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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 August 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: August 11, 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 ended June 30, 2014 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, 2014     June 30, 2014  
     (Yen in millions)  

Current assets:

    

Cash and cash equivalents

   ¥ 335,174      ¥ 277,109   

Short-term investments in debt and equity securities (Notes 3 and 4)

     115,900        129,982   

Other short-term investments (Note 3)

     160,331        147,673   

Trade receivables

    

Notes

     22,054        20,887   

Accounts

     257,850        237,140   

Less allowances for doubtful accounts and sales returns

     (5,062     (5,050
  

 

 

   

 

 

 
     274,842        252,977   

Inventories (Note 5)

     335,802        352,567   

Deferred income taxes

     41,499        42,697   

Other current assets (Notes 4, 6 and 7)

     103,887        103,654   
  

 

 

   

 

 

 

Total current assets

     1,367,435        1,306,659   

Investments and advances:

    

Long-term investments in debt and equity securities (Notes 3 and 4)

     738,212        804,493   

Other long-term investments (Notes 3, 4, 6 and 9)

     14,847        15,789   
  

 

 

   

 

 

 

Total investments and advances

     753,059        820,282   

Property, plant and equipment:

    

Land

     63,268        63,012   

Buildings

     344,167        343,103   

Machinery and equipment

     826,881        821,305   

Construction in progress

     11,821        11,673   

Less accumulated depreciation

     (975,580     (971,221
  

 

 

   

 

 

 

Total property, plant and equipment

     270,557        267,872   

Goodwill

     116,632        115,391   

Intangible assets

     59,326        57,711   

Other assets (Note 6)

     69,695        65,687   
  

 

 

   

 

 

 

Total assets

   ¥ 2,636,704      ¥ 2,633,602   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED BALANCE SHEETS (Unaudited)—(Continued)

 

                                                                 
     March 31, 2014     June 30, 2014  
     (Yen in millions)  

Current liabilities:

    

Short-term borrowings

   ¥ 4,064      ¥ 4,233   

Current portion of long-term debt (Note 4)

     12,360        10,684   

Trade notes and accounts payable

     122,424        120,464   

Other notes and accounts payable

     48,224        46,196   

Accrued payroll and bonus

     56,068        45,838   

Accrued income taxes

     23,353        9,988   

Other accrued liabilities (Note 9)

     31,347        35,957   

Other current liabilities (Notes 4 and 7)

     29,611        33,954   
  

 

 

   

 

 

 

Total current liabilities

     327,451        307,314   

Non-current liabilities:

    

Long-term debt (Note 4)

     19,466        19,153   

Accrued pension and severance liabilities (Note 8)

     36,812        32,722   

Deferred income taxes

     235,954        245,656   

Other non-current liabilities (Note 9)

     29,795        29,481   
  

 

 

   

 

 

 

Total non-current liabilities

     322,027        327,012   
  

 

 

   

 

 

 

Total liabilities

     649,478        634,326   

Commitments and contingencies (Note 9)

    

Kyocera Corporation shareholders’ equity:

    

Common stock

     115,703        115,703   

Additional paid-in capital

     162,666        162,699   

Retained earnings

     1,415,784        1,420,576   

Accumulated other comprehensive income (Note 11)

     250,963        262,034   

Common stock in treasury, at cost

     (35,033     (35,036
  

 

 

   

 

 

 

Total Kyocera Corporation shareholders’ equity

     1,910,083        1,925,976   

Noncontrolling interests

     77,143        73,300   
  

 

 

   

 

 

 

Total equity (Note 10)

     1,987,226        1,999,276   
  

 

 

   

 

 

 

Total liabilities and equity

   ¥ 2,636,704      ¥ 2,633,602   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

                                                                 
     Three months ended June 30,  
     2013     2014  
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net sales (Note 7)

   ¥ 331,655      ¥ 334,714   

Cost of sales (Notes 7 and 8)

     245,298        246,998   
  

 

 

   

 

 

 

Gross profit

     86,357        87,716   

Selling, general and administrative expenses (Notes 8 and 12)

     60,959        68,934   
  

 

 

   

 

 

 

Profit from operations

     25,398        18,782   

Other income (expenses):

    

Interest and dividend income

     7,539        10,011   

Interest expense

     (492     (468

Foreign currency transaction gains, net (Note 7)

     1,721        1,471   

Other, net (Note 7)

     647        884   
  

 

 

   

 

 

 

Total other income (expenses)

     9,415        11,898   
  

 

 

   

 

 

 

Income before income taxes

     34,813        30,680   

Income taxes

     10,892        9,736   
  

 

 

   

 

 

 

Net income

     23,921        20,944   

Net income attributable to noncontrolling interests

     (1,270     (1,477
  

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 22,651      ¥ 19,467   
  

 

 

   

 

 

 

Per share information* (Note 14):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 61.74      ¥ 53.06   

Diluted

     61.74        53.06   

Average number of shares of common stock outstanding:

    

Basic

     366,877        366,866   

Diluted

     366,877        366,866   

 

* Stock Split

As Kyocera Corporation undertook a stock split at the ratio of two-for-one of all common stock on October 1, 2013, “Per share information” during the three months ended June 30, 2013 is calculated under the assumption that the stock split had been undertaken at the beginning of the year ended March 31, 2014 in accordance with accounting principles generally accepted in the United States of America related to earnings per share.

The accompanying notes are an integral part of these statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 

                                                                 
      Three months ended June 30,  
             2013                     2014          
     Amount     Amount  
     (Yen in millions)  

Net income

   ¥ 23,921      ¥ 20,944   
  

 

 

   

 

 

 

Other comprehensive income (loss)—net of taxes

    

Net unrealized gains on securities (Notes 3, 10 and 11)

     97,283        17,671   

Net unrealized losses on derivative financial instruments (Notes 7, 10 and 11)

     (30     (59

Pension adjustments (Notes 8, 10 and 11)

     (341     673   

Foreign currency translation adjustments (Notes 10 and 11)

     22,854        (8,229
  

 

 

   

 

 

 

Total other comprehensive income

     119,766        10,056   
  

 

 

   

 

 

 

Comprehensive income

     143,687        31,000   

Comprehensive income attributable to noncontrolling interests

     (4,287     (378
  

 

 

   

 

 

 

Comprehensive income attributable to shareholders of Kyocera Corporation

   ¥ 139,400      ¥ 30,622   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

                                                                 
    Three months ended June 30,  
    2013     2014  
    (Yen in millions)  

Cash flows from operating activities:

   

Net income

  ¥ 23,921      ¥ 20,944   

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

   

Depreciation and amortization

    16,737        16,098   

Provision for doubtful accounts and loss on bad debts

    37        123   

Write-down of inventories

    2,233        3,769   

Deferred income taxes

    6,588        (1,040

Foreign currency adjustments

    (687     490   

Change in assets and liabilities:

   

Decrease in receivables

    34,171        18,670   

Increase in inventories

    (9,887     (23,486

Increase in other current assets

    (439     (2,799

Increase (decrease) in notes and accounts payable

    (16,813     3,367   

Decrease in accrued income taxes

    (14,318     (13,316

Decrease in other current liabilities

    (11,781     (1,246

Decrease in other non-current liabilities

    (539     (547

Other, net

    (1,438     (1,307
 

 

 

   

 

 

 

Net cash provided by operating activities

    27,785        19,720   
 

 

 

   

 

 

 

Cash flows from investing activities:

   

Payments for purchases of available-for-sale securities

    (4,690     (11,002

Payments for purchases of held-to-maturity securities

    (37,124     (82,902

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

    55        12,167   

Proceeds from maturities of held-to-maturity securities

    11,893        30,919   

Acquisitions of businesses, net of cash acquired

    (158     —     

Investment in affiliates

    (3     (509

Payments for purchases of property, plant and equipment

    (14,860     (16,578

Payments for purchases of intangible assets

    (1,469     (1,470

Acquisition of time deposits

    (84,470     (45,974

Withdrawal of time deposits and certificate of deposits

    80,866        57,657   

Other, net

    2,580        1,257   
 

 

 

   

 

 

 

Net cash used in investing activities

    (47,380     (56,435
 

 

 

   

 

 

 

Cash flows from financing activities:

   

Increase (decrease) in short-term debt, net

    (392     210   

Proceeds from issuance of long-term debt

    4,271        3,059   

Payments of long-term debt

    (3,999     (4,233

Dividends paid

    (11,227     (14,162

Purchase of noncontrolling interests

    (229     (3,364

Other, net

    (3     (216
 

 

 

   

 

 

 

Net cash used in financing activities

    (11,579     (18,706
 

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

    6,606        (2,644
 

 

 

   

 

 

 

Net decrease in cash and cash equivalents

    (24,568     (58,065

Cash and cash equivalents at beginning of period

    305,454        335,174   
 

 

 

   

 

 

 

Cash and cash equivalents at end of period

  ¥ 280,886      ¥ 277,109   
 

 

 

   

 

 

 

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.” 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:

 

Customer relationships

   3 to 20 years

Software

   2 to 10 years

Non-patent technology

   5 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 expense as incurred. Advertising expenses are accounted for under ASC 720-35, “Other Expenses—Advertising Costs”, and charged to expense 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, 2014, Kyocera adopted Accounting Standards Update (ASU) No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This accounting standard requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following: (a) The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors (b) Any additional amount the reporting entity expects to pay on behalf of its co-obligors. The accounting standard also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. 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, 2014, Kyocera adopted ASU No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This accounting standard resolves the diversity in practice about whether ASC 810-10, Consolidation—Overall, or ASC 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, this accounting standard resolves the diversity in practice for the treatment of business combinations achieved in stages involving a foreign entity. 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, 2014, Kyocera adopted 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. 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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(18) Recently issued accounting standards

In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This accounting standard changes the requirements for reporting discontinued operations in ASC 205-20, “Presentation of Financial Statements—Discontinued Operations.” A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. This accounting standard also requires an entity to provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. This accounting standard will be effective for All disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. As this accounting standard is a provision for disclosure, 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.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This accounting standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This accounting standard also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about:

1. Contracts with customers—including revenue and impairments recognized, disaggregation of revenue, and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations)

2. Significant judgments and changes in judgments—determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations

3. Assets recognized from the costs to obtain or fulfill a contract.

This accounting standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Kyocera is currently evaluating the impact that this accounting standard will have on Kyocera’s consolidated results of operations, financial position and cash flows.

In June 2014, the FASB issued ASU No. 2014-10, “Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” This accounting standard removes the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. This accounting standard also eliminates an exception provided to development stage entities in ASC 810, “Consolidation,” for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. This accounting standard will be effective retrospectively for annual reporting periods beginning after December 15, 2015, and interim periods therein. 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 balance sheets at March 31, 2014, and the consolidated statements of cash flows for the three months ended June 30, 2013 to conform to the current presentation.

 

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3. 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, 2014 and June 30, 2014, 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, 2014      June 30, 2014  
     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

   ¥ 273,595       ¥ 735,606       ¥ 462,012       ¥ 1       ¥ 273,595       ¥ 763,225       ¥ 489,630       ¥ —     

Investment trusts

     10,017         10,025         8         —           11,019         11,030         11         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity securities

     283,612         745,631         462,020         1         284,614         774,255         489,641         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

     283,612         745,631         462,020         1         284,614         774,255         489,641         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity securities:

                       

Corporate bonds

     108,475         108,551         87         11         160,214         160,266         133         81   

Government bonds and public bonds

     6         6         —           —           6         6         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total held-to-maturity securities

     108,481         108,557         87         11         160,220         160,272         133         81   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 392,093       ¥ 854,188       ¥ 462,107       ¥ 12       ¥ 444,834       ¥ 934,527       ¥ 489,774       ¥ 81   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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, 2014 and June 30, 2014 are as follows:

 

     March 31, 2014      June 30, 2014  
     (Yen in millions)  

Gross unrealized gains on shares of KDDI

   ¥ 435,428       ¥ 458,678   

At June 30, 2014, Kyocera Corporation’s equity interest in KDDI Corporation was 12.76%.

Short-term investments in debt and equity securities and long-term investments in debt and equity securities at March 31, 2014 and June 30, 2014 are as follows:

 

     March 31, 2014      June 30, 2014  
     Available-
for-Sale
     Held-to-
Maturity
     Total      Available-
for-Sale
     Held-to-
Maturity
     Total  
     (Yen in millions)  

Short-term investment in debt and equity securities

   ¥ 10,000       ¥ 105,900       ¥ 115,900       ¥ 10,000       ¥ 119,982       ¥ 129,982   

Long-term investment in debt and equity securities

     735,631         2,581         738,212         764,255         40,238         804,493   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 745,631       ¥ 108,481       ¥ 854,112       ¥ 774,255       ¥ 160,220       ¥ 934,475   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

 

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(2) Other investments

Kyocera holds time deposits and certificates of deposits which are due over three months to original maturity, non-marketable equity securities, long-term loans and investments in affiliates and an unconsolidated subsidiary. Carrying amounts of these investments at March 31, 2014 and June 30, 2014, included in other short-term investments and in other long-term investments, are summarized as follows:

 

     March 31, 2014      June 30, 2014  
     (Yen in millions)  

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

   ¥ 160,376       ¥ 147,669   

Non-marketable equity securities

     11,616         11,864   

Long-term loans

     26         9   

Investments in affiliates and an unconsolidated subsidiary

     3,160         3,920   
  

 

 

    

 

 

 

Total

   ¥ 175,178       ¥ 163,462   
  

 

 

    

 

 

 

 

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4. 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, 2014      June 30, 2014  
     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       ¥ —         ¥ 10,000       ¥ —         ¥ 10,000   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity securities

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Foreign currency forward contracts

     —           412         —           412         —           1,433         —           1,433   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives

     —           412         —           412         —           1,433         —           1,433   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     —           10,412         —           10,412         —           11,433         —           11,433   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-Current Assets:

                       

Marketable equity securities

     735,606         —           —           735,606         763,225         —           —           763,225   

Investment trusts

     25         —           —           25         27         1,003         —           1,030   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity securities

     735,631         —           —           735,631         763,252         1,003         —           764,255   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current assets

     735,631         —           —           735,631         763,252         1,003         —           764,255   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   ¥ 735,631       ¥ 10,412       ¥ —         ¥ 746,043       ¥ 763,252       ¥ 12,436       ¥ —         ¥ 775,688   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Current Liabilities:

                       

Foreign currency forward contracts

   ¥ —         ¥ 2,391       ¥ —         ¥ 2,391       ¥ —         ¥ 465       ¥ —         ¥ 465   

Interest rate swaps

     —           13         —           13         —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives

     —           2,404         —           2,404         —           465         —           465   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

   ¥ —         ¥ 2,404       ¥ —         ¥ 2,404       ¥ —         ¥ 465       ¥ —         ¥ 465   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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 three months ended June 30, 2013 and 2014.

The fair value of Level 2 derivatives is estimated based on quotes from financial institutions. With respect to the detail information of derivatives, please refer to the Note 7 to the Quarterly Consolidated Financial 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, 2014      June 30, 2014  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Yen in millions)  

Assets (a):

           

Short-term investments in debt and equity securities

   ¥ 115,900       ¥ 115,974       ¥ 129,982       ¥ 130,101   

Long-term investments in debt and equity securities

     738,212         738,214         804,493         804,426   

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

     11,687         11,687         11,869         11,869   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 865,799       ¥ 865,875       ¥ 946,344       ¥ 946,396   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities (b):

           

Long-term debt (including due within one year)

   ¥ 31,826       ¥ 31,834       ¥ 29,837       ¥ 29,842   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 31,826       ¥ 31,834       ¥ 29,837       ¥ 29,842   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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, 2014 and June 30, 2014 were ¥11,563 million and ¥11,852 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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5. INVENTORIES

Inventories at March 31, 2014 and June 30, 2014 are as follows:

 

                                                                 
     March 31, 2014      June 30, 2014  
     (Yen in millions)  

Finished goods

   ¥ 164,892       ¥ 177,694   

Work in process

     60,075         61,978   

Raw materials and supplies

     110,835         112,895   
  

 

 

    

 

 

 

Total

   ¥ 335,802       ¥ 352,567   
  

 

 

    

 

 

 

6. 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, 2014 and June 30, 2014 are as follows:

 

                                                                 
     March 31, 2014      June 30, 2014  
     (Yen in millions)  

Other current assets

   ¥ 378       ¥ 362   

Other assets

         2,139             2,123   

(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, a consolidated German subsidiary 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 estimates allowance for doubtful accounts related to lease receivables at the portfolio level.

 

                                                                 
     Three months ended June 30,  
             2013                     2014         
     (Yen in millions)  

Balance at beginning of period

   ¥ 238       ¥ 283   

Charged to costs or expenses, or charge-offs

     18         13   

Others*

     16         (8
  

 

 

    

 

 

 

Balance at end of period

   ¥ 272       ¥ 288   
  

 

 

    

 

 

 

 

  * Others mainly consist of foreign currency translation.

The amounts of lease receivables less allowances for doubtful accounts at March 31, 2014 and June 30, 2014 were ¥35,552 million and ¥33,802 million, respectively, which are included in other current assets and other assets in the consolidated balance sheets.

 

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7. DERIVATIVES AND HEDGING

Kyocera’s activities are exposed to a variety 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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Table of Contents

The aggregate contractual amounts of derivative financial instruments at March 31, 2014 and June 30, 2014 are as follows:

 

                                                                 
     March 31, 2014      June 30, 2014  
     (Yen in millions)  

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 14,277       ¥ 13,734   

Interest rate swaps

     89         —     
  

 

 

    

 

 

 

Total

     14,366         13,734   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

     162,171         158,498   
  

 

 

    

 

 

 

Total derivatives

   ¥ 176,537       ¥ 172,232   
  

 

 

    

 

 

 

The fair value and location of derivative financial instruments in the consolidated balance sheets at March 31, 2014 and June 30, 2014 are as follows:

 

    

Location

   March 31, 2014      June 30, 2014  
          (Yen in millions)  

Derivative assets:

        

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   Other current assets    ¥ 56       ¥ 62   
     

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

   Other current assets      356         1,371   
     

 

 

    

 

 

 

Total derivative assets

      ¥ 412       ¥ 1,433   
     

 

 

    

 

 

 
        

Derivative liabilities:

        

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   Other current liabilities    ¥ 34       ¥ 27   

Interest rate swaps

   Other current liabilities      13         —     
     

 

 

    

 

 

 

Total

        47         27   
     

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

   Other current liabilities      2,357         438   
     

 

 

    

 

 

 

Total derivative liabilities

      ¥ 2,404       ¥ 465   
     

 

 

    

 

 

 

 

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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 June 30, 2013 and 2014 are as follows:

Derivatives designated as cash flow hedge:

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

 

     Three months ended June 30,  

Type of derivatives

   2013     2014  
     (Yen in millions)  

Foreign currency forward contracts

   ¥ 54      ¥ 7   

Interest rate swaps

     (105     (69
  

 

 

   

 

 

 

Total

   ¥ (51   ¥ (62
  

 

 

   

 

 

 

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

 

          Three months ended June 30,  

Type of derivatives

  

Location

   2013     2014  
          (Yen in millions)  

Foreign currency forward contracts

   Net sales    ¥ 78      ¥ 0   

Foreign currency forward contracts

   Cost of sales      (171     17   

Interest rate swaps

   Other, net      —          (14
     

 

 

   

 

 

 

Total

      ¥ (93   ¥ 3   
     

 

 

   

 

 

 

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

 

          Three months ended June 30,  

Type of derivatives

  

Location

   2013     2014  
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ (2   ¥ 0   

Derivatives not designated as hedging instruments:

Gains (losses) recognized in income

 

          Three months ended June 30,  

Type of derivatives

  

Location

   2013      2014  
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 5,915       ¥ 2,934   

 

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8. 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 three months ended June 30, 2013 and 2014 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 June 30,  
             2013                     2014          
     (Yen in millions)  

Service cost

   ¥ 2,828      ¥ 2,919   

Interest cost

     422        452   

Expected return on plan assets

     (830     (902

Amortization of prior service cost

     (1,086     (1,083

Recognized actuarial loss

     471        405   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 1,805      ¥ 1,791   
  

 

 

   

 

 

 

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, 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 three months ended June 30, 2013 and 2014 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 June 30,  
             2013                     2014          
     (Yen in millions)  

Service cost

   ¥ 123      ¥ 134   

Interest cost

     464        501   

Expected return on plan assets

     (404     (481

Amortization of prior service cost

     2        2   

Recognized actuarial loss

     251        155   
  

 

 

   

 

 

 

Net periodic pension costs

   ¥ 436      ¥ 311   
  

 

 

   

 

 

 

 

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9. COMMITMENTS AND CONTINGENCIES

As of June 30, 2014, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥7,270 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 June 30, 2014 are as follows:

 

                                
     June 30, 2014  
     (Yen in millions)  

Due within 1 year

   ¥ 5,765   

Due after 1 year but within 2 years

     3,677   

Due after 2 years but within 3 years

     2,373   

Due after 3 years but within 4 years

     1,677   

Due after 4 years but within 5 years

     1,286   

Thereafter

     2,244   
  

 

 

 

Total

   ¥ 17,022   
  

 

 

 

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 three months ended June 30, 2014, Kyocera purchased ¥1,577 million and is obligated to purchase ¥205,035 million in total by the end of December 2020.

Kyocera guarantees the debt of employees, an investee and an unconsolidated subsidiary. As of June 30, 2014, the total amount of these guarantees was ¥478 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.

Kyocera’s investment in Kagoshima Mega Solar Power Corporation, which was ¥1,608 million at June 30, 2014 accounted for by the equity method, is pledged as collateral for loans of ¥23,358 million from financial institutions of Kagoshima Mega Solar Power Corporation.

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 or such state statutes authorize joint and several liability, the EPA or state regulatory authorities 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.

On October 10, 2012, the EPA, the United States, and the Commonwealth of Massachusetts and AVX announced that they had reached a settlement with respect to the EPA’s ongoing clean-up of the New Bedford Harbor in the Commonwealth of Massachusetts (the harbor). Under the terms of the settlement, AVX was obligated to pay ¥37,079 million ($366.25 million), plus interest computed from August 1, 2012, in three installments over a two-year period for use by the EPA and the Commonwealth to complete the clean-up of the harbor, and recorded a liability for the full amount of the obligation.

 

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On October 18, 2013, AVX paid the initial settlement installment of ¥13,335 million ($133.35 million), plus accrued interest of ¥395 million ($3.95 million). On March 26, 2014, AVX prepaid a second settlement installment of ¥11,414 million ($110.82 million), plus accrued interest of ¥85 million ($0.82 million) on the remaining settlement amount through that date. In accordance with the terms of the settlement, AVX is obligated to pay ¥12,330 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 date. As of June 30, 2014, AVX and Kyocera have recorded a liability of the amount of the third payment in accordance with the settlement.

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. Also, 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. Accordingly, 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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10. 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, 2014, Kyocera Corporation declared year-end cash dividends totaling ¥14,675 million, ¥40 per share of common stock effective June 27, 2014 to shareholders of record on March 31, 2014.

 

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Changes in Kyocera Corporation shareholders’ equity, noncontrolling interests and total equity for the three months ended June 30, 2013 and June 30, 2014 are as follows:

 

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

Balance at beginning of period

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

Comprehensive income

      

Net income

     22,651        1,270        23,921   

Other comprehensive income—net of taxes

      

Net unrealized gains on securities

     97,317        (34     97,283   

Net unrealized losses on derivative financial instruments

     (51     21        (30

Pension adjustments

     (298     (43     (341

Foreign currency translation adjustments

     19,781        3,073        22,854   
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     116,749        3,017        119,766   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     139,400        4,287        143,687   
  

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation’s shareholders

     (11,006     —          (11,006

Cash dividends paid to noncontrolling interests

     —          (942     (942

Equity transactions with noncontrolling interests and others

     0        49        49   
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 1,774,551      ¥ 72,179      ¥ 1,846,730   
  

 

 

   

 

 

   

 

 

 

 

     Three months ended June 30, 2014  
     Kyocera
Corporation
Shareholders’
Equity
    Noncontrolling
Interests
    Equity  
     (Yen in millions)  

Balance at beginning of period

   ¥ 1,910,083      ¥ 77,143      ¥ 1,987,226   

Comprehensive income

      

Net income

     19,467        1,477        20,944   

Other comprehensive income (loss)—net of taxes

      

Net unrealized gains on securities

     17,674        (3     17,671   

Net unrealized losses on derivative financial instruments

     (62     3        (59

Pension adjustments

     522        151        673   

Foreign currency translation adjustments

     (6,979     (1,250     (8,229
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     11,155        (1,099     10,056   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     30,622        378        31,000   
  

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation’s shareholders

     (14,675     —          (14,675

Cash dividends paid to noncontrolling interests

     —          (937     (937

Equity transactions with noncontrolling interests and others

     (54     (3,284     (3,338
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 1,925,976      ¥ 73,300      ¥ 1,999,276   
  

 

 

   

 

 

   

 

 

 

 

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11. ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in accumulated other comprehensive income for the three months ended June 30, 2013 and June 30, 2014 are as follows:

 

     Three months ended June 30, 2013  
     Net
Unrealized
Gains on
Securities
    Net
Unrealized
Losses

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

Balance at beginning of period

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

Other comprehensive income (loss), net

          

Other comprehensive income (loss) before reclassifications

     97,336        (146     (75     19,781        116,896   

Amounts reclassified from accumulated other comprehensive income

     (19     95        (223     —          (147
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net

     97,317        (51     (298     19,781        116,749   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity transactions with noncontrolling interests

     —          0        0        0        0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 232,565      ¥ (119   ¥ (23,713   ¥ (41,846   ¥ 166,887   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three months ended June 30, 2014  
     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

   ¥ 293,783       ¥ (260   ¥ (21,101   ¥ (21,459   ¥ 250,963   

Other comprehensive income (loss), net

           

Other comprehensive income (loss) before reclassifications

     17,674         (59     817        (6,979     11,453   

Amounts reclassified from accumulated other comprehensive income

     —           (3     (295     —          (298
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net

     17,674         (62     522        (6,979     11,155   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Equity transactions with noncontrolling interests

     —           0        (69     (15     (84
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 311,457       ¥ (322   ¥ (20,648   ¥ (28,453   ¥ 262,034   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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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 June 30, 2013 and June 30, 2014 are as follows:

 

Details about accumulated other
comprehensive income components

  

Affected line items

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

Net unrealized gains (losses) on securities:

     

Sales of securities

   Other, net    ¥ (30
     

 

 

 
   Income before income taxes      (30
   Income taxes      10   
     

 

 

 
   Net income      (20
   Net income attributable to noncontrolling interests      1   
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      (19
     

 

 

 

Net unrealized gains (losses) on derivative financial Instruments:

     

Foreign currency forward contracts

   Net sales      (136
   Cost of sales      297   
   Foreign currency transaction gains, net      4   
     

 

 

 
   Income before income taxes      165   
   Income taxes      (33
     

 

 

 
   Net income      132   
   Net income attributable to noncontrolling interests      (37
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      95   
     

 

 

 

Pension adjustments:

     

Amortization of prior service cost and recognized actuarial loss

   *1      (362
     

 

 

 
   Income before income taxes      (362
   Income taxes      150   
     

 

 

 
   Net income      (212
   Net income attributable to noncontrolling interests      (11
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      (223
     

 

 

 

Total reclassifications for the period

      ¥ (147
     

 

 

 

 

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Table of Contents

Details about accumulated other
comprehensive income components

  

Affected line items

   Three months ended
June 30, 2014
 
          (Yen in millions)  

Net unrealized gains (losses) on derivative financial Instruments:

     

Foreign currency forward contracts and interest rate swaps

   Net sales    ¥ 0   
   Cost of sales      (33
   Foreign currency transaction gains, net      0   
   Other, net      22   
     

 

 

 
   Income before income taxes      (11
   Income taxes      2   
     

 

 

 
   Net income      (9
   Net income attributable to noncontrolling interests      6   
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      (3
     

 

 

 

Pension adjustments:

     

Amortization of prior service cost and recognized actuarial loss

   *1      (521
     

 

 

 
   Income before income taxes      (521
   Income taxes      244   
     

 

 

 
   Net income      (277
   Net income attributable to noncontrolling interests      (18
     

 

 

 
   Net income attributable to shareholders of Kyocera Corporation      (295
     

 

 

 

Total reclassifications for the period

      ¥ (298
     

 

 

 

 

*1 As for the affected line items in the consolidated statements of income by reclassification of pension adjustments, please refer to the Note 8 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 three months ended June 30, 2013 and June 30, 2014 are as follows:

 

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

For the three months ended June 30, 2013 :

      

Net unrealized gains on securities

   ¥ 151,579      ¥ (54,296   ¥ 97,283   

Net unrealized losses on derivative financial instruments

     (71     41        (30

Pension adjustments

     (491     150        (341

Foreign currency translation adjustments

     22,854        —          22,854   
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 173,871      ¥ (54,105   ¥ 119,766   
  

 

 

   

 

 

   

 

 

 

For the three months ended June 30, 2014:

      

Net unrealized gains on securities

   ¥ 27,624      ¥ (9,953   ¥ 17,671   

Net unrealized losses on derivative financial instruments

     (96     37        (59

Pension adjustments

     503        170        673   

Foreign currency translation adjustments

     (8,229     —          (8,229
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   ¥ 19,802      ¥ (9,746   ¥ 10,056   
  

 

 

   

 

 

   

 

 

 

 

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12. SUPPLEMENTAL EXPENSE INFORMATION

Supplemental expense information for the three months ended June 30, 2013 and 2014 is as follows:

 

                                                                 
     Three months ended June 30,  
             2013                      2014          
     (Yen in millions)  

Research and development expenses

   ¥ 12,193       ¥ 13,050   

Advertising expenses

     1,327         1,167   

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

     5,591         5,842   

 

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13. SEGMENT REPORTING

Kyocera manufactures and sells a highly diversified range of products, including components involving fine ceramic technologies and applied ceramic products, telecommunications and information equipment etc.

Kyocera categorizes its operations into seven reporting segments: (1) Fine Ceramic Parts Group, (2) Semiconductor Parts Group, (3) Applied Ceramic Products Group, (4) Electronic Device Group, (5) Telecommunications Equipment Group, (6) Information Equipment Group, and (7) Others.

Main products or businesses of each reporting segment are as follows:

(1) Fine Ceramic Parts Group

Components for Semiconductor Processing Equipment and Flat Panel Display Manufacturing Equipment

Information and Telecommunication Components

General Industrial Machinery Components

Sapphire Substrates

Automotive Components

(2) Semiconductor Parts Group

Ceramic Packages and Substrates

Organic Multilayer Packages and Substrates

(3) Applied Ceramic Products Group

Solar Power Generating Systems

Cutting Tools, Micro Drills

Medical and Dental Implants

Jewelry and Applied Ceramic Related Products

(4) Electronic Device Group

Capacitors

SAW Devices

Crystal Components

Connectors

Liquid Crystal Displays

Printing Devices

(5) Telecommunications Equipment Group

Mobile Phones

PHS-Related Products such as PHS Handsets and PHS Base Stations

(6) Information Equipment Group

Monochrome and Color Printers and Multifunctional Products

Wide Format Systems

Document Solutions

Application Software

Supplies

(7) Others

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

Materials for Semiconductor, Chemical Materials

Realty Development Business

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

Operating profit for each reporting segment represents net sales, less related costs and operating expenses, excluding corporate gains and equity in earnings of affiliates and an unconsolidated subsidiary, income taxes and net income attributable to noncontrolling interests.

 

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Information by reporting segments for the three months ended June 30, 2013 and 2014 is summarized as follows:

Reporting Segments

 

                                                                 
     Three months ended June 30,  
     2013     2014  
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 18,716      ¥ 20,852   

Semiconductor Parts Group

     41,474        48,464   

Applied Ceramic Products Group

     61,496        53,809   

Electronic Device Group

     73,315        66,187   

Telecommunications Equipment Group

     38,512        38,515   

Information Equipment Group

     70,713        77,482   

Others

     38,061        41,614   

Adjustments and eliminations

     (10,632     (12,209
  

 

 

   

 

 

 

Net sales

   ¥ 331,655      ¥ 334,714   
  

 

 

   

 

 

 

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ 2,903      ¥ 3,355   

Semiconductor Parts Group

     7,923        5,655   

Applied Ceramic Products Group

     8,041        2,820   

Electronic Device Group

     6,170        7,664   

Telecommunications Equipment Group

     (1,406     (3,584

Information Equipment Group

     6,067        7,603   

Others

     752        642   
  

 

 

   

 

 

 

Total operating profit

     30,450        24,155   

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

     4,645        6,718   

Adjustments and eliminations

     (282     (193
  

 

 

   

 

 

 

Income before income taxes

   ¥ 34,813      ¥ 30,680   
  

 

 

   

 

 

 

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 1,133      ¥ 1,066   

Semiconductor Parts Group

     3,106        3,656   

Applied Ceramic Products Group

     3,055        2,879   

Electronic Device Group

     3,971        3,258   

Telecommunications Equipment Group

     1,190        1,013   

Information Equipment Group

     2,432        2,380   

Others

     1,320        1,343   

Corporate

     530        503   
  

 

 

   

 

 

 

Total

   ¥ 16,737      ¥ 16,098   
  

 

 

   

 

 

 

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 661      ¥ 2,049   

Semiconductor Parts Group

     3,927        4,474   

Applied Ceramic Products Group

     2,303        1,333   

Electronic Device Group

     3,888        2,534   

Telecommunications Equipment Group

     976        685   

Information Equipment Group

     1,470        2,930   

Others

     1,009        665   

Corporate

     994        314   
  

 

 

   

 

 

 

Total

   ¥ 15,228      ¥ 14,984   
  

 

 

   

 

 

 

 

34


Table of Contents

Geographic segments (Net sales by region)

 

                                                                 
     Three months ended June 30,  
     2013      2014  
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 139,118       ¥ 137,474   

Asia

     68,243         66,221   

Europe

     56,282         63,299   

United States of America

     52,189         52,103   

Others

     15,823         15,617   
  

 

 

    

 

 

 

Net sales

   ¥ 331,655       ¥ 334,714   
  

 

 

    

 

 

 

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

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

 

                                                                 
     Three months ended June 30,  
     2013     2014  
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 145,459      ¥ 143,579   

Intra-group sales and transfer between geographic areas

     111,736        120,354   
  

 

 

   

 

 

 
     257,195        263,933   
  

 

 

   

 

 

 

Asia

     58,863        54,901   

Intra-group sales and transfer between geographic areas

     67,703        73,416   
  

 

 

   

 

 

 
     126,566        128,317   
  

 

 

   

 

 

 

Europe

     58,784        65,839   

Intra-group sales and transfer between geographic areas

     11,140        8,957   
  

 

 

   

 

 

 
     69,924        74,796   
  

 

 

   

 

 

 

United States of America

     61,654        63,620   

Intra-group sales and transfer between geographic areas

     9,878        9,065   
  

 

 

   

 

 

 
     71,532        72,685   
  

 

 

   

 

 

 

Others

     6,895        6,775   

Intra-group sales and transfer between geographic areas

     3,992        3,889   
  

 

 

   

 

 

 
     10,887        10,664   
  

 

 

   

 

 

 

Adjustments and eliminations

     (204,449     (215,681
  

 

 

   

 

 

 

Net sales

   ¥ 331,655      ¥ 334,714   
  

 

 

   

 

 

 

Income before income taxes:

    

Japan

   ¥ 13,542      ¥ 13,827   

Asia

     5,443        6,081   

Europe

     1,775        1,391   

United States of America

     4,888        4,777   

Others

     (124     (288
  

 

 

   

 

 

 
     25,524        25,788   

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

     4,645        6,718   

Adjustments and eliminations

     4,644        (1,826
  

 

 

   

 

 

 

Income before income taxes

   ¥ 34,813      ¥ 30,680   
  

 

 

   

 

 

 

 

35


Table of Contents

14. PER SHARE INFORMATION

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

 

     Three months ended June 30,  
     2013      2014  
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 22,651       ¥ 19,467   
  

 

 

    

 

 

 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 61.74       ¥ 53.06   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 61.74       ¥ 53.06   
  

 

 

    

 

 

 

Basic weighted average number of shares outstanding

     366,877         366,866   

Diluted weighted average number of shares outstanding

     366,877         366,866   
  

 

 

    

 

 

 

Based on a resolution to undertake a stock split at the meeting of the Board of Directors held on August 28, 2013, Kyocera Corporation undertook a stock split at the ratio of two-for-one of all common stock on October 1, 2013. “Per share information” during the three months ended June 30, 2013 is calculated under the assumption that the stock split undertaken by Kyocera Corporation on October 1, 2013 had been undertaken at the beginning of the year ended March 31, 2014.

 

36


Table of Contents

Reference Information (Unaudited)

1. Production (Sales price)

 

     Three months ended June 30,      Increase
(Decrease)
%
 
     2013      2014     
     Amount      % to
the total
     Amount      % to
the total
    
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 20,327         5.7       ¥ 22,274         6.4         9.6   

Semiconductor Parts Group

     43,910         12.4         52,008         14.8         18.4   

Applied Ceramic Products Group

     69,986         19.7         55,761         15.9         (20.3

Electronic Device Group

     75,437         21.3         72,415         20.6         (4.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Components Business

     209,660         59.1         202,458         57.7         (3.4

Telecommunications Equipment Group

     44,596         12.6         38,594         11.0         (13.5

Information Equipment Group

     72,600         20.5         78,645         22.4         8.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Equipment Business

     117,196         33.1         117,239         33.4         0.0   

Others

     27,673         7.8         31,395         8.9         13.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Production

   ¥ 354,529         100.0       ¥ 351,092         100.0         (1.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2. Orders

 

     Three months ended June 30,     Increase
(Decrease)
%
 
     2013     2014    
     Amount     % to
the total
    Amount     % to
the total
   
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 19,447        5.6      ¥ 21,106        5.9        8.5   

Semiconductor Parts Group

     43,751        12.6        50,149        14.0        14.6   

Applied Ceramic Products Group

     66,517        19.2        64,109        17.9        (3.6

Electronic Device Group

     75,877        21.9        70,757        19.8        (6.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Components Business

     205,592        59.3        206,121        57.6        0.3   

Telecommunications Equipment Group

     42,312        12.2        44,707        12.5        5.7   

Information Equipment Group

     71,275        20.6        77,379        21.6        8.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Equipment Business

     113,587        32.8        122,086        34.1        7.5   

Others

     38,056        11.0        40,168        11.2        5.5   

Adjustments and eliminations

     (10,635     (3.1     (10,288     (2.9     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Orders

   ¥ 346,600        100.0      ¥ 358,087        100.0        3.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

37

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