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Kyocera 6-K 2014

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 February 2014

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: February 13, 2014


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  nine months ended December 31, 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     December 31, 2013  
     (Yen in millions)  

Current assets:

    

Cash and cash equivalents

   ¥ 305,454      ¥ 312,457   

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

     43,893        105,078   

Other short-term investments (Note 4)

     179,843        140,136   

Trade receivables:

    

Notes

     27,061        27,588   

Accounts

     268,927        264,508   

Less allowances for doubtful accounts and sales returns

     (4,705     (5,140
  

 

 

   

 

 

 
     291,283        286,956   

Inventories (Note 6)

     296,450        349,635   

Advance payments

     65,812        61,047   

Deferred income taxes

     47,349        47,109   

Other current assets (Notes 5, 7 and 8)

     38,299        41,791   
  

 

 

   

 

 

 

Total current assets

     1,268,383        1,344,209   

Investments and advances:

    

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

     506,490        822,690   

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

     12,661        14,644   
  

 

 

   

 

 

 

Total investments and advances

     519,151        837,334   

Property, plant and equipment:

    

Land

     61,808        63,624   

Buildings

     323,014        344,427   

Machinery and equipment

     788,692        831,049   

Construction in progress

     13,546        9,025   

Less accumulated depreciation

     (918,236     (972,653
  

 

 

   

 

 

 

Total property, plant and equipment

     268,824        275,472   

Goodwill (Note 3)

     103,425        118,555   

Intangible assets

     54,583        61,203   

Other assets (Note 7)

     68,487        66,665   
  

 

 

   

 

 

 

Total assets

   ¥ 2,282,853      ¥ 2,703,438   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED BALANCE SHEETS (Unaudited)—(Continued)

 

     March 31, 2013     December 31, 2013  
     (Yen in millions)  

Current liabilities:

    

Short-term borrowings

   ¥ 3,135      ¥ 3,173   

Current portion of long-term debt (Note 5)

     9,817        11,340   

Trade notes and accounts payable

     111,249        127,787   

Other notes and accounts payable

     52,018        49,104   

Accrued payroll and bonus

     52,420        45,823   

Accrued income taxes

     22,214        16,415   

Other accrued liabilities (Note 10)

     39,135        41,401   

Other current liabilities (Notes 5 and 8)

     36,642        47,760   
  

 

 

   

 

 

 

Total current liabilities

     326,630        342,803   

Non-current liabilities:

    

Long-term debt (Note 5)

     20,855        22,720   

Accrued pension and severance liabilities (Note 9)

     36,322        39,650   

Deferred income taxes

     146,229        254,894   

Other non-current liabilities (Note 10)

     37,875        29,245   
  

 

 

   

 

 

 

Total non-current liabilities

     241,281        346,509   
  

 

 

   

 

 

 

Total liabilities

     567,911        689,312   

Commitments and contingencies (Note 10)

    

Kyocera Corporation shareholders’ equity:

    

Common stock

     115,703        115,703   

Additional paid-in capital

     163,062        163,108   

Retained earnings

     1,368,512        1,412,195   

Accumulated other comprehensive income (Note 12)

     50,138        296,976   

Common stock in treasury, at cost

     (51,258     (51,320
  

 

 

   

 

 

 

Total Kyocera Corporation shareholders’ equity

     1,646,157        1,936,662   

Noncontrolling interests

     68,785        77,464   
  

 

 

   

 

 

 

Total equity (Note 11)

     1,714,942        2,014,126   
  

 

 

   

 

 

 

Total liabilities and equity

   ¥ 2,282,853      ¥ 2,703,438   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

     Nine months ended December 31,  
     2012     2013  
     (Yen in millions and
shares in thousands,
except per share amounts)
 

Net sales (Note 8)

   ¥ 926,524      ¥ 1,071,388   

Cost of sales (Notes 8 and 9)

     686,879        793,309   
  

 

 

   

 

 

 

Gross profit

     239,645        278,079   

Selling, general and administrative expenses (Notes 9, 10 and 13)

     188,411        188,383   
  

 

 

   

 

 

 

Profit from operations

     51,234        89,696   

Other income (expenses):

    

Interest and dividend income

     13,521        16,937   

Interest expense (Note 8)

     (1,310     (1,432

Foreign currency transaction gains, net (Note 8)

     4,304        3,351   

Other, net

     1,133        1,792   
  

 

 

   

 

 

 

Total other income (expenses)

     17,648        20,648   
  

 

 

   

 

 

 

Income before income taxes

     68,882        110,344   

Income taxes

     24,457        36,756   
  

 

 

   

 

 

 

Net income

     44,425        73,588   

Net (income) loss attributable to noncontrolling interests

     545        (4,224
  

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 44,970      ¥ 69,364   
  

 

 

   

 

 

 

Earnings per share* (Note 15):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 122.57      ¥ 189.07   

Diluted

     122.57        189.07   

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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Table of Contents
    Three months ended December 31,  
    2012     2013  
    (Yen in millions and
shares in thousands,
except per share amounts)
 

Net sales (Note 8)

  ¥ 318,093      ¥ 371,725   

Cost of sales (Notes 8 and 9)

    235,081        274,393   
 

 

 

   

 

 

 

Gross profit

    83,012        97,332   

Selling, general and administrative expenses (Notes 9 and 13)

    57,669        65,839   
 

 

 

   

 

 

 

Profit from operations

    25,343        31,493   

Other income (expenses):

   

Interest and dividend income

    6,216        8,245   

Interest expense

    (449     (410

Foreign currency transaction gains, net (Note 8)

    1,954        1,583   

Other, net

    86        380   
 

 

 

   

 

 

 

Total other income (expenses)

    7,807        9,798   
 

 

 

   

 

 

 

Income before income taxes

    33,150        41,291   

Income taxes

    12,580        13,475   
 

 

 

   

 

 

 

Net income

    20,570        27,816   

Net income attributable to noncontrolling interests

    (971     (1,382
 

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

  ¥ 19,599      ¥ 26,434   
 

 

 

   

 

 

 

Earnings per share* (Note 15):

   

Net income attributable to shareholders of Kyocera Corporation:

   

Basic

  ¥ 53.42      ¥ 72.05   

Diluted

    53.42        72.05   

Average number of shares of common stock outstanding:

   

Basic

    366,883        366,868   

Diluted

    366,883        366,868   

 

  * 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)

 

       Nine months ended December 31,    
        2012             2013      
    Amount     Amount  
    (Yen in millions)  

Net income

  ¥ 44,425      ¥ 73,588   
 

 

 

   

 

 

 

Other comprehensive income (loss)—net of taxes

   

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

    30,123        198,671   

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

    (34     (305

Pension adjustments (Notes 9, 11 and 12)

    (1,583     (1,587

Foreign currency translation adjustments (Notes 11 and 12)

    22,615        56,990   
 

 

 

   

 

 

 

Total other comprehensive income (loss)

    51,121        253,769   
 

 

 

   

 

 

 

Comprehensive income

    95,546        327,357   

Comprehensive income attributable to noncontrolling interests

    (2,345     (11,116
 

 

 

   

 

 

 

Comprehensive income attributable to shareholders of Kyocera Corporation

  ¥ 93,201      ¥ 316,241   
 

 

 

   

 

 

 

 

       Three months ended December 31,    
        2012             2013      
    Amount     Amount  
    (Yen in millions)  

Net income

  ¥ 20,570      ¥ 27,816   
 

 

 

   

 

 

 

Other comprehensive income (loss)—net of taxes

   

Net unrealized gains on securities (Notes 4 and 12)

    5,114        106,521   

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

    (134     (149

Pension adjustments (Notes 9 and 12)

    (1,179     (1,076

Foreign currency translation adjustments (Note 12)

    44,061        35,036   
 

 

 

   

 

 

 

Total other comprehensive income (loss)

    47,862        140,332   
 

 

 

   

 

 

 

Comprehensive income

    68,432        168,148   

Comprehensive income attributable to noncontrolling interests

    (6,468     (5,491
 

 

 

   

 

 

 

Comprehensive income attributable to shareholders of Kyocera Corporation

  ¥ 61,964      ¥ 162,657   
 

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

    Nine months ended December 31,  
    2012     2013  
    (Yen in millions)  

Cash flows from operating activities:

   

Net income

  ¥ 44,425      ¥ 73,588   

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

   

Depreciation and amortization

    52,656        54,800   

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

    310        193   

Write-down of inventories

    8,489        5,357   

Deferred income taxes

    (3,431     3,374   

Foreign currency adjustments

    (1,322     (2,319

Change in assets and liabilities:

   

Decrease in receivables

    7,115        44,966   

Increase in inventories

    (31,791     (33,566

Decrease in advance payments

    1,861        4,884   

Decrease in other current assets

    1,907        255   

Decrease in notes and accounts payable

    (18,430     (30,095

Increase (decrease) in accrued income taxes

    4,521        (6,425

Increase (decrease) in other current liabilities

    7,775        (13,425

Increase (decrease) in other non-current liabilities

    18,654        (2,751

Other, net

    (3,644     (2,215
 

 

 

   

 

 

 

Net cash provided by operating activities

    89,095        96,621   
 

 

 

   

 

 

 

Cash flows from investing activities:

   

Payments for purchases of available-for-sale securities

    (18,890     (37,763

Payments for purchases of held-to-maturity securities

    (30,094     (94,881

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

    10,689        24,300   

Proceeds from maturities of held-to-maturity securities

    39,892        43,727   

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

    (11,077     (16,004

Investment in affiliates

    (2,150     (540

Payments for purchases of property, plant and equipment

    (43,045     (38,405

Payments for purchases of intangible assets

    (4,045     (4,575

Acquisition of time deposits and certificate of deposits

    (188,056     (171,737

Withdrawal of time deposits and certificate of deposits

    201,801        217,798   

Other, net

    2,629        1,377   
 

 

 

   

 

 

 

Net cash used in investing activities

    (42,346     (76,703
 

 

 

   

 

 

 

Cash flows from financing activities:

   

Decrease in short-term borrowings, net

    (318     (197

Proceeds from issuance of long-term debt

    6,656        8,073   

Payments of long-term debt

    (9,235     (10,141

Dividends paid

    (23,822     (27,932

Other, net

    (1,437     (1,076
 

 

 

   

 

 

 

Net cash used in financing activities

    (28,156     (31,273
 

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

    9,512        18,358   
 

 

 

   

 

 

 

Net increase in cash and cash equivalents

    28,105        7,003   

Cash and cash equivalents at beginning of period

    273,288        305,454   
 

 

 

   

 

 

 

Cash and cash equivalents at end of period

  ¥ 301,393      ¥ 312,457   
 

 

 

   

 

 

 

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 and an investment in a variable interest entity, for which Kyocera is not the primary beneficiary but has a significant influence to, 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 nine months ended December 31, 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 nine months ended December 31, 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. 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.

The fair values of the assets acquired and liabilities assumed at the acquisition date are shown in the following table. The pro forma results are not presented as the revenue and earnings were not material.

 

     (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   
  

 

 

 

 

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On October 1, 2013, Kyocera acquired 100% of the common stock of NEC Toppan Circuit Solutions, Inc. (TNCSi), a manufacturer of printed circuit board and made it a consolidated subsidiary. TNCSi has changed its name to Kyocera Circuit Solutions, Inc. (KCS) on October 1, 2013.

By making KCS a consolidated subsidiary, Kyocera expects to further enhance and expand Kyocera Group’s organic substrate business. Going forward, Kyocera will strive to further expand its organic substrate business.

The results of operations of the acquired business was included into Kyocera’s consolidated financial statements since the acquisition date. For segment reporting, it is reported in the Semiconductor Parts Group.

Kyocera has used the acquisition method of accounting to record assets acquired and liabilities assumed in accordance with ASC 805, “Business Combinations.” Factors that contributed to the recognition of goodwill include expected synergies and the trained workforce.

The fair values of the assets acquired and liabilities assumed at the acquisition date are shown in the following table. Since the allocation of purchase price has not yet been completed, the purchase price is subject to change. Acquisition-related costs of ¥113 million were included in selling, general and administrative expenses in the consolidated statement of income for the nine months ended December 31, 2013.

 

     (Yen in millions)  

Cash and cash equivalents

   ¥ 3,303   

Trade receivables

     8,231   

Inventories

     3,946   

Others

     910   
  

 

 

 

Total current assets

     16,390   
  

 

 

 

Property, plant and equipment

     5,413   

Intangible assets

     3,134   

Others

     860   
  

 

 

 

Total non-current assets

     9,407   
  

 

 

 

Total assets

     25,797   
  

 

 

 

Trade notes and accounts payable

     5,241   

Others

     3,202   
  

 

 

 

Total current liabilities

     8,443   
  

 

 

 

Non-current liabilities

     3,486   
  

 

 

 

Total liabilities

     11,929   
  

 

 

 

Total identified assets and liabilities

     13,868   
  

 

 

 

Purchase price (Cash)

     19,445   
  

 

 

 

Goodwill

   ¥ 5,577   
  

 

 

 

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

The pro forma results are not presented as the revenue and earnings were not material.

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

 

     (Yen in millions)  

Intangible assets subject to amortization:

  

Technologies

   ¥ 1,423   

Customer relationships

     1,200   

Others

     511   
  

 

 

 

Total

   ¥ 3,134   
  

 

 

 

The weighted average amortization periods for technologies and customer relationships  are 10 years and 13 years respectively.

 

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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 December 31, 2013, included in short-term investments in debt and equity securities and in long-term investments in debt and equity securities are summarized as follows:

 

    March 31, 2013     December 31, 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     ¥ 274,969      ¥ 797,438     ¥ 522,469      ¥ 0   

Investment trusts

    3,900        4,371       471        —          14,678        15,948       1,270        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    278,718        493,119       214,401        0       289,647        813,386       523,739        0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate bonds

    7,549        7,601       108        56       10,720        11,569       856        7   

Government bonds and public bonds

    —          —          —          —          376        384       8        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    7,549        7,601       108        56       11,096        11,953       864        7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

    286,267        500,720       214,509        56       300,743        825,339       524,603        7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Held-to-maturity securities:

               

Corporate bonds

    48,658        48,736       98        20       102,424        102,510       94        8   

Government bonds and public bonds

    5        5       —          —          5        5       —          —     

Others

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

    49,663        49,741       98        20       102,429        102,515       94        8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 335,930      ¥ 550,461     ¥ 214,607      ¥ 76     ¥ 403,172      ¥ 927,854     ¥ 524,697      ¥ 15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  * 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 December 31, 2013 are as follows:

 

     March 31, 2013      December 31, 2013  
     (Yen in millions)  

Gross unrealized gains on shares of KDDI

   ¥ 194,216       ¥ 492,008   

(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 December 31, 2013, included in other short-term investments and in other long-term investments, are summarized as follows:

 

     March 31, 2013      December 31, 2013  
     (Yen in millions)  

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

   ¥ 179,875       ¥ 140,201   

Non-marketable equity securities

     9,441         11,569   

Long-term loans

     43         47   

Investments in affiliates and an unconsolidated subsidiary

     3,145         2,963   
  

 

 

    

 

 

 

Total

   ¥ 192,504       ¥ 154,780   
  

 

 

    

 

 

 

 

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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     December 31, 2013  
    Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  
    (Yen in millions)  

Current Assets:

               

Investment trusts

  ¥ —        ¥ —        ¥ —        ¥ —        ¥ —        ¥ 10,000      ¥ —        ¥ 10,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    —          —          —          —          —          10,000        —          10,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign currency forward contracts

    —          956        —          956        —          366        —          366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

    —          956        —          956        —          366        —          366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    —          956        —          956        —          10,366        —          10,366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Assets:

               

Marketable equity securities

    488,748        —          —          488,748        797,438        —          —          797,438   

Investment trusts

    21        4,350        —          4,371        28        5,920        —          5,948   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity securities

    488,769        4,350        —          493,119        797,466        5,920        —          803,386   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate bonds

    7,601        —          —          7,601        11,569        —          —          11,569   

Government bonds and public bonds

    —          —          —          —          384        —          —          384   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

    7,601        —          —          7,601        11,953        —          —          11,953   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current assets

    496,370        4,350        —          500,720        809,419        5,920        —          815,339   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  ¥ 496,370      ¥ 5,306      ¥ —        ¥ 501,676      ¥ 809,419      ¥ 16,286      ¥ —        ¥ 825,705   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current Liabilities:

               

Foreign currency forward contracts

  ¥ —        ¥ 9,233      ¥ —        ¥ 9,233      ¥ —        ¥ 9,533      ¥ —        ¥ 9,533   

Interest rate swaps

    —          22        —          22        —          17        —          17   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

    —          9,255        —          9,255        —          9,550        —          9,550   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

  ¥ —        ¥ 9,255      ¥ —        ¥ 9,255      ¥ —        ¥ 9,550      ¥ —        ¥ 9,550   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 nine months ended December 31, 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      December 31, 2013  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Yen in millions)  

Assets (a):

           

Short-term investments in debt and equity securities

   ¥ 43,893       ¥ 43,910       ¥ 105,078       ¥ 105,157   

Long-term investments in debt and equity securities

     506,490         506,551         822,690         822,697   

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

     9,516         9,516         11,681         11,681   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 559,899       ¥ 559,977       ¥ 939,449       ¥ 939,535   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities (b):

           

Long-term debt (including due within one year)

   ¥ 30,672       ¥ 30,691       ¥ 34,060       ¥ 34,070   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 30,672       ¥ 30,691       ¥ 34,060       ¥ 34,070   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 December 31, 2013 were ¥9,428 million and ¥11,548 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 December 31, 2013 are as follows:

 

                         
     March 31, 2013      December 31, 2013  
     (Yen in millions)  

Finished goods

   ¥ 142,175       ¥ 172,321   

Work in process

     54,248         62,621   

Raw materials and supplies

     100,027         114,693   
  

 

 

    

 

 

 

Total

   ¥ 296,450       ¥ 349,635   
  

 

 

    

 

 

 

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 December 31, 2013 are as follows:

 

                         
     March 31, 2013      December 31, 2013  
     (Yen in millions)  

Other current assets

   ¥ 387       ¥ 425   

Other long-term investments

     1         —     

Other assets

     1,980         2,142   

(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.

 

     Nine months ended December 31,  
             2012                     2013         
     (Yen in millions)  

Balance at beginning of period

   ¥ 382       ¥ 238   

Charged to costs or expenses, or charge-offs

     7         8   

Others*

     19         48   
  

 

 

    

 

 

 

Balance at end of period

   ¥ 408       ¥ 294   
  

 

 

    

 

 

 

 

  * Others mainly consist of foreign currency translation.

The amounts of lease receivables less allowances for doubtful accounts at March 31, 2013 and December 31, 2013 were ¥32,674 million and ¥35,993 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’ transaction 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 December 31, 2013 are as follows:

 

     March 31, 2013      December 31, 2013  
     (Yen in millions)  

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 12,225       ¥ 17,813   

Interest rate swaps

     120         108   
  

 

 

    

 

 

 

Total

     12,345         17,921   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

     163,526         171,395   
  

 

 

    

 

 

 

Total derivatives

   ¥ 175,871       ¥ 189,316   
  

 

 

    

 

 

 

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

 

    Location   March 31, 2013     December 31, 2013  
        (Yen in millions)  

Derivative assets:

     

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

  Other current assets   ¥ 105      ¥ 131   
   

 

 

   

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

  Other current assets     851        235   
   

 

 

   

 

 

 

Total derivative assets

    ¥ 956      ¥ 366   
   

 

 

   

 

 

 

Derivative liabilities:

     

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

  Other current liabilities   ¥ 192      ¥ 329   

Interest rate swaps

  Other current liabilities     22        17   
   

 

 

   

 

 

 

Total

      214        346   
   

 

 

   

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

  Other current liabilities     9,041        9,204   
   

 

 

   

 

 

 

Total derivative liabilities

    ¥ 9,255      ¥ 9,550   
   

 

 

   

 

 

 

 

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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 nine months ended December 31, 2012 and 2013 are as follows:

Derivatives designated as cash flow hedge:

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

 

        Nine months ended December 31,  

Type of derivatives

      2012     2013  
        (Yen in millions)  

Foreign currency forward contracts

    ¥ (5   ¥ (72

Interest rate swaps

      (24     (206
   

 

 

   

 

 

 

Total

    ¥ (29   ¥ (278
   

 

 

   

 

 

 
        Gains (losses) recognized in income, which are reclassified from net unrealized gains (losses) on derivative financial instruments (effective portion)    
        Nine months ended December 31,  

Type of derivatives

 

Location

  2012     2013  
        (Yen in millions)  

Foreign currency forward contracts

  Net sales   ¥ 83      ¥ 28   

Foreign currency forward contracts

  Cost of sales     (99     (250

Interest rate swaps

  Interest expense     24        —     
   

 

 

   

 

 

 

Total

    ¥ 8      ¥ (222
   

 

 

   

 

 

 

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

 
        Nine months ended December 31,  

Type of derivatives

 

Location

  2012     2013  
        (Yen in millions)  

Foreign currency forward contracts

  Foreign currency transaction gains, net   ¥ (23   ¥ (4

Derivatives not designated as hedging instruments:

 

Gains (losses) recognized in income

 
        Nine months ended December 31,  

Type of derivatives

 

Location

  2012     2013  
        (Yen in millions)  

Foreign currency forward contracts

  Foreign currency transaction gains, net   ¥ (7,127   ¥ (779

 

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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 December 31, 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 December 31,    

Type of derivatives

        2012     2013  
          (Yen in millions)  

Foreign currency forward contracts

      ¥ (98   ¥ (120

Interest rate swaps

        2        16   
     

 

 

   

 

 

 

Total

      ¥ (96   ¥ (104
     

 

 

   

 

 

 

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

 

   

              Three months ended December 31,    

Type of derivatives

  

Location

   2012     2013  
          (Yen in millions)  

Foreign currency forward contracts

   Net sales    ¥ 25      ¥ (16

Foreign currency forward contracts

   Cost of sales      (69     (105
     

 

 

   

 

 

 

Total

      ¥ (44   ¥ (121
     

 

 

   

 

 

 

 

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

 

 
              Three months ended December 31,    

Type of derivatives

  

Location

   2012     2013  
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (6   ¥ (3

 

Derivatives not designated as hedging instruments:

 

Gains (losses) recognized in income

 

 
              Three months ended December 31,    

Type of derivatives

  

Location

           2012                     2013          
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (12,552   ¥ (8,882

 

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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 nine months ended December 31, 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.

 

         Nine months ended December 31,      
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 7,534      ¥ 8,549   

Interest cost

     1,742        1,276   

Expected return on plan assets

     (2,599     (2,497

Amortization of prior service cost

     (3,247     (3,256

Recognized actuarial loss

     1,130        1,414   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 4,560      ¥ 5,486   
  

 

 

   

 

 

 

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the three months ended December 31, 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 December 31,      
         2012             2013      
     (Yen in millions)  

Service cost

   ¥ 2,512      ¥ 2,893   

Interest cost

     580        433   

Expected return on plan assets

     (866     (837

Amortization of prior service cost

     (1,083     (1,085

Recognized actuarial loss

     377        471   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 1,520      ¥ 1,875   
  

 

 

   

 

 

 

 

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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 nine months ended December 31, 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.

 

         Nine months ended December 31,      
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 251      ¥ 373   

Interest cost

     1,202        1,416   

Expected return on plan assets

     (889     (1,227

Amortization of prior service cost

     7        8   

Recognized actuarial loss

     308        764   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 879      ¥ 1,334   
  

 

 

   

 

 

 

Net periodic pension costs at these foreign subsidiaries for the three months ended December 31, 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 December 31,      
             2012                     2013          
     (Yen in millions)  

Service cost

   ¥ 85      ¥ 126   

Interest cost

     408        484   

Expected return on plan assets

     (301     (416

Amortization of prior service cost

     3        2   

Recognized actuarial loss

     104        261   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 299      ¥ 457   
  

 

 

   

 

 

 

 

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10. COMMITMENTS AND CONTINGENCIES

As of December 31, 2013, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥12,289 million principally 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 December 31, 2013 are as follows:

 

     December 31, 2013  
     (Yen in millions)  

Due within 1 year

   ¥ 5,850   

Due after 1 year but within 2 years

     3,997   

Due after 2 years but within 3 years

     2,238   

Due after 3 years but within 4 years

     1,542   

Due after 4 years but within 5 years

     1,177   

Thereafter

     2,133   
  

 

 

 

Total

   ¥ 16,937   
  

 

 

 

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 nine months ended December 31, 2013 and during the three months ended December 31, 2013, Kyocera purchased ¥18,970 million and ¥8,155 million, respectively and is obligated to purchase ¥222,460 million in total by the end of December 2020.

Kyocera guarantees the debt of employees, an investee and an unconsolidated subsidiary. As of December 31, 2013, the total amount of these guarantees was ¥503 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 any 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 ¥13,703 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 certain remedial actions for the harbor clean-up pursuant to the reopener provisions.

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 was obligated to pay ¥37,789 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. The settlement also required the EPA to withdraw the UAO. The United States District Court (the Court) approved the settlement and entered the Supplemental CD on September 19, 2013.

On October 18, 2013, AVX paid the initial settlement installment of ¥13,335 million ($133.35 million), plus accrued interest on the entire settlement amount through that date into a court-managed registry account. Following expiration of the time period for the appeal of the court’s approval of the settlement, such funds were disbursed to the various governments. In accordance with the terms of the Supplemental CD, AVX is obligated to pay ¥11,636 million ($110.82 million), plus interest on September 19, 2014, and ¥12,818 million ($122.08 million), plus interest on September 21, 2015. AVX has the option to prepay any portion of the remaining settlement balance at any time prior to the due dates of the remaining installments.

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. As of December 31, 2013, AVX and Kyocera have recorded a liability of the amount of the second and the third payment in accordance with Supplemental CD.

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 Corporation 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 nine months ended December 31, 2012 and December 31, 2013 are as follows:

 

     Nine months ended December 31, 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

      

Net income

     44,970        (545 )     44,425   

Other comprehensive income (loss)—net of taxes

      

Net unrealized gains on securities

     30,111        12       30,123   

Net unrealized losses on derivative financial instruments

     (29     (5 )     (34

Pension adjustments

     (1,526     (57 )     (1,583

Foreign currency translation adjustments

     19,675        2,940       22,615   
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     48,231        2,890       51,121   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     93,201        2,345       95,546   
  

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation’s shareholders

     (22,013     —          (22,013

Cash dividends paid to noncontrolling interests

     —          (1,619 )     (1,619

Others

     118        (669 )     (551
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 1,540,811      ¥ 64,793     ¥ 1,605,604   
  

 

 

   

 

 

   

 

 

 

 

     Nine months ended December 31, 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

     69,364        4,224       73,588   

Other comprehensive income (loss)—net of taxes

      

Net unrealized gains on securities

     198,635        36       198,671   

Net unrealized losses on derivative financial instruments

     (278     (27 )     (305

Pension adjustments

     (1,514     (73 )     (1,587

Foreign currency translation adjustments

     50,034        6,956       56,990   
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     246,877        6,892       253,769   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     316,241        11,116       327,357   
  

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation’s shareholders

     (25,681     —          (25,681

Cash dividends paid to noncontrolling interests

     —          (2,176 )     (2,176

Others

     (55     (261 )     (316
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 1,936,662      ¥ 77,464     ¥ 2,014,126   
  

 

 

   

 

 

   

 

 

 

 

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12. ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in accumulated other comprehensive income for the nine months ended December 31, 2012 and December 31, 2013 are as follows:

 

     Nine months ended December 31, 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

     30,111        (29 )     (1,526     19,675       48,231   

Equity transactions with noncontrolling interests

     —          0       (8     (207 )     (215
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 70,846      ¥ (99 )   ¥ (13,824   ¥ (90,546 )   ¥ (33,623
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Nine months ended December 31, 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

     199,034        (504 )     (868     50,034       247,696   

Amounts reclassified from accumulated other comprehensive income

     (399     226       (646     —          (819
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net

     198,635        (278 )     (1,514     50,034       246,877   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity transactions with noncontrolling interests

     —          0       (6     (33 )     (39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 333,883      ¥ (346 )   ¥ (24,935   ¥ (11,626 )   ¥ 296,976   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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 nine months ended December 31, 2013 are as follows:

 

Details about accumulated other
comprehensive income components

  

Affected line items

  Nine months ended
December 31, 2013
 
         (Yen in millions)  

Net unrealized gains (losses) on securities:

    

Sales of securities

   Other, net   ¥ (625
    

 

 

 
   Income before income taxes     (625
   Income taxes     225   
    

 

 

 
   Net income     (400
   Net income attributable to noncontrolling interests     1   
    

 

 

 
   Net income attributable to shareholders of Kyocera Corporation     (399
    

 

 

 

Net unrealized gains (losses) on derivative financial Instruments:

    

Foreign currency forward contracts

   Net sales     (49
   Cost of sales     428   
   Foreign currency transaction gains, net     7   
    

 

 

 
   Income before income taxes     386   
   Income taxes     (74
    

 

 

 
   Net income     312   
   Net income attributable to noncontrolling interests     (86
    

 

 

 
   Net income attributable to shareholders of Kyocera Corporation     226   
    

 

 

 

Pension adjustments:

    

Amortization of prior service cost and recognized actuarial loss

   *1     (1,070
    

 

 

 
   Income before income taxes     (1,070
   Income taxes     462   
    

 

 

 
   Net income     (608
   Net income attributable to noncontrolling interests     (38
    

 

 

 
   Net income attributable to shareholders of Kyocera Corporation     (646
    

 

 

 

Total reclassifications for the period

     ¥ (819
    

 

 

 

 

  *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 December 31, 2013 are as follows:

 

Details about accumulated other
comprehensive income components

  

Affected line items

   Three months ended
December 31, 2013
 
          (Yen in millions)  

Net unrealized gains (losses) on securities:

     

Sales of securities

   Other, net    ¥ (407
     

 

 

 
   Income before income taxes      (407
   Income taxes      147   
     

 

 

 
   Net income      (260
   Net income attributable to noncontrolling interests      0   
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      (260
     

 

 

 
     

Net unrealized gains (losses) on derivative financial Instruments:

     

Foreign currency forward contracts

   Net sales      24   
   Cost of sales      177   
   Foreign currency transaction gains, net      6   
     

 

 

 
   Income before income taxes      207   
   Income taxes      (36
     

 

 

 
   Net income      171   
   Net income attributable to noncontrolling interests      (47
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      124   
     

 

 

 

Pension adjustments:

     

Amortization of prior service cost and recognized actuarial loss

   *1      (351
     

 

 

 
   Income before income taxes      (351
   Income taxes      150   
     

 

 

 
   Net income      (201
   Net income attributable to noncontrolling interests      (12
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      (213
     

 

 

 

Total reclassifications for the period

      ¥ (349
     

 

 

 

 

  *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 nine months ended December 31, 2012 and 2013 are as follows:

 

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

For the nine months ended December 31, 2012 :

      

Net unrealized gains on securities

   ¥ 47,098     ¥ (16,975 )   ¥ 30,123  

Net unrealized losses on derivative financial instruments

     (8 )     (26 )     (34 )

Pension adjustments

     (2,270 )     687       (1,583 )

Foreign currency translation adjustments

     22,615       —         22,615  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 67,435      ¥ (16,314   ¥ 51,121   
  

 

 

   

 

 

   

 

 

 

For the nine months ended December 31, 2013:

      

Net unrealized gains on securities

   ¥ 309,943     ¥ (111,272 )   ¥ 198,671  

Net unrealized losses on derivative financial instruments

     (432 )     127       (305 )

Pension adjustments

     (2,049 )     462       (1,587 )

Foreign currency translation adjustments

     56,990       —          56,990  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 364,452      ¥ (110,683   ¥ 253,769   
  

 

 

   

 

 

   

 

 

 

Tax effect allocated to each components of other comprehensive income (loss) for the three months ended December 31, 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 December 31, 2012 :

      

Net unrealized gains on securities

   ¥ 7,964     ¥ (2,850 )   ¥ 5,114  

Net unrealized losses on derivative financial instruments

     (133 )     (1 )     (134 )

Pension adjustments

     (1,416 )     237       (1,179 )

Foreign currency translation adjustments

     44,061       —          44,061  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 50,476      ¥ (2,614   ¥ 47,862   
  

 

 

   

 

 

   

 

 

 

For the three months ended December 31, 2013:

      

Net unrealized gains on securities

   ¥ 166,377     ¥ (59,856 )   ¥ 106,521  

Net unrealized losses on derivative financial instruments

     (169 )     20       (149 )

Pension adjustments

     (1,226 )     150       (1,076 )

Foreign currency translation adjustments

     35,036       —          35,036  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 200,018      ¥ (59,686   ¥ 140,332   
  

 

 

   

 

 

   

 

 

 

 

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13. SUPPLEMENTAL EXPENSE INFORMATION

Supplemental expense information for the nine months ended December 31, 2012 and 2013 is as follows:

 

       Nine months ended December 31,    
             2012                      2013          
     (Yen in millions)  

Research and development expenses

   ¥ 35,615       ¥ 36,374   

Advertising expenses

     5,244         4,942   

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

     14,230         17,674   

Supplemental expense information for the three months ended December 31, 2012 and 2013 is as follows:

 

       Three months ended December 31,    
             2012                      2013          
     (Yen in millions)  

Research and development expenses

   ¥ 11,749       ¥ 12,194   

Advertising expenses

     2,217         2,053   

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

     5,159         6,161   

 

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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 and Board

(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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Table of Contents

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 and equity in earnings of affiliates and an unconsolidated subsidiary, 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:

 

       Nine months ended December 31,    
             2012                      2013          

Amount of sales to KDDI group (Yen in millions)

   ¥ 69,565       ¥ 87,670   

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

     7.5         8.2   
       Three months ended December 31,    
             2012                      2013          

Amount of sales to KDDI group (Yen in millions)

   ¥ 21,132       ¥ 36,436   

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

     6.6         9.8   

 

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Table of Contents

Information by reporting segments for the nine months ended December 31, 2012 and 2013 is summarized as follows:

Reporting Segments

 

     Nine months ended December 31,  
     2012     2013  
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 56,937      ¥ 58,929   

Semiconductor Parts Group

     127,362        139,522   

Applied Ceramic Products Group

     136,726        195,854   

Electronic Device Group

     207,801        216,295   

Telecommunications Equipment Group

     127,360        147,778   

Information Equipment Group

     178,445        221,550   

Others

     115,009        123,177   

Adjustments and eliminations

     (23,116     (31,717
  

 

 

   

 

 

 

Net sales

   ¥ 926,524      ¥ 1,071,388   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 6,429      ¥ 8,484   

Semiconductor Parts Group

     22,848        24,956   

Applied Ceramic Products Group

     9,906        22,816   

Electronic Device Group

     (7,223     21,240   

Telecommunications Equipment Group

     1,671        1,870   

Information Equipment Group

     15,752        17,112   

Others

     7,320        3,479   
  

 

 

   

 

 

 

Total operating profit

     56,703        99,957   

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

     13,350        10,861   

Adjustments and eliminations

     (1,171     (474
  

 

 

   

 

 

 

Income before income taxes

   ¥ 68,882      ¥ 110,344   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 4,671      ¥ 3,616   

Semiconductor Parts Group

     8,930        11,125   

Applied Ceramic Products Group

     10,977        9,863   

Electronic Device Group

     10,794        12,425   

Telecommunications Equipment Group

     5,541        3,871   

Information Equipment Group

     6,902        7,951   

Others

     3,329        4,291   

Corporate

     1,512        1,658   
  

 

 

   

 

 

 

Total

   ¥ 52,656      ¥ 54,800   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 2,908      ¥ 2,291   

Semiconductor Parts Group

     10,219        9,496   

Applied Ceramic Products Group

     6,563        6,992   

Electronic Device Group

     9,052        9,607   

Telecommunications Equipment Group

     2,177        2,563   

Information Equipment Group

     5,044        3,680   

Others

     2,195        2,787   

Corporate

     2,549        2,442   
  

 

 

   

 

 

 

Total

   ¥ 40,707      ¥ 39,858   
  

 

 

   

 

 

 

 

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Table of Contents

Information by reporting segments for the three months ended December 31, 2012 and 2013 is summarized as follows:

Reporting Segments

 

       Three months ended December 31,    
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 18,538      ¥ 20,742   

Semiconductor Parts Group

     44,879        52,459   

Applied Ceramic Products Group

     51,302        68,339   

Electronic Device Group

     66,986        68,844   

Telecommunications Equipment Group

     43,027        51,221   

Information Equipment Group

     61,658        77,025   

Others

     40,148        43,464   

Adjustments and eliminations

     (8,445     (10,369
  

 

 

   

 

 

 

Net sales

   ¥ 318,093      ¥ 371,725   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 1,894      ¥ 2,722   

Semiconductor Parts Group

     8,986        8,915   

Applied Ceramic Products Group

     4,618        7,982   

Electronic Device Group

     4,656        6,578   

Telecommunications Equipment Group

     870        1,604   

Information Equipment Group

     4,646        6,663   

Others

     2,975        1,478   
  

 

 

   

 

 

 

Total operating profit

     28,645        35,942   

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

     5,214        5,491   

Adjustments and eliminations

     (709     (142
  

 

 

   

 

 

 

Income before income taxes

   ¥ 33,150      ¥ 41,291   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 1,643      ¥ 1,296   

Semiconductor Parts Group

     3,434        4,407   

Applied Ceramic Products Group

     3,955        3,490   

Electronic Device Group

     3,903        4,383   

Telecommunications Equipment Group

     1,857        1,270   

Information Equipment Group

     2,533        2,946   

Others

     1,276        1,597   

Corporate

     520        560   
  

 

 

   

 

 

 

Total

   ¥ 19,121      ¥ 19,949   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 905      ¥ 1,076   

Semiconductor Parts Group

     3,926        1,932   

Applied Ceramic Products Group

     1,245        2,467   

Electronic Device Group

     3,739        2,880   

Telecommunications Equipment Group

     569        665   

Information Equipment Group

     1,742        822   

Others

     1,312        599   

Corporate

     743        810   
  

 

 

   

 

 

 

Total

   ¥ 14,181      ¥ 11,251   
  

 

 

   

 

 

 

 

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Table of Contents

Geographic segments (Net sales by region)

 

       Nine months ended December 31,    
             2012                      2013          
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 413,315       ¥ 469,199   

Asia

     172,023         208,472   

Europe

     141,863         177,477   

United States of America

     157,983         167,916   

Others

     41,340         48,324   
  

 

 

    

 

 

 

Net sales

   ¥ 926,524       ¥ 1,071,388   
  

 

 

    

 

 

 
       Three months ended December 31,    
             2012                      2013          
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 138,467       ¥ 169,769   

Asia

     59,288         69,271   

Europe

     48,637         63,358   

United States of America

     57,259         54,046   

Others

     14,442         15,281   
  

 

 

    

 

 

 

Net sales

   ¥ 318,093       ¥ 371,725   
  

 

 

    

 

 

 

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)

 

     Nine months ended December 31,  
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 452,197      ¥ 490,760   

Intra-group sales and transfer between geographic areas

     309,337        357,027   
  

 

 

   

 

 

 
     761,534        847,787   
  

 

 

   

 

 

 

Asia

     148,210        176,383   

Intra-group sales and transfer between geographic areas

     191,664        213,692   
  

 

 

   

 

 

 
     339,874        390,075   
  

 

 

   

 

 

 

Europe

     147,359        183,244   

Intra-group sales and transfer between geographic areas

     25,852        36,468   
  

 

 

   

 

 

 
     173,211        219,712   
  

 

 

   

 

 

 

United States of America

     161,225        200,346   

Intra-group sales and transfer between geographic areas

     20,212        31,655   
  

 

 

   

 

 

 
     181,437        232,001   
  

 

 

   

 

 

 

Others

     17,533        20,655   

Intra-group sales and transfer between geographic areas

     9,250        11,845   
  

 

 

   

 

 

 
     26,783        32,500   
  

 

 

   

 

 

 

Adjustments and eliminations

     (556,315     (650,687
  

 

 

   

 

 

 

Net sales

   ¥ 926,524      ¥ 1,071,388   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 48,337      ¥ 64,114   

Asia

     17,344        18,086   

Europe

     2,205        6,263   

United States of America

     (10,495     12,766   

Others

     515        459   
  

 

 

   

 

 

 
     57,906        101,688   

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

     13,350        10,861   

Adjustments and eliminations

     (2,374     (2,205
  

 

 

   

 

 

 

Income before income taxes

   ¥ 68,882      ¥ 110,344   
  

 

 

   

 

 

 

 

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Table of Contents
     Three months ended December 31,  
             2012                     2013          
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 152,444      ¥ 177,614   

Intra-group sales and transfer between geographic areas

     105,303        120,065   
  

 

 

   

 

 

 
     257,747        297,679   
  

 

 

   

 

 

 

Asia

     52,310        56,813   

Intra-group sales and transfer between geographic areas

     67,856        69,724   
  

 

 

   

 

 

 
     120,166        126,537   
  

 

 

   

 

 

 

Europe

     49,764        64,866   

Intra-group sales and transfer between geographic areas

     9,445        12,369   
  

 

 

   

 

 

 
     59,209        77,235   
  

 

 

   

 

 

 

United States of America

     57,843        65,667   

Intra-group sales and transfer between geographic areas

     7,524        10,722   
  

 

 

   

 

 

 
     65,367        76,389   
  

 

 

   

 

 

 

Others

     5,732        6,765   

Intra-group sales and transfer between geographic areas

     3,208        3,807   
  

 

 

   

 

 

 
     8,940        10,572   
  

 

 

   

 

 

 

Adjustments and eliminations

     (193,336     (216,687
  

 

 

   

 

 

 

Net sales

   ¥ 318,093      ¥ 371,725   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 19,895      ¥ 26,037   

Asia

     5,497        6,728   

Europe

     435        2,346   

United States of America

     3,696        3,597   

Others

     321        242   
  

 

 

   

 

 

 
     29,844        38,950   

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

     5,214        5,491   

Adjustments and eliminations

     (1,908     (3,150
  

 

 

   

 

 

 

Income before income taxes

   ¥ 33,150      ¥ 41,291   
  

 

 

   

 

 

 

 

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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:

 

    Nine months ended December 31,  
    2012     2013  
    (Yen in millions and shares in thousands,
except per share amounts)
 

Net income attributable to shareholders of Kyocera Corporation

  ¥ 44,970      ¥ 69,364   
 

 

 

   

 

 

 

Basic earnings per share:

   

Net income attributable to shareholders of Kyocera Corporation

  ¥ 122.57      ¥ 189.07   

Diluted earnings per share:

   

Net income attributable to shareholders of Kyocera Corporation

  ¥ 122.57      ¥ 189.07   
 

 

 

   

 

 

 

Basic weighted average number of shares outstanding

    366,885        366,873   

Diluted weighted average number of shares outstanding

    366,885        366,873   
 

 

 

   

 

 

 

 

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