

 

 

 

Total

      ¥ 5      ¥ 0   
     

 

 

   

 

 

 

 

Derivatives not designated as hedging instruments:

 

Gains (losses) recognized in income

 

  

  

          Three months ended September 30,  
    

Location

   2010     2011  
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (5,023   ¥ 6,622   

Currency swaps

   Foreign currency transaction gains, net      2        (11
     

 

 

   

 

 

 

Total

      ¥ (5,021   ¥ 6,611   
     

 

 

   

 

 

 

 

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Table of Contents

9. BENEFIT PLANS

Domestic:

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the six months ended September 30, 2010 and 2011 include the following components:

 

0000002010000000 0000002010000000
     Six months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Service cost

   ¥ 4,324      ¥ 4,649   

Interest cost

     1,318        1,251   

Expected return on plan assets

     (1,628     (1,678

Amortization of prior service cost

     (2,164     (2,164

Recognized actuarial loss

     386        570   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 2,236      ¥ 2,628   
  

 

 

   

 

 

 

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the three months ended September 30, 2010 and 2011 include the following components:

 

0000002010000000 0000002010000000
     Three months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Service cost

   ¥ 2,170      ¥ 2,324   

Interest cost

     659        626   

Expected return on plan assets

     (814     (839

Amortization of prior service cost

     (1,082     (1,082

Recognized actuarial loss

     193        285   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 1,126      ¥ 1,314   
  

 

 

   

 

 

 

Foreign:

Kyocera’s foreign consolidated subsidiaries, such as Kyocera International, Inc. and its consolidated subsidiaries (KII), AVX Corporation and its consolidated subsidiaries (AVX), and TA Triumph-Adler GmbH maintain non-contributory defined benefit pension plans in the U.S., Germany and other countries.

Net periodic pension costs at KII, AVX and TA Triumph-Adler GmbH for the six months ended September 30, 2010 and 2011 include the following components:

 

0000002010000000 0000002010000000
     Six months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Service cost

   ¥    160      ¥    155   

Interest cost

     951        903   

Expected return on plan assets

     (571     (614

Amortization of prior service cost

             5                4   

Recognized actuarial loss

     122        121   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥     667      ¥     569   
  

 

 

   

 

 

 

 

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Table of Contents

Net periodic pension costs at KII, AVX and TA Triumph-Adler GmbH for the three months ended September 30, 2010 and 2011 include the following components:

 

0000002010000000 0000002010000000
     Three months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Service cost

   ¥ 77      ¥ 75   

Interest cost

     461        439   

Expected return on plan assets

     (276     (299

Amortization of prior service cost

     2        2   

Recognized actuarial loss

     59        59   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥     323      ¥     276   
  

 

 

   

 

 

 

10. INCOME TAXES

The effective tax rates for the six and three months ended September 30, 2011 of 32.9% and 32.7% were higher than for the six and three months ended September 30, 2010 of 26.4% and 20.7%. The upward difference is mainly due to a reversal of valuation allowance against deferred tax assets at a certain overseas subsidiary for the three months ended September 30, 2010.

 

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Table of Contents

11. COMMITMENTS AND CONTINGENCIES

As of September 30, 2011, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥14,750 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 as of September 30, 2011 are as follows:

 

     September 30, 2011  
     (Yen in millions)  

Due within 1 year

   ¥ 4,331   

Due after 1 year but within 2 years

     2,820   

Due after 2 years but within 3 years

     1,788   

Due after 3 years but within 4 years

     1,343   

Due after 4 years but within 5 years

     887   

Thereafter

     1,068   
  

 

 

 

Total

   ¥ 12,237   
  

 

 

 

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, 2011 and during the three months ended September 30, 2011, Kyocera purchased ¥9,193 million and ¥4,755 million, respectively and is obligated to purchase ¥204,213 million in total by the end of December 2020.

Kyocera guarantees the debt of employees, an investee and an unconsolidated subsidiary. As of September 30, 2011, the total amount of these guarantees was ¥616 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 identified by the United States Environmental Protection Agency (EPA), state governmental agencies or other private parties as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or equivalent state or local laws for clean-up and response costs associated with sites at which remediation is required. Because CERCLA imposes joint and several liability, the EPA could seek to recover all clean-up costs from any one of the PRPs at a site despite the involvement of other PRPs. At certain sites, financially responsible PRPs other than AVX also are, or have been, involved in site investigation and clean-up activities. We believe that any liability resulting from these sites will be apportioned among AVX and other PRPs.

To resolve AVX’s liability at each of the sites at which AVX has been named a PRP, AVX has entered into various administrative orders and consent decrees with federal and state regulatory agencies governing the timing and nature of investigation and remediation. AVX has paid, or reserved for, all estimated amounts required under the terms of these orders and decrees corresponding to its apportioned share of the liabilities. As is customary, the orders and decrees regarding sites where the PRPs are not themselves implementing the chosen remedy contain provisions allowing the EPA to reopen the agreement and seek additional amounts from settling PRPs in the event that certain contingencies occur, such as the discovery of significant new information about site conditions during clean-up or substantial cost overruns for the chosen remedy.

 

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Table of Contents

In 2007, AVX received notification from the EPA and the U.S. Department of Justice indicating that the United States is preparing to exercise the reopener provision under a 1991 consent decree relating to the environmental conditions at, and remediation of, New Bedford Harbor in the Commonwealth of Massachusetts. In 1991, in connection with that consent decree, AVX paid ¥5,082 million, plus interest, toward the environmental conditions at, and remediation of, the harbor in settlement with the EPA and the Commonwealth of Massachusetts, subject to reopener provisions, including a reopener if certain remediation costs for the site exceed ¥10,049 million. The EPA has indicated that remediation costs through October 22, 2010 were approximately ¥32,933 million, not all of which is subject to the reopener provisions. In March 2011, EPA issued a proposal providing alternative remedial action plan to the existing plan for which the future cost estimates ranging from ¥27,874 million to ¥30,877 million, net present value.

AVX has not received complete documentation of past response cost from EPA and therefore 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 past or future costs because the remediation method has changed over time and costs can be appropriately allocated to parties other than AVX. AVX anticipates further discussions with the U.S. Department of Justice, the EPA, and the Commonwealth of Massachusetts. AVX is continuing to investigate the claim as well as potential defenses and other actions with respect to the site. In light of the foregoing, it is not reasonably possible to estimate a range of loss and accordingly, no accrual for costs has been recorded at AVX. Therefore, the potential impact of this matter on Kyocera’s consolidated results of operations, financial condition 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. 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 condition and cash flows.

 

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Table of Contents

12. EQUITY

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 declared.

Based on the resolution for the payment of year-end dividends at the ordinary general shareholders’ meeting held on June 28, 2011, Kyocera declared cash dividends totaling ¥12,846 million, ¥70 per share of common stock effective June 29, 2011 to shareholders of record on March 31, 2011.

Based on the resolution for the payment of interim dividends at the board of directors held on October 27, 2011, Kyocera declared cash dividends totaling ¥11,007 million, ¥60 per share of common stock effective December 5, 2011 to shareholders of record on September 30, 2011.

Changes in Kyocera Corporation shareholders’ equity, noncontrolling interests and total equity for the six months ended September 30, 2010 and 2011 are as follows:

 

    Six months ended September 30,  
    2010     2011  
    Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity  
    (Yen in millions)  

Balance at beginning of period

  ¥ 1,345,235      ¥ 62,027      ¥ 1,407,262      ¥ 1,420,263      ¥ 63,096      ¥ 1,483,359   

Comprehensive income (loss)

    (29     (963     (992     23,280        (106     23,174   

Cash dividends to Kyocera Corporation’s shareholders

    (11,011     —          (11,011     (12,846     —          (12,846

Cash dividends to noncontrolling interests

    —          (860     (860     —          (877     (877

Other

    27        (156     (129     (477     (278     (755
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

  ¥ 1,334,222      ¥ 60,048      ¥ 1,394,270      ¥ 1,430,220      ¥ 61,835      ¥ 1,492,055   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) for the six months ended September 30, 2010 and 2011 are as follows:

 

     Six months ended September 30,  
     2010     2011  
     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity  
     (Yen in millions)  

Net income

   ¥ 61,960      ¥   3,863      ¥      65,823      ¥      46,768      ¥   3,959      ¥ 50,727   

Net unrealized gains (losses) on securities

     (32,441     50        (32,391     3,871        (64     3,807   

Net unrealized gains (losses) on derivative financial instruments

     (30     44        14        37        17        54   

Pension adjustments

     (811     (40     (851     (548     60        (488

Foreign currency translation adjustments

     (28,707     (4,880     (33,587     (26,848     (4,078     (30,926
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   ¥ (29   ¥ (963   ¥ (992   ¥ 23,280      ¥ (106   ¥      23,174   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Comprehensive income (loss) for the three months ended September 30, 2010 and 2011 are as follows:

 

     Three months ended September 30,  
     2010     2011  
     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity  
     (Yen in millions)  

Net income

   ¥ 32,067      ¥ 2,182      ¥ 34,249      ¥ 21,964      ¥ 2,021      ¥ 23,985   

Net unrealized gains (losses) on securities

     (8,360     41        (8,319     (16,974     (67     (17,041

Net unrealized gains (losses) on derivative financial instruments

     (139     4        (135     20        12        32   

Pension adjustments

     (412     28        (384     (202     37        (165

Foreign currency translation adjustments

     (8,127     (1,429     (9,556     (21,428     (2,972     (24,400
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   ¥ 15,029      ¥ 826      ¥ 15,855      ¥ (16,620   ¥ (969   ¥ (17,589
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

13. SUPPLEMENTAL EXPENSE INFORMATION

Supplemental expense information is as follows:

 

     Six months ended September 30,  
                 2010                               2011               
     (Yen in millions)  

Research and development expenses

   ¥ 23,463       ¥ 23,665   

Advertising expenses

   ¥ 3,119       ¥ 3,496   

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

   ¥ 8,173       ¥ 8,547   
     Three months ended September 30,  
                 2010                               2011               
     (Yen in millions)  

Research and development expenses

   ¥ 12,076       ¥ 11,726   

Advertising expenses

   ¥ 1,690       ¥ 1,461   

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

   ¥ 4,154       ¥ 4,335   

 

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14. 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:

(1) Fine Ceramic Parts Group

Components for Semiconductor Processing Equipment and LCD Manufacturing Equipment,

Information & Telecommunication Components,

General Industrial Ceramic Components,

Sapphire Substrates,

Automotive Components

(2) Semiconductor Parts Group

Ceramic Packages for Crystal and SAW Devices,

Ceramic Packages for CMOS/CCD Sensors,

LSI Ceramic Packages,

Wireless Communication Device Packages,

Optical Communication Device Packages and Components,

Organic Multilayer Packages and Substrates

(3) 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

(4) Electronic Device Group

Ceramic Capacitors, Tantalum Capacitors,

Surface Acoustic Wave (SAW) Devices, RF Modules, Electro Magnetic Interference (EMI) Filters,

Timing Devices such as Temperature Compensated Crystal Oscillators (TCXOs), Crystal Units, Clock Oscillators and Ceramic Resonators,

Connectors,

Thermal Printheads,

Inkjet Printheads,

Amorphous Silicon Photoreceptor Drums,

Liquid Crystal Displays (LCDs),

Touch Panels

(5) Telecommunications Equipment Group

Mobile Phone Handsets,

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

(6) Information Equipment Group

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

Wide Format Multifunctional Systems,

Printer and Multifunction Peripherals Supplies,

Business Solution Services such as Managed Print Service

 

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Table of Contents

(7) Others

Information Systems & Telecommunication Services,

Electrical Insulation and Sheet Materials, Synthetic Resin Molded Parts,

Real Estate Business

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 gains, equity in earnings, income taxes and net income attributable to noncontrolling interests.

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

 

     Six months ended September 30,  
                 2010                               2011               

Amount of sales to KDDI group (Yen in millions)

   ¥ 78,226       ¥ 57,812   

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

     12.3         9.6   

 

     Three months ended September 30,  
                 2010                               2011               

Amount of sales to KDDI group (Yen in millions)

   ¥ 37,107       ¥ 27,748   

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

     11.4         9.3   

 

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Information by reporting segments for the six and three months ended September 30, 2010 and 2011 is summarized as follows:

Reporting Segments

 

     Six months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 36,674      ¥ 41,981   

Semiconductor Parts Group

     88,125        81,754   

Applied Ceramic Products Group

     95,620        90,712   

Electronic Device Group

     123,554        115,830   

Telecommunications Equipment Group

     122,282        90,024   

Information Equipment Group

     117,009        121,190   

Others

     68,071        76,186   

Adjustments and eliminations

     (13,943     (13,409
  

 

 

   

 

 

 

Net sales

   ¥ 637,392      ¥ 604,268   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 5,314      ¥ 7,268   

Semiconductor Parts Group

     18,452        17,873   

Applied Ceramic Products Group

     15,692        6,356   

Electronic Device Group

     22,248        17,623   

Telecommunications Equipment Group

     1,904        326   

Information Equipment Group

     14,405        15,828   

Others

     4,633        3,495   
  

 

 

   

 

 

 

Total operating profit

     82,648        68,769   

Corporate gains and Equity in earnings of affiliates and unconsolidated subsidiaries

     7,614        7,359   

Adjustments and eliminations

     (769     (563
  

 

 

   

 

 

 

Income before income taxes

   ¥ 89,493      ¥ 75,565   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 2,179      ¥ 2,966   

Semiconductor Parts Group

     4,761        5,363   

Applied Ceramic Products Group

     5,845        7,078   

Electronic Device Group

     6,570        6,285   

Telecommunications Equipment Group

     5,395        4,376   

Information Equipment Group

     5,164        5,007   

Others

     2,293        2,262   

Corporate

     984        1,056   
  

 

 

   

 

 

 

Total

   ¥ 33,191      ¥ 34,393   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 4,302      ¥ 6,418   

Semiconductor Parts Group

     6,682        6,907   

Applied Ceramic Products Group

     8,349        5,314   

Electronic Device Group

     5,897        9,315   

Telecommunications Equipment Group

     1,739        2,183   

Information Equipment Group

     3,810        1,752   

Others

     1,123        1,414   

Corporate

     785        1,221   
  

 

 

   

 

 

 

Total

   ¥ 32,687      ¥ 34,524   
  

 

 

   

 

 

 

 

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Table of Contents

Reporting Segments

 

     Three months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 19,441      ¥ 21,466   

Semiconductor Parts Group

     45,317        40,979   

Applied Ceramic Products Group

     50,773        45,277   

Electronic Device Group

     64,005        56,413   

Telecommunications Equipment Group

     57,526        41,075   

Information Equipment Group

     58,544        61,000   

Others

     35,431        39,917   

Adjustments and eliminations

     (6,820     (7,090
  

 

 

   

 

 

 

Net sales

   ¥ 324,217      ¥ 299,037   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 2,992      ¥ 3,816   

Semiconductor Parts Group

     9,468        8,568   

Applied Ceramic Products Group

     8,260        2,045   

Electronic Device Group

     12,768        8,217   

Telecommunications Equipment Group

     (3,228     1,067   

Information Equipment Group

     8,902        8,214   

Others

     2,760        2,701   
  

 

 

   

 

 

 

Total operating profit

     41,922        34,628   

Corporate gains and Equity in earnings of affiliates and unconsolidated subsidiaries

     1,547        1,409   

Adjustments and eliminations

     (299     (394
  

 

 

   

 

 

 

Income before income taxes

   ¥ 43,170      ¥ 35,643   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 1,138      ¥ 1,561   

Semiconductor Parts Group

     2,575        2,789   

Applied Ceramic Products Group

     3,136        3,793   

Electronic Device Group

     3,425        3,260   

Telecommunications Equipment Group

     2,315        2,198   

Information Equipment Group

     2,640        2,502   

Others

     1,158        1,141   

Corporate

     465        543   
  

 

 

   

 

 

 

Total

   ¥ 16,852      ¥ 17,787   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 2,723      ¥ 3,206   

Semiconductor Parts Group

     3,723        4,712   

Applied Ceramic Products Group

     5,715        3,440   

Electronic Device Group

     4,187        3,781   

Telecommunications Equipment Group

     1,023        1,342   

Information Equipment Group

     2,383        827   

Others

     467        595   

Corporate

     469        610   
  

 

 

   

 

 

 

Total

   ¥ 20,690      ¥ 18,513   
  

 

 

   

 

 

 

 

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Table of Contents

Geographic segments (Net sales by region)

 

     Six months ended September 30,  
                 2010                               2011               
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 284,707       ¥ 275,957   

Asia

     106,758         109,461   

Europe

     105,082         103,604   

United States of America

     110,691         85,876   

Others

     30,154         29,370   
  

 

 

    

 

 

 

Net sales

   ¥ 637,392       ¥ 604,268   
  

 

 

    

 

 

 
     Three months ended September 30,  
                 2010                           2011               
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 145,951       ¥ 141,725   

Asia

     55,818         53,730   

Europe

     52,184         50,333   

United States of America

     54,651         39,126   

Others

     15,613         14,123   
  

 

 

    

 

 

 

Net sales

   ¥ 324,217       ¥ 299,037   
  

 

 

    

 

 

 

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

 

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Table of Contents

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

 

     Six months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 292,001      ¥ 282,445   

Intra-group sales and transfer between geographic areas

     225,696        216,285   
  

 

 

   

 

 

 
     517,697        498,730   
  

 

 

   

 

 

 

Asia

     91,030        94,499   

Intra-group sales and transfer between geographic areas

     93,331        85,837   
  

 

 

   

 

 

 
     184,361        180,336   
  

 

 

   

 

 

 

Europe

     109,633        108,673   

Intra-group sales and transfer between geographic areas

     16,402        17,052   
  

 

 

   

 

 

 
     126,035        125,725   
  

 

 

   

 

 

 

United States of America

     133,074        105,654   

Intra-group sales and transfer between geographic areas

     16,609        11,455   
  

 

 

   

 

 

 
     149,683        117,109   
  

 

 

   

 

 

 

Others

     11,654        12,997   

Intra-group sales and transfer between geographic areas

     6,897        6,314   
  

 

 

   

 

 

 
     18,551        19,311   
  

 

 

   

 

 

 

Adjustments and eliminations

     (358,935     (336,943
  

 

 

   

 

 

 

Net sales

   ¥ 637,392      ¥ 604,268   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 52,122      ¥ 42,602   

Asia

     9,699        11,322   

Europe

     9,208        6,842   

United States of America

     10,567        9,160   

Others

     1,458        835   
  

 

 

   

 

 

 
     83,054        70,761   

Corporate gains and Equity in earnings of affiliates and unconsolidated subsidiaries

     7,614        7,359   

Adjustments and eliminations

     (1,175     (2,555
  

 

 

   

 

 

 

Income before income taxes

   ¥ 89,493      ¥ 75,565   
  

 

 

   

 

 

 

 

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Table of Contents
     Three months ended September 30,  
                 2010                              2011               
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 149,646      ¥ 145,074   

Intra-group sales and transfer between geographic areas

     115,744        104,011   
  

 

 

   

 

 

 
     265,390        249,085   
  

 

 

   

 

 

 

Asia

     47,550        46,317   

Intra-group sales and transfer between geographic areas

     45,503        42,547   
  

 

 

   

 

 

 
     93,053        88,864   
  

 

 

   

 

 

 

Europe

     54,578        52,870   

Intra-group sales and transfer between geographic areas

     8,719        8,097   
  

 

 

   

 

 

 
     63,297        60,967   
  

 

 

   

 

 

 

United States of America

     66,514        48,587   

Intra-group sales and transfer between geographic areas

     8,123        5,800   
  

 

 

   

 

 

 
     74,637        54,387   
  

 

 

   

 

 

 

Others

     5,929        6,189   

Intra-group sales and transfer between geographic areas

     3,392        3,322   
  

 

 

   

 

 

 
     9,321        9,511   
  

 

 

   

 

 

 

Adjustments and eliminations

     (181,481     (163,777
  

 

 

   

 

 

 

Net sales

   ¥ 324,217      ¥ 299,037   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 26,384      ¥ 22,700   

Asia

     4,821        5,112   

Europe

     5,373        2,581   

United States of America

     5,484        4,034   

Others

     767        149   
  

 

 

   

 

 

 
     42,829        34,576   

Corporate gains and Equity in earnings of affiliates and unconsolidated subsidiaries

     1,547        1,409   

Adjustments and eliminations

     (1,206     (342
  

 

 

   

 

 

 

Income before income taxes

   ¥ 43,170      ¥ 35,643   
  

 

 

   

 

 

 

 

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Table of Contents

15. 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,           
     2010      2011  
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 61,960       ¥ 46,768   
  

 

 

    

 

 

 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 337.62       ¥ 254.93   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 337.62       ¥ 254.93   
  

 

 

    

 

 

 

Basic weighted average number of shares outstanding

     183,519         183,457   

Diluted weighted average number of shares outstanding

     183,519         183,457   
  

 

 

    

 

 

 
     Three months ended September 30,  
     2010      2011  
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 32,067       ¥ 21,964   
  

 

 

    

 

 

 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 174.74       ¥ 119.73   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 174.74       ¥ 119.73   
  

 

 

    

 

 

 

Basic weighted average number of shares outstanding

     183,519         183,446   

Diluted weighted average number of shares outstanding

     183,519         183,446   
  

 

 

    

 

 

 

 

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Table of Contents

Reference Information (Unaudited)

1. Production (Sales price)

 

     Six months ended September 30,     Increase
(Decrease)
%
 
     2010     2011    
     Amount     % to
the total
    Amount     % to
the total
   
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 37,506        5.8      ¥ 42,981        7.1        14.6   

Semiconductor Parts Group

     90,707        14.0        84,495        14.1        (6.8

Applied Ceramic Products Group

     99,007        15.2        92,386        15.4        (6.7

Electronic Device Group

     127,596        19.6        115,578        19.3        (9.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Components Business

     354,816        54.6        335,440        55.9        (5.5

Telecommunications Equipment Group

     123,875        19.0        85,896        14.3        (30.7

Information Equipment Group

     120,857        18.6        127,973        21.4        5.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Equipment Business

     244,732        37.6        213,869        35.7        (12.6

Others

      50,500         7.8        50,236         8.4        (0.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Production

   ¥ 650,048        100.0      ¥ 599,545        100.0        (7.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2. Orders

 

  

     
     Six months ended September 30,     Increase
(Decrease)
%
 
     2010     2011    
     Amount     % to
the total
    Amount     % to
the total
   
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 39,777        6.0      ¥ 41,840        6.9        5.2   

Semiconductor Parts Group

     92,752        14.0        83,267        13.8        (10.2

Applied Ceramic Products Group

     99,858        15.0        94,020        15.5        (5.8

Electronic Device Group

     136,389        20.6        115,304        19.1        (15.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Components Business

     368,776        55.6        334,431        55.3        (9.3

Telecommunications Equipment Group

     122,777        18.5        86,356        14.3        (29.7

Information Equipment Group

     116,400        17.5        120,933        20.0        3.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Equipment Business

     239,177        36.0        207,289        34.3        (13.3

Others

     69,543        10.5        76,461        12.7        9.9   

Adjustments and eliminations

     (13,836     (2.1     (13,881     (2.3     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Orders

   ¥ 663,660        100.0      ¥ 604,300        100.0        (8.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

41

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