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Kyocera 6-K 2013

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 2013

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 Accounting Group

Date: November 13, 2013


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, 2013 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, 2013     September 30, 2013  
     (Yen in millions)  

Current assets:

    

Cash and cash equivalents

   ¥ 305,454     ¥ 316,943   

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

     43,893       86,530   

Other short-term investments (Note 4)

     179,843       157,483   

Trade receivables:

    

Notes

     27,061       24,880   

Accounts

     268,927       259,628   

Less allowances for doubtful accounts and sales returns

     (4,705 )     (4,791
  

 

 

   

 

 

 
     291,283       279,717   

Inventories (Note 6)

     296,450       321,380   

Advance payments

     65,812       63,291   

Deferred income taxes

     47,349       45,571   

Other current assets (Notes 5, 7 and 8)

     38,299       40,395   
  

 

 

   

 

 

 

Total current assets

     1,268,383       1,311,310   

Investments and advances:

    

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

     506,490       659,020   

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

     12,661       13,553   
  

 

 

   

 

 

 

Total investments and advances

     519,151       672,573   

Property, plant and equipment:

    

Land

     61,808       62,691   

Buildings

     323,014       333,265   

Machinery and equipment

     788,692       809,353   

Construction in progress

     13,546       9,186   

Less accumulated depreciation

     (918,236 )     (945,320
  

 

 

   

 

 

 

Total property, plant and equipment

     268,824       269,175   

Goodwill (Note 3)

     103,425       107,298   

Intangible assets

     54,583       55,197   

Other assets (Note 7)

     68,487       63,494   
  

 

 

   

 

 

 

Total assets

   ¥ 2,282,853     ¥ 2,479,047   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED BALANCE SHEETS (Unaudited)—(Continued)

 

     March 31, 2013     September 30, 2013  
     (Yen in millions)  

Current liabilities:

    

Short-term borrowings

   ¥ 3,135     ¥ 2,720   

Current portion of long-term debt (Note 5)

     9,817       10,482   

Trade notes and accounts payable

     111,249       124,513   

Other notes and accounts payable

     52,018       44,310   

Accrued payroll and bonus

     52,420       54,934   

Accrued income taxes

     22,214       16,870   

Other accrued liabilities (Note 10)

     39,135       52,871   

Other current liabilities (Notes 5 and 8)

     36,642       30,574   
  

 

 

   

 

 

 

Total current liabilities

     326,630       337,274   

Non-current liabilities:

    

Long-term debt (Note 5)

     20,855       21,830   

Accrued pension and severance liabilities (Note 9)

     36,322       34,791   

Deferred income taxes

     146,229       194,866   

Other non-current liabilities (Note 10)

     37,875       28,467   
  

 

 

   

 

 

 

Total non-current liabilities

     241,281       279,954   
  

 

 

   

 

 

 

Total liabilities

     567,911       617,228   

Commitments and contingencies (Note 10)

    

Kyocera Corporation shareholders’ equity:

    

Common stock

     115,703       115,703   

Additional paid-in capital

     163,062       163,091   

Retained earnings

     1,368,512       1,400,436   

Accumulated other comprehensive income (Note 12)

     50,138       160,779   

Common stock in treasury, at cost

     (51,258 )     (51,295
  

 

 

   

 

 

 

Total Kyocera Corporation shareholders’ equity

     1,646,157       1,788,714   

Noncontrolling interests

     68,785       73,105   
  

 

 

   

 

 

 

Total equity (Note 11)

     1,714,942       1,861,819   
  

 

 

   

 

 

 

Total liabilities and equity

   ¥ 2,282,853     ¥ 2,479,047   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of these statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

     Six months ended September 30,  
             2012                     2013          
     (Yen in millions and
shares in thousands,
except per share amounts)
 

Net sales (Note 8)

   ¥ 608,431     ¥ 699,663   

Cost of sales (Note 8)

     451,798       518,916   
  

 

 

   

 

 

 

Gross profit

     156,633       180,747   

Selling, general and administrative expenses (Notes 10 and 13)

     130,742       122,544   
  

 

 

   

 

 

 

Profit from operations

     25,891       58,203   

Other income (expenses):

    

Interest and dividend income

     7,305       8,692   

Interest expense (Note 8)

     (861 )     (1,022

Foreign currency transaction gains, net (Note 8)

     2,350       1,768   

Other, net

     1,047       1,412   
  

 

 

   

 

 

 

Total other income (expenses)

     9,841       10,850   
  

 

 

   

 

 

 

Income before income taxes

     35,732       69,053   

Income taxes

     11,877       23,281   
  

 

 

   

 

 

 

Net income

     23,855       45,772   

Net (income) loss attributable to noncontrolling interests

     1,516       (2,842
  

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 25,371     ¥ 42,930   
  

 

 

   

 

 

 

Earnings per share* (Note 15):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 69.15     ¥ 117.02   

Diluted

     69.15       117.02   

Average number of shares of common stock outstanding:

    

Basic

     366,886       366,875   

Diluted

     366,886       366,875   

 

  * Stock Split
     As Kyocera Corporation undertook a stock split at the ratio of two for one of all  common shares on October 1, 2013, Earnings per share are computed under the assumption that the stock split had been undertaken at the beginning of the year ended March 31, 2013 in accordance with standard related to earnings per share.

The accompanying notes are an integral part of these statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)—(Continued)

 

     Three months ended September 30,  
             2012                     2013          
     (Yen in millions and
shares in thousands,
except per share amounts)
 

Net sales (Note 8)

   ¥ 310,705     ¥ 368,008   

Cost of sales (Note 8)

     228,873       273,618   
  

 

 

   

 

 

 

Gross profit

     81,832       94,390   

Selling, general and administrative expenses (Notes 10 and 13)

     53,939       61,585   
  

 

 

   

 

 

 

Profit from operations

     27,893       32,805   

Other income (expenses):

    

Interest and dividend income

     1,075       1,153   

Interest expense (Note 8)

     (428 )     (530

Foreign currency transaction gains, net (Note 8)

     1,251       47   

Other, net

     1,214       765   
  

 

 

   

 

 

 

Total other income (expenses)

     3,112       1,435   
  

 

 

   

 

 

 

Income before income taxes

     31,005       34,240   

Income taxes

     10,927       12,389   
  

 

 

   

 

 

 

Net income

     20,078       21,851   

Net income attributable to noncontrolling interests

     (1,277 )     (1,572
  

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 18,801     ¥ 20,279   
  

 

 

   

 

 

 

Earnings per share* (Note 15):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 51.24     ¥ 55.28   

Diluted

     51.24       55.28   

Average number of shares of common stock outstanding:

    

Basic

     366,885       366,873   

Diluted

     366,885       366,873   

 

  * Stock Split
     As Kyocera Corporation undertook a stock split at the ratio of two for one of all common shares on October 1, 2013, Earnings per share are computed under the assumption that the stock split had been undertaken at the beginning of the year ended March 31, 2013 in accordance with standard related to earnings per share.

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 

     Six months ended September 30,  
            2012                     2013          
    Amount     Amount  
    (Yen in millions)  

Net income

  ¥ 23,855     ¥ 45,772   
 

 

 

   

 

 

 

Other comprehensive income (loss)—net of taxes

   

Net unrealized gains on securities (Notes 4, 11 and 12)

    25,009       92,150   

Net unrealized gains (losses) on derivative financial instruments (Notes 8, 11 and 12)

    100       (156

Pension adjustments (Notes 9, 11 and 12)

    (404 )     (511

Foreign currency translation adjustments (Notes 11 and 12)

    (21,446 )     21,954   
 

 

 

   

 

 

 

Total other comprehensive income (loss)

    3,259       113,437   
 

 

 

   

 

 

 

Comprehensive income

    27,114       159,209   

Comprehensive (income) loss attributable to noncontrolling interests

    4,123       (5,625
 

 

 

   

 

 

 

Comprehensive income attributable to shareholders of Kyocera Corporation

  ¥ 31,237     ¥ 153,584   
 

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)—(Continued)

 

     Three months ended September 30,  
            2012                     2013          
    Amount     Amount  
    (Yen in millions)  

Net income

  ¥ 20,078     ¥ 21,851   
 

 

 

   

 

 

 

Other comprehensive income (loss)—net of taxes

   

Net unrealized gains (losses) on securities (Notes 4 and 12)

    35,849       (5,133

Net unrealized gains (losses) on derivative financial instruments (Notes 8 and 12)

    33       (126

Pension adjustments (Notes 9 and 12)

    (310 )     (170

Foreign currency translation adjustments (Note 12)

    (2,771 )     (900
 

 

 

   

 

 

 

Total other comprehensive income (loss)

    32,801       (6,329
 

 

 

   

 

 

 

Comprehensive income

    52,879       15,522   

Comprehensive income attributable to noncontrolling interests

    (956 )     (1,338
 

 

 

   

 

 

 

Comprehensive income attributable to shareholders of Kyocera Corporation

  ¥ 51,923     ¥ 14,184   
 

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     Six months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Cash flows from operating activities:

    

Net income

   ¥ 23,855     ¥ 45,772   

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

    

Depreciation and amortization

     33,535       34,851   

Provision (recovery) for doubtful accounts and loss on bad debts

     (30 )     72   

Write-down of inventories

     5,662       3,745   

Deferred income taxes

     (2,942 )     4,675   

Foreign currency adjustments

     738       (4

Change in assets and liabilities:

    

(Increase) decrease in receivables

     (15,360 )     25,015   

Increase in inventories

     (20,360 )     (20,508

Decrease in advance payments

     1,359       2,564   

Increase in other current assets

     (1,191 )     (2,506

Increase (decrease) in notes and accounts payable

     11,384       (7,989

Increase (decrease) in accrued income taxes

     3,639       (5,550

Increase (decrease) in other current liabilities

     1,833       (2,621

Increase (decrease) in other non-current liabilities

     20,345       (1,275

Other, net

     (2,441 )     (1,776
  

 

 

   

 

 

 

Net cash provided by operating activities

     60,026       74,465   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Payments for purchases of available-for-sale securities

     (7,611 )     (15,656

Payments for purchases of held-to-maturity securities

     (29,094 )     (77,001

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

     1,897       11,051   

Proceeds from maturities of held-to-maturity securities

     29,258       31,503   

Investment in affiliates

     (2,125 )     (3

Payments for purchases of property, plant and equipment

     (28,477 )     (27,191

Payments for purchases of intangible assets

     (3,057 )     (3,116

Acquisition of time deposits and certificate of deposits

     (154,440 )     (128,721

Withdrawal of time deposits and certificate of deposits

     139,715       153,220   

Other, net

     1,105       2,147   
  

 

 

   

 

 

 

Net cash used in investing activities

     (52,829 )     (53,767
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Increase (decrease) in short-term borrowings, net

     2,152       (463

Proceeds from issuance of long-term debt

     4,781       6,109   

Payments of long-term debt

     (5,953 )     (7,014

Dividends paid

     (12,240 )     (12,489

Other, net

     (1,019 )     (512
  

 

 

   

 

 

 

Net cash used in financing activities

     (12,279 )     (14,369
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (6,689 )     5,160   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (11,771 )     11,489   

Cash and cash equivalents at beginning of period

     273,288       305,454   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   ¥ 261,517     ¥ 316,943   
  

 

 

   

 

 

 

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 variable interest entities for which Kyocera 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. These variable interest entities do not have material impacts on Kyocera’s consolidated result 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 has no further obligations under the contracts and all revenue recognition criteria under ASC 605, “Revenue Recognition” 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, “Products” 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 personnel. 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 have historically approximated 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, “Revenue Recognition” 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, “Products” 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 personnel. 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 have historically approximated 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, “Customer Payments and Incentives.”

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 will 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 mainly determined by the average method. For raw materials and supplies, cost is mainly determined by the first-in, first-out method. 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.

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.

 

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(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 is 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 cash flow 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. However, changes in fair value of most of the foreign currency forward contracts are recorded in income without applying hedge accounting as it is expected that such changes will be offset by corresponding gains or losses of the underlying hedged 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) Commitments and contingencies

Commitments and contingencies are accounted for under ASC 450, “Contingencies.” Liabilities for loss contingencies are recorded when analysis indicates that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. When a range of loss can be estimated, we accrue the most likely amount. In the event that no amount in the range of probable loss is considered most likely, the minimum loss in the range is accrued. Amounts recorded are reviewed periodically and adjusted to reflect additional legal and technical information that becomes available. Legal costs are accrued as incurred.

(13) 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 based on the grant date fair value over the measurement method.

(14) 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.

(15) Research and development expenses and advertising expenses

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

 

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(16) 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.

(17) Recently adopted accounting standards

On April 1, 2013, Kyocera adopted the FASB’s Accounting Standards Update (ASU) No. 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification.” This accounting standard requires the reporting entity to apply the guidance in ASC 360-20, “Property, Plant, and Equipment—Real Estate Sales” to determine whether it should derecognize the in substance real estate when a parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. 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, 2013, Kyocera adopted the FASB’s ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities” and ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” ASU No. 2011-11 requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. ASU 2013-01 clarifies that the scope of ASU No. 2011-11 applies to derivatives accounted for in accordance with ASC 815, “Derivatives and Hedging” including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45, “Balance Sheet—Offsetting—Other Presentation Matters” or ASC 815-10-45, “Derivatives and Hedging—Overall—Other Presentation Matters” or subject to an enforceable master netting arrangement or similar agreement. As these accounting standards were the provisions for disclosure, the adoption of these accounting standards did not have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

On April 1, 2013, Kyocera adopted the FASB’s ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment.” This accounting standard permits an entity to first assess qualitative factors to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the impairment test. An entity is not required to calculate the fair value of the indefinite-lived intangible asset unless the entity determines that it is more likely than not that the indefinite-lived intangible asset is impaired. As this accounting standard did not actually change how the impairment would be calculated, 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, 2013, Kyocera adopted the FASB’s ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This accounting standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, this accounting standard requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, this accounting standard required an entity to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. As this accounting standard was a provision for disclosure, the adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

 

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On July 17, 2013, Kyocera adopted the FASB’s ASU No. 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” This accounting standard permits an entity to use the Fed Funds Effective Swap Rate (Overnight Index Swap Rate) as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, “Derivatives and Hedging,” in addition to the interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

(18) Recently issued accounting standards

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This accounting standard requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward in the financial statements. This accounting standard will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this accounting standard is not expected to have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

(19) Reclassifications

Certain reclassifications and format changes have been made to the consolidated statements of cash flows for six months ended September 30, 2012 to conform to the current presentation.

 

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3. BUSINESS COMBINATION

On February 6, 2013, AVX Corporation, a U.S. based subsidiary, acquired by merger all of the outstanding capital stock of the Tantalum Components Division of Nichicon Corporation (Asia Tantalum) for ¥8,054 million in cash, subject to customary working capital adjustments. During the six months ended September 30, 2013, AVX Corporation paid an additional ¥158 million to settle the working capital adjustment provisions of the purchase agreement, resulting in an increase in recorded goodwill during the period by the same amount.

Asia Tantalum designs, develops, manufactures and markets tantalum electronic components. Asia Tantalum’s products are used in a broad range of commercial applications. Asia Tantalum has manufacturing facilities located in Shiga, Japan and Tianjin, China. The acquisition enhances AVX Corporation’s leadership position in the passive electronic component industry and provides further opportunities for expansion in the Asian region and tantalum component manufacturing efficiencies.

AVX Corporation has used the acquisition method of accounting to record the transaction in accordance with ASC 805, “Business Combinations.” In accordance with the purchase method, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values with the excess being allocated to goodwill. Factors that contributed to the recognition of goodwill include expected synergies and the trained workforce. The total amount of goodwill is not expected to be deductible for tax purposes.

The results of operations of Asia Tantalum were included into AVX Corporation and Kyocera’s consolidated financial statements since the acquisition date. For segment reporting, it is reported in the Electronic Device Group.

As of September 30, 2013, the allocation of the purchase price was prepared based on estimates of fair values, as shown in the following table. The pro forma results are not presented as the revenue and earnings were not material.

 

     September 30, 2013  
     (Yen in millions)  

Accounts receivables

   ¥ 727   

Inventories

     1,414   

Other current assets and liabilities

     (200
  

 

 

 

Working capital

     1,941   
  

 

 

 

Property, plant and equipment

     2,873   

Accrued benefit liability

     (179
  

 

 

 

Total identified assets and liabilities

     4,635   
  

 

 

 

Purchase price (Cash)

     8,212   
  

 

 

 

Goodwill

   ¥ 3,577   
  

 

 

 

On October 1, 2013, Kyocera Corporation acquired 100% of the common stock of NEC Toppan Circuit Solutions, Inc. (TNCSi), a manufacture of printed circuit board, in order to further strengthen and expand its organic substrate business, and made it a consolidated subsidiary. TNCSi has changed its name to Kyocera Circuit Solutions, Inc. on October 1, 2013. The total purchase price for the transaction is approximately ¥19,500 million in cash. The calculation of the amounts of the identifiable assets and liabilities has not yet been completed.

 

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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, 2013 and September 30, 2013, included in short-term investments in debt securities and in long-term investments in debt and equity securities are summarized as follows:

 

    March 31, 2013     September 30, 2013  
    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

  ¥ 274,818     ¥ 488,748     ¥ 213,930      ¥ 0     ¥ 275,202      ¥ 632,467     ¥ 357,270     ¥ 5   

Investment trusts

    3,900       4,371       471        —          3,900        4,821       921       —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    278,718       493,119       214,401        0       279,102        637,288       358,191       5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate bonds

    7,549       7,601       108        56       11,996        12,029       258       225   

Government bonds and public bonds

    —          —          —          —          376        361       —          15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    7,549       7,601       108        56       12,372        12,390       258       240   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

    286,267       500,720       214,509        56       291,474        649,678       358,449       245   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Held-to-maturity securities:

               

Corporate bonds

    48,658       48,736       98        20       94,866        94,955       130       41   

Government bonds and public bonds

    5       5       —          —          6        6       —          —     

Others

    1,000       1,000       0        —          1,000        1,000       0       —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

    49,663       49,741       98        20       95,872        95,961       130       41   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 335,930     ¥ 550,461     ¥ 214,607      ¥ 76     ¥ 387,346      ¥ 745,639     ¥ 358,579     ¥ 286   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  * 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.

Gross unrealized gains on equity securities which derived from a fluctuation in the market value of the shares of KDDI Corporation (KDDI) at March 31, 2013 and September 30, 2013 are as follows:

 

     March 31, 2013      September 30, 2013  
     (Yen in millions)  

Gross unrealized gains on shares of KDDI

   ¥ 194,216       ¥ 328,222   

(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 an unconsolidated subsidiary. Carrying amounts of these investments at March 31, 2013 and September 30, 2013, included in other short-term investments and in other long-term investments, are summarized as follows:

 

     March 31, 2013      September 30, 2013  
     (Yen in millions)  

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

   ¥ 179,875       ¥ 157,640   

Non-marketable equity securities

     9,441         10,681   

Long-term loans

     43         53   

Investments in affiliates and an unconsolidated subsidiary

     3,145         2,662   
  

 

 

    

 

 

 

Total

   ¥ 192,504       ¥ 171,036   
  

 

 

    

 

 

 

 

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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, 2013     September 30, 2013  
    Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  
    (Yen in millions)  

Current Assets:

               

Foreign currency forward contracts

  ¥ —        ¥ 956      ¥ —        ¥ 956      ¥ —        ¥ 1,250      ¥ —        ¥ 1,250   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

    —          956        —          956        —          1,250        —          1,250   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    —          956        —          956        —          1,250        —          1,250   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Assets:

               

Marketable equity securities

    488,748        —          —          488,748        632,467        —          —          632,467   

Investment trusts

    21        4,350        —          4,371        25        4,796        —          4,821   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    488,769        4,350        —          493,119        632,492        4,796        —          637,288   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate bonds

    7,601        —          —          7,601        12,029        —          —          12,029   

Government bonds and public bonds

    —          —          —          —          361        —          —          361   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    7,601        —          —          7,601        12,390        —          —          12,390   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current assets

    496,370        4,350        —          500,720        644,882        4,796        —          649,678   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  ¥ 496,370      ¥ 5,306      ¥ —        ¥ 501,676      ¥ 644,882      ¥ 6,046      ¥ —        ¥ 650,928   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current Liabilities:

               

Foreign currency forward contracts

  ¥ —        ¥ 9,233      ¥ —        ¥ 9,233     ¥ —        ¥ 1,338      ¥ —        ¥ 1,338   

Interest rate swaps

    —          22        —          22       —          17        —          17   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

    —          9,255        —          9,255       —          1,355        —          1,355   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

  ¥ —        ¥ 9,255      ¥ —        ¥ 9,255     ¥ —        ¥ 1,355      ¥ —        ¥ 1,355   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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, 2012 and 2013.

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.

 

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(2) Fair value of financial instruments

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

 

     March 31, 2013      September 30, 2013  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Yen in millions)  

Assets (a):

           

Short-term investments in debt securities

   ¥ 43,893       ¥ 43,910       ¥ 86,530       ¥ 86,617   

Long-term investments in debt and equity securities

     506,490         506,551         659,020         659,022   

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

     9,516         9,516         10,891         10,891   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 559,899       ¥ 559,977       ¥ 756,441       ¥ 756,530   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities (b):

           

Long-term debt (including due within one year)

   ¥ 30,672       ¥ 30,691       ¥ 32,312       ¥ 32,327   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 30,672       ¥ 30,691       ¥ 32,312       ¥ 32,327   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) For investments with active markets, fair value is based on quoted market prices. For non-marketable equity securities, it is not practicable to estimate the fair value 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, 2013 and September 30, 2013 were ¥9,428 million and ¥10,659 million, respectively.

Fair value of held-to-maturity investments in debt securities is mainly classified as Level 1 and Level 2.

(b) The fair value is estimated by discounting cash flows, using current interest rates for instruments with similar terms and remaining maturities, and classified as Level 2.

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.

 

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6. INVENTORIES

Inventories at March 31, 2013 and September 30, 2013 are as follows:

 

     March 31, 2013      September 30, 2013  
     (Yen in millions)  

Finished goods

   ¥ 142,175      ¥ 155,201   

Work in process

     54,248        60,568   

Raw materials and supplies

     100,027        105,611   
  

 

 

    

 

 

 

Total

   ¥ 296,450      ¥ 321,380   
  

 

 

    

 

 

 

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, 2013 and September 30, 2013 are as follows:

 

     March 31, 2013      September 30, 2013  
     (Yen in millions)  

Other current assets

   ¥ 387      ¥ 381   

Other long-term investments

     1        —     

Other assets

     1,980        2,118   

(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, consolidated German subsidiaries of Kyocera Document Solutions Inc. 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 Triumph-Adler GmbH and its consolidated subsidiaries estimate allowance for doubtful accounts related to lease receivables at the portfolio level.

 

     Six months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Balance at beginning of period

   ¥ 382     ¥ 238   

Charged to costs or expenses, or charge-offs

     27       (1

Others*

     (35 )     22   
  

 

 

   

 

 

 

Balance at end of period

   ¥ 374     ¥ 259   
  

 

 

   

 

 

 

 

  * Others mainly consist of foreign currency translation.

The amounts of lease receivables less allowances for doubtful accounts at March 31, 2013 and September 30, 2013 were ¥32,674 million and ¥34,146 million, respectively, which are included in other current assets and other assets in the consolidated balance sheets.

 

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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 60% of Kyocera’s net sales are generated from overseas customers, which expose Kyocera to foreign currency exchange rate 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 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 rate 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 rate debt to fixed rate 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 to protect against the adverse effects that exchange rate fluctuations may have on foreign-currency-denominated trade receivables and payables. The gains and losses on both the derivatives and the foreign-currency-denominated trade receivables and payables are recorded as foreign currency transaction gains, net in the consolidated statement of income. Kyocera does not adopt hedge accounting for such derivatives.

 

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The aggregate contractual amounts of derivative financial instruments at March 31, 2013 and September 30, 2013 are as follows:

 

     March 31, 2013      September 30, 2013  
     (Yen in millions)  

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 12,225       ¥ 14,305   

Interest rate swaps

     120         98   
  

 

 

    

 

 

 

Total

     12,345         14,403   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

     163,526         176,670   
  

 

 

    

 

 

 

Total derivatives

   ¥ 175,871       ¥ 191,073   
  

 

 

    

 

 

 

The fair value and location of derivative financial instruments in the consolidated balance sheets at March 31, 2013 and September 30, 2013 are as follows:

 

     Location      March 31, 2013      September 30, 2013  
            (Yen in millions)  

Derivative assets:

        

Derivatives designated as hedging instruments:

        

Foreign currency forward contracts

     Other current assets       ¥ 105       ¥ 97   
     

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

        

Foreign currency forward contracts

     Other current assets         851         1,153   
     

 

 

    

 

 

 

Total derivative assets

      ¥ 956       ¥ 1,250   
     

 

 

    

 

 

 

Derivative liabilities:

        

Derivatives designated as hedging instruments:

        

Foreign currency forward contracts

     Other current liabilities       ¥ 192       ¥ 98   

Interest rate swaps

     Other current liabilities         22         17   
     

 

 

    

 

 

 

Total

        214         115   
     

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

        

Foreign currency forward contracts

     Other current liabilities         9,041         1,240   
     

 

 

    

 

 

 

Total derivative liabilities

      ¥ 9,255       ¥ 1,355   
     

 

 

    

 

 

 

 

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The amounts of derivative financial instruments included in comprehensive income and the locations in the consolidated statements of income for the six months ended September 30, 2012 and 2013 are as follows:

Derivatives designated as cash flow hedge:

Gains (losses) recognized in net unrealized gains (losses) on derivative financial instruments

 

              Six months ended September 30,      

Type of derivatives

            2012             2013      
          (Yen in millions)  

Foreign currency forward contracts

   ¥ 93      ¥ 48   

Interest rate swaps

     (26     (222
     

 

 

   

 

 

 

Total

   ¥ 67      ¥ (174
     

 

 

   

 

 

 

Gains (losses) recognized in income, which are reclassified from net unrealized gains (losses) on derivative financial instruments (effective portion)

 

   

              Six months ended September 30,      

Type of derivatives

  

Location

           2012                     2013          
          (Yen in millions)  

Foreign currency forward contracts

   Net sales    ¥ 58      ¥ 44   

Foreign currency forward contracts

   Cost of sales      (30     (145

Interest rate swaps

   Interest expense      24        —     
     

 

 

   

 

 

 

Total

      ¥ 52      ¥ (101
     

 

 

   

 

 

 

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

 

  

              Six months ended September 30,      

Type of derivatives

  

Location

           2012                     2013          
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (17   ¥ (1

Derivatives not designated as hedging instruments:

 

Gains (losses) recognized in income

  

  

              Six months ended September 30,      

Type of derivatives

  

Location

           2012                 2013      
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 5,425      ¥ 8,103   

 

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The amounts of derivative financial instruments included in comprehensive income and the locations in the consolidated statements of income for the three months ended September 30, 2012 and 2013 are as follows:

Derivatives designated as cash flow hedge:

Gains (losses) recognized in net unrealized gains (losses) on derivative financial instruments

 

              Three months ended September 30,      

Type of derivatives

        2012     2013  
          (Yen in millions)  

Foreign currency forward contracts

   ¥ 24      ¥ (6

Interest rate swaps

     (1     (117
     

 

 

   

 

 

 

Total

   ¥ 23      ¥ (123
     

 

 

   

 

 

 

Gains (losses) recognized in income, which are reclassified from net unrealized gains (losses) on derivative financial instruments (effective portion)

   

              Three months ended September 30,      

Type of derivatives

  

Location

           2012                     2013          
          (Yen in millions)  

Foreign currency forward contracts

   Net sales    ¥ 25      ¥ (34

Foreign currency forward contracts

   Cost of sales      30        26   
     

 

 

   

 

 

 

Total

      ¥ 55      ¥ (8
     

 

 

   

 

 

 

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

 

  

              Three months ended September 30,      

Type of derivatives

  

Location

           2012                     2013          
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 2      ¥ 1   

Derivatives not designated as hedging instruments:

 

Gains (losses) recognized in income

  

  

              Three months ended September 30,      

Type of derivatives

  

Location

           2012                     2013          
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (1,784   ¥ 2,188   

 

 

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9. BENEFIT PLANS

Domestic:

Kyocera Corporation and its major domestic subsidiaries sponsor funded defined benefit pension plans or unfunded retirement and severance plans for their employees.

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the six months ended September 30, 2012 and 2013 include the following components and were recorded in cost of sales, and selling general and administrative expenses in the consolidated statements of income.

 

     Six months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 5,022      ¥ 5,656   

Interest cost

     1,162        843   

Expected return on plan assets

     (1,733     (1,660

Amortization of prior service cost

     (2,164     (2,171

Recognized actuarial loss

     753        943   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 3,040      ¥ 3,611   
  

 

 

   

 

 

 

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the three months ended September 30, 2012 and 2013 include the following components and were recorded in cost of sales, and selling general and administrative expenses in the consolidated statements of income.

 

     Three months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 2,511      ¥ 2,828   

Interest cost

     581        421   

Expected return on plan assets

     (866     (830

Amortization of prior service cost

     (1,082     (1,085

Recognized actuarial loss

     376        472   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 1,520      ¥ 1,806   
  

 

 

   

 

 

 

 

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Foreign:

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

Net periodic pension costs at these foreign subsidiaries for the six months ended September 30, 2012 and 2013 include the following components and were recorded in cost of sales, and selling general and administrative expenses in the consolidated statements of income.

 

     Six months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 166      ¥ 247   

Interest cost

     794        932   

Expected return on plan assets

     (588     (811

Amortization of prior service cost

     4        6   

Recognized actuarial loss

     204        503   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 580      ¥ 877   
  

 

 

   

 

 

 

Net periodic pension costs at these foreign subsidiaries for the three months ended September 30, 2012 and 2013 include the following components and were recorded in cost of sales, and selling general and administrative expenses in the consolidated statements of income.

     Three months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 82      ¥ 124   

Interest cost

     392        468   

Expected return on plan assets

     (292     (407

Amortization of prior service cost

     2        4   

Recognized actuarial loss

     102        252   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 286      ¥ 441   
  

 

 

   

 

 

 

 

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10. COMMITMENTS AND CONTINGENCIES

As of September 30, 2013, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥11,421 million due within one year.

Kyocera is a lessee under long-term operating leases primarily for office space and equipment. The future minimum lease commitments under non-cancelable leases as of September 30, 2013 are as follows:

 

     September 30, 2013  
     (Yen in millions)  

Due within 1 year

   ¥ 5,599   

Due after 1 year but within 2 years

     3,878   

Due after 2 years but within 3 years

     2,030   

Due after 3 years but within 4 years

     1,305   

Due after 4 years but within 5 years

     1,020   

Thereafter

     1,476   
  

 

 

 

Total

   ¥ 15,308   
  

 

 

 

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, 2013 and during the three months ended September 30, 2013, Kyocera purchased ¥10,815 million and ¥8,569 million, respectively and is obligated to purchase ¥214,982 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, 2013, the total amount of these guarantees was ¥507 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 corporation (AVX), a U.S. based subsidiary, 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 certain sites at which remediation is required with respect to prior contamination. Because CERCLA has generally been construed to authorize 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. AVX believes that liability resulting from these sites will be apportioned between AVX and other PRPs.

To resolve its liability at 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. 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.

In 1991, in connection with a consent decree finally approved in 1992 (1992 Consent Decree), AVX paid ¥8,878 million ($66 million), plus interest, toward the environmental conditions at, and remediation of, New Bedford Harbor in the Commonwealth of Massachusetts (the harbor) in a settlement with the United States, the EPA and the Commonwealth of Massachusetts (the Governments), subject to reopener provisions, including a reopener if certain remediation costs for the site exceed ¥12,789 million ($130.5 million).

 

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On April 18, 2012, the EPA issued to AVX a Unilateral Administrative Order (UAO) directing AVX to perform the Remedial Design, the Remedial Action and Operation and Maintenance as set forth in the UAO, for the harbor clean-up, pursuant to the reopener provision. The original effective date set forth in the UAO was June 18, 2012 (and subsequently extended to January 2, 2014), pursuant to which AVX had to inform the EPA if it intends to comply with the UAO.

On October 10, 2012, the Governments and AVX announced that they had reached a settlement with respect to the EPA’s ongoing clean-up of the harbor. That agreement is set forth in a Supplemental Consent Decree (Supplemental CD) that modifies certain provisions of the 1992 Consent Decree, including elimination of the Governments’ right to invoke any clean-up reopener provisions in the future. Under the terms of the settlement, AVX will pay ¥35,893 million ($366.25 million), plus interest computed from August 1, 2012, in three installments over a two-year period for use by the Governments to complete the clean-up of the harbor. In addition, the settlement requires EPA to withdraw the UAO.

The United States District Court (the Court) approved the settlement and entered the Supplemental CD on September 19, 2013. A third party has the right to file an appeal of entry of the Supplemental CD until November 18, 2013.

On October 18, 2013, AVX paid the initial settlement payment of ¥13,068 million ($133.35 million), plus accrued interest on the entire settlement amount through that date, into a court-managed registry account (“registry”). This payment and any other payments made by AVX into the registry shall not be disbursed to the Governments except by order of the Court issued after either (a) the time by which the third party may seek an appeal of the Supplemental CD has expired, or (b) the Court’s approval of the Supplemental CD is upheld on appeal and all appellate rights are exhausted. The effective date of the UAO will be extended throughout any appeal period, and the UAO will be withdrawn prior to any disbursement of the registry funds to the Government.

As AVX and Kyocera recorded a charge with respect to this matter in the amount of ¥7,900 million ($100 million) for the year ended March 31, 2012, and ¥21,300 million ($266.25 million) for the year ended March 31, 2013, which are included in selling, general and administrative expenses in the consolidated statements of income, AVX and Kyocera have recorded a liability for the full amount of the settlement as of September 30, 2013.

In addition to the above matter, Kyocera is involved in various environmental matters and Kyocera currently has certain amount of reserves related to such environmental matters. The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and adjusted to reflect additional legal and technical information that becomes available. The uncertainties about the status of laws, regulations, regulatory actions, technology and information related to individual sites make it difficult to develop an estimate of the reasonably possible aggregate environmental remediation exposure; therefore these costs could differ from our current estimates.

Kyocera is also 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 material impact on Kyocera’s consolidated results of operations, financial condition and cash flows.

 

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11. 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 at the ordinary general shareholders’ meeting held on June 26, 2013, Kyocera Corporation declared year-end cash dividends totaling ¥11,006 million, ¥60 per share of common stock effective June 27, 2013 to shareholders of record on March 31, 2013.

Based on the resolution for the payment of interim dividends at the board of directors held on October 31, 2013, Kyocera declared cash dividends totaling ¥14,675 million, ¥80 per share of common stock effective December 5, 2013 to shareholders of record on September 30, 2013.

At the meeting of the board of directors of Kyocera Corporation held on August 28, 2013, a resolution was made to undertake a stock split and a stock split at the ratio of two for one of all common shares was undertaken on October 1, 2013. Under the assumption that the stock split had been undertaken at the beginning of the year ended March 31, 2013, year-end cash dividend per share of common stock resolved at the ordinary general shareholders’ meeting held on June 26, 2013 and interim dividend per share of common stock resolved at the board of directors held on October 31, 2013 would be ¥30 and ¥40, respectively.

 

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Changes in Kyocera Corporation shareholders’ equity, noncontrolling interests and  total equity for the six months ended September 30, 2012 and September 30, 2013 are as follows:

 

     Six months ended September 30, 2012  
     Kyocera
Corporation
Shareholders’
Equity
    Noncontrolling
Interests
    Equity  
     (Yen in millions)  

Balance at beginning of period

   ¥ 1,469,505      ¥ 64,736      ¥ 1,534,241   

Comprehensive income (loss)

      

Net income (loss)

     25,371        (1,516     23,855   

Other comprehensive income (loss)—net of taxes

      

Net unrealized gains (losses) on securities

     25,021        (12     25,009   

Net unrealized gains on derivative financial instruments

     67        33        100   

Pension adjustments

     (424     20        (404

Foreign currency translation adjustments

     (18,798     (2,648     (21,446
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     5,866        (2,607     3,259   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     31,237        (4,123     27,114   
  

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation’s shareholders

     (11,007     —          (11,007

Cash dividends paid to noncontrolling interests

     —          (994     (994

Others

     92        (584     (492
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 1,489,827      ¥ 59,035      ¥ 1,548,862   
  

 

 

   

 

 

   

 

 

 
     Six months ended September 30, 2013  
     Kyocera
Corporation
Shareholders’
Equity
    Noncontrolling
Interests
    Equity  
     (Yen in millions)  

Balance at beginning of period

   ¥ 1,646,157      ¥ 68,785      ¥ 1,714,942   

Comprehensive income

      

Net income

     42,930        2,842        45,772   

Other comprehensive income (loss)—net of taxes

      

Net unrealized gains on securities

     92,148        2        92,150   

Net unrealized gains (losses) on derivative financial instruments

     (174     18        (156

Pension adjustments

     (502     (9     (511

Foreign currency translation adjustments

     19,182        2,772        21,954   
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     110,654        2,783        113,437   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     153,584        5,625        159,209   
  

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation’s shareholders

     (11,006     —          (11,006

Cash dividends paid to noncontrolling interests

     —          (1,341     (1,341

Others

     (21     36        15   
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 1,788,714      ¥ 73,105      ¥ 1,861,819   
  

 

 

   

 

 

   

 

 

 

 

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12. ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in accumulated other comprehensive income for the six months ended September 30, 2012 and September 30, 2013 are as follows:

 

     Six months ended September 30, 2012  
     Net
Unrealized
Gains on
Securities
    Net
Unrealized
Losses

on Derivative
Financial
Instruments
    Pension
Adjustments
    Foreign
Currency
Translation
Adjustments
    Total
Accumulated
Other
Comprehensive
Income
 
     (Yen in millions)  

Balance at beginning of period

   ¥ 40,735      ¥ (70 )   ¥ (12,290   ¥ (110,014 )   ¥ (81,639

Other comprehensive income (loss), net

     25,021        67       (424     (18,798 )     5,866   

Equity transactions with noncontrolling interests

     —          0       (6     (167 )     (173
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 65,756      ¥ (3 )   ¥ (12,720   ¥ (128,979 )   ¥ (75,946
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Six months ended September 30, 2013  
     Net
Unrealized
Gains on
Securities
    Net
Unrealized
Losses
on Derivative
Financial
Instruments
    Pension
Adjustments
    Foreign
Currency
Translation
Adjustments
    Total
Accumulated
Other
Comprehensive
Income
 
     (Yen in millions)  

Balance at beginning of period

   ¥ 135,248      ¥ (68 )   ¥ (23,415   ¥ (61,627 )   ¥ 50,138   

Other comprehensive income (loss), net

          

Other comprehensive income (loss) before reclassifications

     92,287        (276 )     (69     19,182       111,124   

Amounts reclassified from accumulated other comprehensive income

     (139     102       (433     —          (470
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net

     92,148        (174 )     (502     19,182       110,654   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity transactions with noncontrolling interests

     —          0       (2     (11 )     (13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 227,396      ¥ (242 )   ¥ (23,919   ¥ (42,456 )   ¥ 160,779   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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The amounts reclassified out of accumulated other comprehensive income and the affected line items in the consolidated statements of income for the six months ended September 30, 2013 are as follows:

 

Details about accumulated other

comprehensive income components

  

Affected line items

   Six months ended
September 30, 2013
 
          (Yen in millions)  

Net unrealized gains (losses) on securities:

     

Sales of securities

   Other, net    ¥ (218
     

 

 

 
   Income before income taxes      (218
   Income taxes      78   
     

 

 

 
   Net income      (140
   Net income attributable to noncontrolling interests      1   
     

 

 

 
  

Net income attributable to shareholders of
Kyocera Corporation

     (139
     

 

 

 

Net unrealized gains (losses) on derivative financial Instruments:

     

Foreign currency forward contracts

   Net sales      (73
   Cost of sales      251   
   Foreign currency transaction gains, net      1   
     

 

 

 
   Income before income taxes      179   
   Income taxes      (38
     

 

 

 
   Net income      141   
   Net income attributable to noncontrolling interests      (39
     

 

 

 
  

Net income attributable to shareholders of
Kyocera Corporation

     102   
     

 

 

 

Pension adjustments:

     

Amortization of prior service cost and recognized actual loss

   *1      (719
     

 

 

 
   Income before income taxes      (719
   Income taxes      312   
     

 

 

 
   Net income      (407
   Net income attributable to noncontrolling interests      (26
     

 

 

 
  

Net income attributable to shareholders of
Kyocera Corporation

     (433
     

 

 

 

Total reclassifications for the period

      ¥ (470
     

 

 

 

 

  *1 As for the affected line items in the consolidated statements of income by reclassification of pension adjustments, please refer to the Note 9 to the Quarterly Consolidated Financial Statements.
  *2 Amounts in parentheses indicate gains in the consolidated statements of income.

 

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The amounts reclassified out of accumulated other comprehensive income and the affected line items in the consolidated statements of income for the three months ended September 30, 2013 are as follows:

 

Details about accumulated other

comprehensive income components

  

Affected line items

  Three months ended
September 30, 2013
 
         (Yen in millions)  

Net unrealized gains (losses) on securities:

    

Sales of securities

   Other, net   ¥ (188
    

 

 

 
   Income before income taxes     (188
   Income taxes     68   
    

 

 

 
   Net income     (120
   Net income attributable to noncontrolling interests     —     
    

 

 

 
  

Net income attributable to shareholders of
Kyocera Corporation

    (120
    

 

 

 

Net unrealized gains (losses) on derivative financial Instruments:

    

Foreign currency forward contracts

   Net sales     63   
   Cost of sales     (46
   Foreign currency transaction gains, net     (3
    

 

 

 
   Income before income taxes     14   
   Income taxes     (5
    

 

 

 
   Net income     9   
   Net income attributable to noncontrolling interests     (2
    

 

 

 
  

Net income attributable to shareholders of
Kyocera Corporation

    7   
    

 

 

 

Pension adjustments:

    

Amortization of prior service cost and recognized actual loss

   *1     (357
    

 

 

 
   Income before income taxes     (357
   Income taxes     162   
    

 

 

 
   Net income     (195
   Net income attributable to noncontrolling interests     (15
    

 

 

 
  

Net income attributable to shareholders of
Kyocera Corporation

    (210
    

 

 

 

Total reclassifications for the period

     ¥ (323
    

 

 

 

 

  *1 As for the affected line items in the consolidated statements of income by reclassification of pension adjustments, please refer to the Note 9 to the Quarterly Consolidated Financial Statements.
  *2 Amounts in parentheses indicate gains in the consolidated statements of income.

 

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Table of Contents

Tax effect allocated to each components of other comprehensive income (loss) for the six months ended September 30, 2012 and 2013 are as follows:

 

     Before-tax
amount
    Tax (expense)
or benefit
    Net-of-tax
amount
 
     (Yen in millions)  

For the six months ended September 30, 2012:

      

Net unrealized gains on securities

   ¥ 39,134     ¥ (14,125 )   ¥ 25,009  

Net unrealized gains on derivative financial instruments

     125       (25 )     100  

Pension adjustments

     (854 )     450       (404 )

Foreign currency translation adjustments

     (21,446 )     —          (21,446 )
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 16,959      ¥ (13,700   ¥ 3,259   
  

 

 

   

 

 

   

 

 

 

For the six months ended September 30, 2013:

      

Net unrealized gains on securities

   ¥ 143,566     ¥ (51,416 )   ¥ 92,150  

Net unrealized losses on derivative financial instruments

     (263 )     107       (156 )

Pension adjustments

     (823 )     312       (511 )

Foreign currency translation adjustments

     21,954       —          21,954  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 164,434      ¥ (50,997   ¥ 113,437   
  

 

 

   

 

 

   

 

 

 

 

Tax effect allocated to each components of other comprehensive income (loss) for the three months ended September 30, 2012 and 2013 are as follows:

 

   

 
     Before-tax
amount
    Tax (expense)
or benefit
    Net-of-tax
amount
 
     (Yen in millions)  

For the three months ended September 30, 2012:

      

Net unrealized gains on securities

   ¥ 56,012     ¥ (20,163 )   ¥ 35,849  

Net unrealized gains on derivative financial instruments

     44       (11 )     33  

Pension adjustments

     (529 )     219       (310 )

Foreign currency translation adjustments

     (2,771 )     —          (2,771 )
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 52,756      ¥ (19,955   ¥ 32,801   
  

 

 

   

 

 

   

 

 

 

For the three months ended September 30, 2013:

      

Net unrealized losses on securities

   ¥ (8,013 )   ¥ 2,880     ¥ (5,133 )

Net unrealized losses on derivative financial instruments

     (192 )     66       (126 )

Pension adjustments

     (332 )     162       (170 )

Foreign currency translation adjustments

     (900 )     —          (900 )
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ (9,437   ¥ 3,108      ¥ (6,329
  

 

 

   

 

 

   

 

 

 

 

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13. SUPPLEMENTAL EXPENSE INFORMATION

Supplemental expense information for the six months ended September 30, 2012 and 2013 is as follows:

 

     Six months ended September 30,  
             2012                      2013          
     (Yen in millions)  

Research and development expenses

   ¥ 23,866       ¥ 24,180   

Advertising expenses

     3,027         2,889   

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

     9,071         11,513   

Supplemental expense information for the three months ended September 30, 2012 and 2013 is as follows:

  

     Three months ended September 30,  
             2012                      2013          
     (Yen in millions)  

Research and development expenses

   ¥ 12,121       ¥ 11,987   

Advertising expenses

     1,410         1,562   

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

     4,471         5,922   

 

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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 Flat Panel Display (FPD) Manufacturing Equipment,

Information & Telecommunication Components,

General Industrial Machinery Components,

Sapphire Substrates, and

Automotive Components

(2) Semiconductor Parts Group

Ceramic Packages for Crystal and SAW Devices, CMOS/CCD Image Sensor Ceramic Packages,

LSI Ceramic Packages, Wireless Communication Device Packages,

Optical Communication Device Packages and Components, and

Organic Multilayer Packages

(3) Applied Ceramic Products Group

Residential and Commercial Use Solar Power Generating Systems, Solar Cells and Modules,

Cutting Tools, Micro Drills,

Medical and Dental Implants, and

Jewelry and Applied Ceramic Related Products

(4) Electronic Device Group

Ceramic Capacitors, Tantalum Capacitors,

SAW Devices, RF Modules, EMI Filters,

Clock Oscillators, Crystal Units, Ceramic Resonators, Optical Low Pass Filters,

Connectors,

Thermal Printheads, Inkjet Printheads,

Amorphous Silicon Photoreceptor Drums,

LCDs, and Touch Panels

(5) Telecommunications Equipment Group

Mobile Phones, and

PHS related Products such as PHS Handsets and PHS Base Stations

(6) Information Equipment Group

Monochrome and Color Printers and Multifunction Products,

Wide Format Systems,

Document Solutions,

Application Software, and

Supplies

(7) Others

Information Systems & Telecommunication Services, Engineering Business, Management Consulting Business,

Epoxy Molding Compounds for Semiconductor Encapsulation, Electrical Insulators,

Flexible Printed Circuit Sheet Materials, Synthetic Resin Molded Parts,

Realty Development Business, and

LED Lighting Systems

 

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Inter-segment sales, operating revenue and transfers are made with reference to prevailing market prices. Transactions between reportable segments are immaterial and not shown separately.

Operating profit for each reporting segment represents net sales, less related costs and operating expenses, excluding corporate 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,  
             2012                      2013          

Amount of sales to KDDI group (Yen in millions)

   ¥ 48,433       ¥ 51,234   

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

     8.0         7.3   
     Three months ended September 30,  
             2012                      2013          

Amount of sales to KDDI group (Yen in millions)

   ¥ 22,448       ¥ 27,485   

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

     7.2         7.5   

 

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Table of Contents

Information by reporting segments for the six months ended September 30, 2012 and 2013 is summarized as follows:

Reporting Segments

 

     Six months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 38,399      ¥ 38,187   

Semiconductor Parts Group

     82,483        87,063   

Applied Ceramic Products Group

     85,424        127,515   

Electronic Device Group

     140,815        147,451   

Telecommunications Equipment Group

     84,333        96,557   

Information Equipment Group

     116,787        144,525   

Others

     74,861        79,713   

Adjustments and eliminations

     (14,671     (21,348
  

 

 

   

 

 

 

Net sales

   ¥ 608,431      ¥ 699,663   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 4,535      ¥ 5,762   

Semiconductor Parts Group

     13,862        16,041   

Applied Ceramic Products Group

     5,288        14,834   

Electronic Device Group

     (11,879     14,662   

Telecommunications Equipment Group

     801        266   

Information Equipment Group

     11,106        10,449   

Others

     4,345        2,001   
  

 

 

   

 

 

 

Total operating profit

     28,058        64,015   

Corporate gains and Equity in earnings of affiliates and an unconsolidated subsidiary

     8,136        5,370   

Adjustments and eliminations

     (462     (332
  

 

 

   

 

 

 

Income before income taxes

   ¥ 35,732      ¥ 69,053   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 3,028      ¥ 2,320   

Semiconductor Parts Group

     5,496        6,718   

Applied Ceramic Products Group

     7,022        6,373   

Electronic Device Group

     6,891        8,042   

Telecommunications Equipment Group

     3,684        2,601   

Information Equipment Group

     4,369        5,005   

Others

     2,053        2,694   

Corporate

     992        1,098   
  

 

 

   

 

 

 

Total

   ¥ 33,535      ¥ 34,851   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 2,003      ¥ 1,215   

Semiconductor Parts Group

     6,293        7,564   

Applied Ceramic Products Group

     5,318        4,525   

Electronic Device Group

     5,313        6,727   

Telecommunications Equipment Group

     1,608        1,898   

Information Equipment Group

     3,302        2,858   

Others

     883        2,188   

Corporate

     1,806        1,632   
  

 

 

   

 

 

 

Total

   ¥ 26,526      ¥ 28,607   
  

 

 

   

 

 

 

 

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Table of Contents

Information by reporting segments for the three months ended September 30, 2012 and 2013 is summarized as follows:

Reporting Segments

 

     Three months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 19,330      ¥ 19,471   

Semiconductor Parts Group

     44,083        45,589   

Applied Ceramic Products Group

     42,824        66,019   

Electronic Device Group

     70,924        74,136   

Telecommunications Equipment Group

     42,812        58,045   

Information Equipment Group

     58,304        73,812   

Others

     40,172        41,652   

Adjustments and eliminations

     (7,744     (10,716
  

 

 

   

 

 

 

Net sales

   ¥ 310,705      ¥ 368,008   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 2,201      ¥ 2,859   

Semiconductor Parts Group

     8,157        8,118   

Applied Ceramic Products Group

     3,805        6,793   

Electronic Device Group

     5,624        8,492   

Telecommunications Equipment Group

     1,007        1,672   

Information Equipment Group

     5,404        4,382   

Others

     3,101        1,249   
  

 

 

   

 

 

 

Total operating profit

     29,299        33,565   

Corporate gains and Equity in earnings of affiliates and an unconsolidated subsidiary

     2,106        725   

Adjustments and eliminations

     (400     (50
  

 

 

   

 

 

 

Income before income taxes

   ¥ 31,005      ¥ 34,240   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 1,553      ¥ 1,187   

Semiconductor Parts Group

     2,881        3,612   

Applied Ceramic Products Group

     3,735        3,318   

Electronic Device Group

     3,526        4,071   

Telecommunications Equipment Group

     1,837        1,411   

Information Equipment Group

     2,184        2,573   

Others

     1,048        1,374   

Corporate

     506        568   
  

 

 

   

 

 

 

Total

   ¥ 17,270      ¥ 18,114   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 668      ¥ 554   

Semiconductor Parts Group

     4,010        3,637   

Applied Ceramic Products Group

     2,690        2,222   

Electronic Device Group

     2,729        2,839   

Telecommunications Equipment Group

     837        922   

Information Equipment Group

     1,221        1,388   

Others

     424        1,179   

Corporate

     756        638   
  

 

 

   

 

 

 

Total

   ¥ 13,335      ¥ 13,379   
  

 

 

   

 

 

 

 

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Table of Contents

Geographic segments (Net sales by region)

 

     Six months ended September 30,  
             2012                      2013          
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 274,848       ¥ 299,430   

Asia

     112,735         139,201   

Europe

     93,226         114,119   

United States of America

     100,724         113,870   

Others

     26,898         33,043   
  

 

 

    

 

 

 

Net sales

   ¥ 608,431       ¥ 699,663   
  

 

 

    

 

 

 
     Three months ended September 30,  
             2012                      2013          
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 141,737       ¥ 160,312   

Asia

     57,208         70,958   

Europe

     46,060         57,837   

United States of America

     51,226         61,681   

Others

     14,474         17,220   
  

 

 

    

 

 

 

Net sales

   ¥ 310,705       ¥ 368,008   
  

 

 

    

 

 

 

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,  
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 299,753      ¥ 313,146   

Intra-group sales and transfer between geographic areas

     204,034        236,962   
  

 

 

   

 

 

 
     503,787        550,108   
  

 

 

   

 

 

 

Asia

     95,900        119,570   

Intra-group sales and transfer between geographic areas

     123,808        143,968   
  

 

 

   

 

 

 
     219,708        263,538   
  

 

 

   

 

 

 

Europe

     97,595        118,378   

Intra-group sales and transfer between geographic areas

     16,407        24,099   
  

 

 

   

 

 

 
     114,002        142,477   
  

 

 

   

 

 

 

United States of America

     103,382        134,679   

Intra-group sales and transfer between geographic areas

     12,688        20,933   
  

 

 

   

 

 

 
     116,070        155,612   
  

 

 

   

 

 

 

Others

     11,801        13,890   

Intra-group sales and transfer between geographic areas

     6,042        8,038   
  

 

 

   

 

 

 
     17,843        21,928   
  

 

 

   

 

 

 

Adjustments and eliminations

     (362,979     (434,000
  

 

 

   

 

 

 

Net sales

   ¥ 608,431      ¥ 699,663   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 28,442      ¥ 38,077   

Asia

     11,847        11,358   

Europe

     1,770        3,917   

United States of America

     (14,191     9,169   

Others

     194        217   
  

 

 

   

 

 

 
     28,062        62,738   

Corporate gains and Equity in earnings of affiliates and an unconsolidated subsidiary

     8,136        5,370   

Adjustments and eliminations

     (466     945   
  

 

 

   

 

 

 

Income before income taxes

   ¥ 35,732      ¥ 69,053   
  

 

 

   

 

 

 

 

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Table of Contents
     Three months ended September 30,  
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 153,788      ¥ 167,687   

Intra-group sales and transfer between geographic areas

     106,646        125,226   
  

 

 

   

 

 

 
     260,434        292,913   
  

 

 

   

 

 

 

Asia

     49,162        60,707   

Intra-group sales and transfer between geographic areas

     65,646        76,265   
  

 

 

   

 

 

 
     114,808        136,972   
  

 

 

   

 

 

 

Europe

     47,821        59,594   

Intra-group sales and transfer between geographic areas

     8,961        12,959   
  

 

 

   

 

 

 
     56,782        72,553   
  

 

 

   

 

 

 

United States of America

     54,137        73,025   

Intra-group sales and transfer between geographic areas

     6,092        11,055   
  

 

 

   

 

 

 
     60,229        84,080   
  

 

 

   

 

 

 

Others

     5,797        6,995   

Intra-group sales and transfer between geographic areas

     3,002        4,046   
  

 

 

   

 

 

 
     8,799        11,041   
  

 

 

   

 

 

 

Adjustments and eliminations

     (190,347     (229,551
  

 

 

   

 

 

 

Net sales

   ¥ 310,705      ¥ 368,008   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 19,541      ¥ 24,535   

Asia

     6,508        5,915   

Europe

     735        2,142   

United States of America

     3,209        4,281   

Others

     144        341   
  

 

 

   

 

 

 
     30,137        37,214   

Corporate gains and Equity in earnings of affiliates and an unconsolidated subsidiary

     2,106        725   

Adjustments and eliminations

     (1,238     (3,699
  

 

 

   

 

 

 

Income before income taxes

   ¥ 31,005      ¥ 34,240   
  

 

 

   

 

 

 

 

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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,           
     2012      2013  
    

(Yen in millions and shares in thousands,

except per share amounts)

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 25,371       ¥ 42,930   
  

 

 

    

 

 

 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 69.15       ¥ 117.02   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 69.15       ¥ 117.02   
  

 

 

    

 

 

 

Basic weighted average number of shares outstanding

     366,886         366,875   

Diluted weighted average number of shares outstanding

     366,886         366,875   
  

 

 

    

 

 

 
             Three months ended September 30,           
     2012      2013  
    

(Yen in millions and shares in thousands,

except per share amounts)

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 18,801       ¥ 20,279   
  

 

 

    

 

 

 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 51.24       ¥ 55.28   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 51.24       ¥ 55.28   
  

 

 

    

 

 

 

Basic weighted average number of shares outstanding

     366,885         366,873   

Diluted weighted average number of shares outstanding

     366,885         366,873   
  

 

 

    

 

 

 

At the meeting of the board of directors of Kyocera Corporation held on August 28, 2013, a resolution was made to undertake a stock split, and a stock split at the ratio of two for one of all common shares was undertaken on October 1, 2013. Per share information is computed under the assumption that the stock split had been undertaken at the beginning of the year ended March 31, 2013.

 

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Reference Information (Unaudited)

1. Production (Sales price)

 

     Six months ended September 30,     Increase
(Decrease)
%
 
     2012     2013    
     Amount     % to
the total
    Amount     % to
the total
   
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 38,004        6.1      ¥ 40,069        5.5        5.4   

Semiconductor Parts Group

     83,073        13.4        87,849        12.1        5.7   

Applied Ceramic Products Group

     96,299        15.6        141,310        19.5        46.7   

Electronic Device Group

     139,657        22.6        150,700        20.8        7.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Components Business

     357,033        57.7