XPAR:RICOP Annual Report 20-F Filing - 3/31/2012

Effective Date 3/31/2012

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20 – F

 

 

(Mark One)

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report             

For the transition period from              to             

Commission file number 2-68279

 

 

KABUSHIKI KAISHA RICOH

(Exact name of Registrant as specified in its charter)

RICOH COMPANY, LTD.

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan

(Address of principal executive offices)

Kunihito Minakawa, (T)+81-3-6278-5241, (F)+81-3-3543-9086

13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

  

Name of each exchange on which registered

None

   None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Common Stock*

(Title of Class)

 

* 247,195 American Depositary Shares evidenced by American Depositary Receipts, each American Depositary Share representing 5 shares of Common Stock of Ricoh Company, Ltd.

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Common stock outstanding as of March 31, 2012: 725,081,018 shares (excluding 19,831,060 shares of Treasury Stock)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x                 Accelerated filer  ¨                 Non-accelerated filer  ¨.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP  x

    

International Financial Reporting Standards as issued

by the International Accounting Standards Board  ¨

   Other  ¨.

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

 

 

 


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Defined Terms, Conventions and Presentation of Financial Information

On June 26, 2012 the noon buying rate for cable transfers in New York City as certified for customs purposes by the Federal Reserve Board for the Japanese Yen to the U.S. Dollar was ¥79.46 = U.S.$1.00.

In this document, the term “Company” refers to Ricoh Company, Ltd., the registrant, and “Ricoh” refers to the Company and its consolidated subsidiaries, unless the context otherwise indicates.

Ricoh’s fiscal year end is March 31. In this document “fiscal year 2012” refers to Ricoh’s fiscal year ended March 31, 2012, and other fiscal years of Ricoh are referred to in a corresponding manner.

As used in this annual report, “U.S. GAAP” means U.S. generally accepted accounting principles.

Cautionary Statement With Respect to Forward-Looking Statements

Statements made in this annual report with respect to Ricoh’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are or may be deemed to be forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, about the future performance of Ricoh. These forward-looking statements are made in reliance upon the protections provided by such acts for forward-looking statements. Forward-looking statements include but are not limited to those using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “may” or “might” and words of similar meaning in connection with a discussion of future operations or financial performance. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Ricoh cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on any obligation of Ricoh to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Ricoh disclaims any such obligation. Risks and uncertainties that might affect Ricoh include, but are not limited to (i) general economic conditions in Ricoh’s markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the Japanese Yen and the U.S. Dollar, the Euro, and other currencies in which Ricoh makes significant sales or in which Ricoh’s assets and liabilities are denominated; (iii) Ricoh’s ability to continue to design and develop products and services, and win acceptance of its products and services which are offered in highly competitive markets characterized by continual introduction of new products, rapid development in new technology, and consumer preferences that are subjective and likely to change; (iv) Ricoh’s ability to successfully implement strategies for its office equipment business, such as further globalization of its operations to increase account sales to corporate clients, reinforcement of the color printer line-up to meet growing demand for color products among its office users, implementation of optimal printing solutions for customers’ digitally networked offices and enhancement of printing capabilities centered on multi-functional printers (“MFPs”), and implementation of optimal localization of manufacturing operations so that such operations are closer to the customer; (v) Ricoh’s ability to continuously devote sufficient resources to research and development, and capital expenditures for digital and networking equipment, such as digital plain paper copiers (“PPCs”), MFPs, laser printers, GELJET printers and production printing products; (vi) the success of Ricoh’s alliances with various computer manufacturers which Ricoh may engage in alliances with in the future; and (vii) the outcome of contingencies.

Important information regarding risks and uncertainties is also set forth elsewhere in this annual report, including in “Risk Factors” included in “Item 3. Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”


Table of Contents

TABLE OF CONTENTS

 

PART I

  

Item 1. Identity of Directors, Senior Management and Advisers

     1   

Item 2. Offer Statistics and Expected Timetable

     1   

Item 3. Key Information

     1   

Item 4. Information on the Company

     11   

Item 4A. Unresolved Staff Comments

     34   

Item 5. Operating and Financial Review and Prospects

     35   

Item 6. Directors, Senior Management and Employees

     74   

Item 7. Major Shareholders and Related Party Transactions

     94   

Item 8. Financial Information

     95   

Item 9. The Offer and Listing

     95   

Item 10. Additional Information

     97   

Item 11. Quantitative and Qualitative Disclosures About Market Risk

     112   

Item 12. Description of Securities Other Than Equity Securities

     115   

PART II

  

Item 13. Defaults, Dividend Arrearages and Delinquencies

     117   

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

     117   

Item 15. Controls and Procedures

     117   

Item 16. [RESERVED]

     119   

Item 16A. Audit Committee Financial Expert

     119   

Item 16B. Code of Ethics

     119   

Item 16C. Principal Accountant Fees and Services

     119   

Item 16D. Exemptions from the Listing Standards for Audit Committees

     120   

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

     121   

Item 16F. Change in Registrant's Certifying Accountant

     121   

Item 16G. Corporate Governance

     121   

PART III

  

Item 17. Financial Statements

     122   

Item 18. Financial Statements

     122   

Item 19. Exhibits

     122   


Table of Contents

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data.

The following selected consolidated financial data have been derived from the audited consolidated financial statements of Ricoh prepared in accordance with U.S. generally accepted accounting principles as of each of the dates and for each of the periods indicated below. This information should be read in conjunction with Ricoh’s audited consolidated balance sheets as of March 31, 2011 and 2012, the related consolidated statements of operations, changes in equity and cash flows for the three years ended March 31, 2010, 2011 and 2012 and the notes thereto that appear elsewhere in this annual report.

As described in Note 2(b) to the consolidated financial statements, during the year ended March 31, 2012, Ricoh eliminated the previously existing three months difference between the reporting periods of the Company and certain subsidiaries. The consolidated financial statements for the year ended March 2010 and 2011 have been retrospectively adjusted to reflect the elimination of the lag period.

With respect to the selected consolidated financial data for the earliest two years of the five-year period (2009 and 2008), we omit such information because we are not able to provide the restated financial data without unreasonable effort and expense.

 

     Millions of Yen except per share amounts and number of  shares
Year ended March 31,
 
             2010                      2011                      2012          

Income Statement Data:

        

Net sales:

   ¥ 2,015,811       ¥ 1,941,336       ¥ 1,903,477   

Restructuring charges

     —           885         30,169   

Loss on impairment of goodwill

     —           —           27,491   

Loss on impairment of long-lived assets

     2,353         765         9,519   

Operating income (loss)

     65,901         58,071         (18,068

Income (loss) before income taxes and equity in earnings of affiliates

     57,082         44,169         (31,937

Net income (loss) attributable to Ricoh Company, Ltd.

     27,044         18,630         (44,560

Per American Depositary Share:(1)

        

Net income (loss) (basic)

     186.35         128.40         (307.10

Net income (loss) (diluted)

     181.25         125.75         (307.10

 

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     Millions of Yen except per share amounts and number of  shares
Year ended March 31,
 
             2010                     2011                     2012          

Balance Sheet Data:

      

Total assets

     2,377,983        2,255,564        2,289,358   

Total Ricoh Company, Ltd. shareholders’ equity

     969,358        925,243        822,704   

Total equity

     1,019,891        978,130        879,018   

Common stock

     135,364        135,364        135,364   

Weighted average number of shares outstanding

     725,613,259        725,554,477        725,483,319   

Cash dividends declared Per American Depositary Share:(1), (2)

      

Interim

     82.50        82.50        82.50   
   $ (0.95   $ (0.98   $ (1.02

Year-end

     82.50        82.50        42.50   
   $ (0.92   $ (1.03   $ (1.06

Cash and cash equivalents

     237,101        172,221        156,210   

Capital investments

     66,886        66,875        73,271   

Long-term indebtedness, excluding current installment

     514,719        479,423        525,435   

 

Notes:

(1) Each American Depositary Share represents five shares of Ricoh Common Stock.
(2) Cash dividends declared per American Depositary Share for any given fiscal year consist of interim dividends paid during the fiscal year and year-end dividends to be paid after the fiscal year-end for such fiscal year, which are not equal to the dividends paid during such fiscal year, set forth under “Per American Depositary Share, each representing 5 shares of common stock – Cash dividends paid per share” in the Consolidated Statements of Operations appearing elsewhere in this annual report.

In the preceding table, cash dividends declared in U.S. Dollars are based on the exchange rates at each respective payment date, using the noon buying rates for cable transfer in Japanese Yen in New York City as certified for customs purposes by the Federal Reserve Board.

On June 26, 2012, the noon buying rate for cable transfers in New York City as certified for customs purposes by the Federal Reserve Board for the Japanese Yen to the U.S. Dollar was ¥79.46= U.S.$1.00.

The following table sets forth the exchange rates for the Japanese Yen and the U.S. Dollar based on the noon buying rate for cable transfers in Japanese Yen in New York City as certified for customs purposes by the Federal Reserve Board during the previous six months and prior five fiscal years:

 

     December
2011
     January
2012
     February
2012
     March
2012
     April
2012
     May
2012
 

High

     76.98         76.28         76.11         80.86         79.81         78.29   

Low

     78.13         78.13         81.10         83.78         82.62         80.36   

 

     Year ended March 31,  
     2008      2009      2010      2011      2012  

Year-end

     99.85         99.15         93.40         82.76         82.41   

Average*

     113.61         100.85         92.49         85.00         78.86   

High

     96.88         87.80         86.12         78.74         75.72   

Low

     124.09         110.48         100.71         94.68         85.26   

 

* The average Japanese Yen exchange rates represent average noon buying rate on the last business day of each month during the respective period.

 

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B. Capitalization and Indebtedness.

Not applicable.

C. Reasons for the Offer and Use of Proceeds.

Not applicable.

D. Risk Factors.

Ricoh is a global manufacturer of office equipment and conducts business on a global scale. As such, Ricoh is exposed to various risks which include the risks listed below. Although certain risks that may affect Ricoh’s businesses are listed in this section, this list is not exhaustive. Ricoh’s business may in the future also be affected by other risks that are currently unknown or that are not currently considered significant or material. In addition, this section contains forward-looking statements that are subject to the “Cautionary Statement With Respect to Forward-Looking Statements” appearing in this annual report.

Ricoh’s Success Will Depend on Its Ability to Respond to Rapid Technological Changes in the Document Imaging and Management Industry

The document imaging and management industry includes products such as copiers, printers, facsimile machines and scanners. The technology used in this industry changes rapidly and products in this industry will often require frequent and timely product enhancements or have a short product life cycle. Most of Ricoh’s products are a part of this industry and as such Ricoh’s success will depend on its ability to respond to such technological changes in the industry. To remain competitive in this industry, Ricoh invests a significant amount of resources and capital every year in research and development activities. Despite this investment, the process of developing new products or technologies is inherently complex and uncertain and there are a number of risks that Ricoh is subject to, including the following:

 

   

No assurances can be made that Ricoh will successfully anticipate whether its products or technologies will satisfy its customers’ needs or gain market acceptance;

 

   

No assurances can be made that the introduction of more advanced products that also possess the capabilities of existing products will not adversely affect the sales performance of each such product;

 

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No assurances can be made that Ricoh will be able to procure raw materials and parts necessary for new products or technologies from its suppliers at competitive prices;

 

   

No assurances can be made that Ricoh will be able to successfully manage the distribution system for its new products to eliminate the risk of loss resulting from a failure to take advantage of market opportunities;

 

   

No assurances can be made that Ricoh will succeed in marketing any newly developed product or technology; and

 

   

No assurances can be given that Ricoh will be able to respond adequately to changes in the industry.

Ricoh’s failure to respond to any risks associated with this industry, including those described above, may reduce Ricoh’s future growth and profitability and may adversely affect Ricoh’s financial results and condition.

In addition to the above general risks, Ricoh is exposed to the following specific risks relating to the document imaging and management industry:

Digital Technology

Among the various technologies used in the document imaging and management industry, Ricoh believes the successful development of digital technology is one of the most essential factors in attaining a competitive advantage. Ricoh currently is a leader in digital technology and believes that the importance of digital technology used in office equipment, including copiers, printers, facsimiles and scanners, will continue to grow in the future. While most of Ricoh’s PPCs sold in Japan and overseas are already digital, Ricoh believes that the digital technology used in connection with digital copiers and other digital products will continue to develop and that competition with respect to digital products will intensify. There is no assurance that Ricoh will continue to be in the forefront of digital technology despite its commitment to invest in research and development activities in this area. Failure of Ricoh to adequately develop digital technology may adversely affect Ricoh’s financial results and condition.

Multi-Functional Equipment

Ricoh believes that the document imaging and management industry is moving towards a multi-functional office environment where various office equipment (including copiers, facsimile machines, printers, scanners and personal computers) become more interdependent on each other due to the increasing use of digital technology and initiatives taken by many offices to eventually become a “paperless office.” As a result, certain existing office equipment may either be consolidated into multi-functional equipment or may be linked together electronically to perform various office functions. Although Ricoh already manufactures certain multi-functional equipment, as a result of this trend towards multi-functional equipment, some of Ricoh’s products may become obsolete while other products may require substantial product enhancements, requiring technologies currently unavailable within Ricoh. No assurances can be made that Ricoh will be able to successfully adjust to such changes.

 

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Ricoh Must Successfully Operate in Highly Competitive Markets

The document imaging and management industry, including the copier industry, is intensely competitive. Ricoh expects to face increased competition in the various markets in which it operates. Currently, Ricoh’s competitors include other large manufacturers and distributors of office equipment. In addition, as digital and other new technology develops and as new office equipment products using these newly developed technologies gain increased market acceptance, Ricoh may find itself competing with new competitors that develop such new technologies, including computer software and hardware manufacturers and distributors. Accordingly, it is possible that new competitors or alliances among existing and new competitors may emerge and rapidly acquire significant market share. While Ricoh believes it is a leading manufacturer and distributor in the document imaging and management industry and it intends to maintain its position, no assurances can be made that it will continue to compete effectively in the future. Pricing pressures or loss of potential customers resulting from Ricoh’s failure to compete effectively may adversely affect Ricoh’s financial results and condition.

Ricoh Is Subject to the Risks of International Operations and the Risks of Overseas Expansion

A substantial portion of Ricoh’s manufacturing and marketing activity is conducted outside of Japan, including in the United States, Europe, and in developing and emerging markets such as China. There are a number of risks inherent in doing business in such overseas markets, including the following:

 

   

unfavorable political or economical factors;

 

   

fluctuations in foreign currency exchange rates;

 

   

potentially adverse tax consequences;

 

   

unexpected legal or regulatory changes;

 

   

lack of sufficient protection for intellectual property rights;

 

   

difficulties in recruiting and retaining personnel, and managing international operations; and

 

   

less developed infrastructure.

Ricoh’s inability to manage successfully the risks inherent in its international activities could adversely affect its business, financial condition and operating results. In addition, while Ricoh plans to continue to expand its business worldwide and increase overseas sales, because of the risks associated with conducting an international operation (including the risks listed above), there can be no assurances that Ricoh’s overseas expansion will be successful or have a positive effect on Ricoh’s financial results and condition.

Economic Trends in Ricoh’s Major Markets May Adversely Affect Ricoh’s Sales

Demand for Ricoh’s products is affected by cyclical changes in the economies of Ricoh’s major markets, including Japan, the United States and Europe. Economic downturns and declines in consumption in Ricoh’s major markets may adversely affect Ricoh’s financial results and condition.

 

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Foreign Exchange Fluctuations Affect Ricoh’s Results

Local currency-denominated financial results in each of the Company’s subsidiaries around the world are translated into Japanese Yen by applying the average market rate during each financial period and recorded on Ricoh’s consolidated statements of operations. Local currency-denominated assets and liabilities are translated into Japanese Yen by applying the market rate at the end of each financial period and recorded on Ricoh’s consolidated balance sheets. Accordingly, the financial results, assets and liabilities are subject to foreign exchange fluctuations.

In addition, operating profits and losses are highly sensitive to the fluctuations in the value of the Japanese Yen because the high volume of Ricoh's production and sales activities in the Americas, Europe and Other, such as China, results in a large proportion of revenues and costs denominated in local currencies. Although Ricoh engages in hedging transactions such as forward contracts with several financial institutions having credit ratings satisfactory to Ricoh to minimize the negative effects of short-term fluctuations in foreign exchange rates among major currencies such as the U.S. Dollar, the Euro and Japanese Yen, mid-to-long-term volatile changes in the exchange rate levels make it difficult for Ricoh to execute planned procurement, production, logistics, and sales activities and may adversely affect Ricoh’s financial results and condition.

Crude Oil Price Fluctuations Affect Ricoh’s Results

Many of the parts or materials used in manufacturing Ricoh’s products are made from oil. If the price of crude oil rises, the purchase price of such product parts or materials may increase as well. Furthermore, a rise in the price of crude oil may lead to an increase in shipping and handling costs due in part to a rise in the cost of fuel and the cost of utilities. Ricoh may not be able to pass these incremental costs onto the sales price of its products. Such fluctuations in crude oil prices may therefore adversely affect Ricoh’s financial position and results of operations.

Ricoh Is Subject to Government Regulation That Can Limit Its Activities or Increase Its Cost of Operations

Ricoh is subject to various governmental regulations and approval procedures in the countries in which it operates. For example, Ricoh may be required to obtain approvals for its business and investment plans, be subject to export regulations and tariffs, as well as rules and regulations relating to commerce, antitrust, patent, consumer and business taxation, exchange control, and environmental and recycling laws. Ricoh has established a Corporate Social Responsibility Office to heighten awareness of the importance of corporate social responsibility. Through this office, Ricoh involves its employees in various activities designed to ensure compliance with applicable regulations as part of its overall risk management and compliance program. However, if Ricoh is unable to comply with any of these regulations or fails to obtain the requisite approvals, Ricoh’s activities in such countries may be restricted. In addition, even if Ricoh is able to comply with these regulations, compliance can result in increased costs. In either event, Ricoh’s financial results and condition may be adversely affected.

 

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Ricoh Is Subject to Internal Control Evaluations and Attestation Over Financial Reporting under the Sarbanes-Oxley Act of 2002 of the United States and the Financial Instruments and Exchange Act of Japan

The United States Securities and Exchange Commission (the “SEC”), as required by Section 404 of the Sarbanes-Oxley Act of 2002 of the United States, adopted rules requiring every company that files reports with the SEC to include a management report on such company’s internal control over financial reporting in its annual report. In addition, the company’s independent registered public accounting firm must publicly attest to the effectiveness of the company’s internal control over financial reporting. Furthermore, the Financial Instruments and Exchange Act of Japan requires Japanese companies whose shares are listed on the Japanese stock exchanges to submit a report which evaluates internal control over financial reporting to the commissioner of the financial bureau of Japan. Ongoing compliance with these requirements is complex, costly and time-consuming. If Ricoh were to fail to maintain effective internal control over financial reporting, Ricoh’s management were to fail to assess on a timely basis the adequacy of such internal control, or Ricoh’s independent registered public accounting firm were to fail to attest on a timely basis to the effectiveness of such internal control or issue a qualified opinion, Ricoh could be subject to regulatory sanctions or could face adverse reactions in the financial markets due to loss of investor confidence.

Ricoh’s Business Depends on Protecting Its Intellectual Property Rights

Ricoh owns or licenses a number of intellectual property rights in the field of office equipment automation and, when Ricoh believes it is necessary or desirable, obtains additional licenses for the use of other parties’ intellectual property rights. If Ricoh fails to protect, maintain or obtain such rights, its performance and ability to compete may be adversely affected. Ricoh has a program in place under which company employees are compensated for any valuable intellectual property rights arising out of any inventions developed by them during the course of their employment with Ricoh. While unlikely, management believes that there could arise instances in the future where Ricoh may become the subject of legal actions or proceedings where claims alleging inadequate compensation are asserted by company employees.

Ricoh Is Dependent on Securing and Retaining Specially Skilled Personnel

Ricoh believes that it can continue to remain competitive by securing and retaining additional personnel who are highly skilled in the fields of management and information technology. However, the number of skilled personnel is limited and the competition for attracting and retaining such personnel is intense, particularly in the information technology industry. Securing and retaining skilled personnel in the information technology industry is especially important for Ricoh to compete effectively with its competitors as expectations and market standards for office equipment become more technologically advanced. Ricoh cannot assure that it will be able to successfully secure and retain additional skilled personnel.

 

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Ricoh May Be Adversely Affected by Its Employee Benefit Obligations

With respect to its employee benefit obligations and plan assets, Ricoh accrues the cost of such benefits based on applicable accounting policies and funds such benefits in accordance with governmental regulations. Currently, there is no immediate and significant funding requirement; however, if returns from investment assets continue to decrease and/or turn to be negative due to market conditions, such as the fluctuations in the stock or bond markets, additional funding and accruals may be required. Such additional funding and accruals may adversely affect Ricoh’s financial position and results of operations.

Ricoh’s Operations Are Subject to Environmental Laws and Regulations

Ricoh’s operations are subject to many environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal, product recycling, and soil and ground-water contamination. Ricoh faces risks of environmental liability in our current and historical manufacturing activities. Costs associated with future additional environmental compliance or remediation obligations could adversely affect Ricoh’s business, operating results, and financial condition.

Risks Associated with Ricoh’s Equipment Financing Business May Adversely Affect Ricoh’s Financial Condition

Ricoh provides financing to some of its customers in connection with its equipment sales and leases. Ricoh evaluates the creditworthiness and the amount of credit extended to a customer prior to the financing arrangement and during the financing term on a regular basis. Depending on such evaluations, Ricoh makes adjustments to such extensions of credit as it deems necessary to minimize any potential risks of concentrating credit risk or non-payment of credit. Despite the application of these monitoring procedures, no assurances can be made that Ricoh will be able to fully collect on such extensions of credit due to unforeseeable defaults by its customers.

In addition, these financing arrangements that Ricoh enters into with its customers result in long-term receivables bearing a fixed rate of interest. However, Ricoh finances these financing arrangements primarily with short-term borrowings subject to a variable interest rate. Although Ricoh engages in hedging activities, Ricoh is not able to fully hedge this interest rate mismatch.

If Ricoh is unable to successfully manage these risks associated with its equipment financing business, Ricoh’s financial results and condition may be adversely affected.

Ricoh May Be Subject to Product Liability Claims that Could Significantly Affect Its Financial Condition

Ricoh may be held responsible for any defects that occur with respect to its products and services. Based on the defect, Ricoh may be liable for significant damages, which may adversely affect its financial results and condition. Furthermore, as Ricoh increasingly provides products and services utilizing sophisticated and complex technologies, such defects may occur more frequently. Such potential increase in defects, which could result in an increase in Ricoh’s liability, may adversely affect its financial results and condition.

In addition, negative publicity concerning these defects could make it more difficult for Ricoh to attract and maintain customers to purchase Ricoh products and services. As a result, Ricoh’s financial results and condition may be adversely affected.

 

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Ricoh’s Performance Can Be Affected by Alliance with, and Strategic Investments in, Other Entities

Ricoh engages in alliances with other entities to create various products and services to fulfill customer demands. Ricoh believes that an alliance is an effective method for timely development of new technology and products using management resources of both parties. However, if Ricoh’s interest differs from other parties’ interests due to financial or other reasons, Ricoh may be unable to maintain the alliance. Ricoh also makes strategic investments to acquire interests in companies that Ricoh believes would support existing businesses and/or lead to new businesses. Such strategic investments may not necessarily lead to the expected outcome or performance and may result in increased time and expenses being incurred due to the integration of businesses, technologies, products and/or personnel necessitated by such investments. Accordingly, these types of management decisions may have a significant impact on the future performance of Ricoh. Failure to maintain an on-going alliance, establish a necessary alliance or make a strategic investment to acquire an interest in a company may adversely affect Ricoh’s future financial position and results of operations.

Inadvertent or accidental leakage or disclosure of confidential or sensitive information may adversely affect Ricoh’s operations

Ricoh obtains confidential or sensitive information from various sources, including its customers, in the ordinary course of its business. Ricoh also holds trade secrets regarding its technologies and other confidential or sensitive information relating to marketing. To prevent unauthorized access and/or fraudulent leakage or disclosure of such confidential or sensitive information, Ricoh has implemented an internal management system, which includes measures to improve security and access to its internal database, as well as employee training programs to educate its employees with respect to compliance with applicable regulations relating to information security and data access. Despite Ricoh’s efforts, however, confidential or sensitive information may be inadvertently or accidentally leaked or disclosed and any such leakage or disclosure may result in Ricoh incurring damages, which may adversely affect Ricoh’s reputation. In addition, Ricoh may incur significant expenses for defending any lawsuits that may arise from such claims. Furthermore, the leakage or disclosure of Ricoh’s confidential or sensitive marketing and technological information to a third party may adversely affect Ricoh’s financial results and condition.

 

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Ricoh May Suffer Loss as a Result of Catastrophic Disaster, Information Technology Problems or Infectious Diseases

Several of Ricoh’s manufacturing facilities in Japan could be subject to a catastrophic loss caused by earthquakes as such facilities are located in areas with above average seismic activity. If any of these facilities were to experience a catastrophic loss, Ricoh could experience disruptions in its operations and delays in its production and shipments. If such occurred, Ricoh would likely record a decrease in revenue, and require large expenditures to repair or replace the damaged facility, which is likely to affect Ricoh’s financial position and results of operations.

As Ricoh becomes increasingly dependent on information technology, software and hardware defects, computer viruses, as well as internal database problems (e.g., falsifications or disappearance of information relating to our customers) pose a greater risk to its operations. Although Ricoh has taken various precautionary measures, such as installing firewalls and anti-virus software to detect and eliminate computer viruses, Ricoh may not be able to completely prevent or mitigate the effects of such problems, which may affect Ricoh’s performance.

In addition, the Ricoh is continually expanding its worldwide operations to set in place a global supply chain of its products and services so that we can satisfy our local customer needs faster, more effectively and on a regular basis. As Ricoh expands its operations worldwide, additional risks, such as infectious diseases (e.g., a new strain of influenza) and epidemics, may adversely affect Ricoh’s operations and financial positions.

Shortage of Electric Power Supply in Japan May Affect Ricoh’s Production

All nuclear reactors in Japan were stopped for inspection after the Great East Japan Earthquake, which caused the availability of electric power supply in Japan to be unpredictable. Such uncertainty of electric power supply may affect Ricoh’s production activity or cost of production.

 

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Item 4. Information on the Company

A. History and Development of the Company

The Company was incorporated as a joint stock corporation (kabushiki kaisha) on February 6, 1936 in accordance with Japanese law under the name Riken Kankoshi Co., Ltd. as a manufacturer and distributor of sensitized paper for use in copiers. Since its incorporation, Ricoh has expanded its business into related businesses in the office equipment field. It now manufactures and markets copiers (such as PPCs), MFPs, laser printers, GELJET printers, production printing products, facsimile machines, personal computers and servers, network related software and other equipment, including semiconductors, measuring equipment and cameras. More recently, Ricoh has further expanded its businesses to manufacture and sell products such as projectors, LED tubes, video conference systems, thermal rewritable products, and mobile devices called EWS (which stands for “eWriter Solutions”).

Historical Highlights

 

February 1936    Riken Kankoshi Co., Ltd. is formed in Kita-kyushu to manufacture and market sensitized paper.
March 1938    The Company’s name is changed to Riken Optical Co., Ltd., and starts manufacturing and selling optical devices and equipment.
May 1949    The Company lists its securities on the Tokyo and Osaka Stock Exchanges.
April 1954    The Company establishes an optical device and equipment plant in Ohmori, Ohta-ku, Tokyo (now known as the Ohmori plant).
May 1955    The Company begins manufacturing and selling desktop copiers.
May 1961    The Company establishes a sensitized paper plant in Ikeda, Osaka (now known as the Ikeda plant).
October 1961    The Company lists its securities on the First Section of each of the Tokyo and Osaka Stock Exchanges.
June 1962    The Company starts operations of a paper plant in Numazu, Shizuoka, which featured a fully-integrated sensitized paper production system (now known as the Numazu plant).
December 1962    The Company establishes Ricoh of America, Inc. (a subsidiary, later known as Ricoh Corporation and now known as Ricoh Americas Corporation).
April 1963    The Company changes its corporate name to Ricoh Company, Ltd.
July 1967    The Company establishes Tohoku Ricoh Co., Ltd. (a subsidiary) in Shibata-gun, Miyagi.
May 1971    The Company completes its manufacturing facility in Atsugi, Kanagawa (now known as the Atsugi plant), to which it transfers some of its office equipment production from the Ohmori plant.
June 1971    The Company establishes Ricoh Nederland B.V. (a subsidiary, later known as Ricoh Europe B.V. and now known as Ricoh Europe Holdings B.V.) in the Netherlands.
January 1973    The Company establishes Ricoh Electronics, Inc. (a subsidiary) in the United States.

 

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December 1976    The Company forms Ricoh Credit Co., Ltd. (a subsidiary, now known as Ricoh Leasing Co., Ltd.).
March 1977    The Company relocates its headquarters to Minato-ku, Tokyo.
December 1978    The Company establishes Ricoh Business Machines, Ltd. (a subsidiary, now known as Ricoh Hong Kong Ltd.).
March 1981    The Company builds the Ricoh Electronics Development Center at the Ikeda plant to develop and manufacture electronic devices.
October 1981    The Company lists its securities on the Paris Stock Exchange (now known as Euronext Paris).
May 1982    The Company establishes sensitized paper production facilities in Sakai, Fukui (now known as the Fukui plant), which takes over some of the sensitized paper production from the Osaka plant (now known as the Ikeda plant).
December 1983    The Company establishes Ricoh UK Products Ltd. (a subsidiary).
October 1985    The Company builds a copier manufacturing plant in Gotenba, Shizuoka (now known as the Gotenba plant).
April 1986    The Company opens a research and development (“R&D”) facility in Yokohama, Kanagawa (now known as the Ricoh Research and Development Center) in commemoration of the Company’s 50th anniversary, to which it transfers some of its R&D operations from the Ohmori plant.
April 1987    The Company establishes Ricoh Industrie France S.A. (a subsidiary, now known as Ricoh Industrie France S.A.S.).
April 1989    The Company sets up an electronic devices facility in Yashiro-cho, Kato-gun, Hyogo (now known as the Yashiro plant).
January 1991    The Company establishes Ricoh Asia Industry (Shenzhen) Ltd. (a subsidiary) in China.
March 1995    Ricoh Corporation acquires Savin Corporation, an American office equipment sales company.
September 1995    The Company acquires Gestetner Holdings PLC (now known as Ricoh Europe PLC), a British office equipment sales company.
January 1996    Ricoh Leasing Co., Ltd. lists its securities on the Second Section of the Tokyo Stock Exchange (currently listed on the First Section of the Tokyo Stock Exchange).
December 1996    The Company establishes Ricoh Asia Pacific Pte Ltd (a subsidiary) in Singapore.
March 1997    The Company establishes Ricoh Silicon Valley, Inc. (now known as Ricoh Innovations, Inc.) in the United States.
August 1999    Ricoh Hong Kong Ltd. acquires Inchcape NRG Ltd., a Hong Kong-based office equipment sales company.
January 2001    Ricoh Corporation acquires Lanier Worldwide, Inc., an American office equipment sales company.

 

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October 2002    The Company establishes Ricoh China Co., Ltd. (a subsidiary).
April 2003    Tohoku Ricoh Co., Ltd. becomes a wholly-owned subsidiary of the Company.
October 2004    The Company acquires Hitachi Printing Solutions, Ltd. (now known as Ricoh Printing Systems, Ltd.) in Japan.
August 2005    The Company opens Ricoh Technology Center in Ebina, Kanagawa to integrate its domestic development facilities and offices.
November 2005    The Company relocates its headquarters to Chuo-ku, Tokyo.
January 2007    Ricoh Europe B.V. acquires the European operations of Danka Business Systems PLC.
June 2007    InfoPrint Solutions Company, LLC (now known as Ricoh Production Print Solutions, LLC), a joint venture company of Ricoh and International Business Machines Corporation (“IBM”), commences its operations.
May 2008    The Company establishes Ricoh Manufacturing (Thailand) Ltd. (a subsidiary) in Thailand.
August 2008    Ricoh Elemex Corporation becomes a wholly-owned subsidiary of the Company.
October 2008    Ricoh Americas Corporation acquires all of the outstanding shares of IKON Office Solutions, Inc. (“IKON”), an American office equipment sales and service company.
July 2010    Seven domestic sales subsidiaries and the marketing group of the Company are merged into one domestic sales subsidiary named Ricoh Japan Corporation.
August 2010    The Company completes the construction of a new building that expands the Ricoh Technology Center, which is located in Ebina, Kanagawa.
October 2011    The Company acquires the PENTAX imaging systems business from HOYA Corporation.

 

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The Company’s registered head office and executive office are as follows:

 

    

Address

  

Telephone number

Registered head office    3-6, Naka Magome 1-chome, Ohta-ku, Tokyo 143-8555, Japan    +81-3-3777-8111
Executive office    13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan    +81-3-6278-2111

Principal Capital Investments

Ricoh’s capital investments for fiscal years 2010, 2011 and 2012 were ¥66.8 billion, ¥66.8 billion and ¥73.2 billion, respectively. Ricoh directed a significant portion of its capital investments for fiscal years 2010, 2011 and 2012 towards digital and networking equipment, such as digital PPCs/MFPs, laser printers and production printing products, and manufacturing facilities to maintain or enhance its competitiveness in the industry. For fiscal year 2012, Ricoh’s capital investments included ¥5.9 billion for the construction of a second plant that manufactures polymerized PxP toner in Japan and ¥4.8 billion for purchasing mold casts used in the manufacturing of MFPs, production printing equipment and printers. By geographic areas, for fiscal year 2012, Ricoh made capital investments in Japan, the Americas, Europe and Other in the amounts of ¥43.0 billion, ¥14.0 billion, ¥12.3 billion and ¥3.9 billion, respectively.

Ricoh projects that for fiscal year 2013, its capital investments will amount to approximately ¥83.0 billion, which will principally be used for investments in manufacturing facilities of digital and networking equipment with new engines, toners, semiconductors and thermal media. It is expected that Ricoh’s capital investments in Japan, the Americas, Europe and Other will be in the amount of approximately ¥49.5 billion, ¥16.4 billion, ¥12.4 billion and ¥4.7 billion, respectively, for fiscal year 2013. These capital investments are expected to be financed with internally generated funds and/or borrowings from third parties.

 

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B. Business Overview

Ricoh is a leading manufacturer of office automation equipment. Ricoh’s principal products include copiers (such as PPCs), printers (such as MFPs, laser printers and GELJET printers), production printing products and facsimile machines. Ricoh is also a prominent manufacturer of digital and advanced electronic devices such as semiconductor devices. In recent years, Ricoh has been rapidly building a solid presence globally as a comprehensive document solutions provider that helps its customers streamline their businesses and decrease operating costs. More specifically, Ricoh supports its office and production printing equipment businesses by offering customers various “solution” systems that work with personal computers and servers, network systems, application software and related product support and after-sales services to assist customers in fully utilizing the Ricoh products that they purchase. Ricoh’s product support services include assisting customers in setting up their information technology environment or network. Ricoh also offers various supplies and peripheral products to be used with its products and systems. More recently, Ricoh has further expanded its businesses to manufacture and sell products such as projectors, LED tubes, video conference systems, thermal rewritable products, and mobile devices called EWS (which stands for “eWriter Solutions”).

PRODUCTS

Ricoh’s operating segments consist of “Imaging & Solutions,” “Industrial Products” and “Other.”

Ricoh’s management analyzes its business operations and performance based on these segments.

The following table sets forth Ricoh’s sales by products for fiscal years 2010, 2011 and 2012.

SALES BY PRODUCT

 

     Millions of Yen (except for percentages)
For the Year Ended March 31,
 
     2010     2011     2012  

Imaging & Solutions

               

Imaging Solutions

   ¥ 1,614,347         80.1   ¥ 1,531,219         78.9   ¥ 1,471,827         77.3

Network System Solutions

     175,370         8.7        181,411         9.3        198,945         10.5   

Industrial Products

     101,692         5.0        106,830         5.5        96,584         5.1   

Other

     124,402         6.2        121,876         6.3        136,121         7.1   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   ¥ 2,015,811         100.0   ¥ 1,941,336         100.0   ¥ 1,903,477         100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

Note:

(1) The above consolidated financial data set forth net sales to external customers by product.

Imaging & Solutions

This segment consists of products that are widely used in the office and production printing environments and are categorized as follows:

(1) Imaging Solutions

For fiscal year 2012, the Imaging Solutions product category accounted for 77.3% of Ricoh’s net sales.

The primary functions of products in this category are (1) to produce copies and (2) to print or produce images using a network. Stand-alone PPCs are representative of products in the first group, and MFPs and laser printers are representative of products in the second group.

The principal products in the Imaging Solutions product category include monochrome and color digital PPCs/MFPs, laser printers, GELJET printers and production printing products.

 

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Ricoh continues to be a global leader in PPCs/MFPs and has been a pioneer in the development of digital machines. Ricoh manufactures a wide range of PPCs/MFPs with a variety of copying speeds and functions such as double-sided printing, sorting, reducing and enlarging, and zoom adjustment based on copy sizes. Ricoh continues to strengthen its digital PPC/MFP product lineup with new product offerings that range from low-end models (regular print speed models for low volume copying or printing) to high-end models (high print speed models for large volume copying or printing). PPCs/MFPs use a drum or other medium coated with a photo conductive material on which an image of the original document is projected optically and developed by applying a dry powder-based toner. The application of this printing process enables higher picture quality and is environmentally friendly. Ricoh’s PPCs/MFPs are designed to provide information technology support for all types of office environments by delivering enhanced basic features (i.e., reduction, enlargements), simpler operation, reduced paper consumption through electronic storage, and better connectivity with document distribution and storage systems. Ricoh also manufactures a wide range of laser printers that print in monochrome or color and in a variety of print speeds, are able to connect to a network and are multifunctional in that they have scanning, faxing and copying capabilities as well as advanced finishing capabilities. GELJET printers utilize “GELJET technology” developed by Ricoh, which enables ultra-fine particle pigment dispersion to produce higher image qualities. All GELJET printers are color printers. In addition, Ricoh manufactures production printing products that are high-speed laser printers designed to be used as a central printing device to satisfy customers’ needs to print-on-demand and print large volumes. Production printing products are often used in data processing environments (e.g., central reproduction departments within companies and data centers) and the commercial professional printing market (i.e., market comprised of businesses offering high-quality printing services).

In response to customer demand, Ricoh continues to be focused in recent years on designing a wide-range of products that enhance productivity, have improved security features, are user friendly and are environmentally friendly.

For example, during fiscal year 2012, Ricoh released its imagio MP C5002/C4002/C3302/C2802 series (also known as Aficio MP C5002/C4002/C3302/C2802 series when sold overseas) as part of its color MFP product lineup. These new color MFPs (1) have a simpler and more user-friendly operation panel which enable customers to operate the equipment more efficiently, and (2) use color QSU (quick start up) technology and color PxP-EQ toner, the use of which enables the MFP to consume less energy but still produce high quality images in a highly productive manner. Ricoh also developed and introduced during fiscal year 2012 the imagio MP 5002/4002 series (also known as Aficio 5002/4002 series when sold overseas), which is a black and white MFP with features, such as a more user-friendly operation panel, that assist customers improve their productivity compared to prior models.

In terms of laser printers, Ricoh developed and introduced during fiscal year 2012 the IPSiO SP C241/C230L series, which are color laser printers that print on A4-sized paper. This series prints characters, photos and graphic data in high resolution by using an oil-free toner. This series also has a toner-save print function and enables customers to adjust the print density of characters, photos and illustrations depending on the type of document they are printing. The standard electronic power consumption of this model is 35 percent less than that of previous models.

With respect to GELJET printers, Ricoh developed and introduced the IPSiO SG 3100/2100/2010L series during fiscal year 2012. Printers in this series are of a simple square design and consequently are at a maximum 42 percent smaller in volume when compared to previous models. These printers take less than 2.5 seconds to print the first page on A4-sized paper (i.e., less wait time to print a page) and are capable of printing large numbers of single pages. In addition, the average electronic power consumption of these printers is approximately 23.5 Watts, which is 25 percent less than previous models.

 

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Furthermore, in terms of production printing products, Ricoh developed and introduced the RICOH Pro C751EX/C651EX for its production printing customers during fiscal year 2012. The RICOH Pro C751EX/C651EX is a color laser printer with a high print speed of 75/65 pages per minute for both monochrome and color printing on A4-sized paper. In addition, these laser printers (1) can produce high quality images with a print resolution of 1,200 dpi x 4,800 dpi by using technology unique to Ricoh and its oil-free polymerized PxP toners, (2) can maintain high productivity by functioning stably for long hours with optional parts that replace paper and toner bottles without interruptions, and supply a maximum of 7,700 sheets of paper, (3) are highly versatile machines being capable of printing on different weighted paper that ranges from 52.3g to 300g/m2 and different sized paper ranging from postcard-sized paper to paper measuring 13 x 19.2 inches, (4) offer a variety of finishing options, including an in-line paper booklet maker and trimmer which can assist customers automate their printing jobs, and (5) have large LCD color display operating panels enabling easy and comfortable operation by customers.

In addition, in Japan as well as the overseas market, Ricoh has been expanding its managed document services (“MDS”) since its acquisition of IKON in fiscal year 2009. Historically, Ricoh has grown its business by inventing and selling new products. While Ricoh remains committed to providing innovative hardware and software products, Ricoh believes that its MDS can provide customers added-values. The objective of Ricoh’s MDS is to provide customers with a competitive advantage over its competitors, decrease costs, improve efficiencies and strengthen data security protection.

Ricoh continues to expand its MDS business globally because it believes that customers’ needs are changing. Unlike before, customers appear to be less willing to pay for hardware and software which they must manage and optimize themselves. Rather, customers appear to be seeking a consultative partner that provides not only innovative products but also solutions that enable customers to pay only for what they actually use, which may change quickly based on changes in customers’ companies and the markets they serve. Based on Ricoh’s experience, customers also appear to be looking to outsource non-core business functions to third-party partners who are willing to invest, collaborate and work with them.

More specifically, Ricoh’s MDS is a global service that helps customers improve their document workflow and office processes, manages and optimizes customer’s information, increases productivity and reduces total cost of ownership (“TCO”). Ricoh’s MDS is provided to customers in the following five phases:

Phase I (Understand – Understanding the state of the customer’s environment): In this phase, Ricoh works with customers and conducts a detailed assessment of the state of the customer’s document output environment. Ricoh’s dedicated team of analysts performs this assessment and provides the customer with an analysis of the customer’s environment, including limitations to its environment and associated costs.

Phase II (Improve – Presenting a design proposal that focuses on the customer’s goals): Using the assessment from Phase I, Ricoh’s experts (including a team of analysts, system engineers, consultants and technology specialists) develop and provide recommendations to achieve the customer’s objectives in this phase. Such objectives may include enhancing efficiency, increasing productivity, and deriving measurable and sustained cost savings.

Phase III (Transform – Transforming the customer’s environment): In this phase, Ricoh provides a clear roadmap that shows how the customer can transition from the current state to the desired future state, and offers the services of experts who can ensure that the transition to a new environment is accomplished efficiently, with minimum impact on the customer’s business, and the objectives of the change can be realized quickly.

 

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Phase IV (Govern – Governing the new environment for continuous improvement): In this phase, Ricoh provides onsite services to generate cost savings, fleet productivity and workflow improvements. Ricoh strives to deliver measurable and sustained improvements that differentiate Ricoh’s MDS from other print solutions and ensure measurable cost containment, reduced IT efforts and enhanced end-user satisfaction.

Phase V (Optimize – Optimize the new environment): In this last phase, Ricoh provides services that transform the customer’s workflow and enables customers to deliver information at the appropriate time and format, while at the same time saving costs for such action. In providing this service, Ricoh offers the services of its experts without adding to the customers’ headcount and without having customers relinquishing control over their own information infrastructure. Ricoh’s experts will work as an extension of the customer’s staff, applying the requisite expertise as needed.

(2) Network System Solutions

For fiscal year 2012, the Network System Solutions product category accounted for 10.5% of Ricoh’s net sales. More than 90% of the sales of the Network System Solutions product category is generated in Japan.

The primary function of products in this category is to assist customers in establishing a networked environment and provide customized printing solutions that satisfy customers’ individual needs. The principal products in the Network System Solutions product category include personal computers and servers, network systems, application software, and related services and support such as document outsourcing services.

In Japan, Ricoh has its own solutions brand called “Operius” and is focused on providing solutions to customers to optimize their office environment. Operius is comprised of three key components: (1) hardware, (2) software and (3) support and services. By identifying and utilizing the most appropriate hardware and software to address customers’ needs, and supplementing such products with a comprehensive support and service team (such as a 24-hour IT monitoring center, and an expert team of hardware and software engineers), Ricoh strives to assist its customers in creating a working environment that is more efficient. For example, Ricoh develops storage and management solutions that address the customers’ need to organize and keep track of both paper and digital files, and that provide a secure centralized electronic document storage system that enables easy retrieval. Through the seamless integration of hardware and software, customers can utilize and benefit from streamlined document scanning, indexing and electronic document distribution. As part of Operius, Ricoh delivers total TCO consulting that begins with analyzing the customers’ document workflow, output devices and document processes. In addition, through its support services, Ricoh has been able to lower the total printing costs of its customers by assisting them in the set up of their information technology or networks in various environments in Japan (where physical space is costly) and thereby increasing the efficiency of their printing process.

 

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Industrial Products

The Industrial Products operating segment consists of products that are used in the industrial sector. For fiscal year 2012, this segment accounted for 5.1% of Ricoh’s net sales. Principal products in this segment include thermal media, optical equipment, semiconductor devices, electronic components and measuring equipment.

Through technological enhancements in its thermal media business, Ricoh has been able to expand its business from the production of thermal paper for use in facsimiles to a variety of business areas, including the production of POS sheets, logistics management sheets (such as dispatch labels), reward cards, identification cards, medical films, food labels, industrial use labels, amusement tags and tickets, pharmaceutical labels and thermal rewritable films that utilize thermo-chromic printing technology that can be used to erase and update text and graphics up to 500 times.

Ricoh’s optical equipment business utilizes technology originally developed by Ricoh for its copiers and cameras. This business supplies optical equipment and optical supply parts, such as lens units, to third parties.

Ricoh also manufactures various types of semiconductor devices. Such devices include application-specific integrated circuits (“ASICs”) and application-specific standard products (“ASSPs”) that are often used in digital copiers, printers, personal computers, PC card, cellular phones and other digital appliances.

The electronic components business consists of components supplied to Ricoh’s manufacturing plants in connection with the production of its own products, such as copiers and printers, as well as components supplied to third parties.

Other

The Other operating segment, which accounted for 7.1% of Ricoh’s net sales for fiscal year 2012, includes digital cameras, financing and logistics services.

Ricoh is one of the pioneers in commercializing digital cameras, which have tremendous potential as “image capturing devices.” As digital cameras may be used in a variety of ways to capture and input images, Ricoh expects that the digital camera market will continue to grow in the future. To further expand its digital camera business, Ricoh acquired the PENTAX imaging systems business from HOYA Corporation in October 2011. With this acquisition, Ricoh’s digital camera lineup includes single lens reflex cameras. Subsequent to such acquisition, Ricoh released new digital cameras under the names “GR DIGITAL IV” and “PENTAX K-01”.

With the improved “GR ENGINE IV” as the new image engine and an improved optical filter, “GR DIGITAL IV” produces higher quality images than prior GR models. An external autofocus sensor developed by Ricoh and installed on this camera allows for high-speed, high-precision distance calculations of up to 190 points. The distance information calculated by such sensor can now be displayed, as necessary, thereby helping to improve the convenience and comfort level of the operator. The maximum brightness of the new image monitor has been increased by about 1.7 times over that of the GR DIGITAL III. Accordingly, the visibility of the image monitor in an outdoor environment has been greatly improved. If the brightness controller is set to Auto on this camera, the brightness of the image monitor will adjust automatically in accordance with the brightness of the subject. The size of the image monitor is now an easily viewed 3-inch screen (approximately 1.23 million-dot* VGA) and the wide viewing angle allows for viewing from various directions.

 

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The “PENTAX K-01” is a digital single reflex camera with an interchangeable lens that has been designed by Marc Newson (an acclaimed and influential contemporary designer). The PENTAX mirrorless body design is compatible with over 25 million PENTAX K-mount lenses which have been introduced over decades, providing flexibility and an extensive optical selection. The large 16 megapixel APS-C sized CMOS image sensor on this camera delivers high resolution image quality, color accuracy and low noise in multiple aspect ratios. The sensor-shift PENTAX Shake and Dust Reduction system available on this camera is compatible with every mounted PENTAX lens for beautifully still images and stabilized videography.

Ricoh provides certain financing services in Japan through Ricoh Leasing Co., Ltd., which leases industrial equipment and medical equipment as well as office equipment, and offers loans, such as support loans, to small businesses and independent medical doctors. Ricoh is also increasing its financing services in the United States and Western Europe by extending more leases to customers in order to meet the change in customers’ demand to “use” equipment rather than to “own” equipment, and to support sales of the Imaging Solutions business.

Ricoh Logistics System Co. Ltd. offers logistics services in the delivery, distribution and storage of products, such as electronic products, office equipment, and electronic and machinery parts.

New Businesses

Recently, Ricoh has further expanded its businesses to manufacture and sell products such as projectors, LED tubes, video conference systems, thermal rewritable products and mobile devices called EWS (which stands for “eWriter Solutions”).

The market for projectors is experiencing great changes as demand increases and technological advances are made. Ricoh believes that its extensive knowledge in optical system technologies and processing techniques, which it uses in its existing businesses and has acquired over the years, as well as new R&D activity for projectors that it is undertaking will enable it to introduce innovative products that will meet customer demands. Using its existing global distribution and services infrastructure, Ricoh believes that it is well situated to provide the same high-quality products and services as its existing businesses, and expand into the projector market.

In recent years, Ricoh has been focused on “Environmental Management”, a phrase Ricoh uses to refer to efforts to achieve environmental conservation while generating profits, and has promoted environmental burden reduction initiatives. For example, in its mainstay multifunction products and printers, Ricoh uses recycled resources in its production to greatly reduce new extraction of ores and fossil resources from the global environment. Ricoh is also working to develop technology so as to reduce and replace materials that are at greater risk of becoming exhausted and chemicals that are harmful to people and the environment. Ricoh makes full use of these proprietary environmental technologies and has recently launched its eco solutions business which includes a new line of products that effectively conserve energy, thereby providing customers with solutions which contribute to reducing the global environmental burden. More specifically, amid a growing interest in global environmental protection, large market growth is expected for LED illumination, which consumes less electricity and generates lower CO2 emissions than traditional incandescent and fluorescent lamps. This is especially the case in the office environment where energy conservation regulations have been adopted. Accordingly, as a first step for its eco solutions business, Ricoh entered the LED illumination market utilizing its proprietary technologies and global sales and services network, and started selling straight tube type LED illumination in July 2011. While Ricoh intends for its LED illumination line of products to become the core product of this new business, it is also focused on developing its ESCO business (which is a business that provides comprehensive services to achieve energy savings in buildings and factories with the objective of providing energy saving benefits to customers and contributing to preserving the global environment).

 

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Faster and inexpensive IP networks are enabling seamless interaction between diverse forms of information and using various communication methods and devices. The unified communication systems (“UCS”) business, which is a business that integrates video, voice and various other forms of information to achieve efficient communication, offers solutions that match this communication evolution, and serves to enhance the efficiency and improve the productivity of customers’ business while saving costs. In light of such environment, Ricoh has entered into the USC business. Ricoh offers systems and cloud services which unify various data such as video, voice, documents, text and handwritten input, thereby enabling communication “anytime, anywhere, with anyone.”

Ricoh’s rewritable printing technology enables printing on a thermal media that can be rewritten multiple times by using technology that controls coloring and discoloring reactions on such thermal media. Application of this technology to rewritable cards and rewritable papers is set to expand. Rewritable printing technology was first practically applied in loyalty cards, patient registration cards, commuter passes, and other rewritable cards. Now, the convenience of these cards has greatly increased in light of the ability to view digital information recorded on the magnetic recording strips on the back of these cards. The technology has subsequently been applied to rewritable sheets, making it possible to sharply reduce the use of printed paper at factories and other sites, and to rewritable hybrid media (“RHM”), which is a new information media incorporated into distribution and production management systems in combination with RF tags. Ricoh’s rewritable technology has been commercialized as RECO-View RF tags, and its use is increasing.

Ricoh’s eWriter Solution business is comprised of a business-class tablet device and a data management service, which together enable the paperless processing of business matters. This solution addresses technology gaps in the digital workflow by replacing paper-based writing solutions with efficient digital alternatives. With the use of this solution, customers are able to increase their productivity while reducing their paper costs and carbon footprint.

 

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GROUP VISION AND MANAGEMENT PLANS

With “Winner in the 21st Century (Build a strong global RICOH brand)” as its group vision, Ricoh strives to continue growing and developing as a global company by gaining the trust of its customers. Ricoh intends to gain the trust of its customers by continuously working towards achieving greater customer productivity and knowledge management. Accordingly, Ricoh plans to conduct its business activities in a way that provides innovative products and services to all of its customers (including those who use information at work and in their lives outside of work) based on Ricoh’s three core values of “harmonizing with the environment (i.e., reducing and minimizing environmental impact),” “simplifying your life and work (i.e., enhancing user friendliness and striving towards simplification)” and “supporting knowledge management (i.e., offering solutions to process information).”

In addition to this overall group vision, management has established medium-term goals. The objective of the 17th Mid Term Plan (“MTP”), which covers the period from April 2011 to March 2014, is to achieve growth and to restructure its organization simultaneously in order to develop new values that can be provided to customers. To achieve this objective by the end of the 17th MTP, Ricoh has implemented the following two basic group management strategies: (1) “business creation and integration” and (2) “establish highly efficient management.”

By “business creation and integration,” Ricoh means that it will strive to strengthen its services business with the goal of increasing its market share not only in products but also in services. More specifically, Ricoh will focus on achieving five objectives under the “business creation and integration” strategy. First, Ricoh will work to maintain its top market share status in its core business (i.e., products that are used in the office environment), while streamlining its operations. Second, Ricoh will aim to expand its services business in developed countries and areas, such as the United States, Western Europe and Japan, by enhancing its MDS offerings and expanding its IT services. Third, Ricoh will strive to expand its product line-up and market share in the emerging markets. Fourth, Ricoh will work to strengthen its production printing business by making necessary adjustments to its sales and service structures and expanding its product line-up so that its production printing business can realize a profit at an early stage. Lastly, Ricoh will continue to develop new businesses to achieve growth, which new businesses will include developing network appliances and Eco solutions. Network appliances consist of projectors, UCSs and other systems. Eco solutions consist of the LED illumination business, the ESCO business (which is a business that provides comprehensive services to achieve energy savings in buildings and factories with the objective of providing energy saving benefits to customers and contributing to preserving the global environment), the recycling business and other businesses. In addition, as part of the 17th MTP and in light of the shift in customer demand to merely “use” equipment as opposed to “own” equipment, Ricoh intends to (1) provide comprehensive MDS or Eco solutions by using a combination of existing systems and the Ricoh group expertise and (2) provide financial solutions for customers to facilitate the purchase of higher priced products and services, such as the building- or factory-wide comprehensive installation of LED illuminations and production printing products. Separately, to assist in the recovery of the Tohoku area after the Great East Japan Earthquake, Ricoh has established a new recycling center in the Tohoku area and plans to expand its toner production capacity in the Tohoku area. To date, Ricoh has contributed ¥0.3 billion and established a Recovery Support Department to strengthen its recovery efforts and support the mid- to long-term recovery of the affected areas.

 

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During fiscal year 2012, Ricoh secured a large share of the color copier and multifunctional equipment markets in Japan and abroad based on the number of units sold. To achieve such result, Ricoh worked to strengthen its product competitiveness. In addition, to offer products that are more environmentally friendly, Ricoh has been working to develop lower fusing temperature toners that use less energy per print page, and launched toners that can fuse particles at temperatures as low as 120 C degrees during fiscal year 2012. Ricoh also started to shift its overseas marketing approach from a product-driven marketing approach to a customer-centric marketing approach. In order to increase Ricoh’s share-of-wallet, Ricoh provided customers with high value added product-service combinations for copier and multifunctional equipment, printers and other equipment.

Ricoh has also been working to transform the business structure of its services business. For example, during fiscal year 2012, Ricoh reinforced its MDS and obtained MDS orders from several global customers. As a result of such efforts, Ricoh’s MDS sales increased by 20% as compared to the previous fiscal year and Ricoh is now recognized as a top player in the market. In addition, sales of Ricoh’s network system solutions business increased by 10% for fiscal year 2012 compared to fiscal year 2011. Ricoh has worked to strengthen its the core and its adjacent businesses while connecting value chains of products and services, and is now starting to see fruits of its efforts.

Ricoh also achieved business growth in the emerging markets. For fiscal year 2012, Ricoh expanded its MFP market share in China and the Asia Pacific based on the number of units sold. In addition, Ricoh strengthened its product competitiveness in China by, for example, launching printers and A4 MFPs designed and developed specifically for the Chinese market. Ricoh also established during fiscal year 2012 a new research center in India and a new affiliated sales company in Vietnam.

In addition, Ricoh worked to strengthen its production printing business during fiscal year 2012. For example, Ricoh focused its attention on strengthening the competitiveness of its production printing products. More specifically, Ricoh launched a new product in the light volume segment of cut sheet printers. This new product boosted Ricoh’s market share in terms of color cut sheet printers based on the number of units sold. Ricoh also unveiled wide format color inkjet production printing printers and full color continuous feed production printing printers. Ricoh believes wide format and continuous feed printing will be a growth business in the future. As a result of its efforts, Ricoh recorded an increase in revenue in its production printing business for fiscal year 2012. In the future, Ricoh hopes to further improve its product competitiveness and cultivate the corporate printing market vertically.

Ricoh also worked to further develop its new businesses during fiscal year 2012. For example, it launched new products such as projectors, LED tubes, video conference systems, thermal rewritable products, and mobile devices called EWS. With respect to its projector business, Ricoh added ultra-short-throw projectors to its product lineup and was ranked fourth in terms of market share in Japan based on the number of units sold. More than 50% of Ricoh’s LED tube customers are new customers and Ricoh expects that it will one day be able to generate some new business from these customers by selling its other products to these customers. In addition, Ricoh launched UCS in Japan during fiscal year 2012 and prepared for the launch of such business in the overseas market during fiscal year 2012.

 

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By “establish highly efficient management,” Ricoh means that it will work to create a corporate environment through which its growth strategies can be accelerated. More specifically, Ricoh will strive to realize a corporate culture that encourages the accelerated implementation of growth strategies that seek to achieve in-depth restructuring as part of the Corporate Restructuring and Growth Program (“CRGP”) , which Ricoh started in fiscal year 2009. Ricoh intends to achieve this restructuring by (1) streamlining its sales systems, (2) reviewing non-profitable businesses and deciding either to support and turn around such businesses or withdraw from such businesses, (3) integrating production sites and shifting resources to growth areas, (4) encouraging operational re-engineering, such as re-engineering its business processes, streamlining redundant operations and reorganizing headquarter functions, (5) relocating approximately 15,000 personnel to new growth areas and reducing personnel headcount by approximately 10,000 persons, (6) reducing purchase costs by centralizing purchase functions and aggregating purchase orders and (7) reviewing its development processes (such as the “create without making” process, which means to develop products without incurring costs arising from test models) and strengthening its support for low cost development. In addition, as part of the 17th MTP and to investment in its future growth, Ricoh intends to (1) make capital investments of approximately ¥200.0 billion during fiscal years 2012 to 2014 (which will be maintained on an annual basis at current levels equivalent to depreciation), (2) maintain R&D expenses at 5-6% of net sales (which it intends to use to expand into new business areas and streamline existing business areas while also engaging in product development for emerging markets) and (3) expand its business infrastructure in new areas and growth areas (which it intends to accomplish by reallocating resources and implementing strategic investments into new business areas).

To improve the allocation of human resources, Ricoh spent ¥34.1 billion during fiscal year 2012, and plans to spend ¥25 billion during fiscal year 2013. Ricoh is starting to see the benefits of its restructuring efforts and aims to achieve ¥70 billion of cost savings through these restructuring efforts by the end of fiscal year 2014. More specifically, in connection with restructuring its sales force in Japan, Ricoh is working to improve its sales and post-sales service productivity by, for example, introducing satellite offices and mobile-based work arrangements so that its sales force can increase its contact with customers and thereby increase sales.

Ricoh started fiscal year 2012 targeting ¥70 billion in operating income; but ended the fiscal year with a loss of ¥18 billion. This was primarily because during fiscal year 2012 Ricoh was profoundly affected by a series of unexpected events, including the Great East Japan Earthquake and the flood in Thailand and also extraordinary events such as restructuring costs, foreign exchange losses due to the continuing appreciation of the Japanese Yen relative to other currencies, the Eurozone crisis and impairment loss. Had these events, which are estimated to have reduced Ricoh’s operating income by ¥73 billion, not occurred, Ricoh would have achieved ¥70 billion of operating income in fiscal year 2012. In light of these unexpected and extraordinary events, Ricoh has revised its financial targets that it set to achieve by March 2014 in connection with the 17th MTP. The net sales target figure has been reduced from ¥2,400 billion or higher to ¥2,100 billion or higher. The operating income target figure has been reduced from ¥210 billion or higher to ¥150 billion or higher. In addition, Ricoh was aiming to generate an aggregate of ¥200 billion of free cash flow (which is the sum of cash flows from operating activities plus cash flows from investing activities) over the three year period of the 17th MTP. However, because Ricoh recorded a negative cash flow of ¥101.2 billion for fiscal year 2012, Ricoh has reduced its free cash flow target figure to approximately ¥50 billion over the three year period of the 17th MTP. The target figure for Ricoh’s shareholder return ratio (the ratio of payments dividend out of net income) remains the same at approximately 30%.

 

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SALES AND DISTRIBUTION

Ricoh continues to utilize the following three marketing and sales channels for the distribution of its products to end-user customers in Japan: (1) direct sales by Ricoh to end-user customers through domestic subsidiaries and affiliates, (2) sales through independent dealers of office equipment and (3) sales through independent office supply wholesalers and retailers. Ricoh estimates that over one-half of its PPC/MFP and laser printer sales in Japan by revenue are derived from its direct sales channels to end-user customers, with the remaining balance being divided between sales through independent dealers of office equipment and independent office supply wholesalers and retailers.

Outside of Japan, Ricoh has organized its marketing and sales channels to accommodate its four operating regions: (1) the Americas, (2) Europe, Africa, and the Middle East, (3) Asia and Oceania and (4) China. One of Ricoh’s strategies in expanding its overseas marketing and sales channels has been to acquire office equipment sales companies in various locations around the world through which it can sell its products. Accordingly, in addition to selling Ricoh brand name products through its overseas sales subsidiaries, affiliates and independent dealers (similar to the marketing and sales channels used for the distribution of products in Japan), Ricoh also sells its products through the following two marketing and sales channels in the overseas market: (1) sales of products under brand names that Ricoh purchased through acquisitions (i.e., the “Savin” brand, the “Lanier” brand and the “Infotec” brand) and (2) sales of Ricoh’s products by other companies under their brand names where Ricoh is the original equipment manufacturer (“OEM”). Savin and Lanier were originally Ricoh’s OEM distributors prior to their acquisition.

With respect to direct sales to end-user customers, Ricoh recognizes revenue for sales upon the delivery and installation of equipment. Revenue from the sales of equipment under sales-type leases is recognized as product sales at the inception of the lease. With respect to sales through independent dealers or independent office supply wholesalers and retailers, Ricoh recognizes revenue upon the delivery of the equipment to such independent dealers or independent office supply wholesalers and retailers. Information regarding the methods by which Ricoh recognizes revenue is also set forth in Item 5. Critical Accounting Policies and Note 2 to the Consolidated Financial Statements which are included in this annual report.

AFTER-SALES SERVICE

Ricoh provides repair and maintenance services for its products to end-user customers based on the belief that periodic and timely maintenance services are essential in preserving Ricoh’s market share in the relevant products. These maintenance services are provided to end-user customers pursuant to maintenance service contracts customarily entered into at the time the equipment is originally sold to the end-user customer.

In Japan, repair and maintenance services are generally provided by Ricoh’s service specialists. Ricoh’s service network in Japan includes service centers operated by Ricoh and its affiliates and service outlets operated by other companies. The total number of Ricoh’s sales and service personnel in Japan is approximately 19,800. Similar to Japan, Ricoh employees and contracted maintenance providers provide repair and maintenance services to end-user customers in the overseas market who purchase Ricoh products. The total number of Ricoh’s overseas sales and service personnel is approximately 44,700.

Ricoh’s customer support system (“@Remote”) is available globally in order to enhance customer satisfaction and service efficiency. This system allows Ricoh to remotely monitor copiers that are in operation and provide prompt service to such copiers.

Additional information regarding the manner in which Ricoh accounts for its after-sales services is set forth in Item 5. Critical Accounting Policies and Note 2 to the Consolidated Financial Statements which are included in this annual report.

 

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PRINCIPAL MARKETS

Ricoh distributes its products and competes in the following four geographic areas: Japan, the Americas, Europe and Other. In the aggregate, Ricoh’s sales decreased in fiscal year 2012. As noted below, for fiscal year 2012, net sales in Japan, the Americas, Europe and Other as a percentage of total net sales were 46.6%, 24.6%, 21.5% and 7.3%, respectively. The table below breaks down for each geographic area the total net sales amount and percentage of such net sales amount as compared against total net sales for each of the last three fiscal years.

SALES BY GEOGRAPHIC AREA

 

     Millions of Yen (except for percentages to net sales)
For the Year Ended March 31,
 
     2010     2011     2012  

Japan

   ¥ 876,498         43.5   ¥ 875,819         45.1   ¥ 886,425         46.6

The Americas

     558,942         27.7        520,000         26.8        468,728         24.6   

Europe

     456,563         22.6        415,189         21.4        408,542         21.5   

Other

     123,808         6.2        130,328         6.7        139,782         7.3   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   ¥ 2,015,811         100.0   ¥ 1,941,336         100.0   ¥ 1,903,477         100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

Note:

(1) Sales amounts set forth in the above table are based on the location of the purchaser (external customer) of the product. For example, if the product is manufactured in Japan and sold to an external customer located in the United States, such sale would be recorded as a sale in the Americas.

(1) Japan

In Japan, the business environment surrounding Ricoh continued to be unfavorable due mainly to a series of events including the adverse effect of the Great East Japan Earthquake followed by the flood in Thailand on Ricoh’s supply chain, the shortfall in electrical power supply and the sharp appreciation of the Japanese Yen against the U.S. Dollar and the Euro. In the Imaging & Solutions operating segment, Ricoh worked to restructure its sales infrastructure with Ricoh Japan Corporation as its main sales company in Japan. By centralizing the management functions relating to sales in Japan at Ricoh Japan Corporation, Ricoh expects to improve its management efficiency and decision making process such that it can promptly respond to the diversifying needs of its customers. In the Industrial Products operating segment, sales of semiconductor devices and thermal media decreased as compared to fiscal year 2011. Sales in the Other operating segment increased as compared to fiscal year 2011 due primarily to additional digital cameras sales recorded in light of Ricoh’s acquisition of the PENTAX imaging systems business from HOYA Corporation during fiscal year 2012.

(2) The Americas

In the Americas, economic conditions remained unpredictable despite the recovery in individual consumption and capital investments. While Ricoh’s efforts to strengthen its overall sales structure and expand its sales channel through the acquisition of IKON contributed to sales in the Americas, such efforts were not sufficient to overcome the appreciation of the Japanese Yen against the U.S. Dollar. As a result, overall sales in the Americas decreased compared to fiscal year 2011.

(3) Europe

In Europe, the economic condition remained uncertain due to the widening of intra-regional economic disparities in light of the financial crisis and increase in unemployment in some of the European countries. In addition, the sharp depreciation of the Euro relative to other foreign currencies contributed to such uncertain economic conditions.

(4) Other

The Other geographic area includes China, South East Asia and Oceania. In light of the expanding economies in the emerging markets, including China and India, Ricoh strengthened its sales force in the emerging markets during fiscal year 2012 and recorded increased sales in all operating segments in this geographic area compared to fiscal year 2011.

 

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COMPETITION

The office equipment industry in which Ricoh primarily competes remains highly competitive and Ricoh continues to encounter intense competition in its Imaging & Solutions operating segment. Furthermore, competition in each of the product categories in the Imaging & Solutions operating segment is expected to increase in the future as Ricoh’s competitors enhance and expand their product and service offerings. For example, in response to the trend in the office equipment market towards digital networking systems and the shift in customers’ demands towards color products, Ricoh’s competitors are introducing a range of color products and digital networking systems, thereby increasing the level of competition in these products. This increase in competition may result in price reductions and decreases in profitability as well as market share in these products. Ricoh seeks to prevail over the intense competition in the office equipment market by providing customers with equipment that optimizes the TCO of such equipment and enhancing office productivity and efficiency. However, Ricoh cannot provide assurance that it will be able to compete successfully against existing or future competitors. Moreover, Ricoh may face competition from some of its current customers and companies with which Ricoh has strategic business relationships.

The size and number of Ricoh’s competitors vary across its product categories, as do the resources allocated by its competitors to the markets Ricoh targets. Ricoh’s competitors may have greater financial, personnel and other resources than Ricoh has in a particular market or overall. These competitors may have greater resources available to them to respond quickly to new technologies and may be able to undertake more extensive marketing campaigns than Ricoh. Competitors may also adopt more aggressive pricing policies for their products and make more attractive offers to potential customers, employees and strategic partners. These competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with third parties to increase their ability to gain market share.

Despite the intense competition in the office equipment industry, Ricoh’s management believes that Ricoh will be able to maintain and enhance its position in the global market because of its experience, expertise and technical capabilities as a leading provider of office and production printing equipment, and dedication to meet customers’ needs.

 

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SEASONALITY

Sales in the Imaging & Solutions operating segment generally increase in March of each year, which is the end of the fiscal year for most Japanese companies. This is due to the increase in demand for these products as many Japanese companies and government entities try to expend their allotted capital expenditure budget for the fiscal year. However, the effect of this seasonality on a consolidated basis has customarily been minimal. For example, sales generated during the month of March due to this seasonality accounted for 12.7% of Ricoh’s sales in Japan for fiscal year 2012. However, the effect of this seasonality on a consolidated basis was minimal for fiscal year 2012, as only 6.0% of Ricoh’s total consolidated sales for fiscal year 2012 was generated from sales in Japan during the month of March.

SOURCES OF SUPPLY

Raw materials, parts and components used in the production of Ricoh’s products, such as plastics, rubber and chemicals are procured on a global basis. Prices of some raw materials that Ricoh uses fluctuate according to the market and prices of some parts and components that Ricoh uses fluctuate as well. Generally, Ricoh maintains multiple suppliers for the most significant categories of raw materials, parts and components to address such fluctuations. Because very few of the raw materials required by Ricoh in manufacturing its products can be procured in Japan, most of the raw materials used by Ricoh come from outside of Japan. Ricoh monitors the availability of raw materials on a regular basis to ensure that it will not encounter any shortages. Ricoh has not experienced any significant difficulty in obtaining the raw materials, parts and components necessary for it to manufacture its products and believes that it will be able to continue to obtain necessary raw materials, parts and components in sufficient quantities to meet its manufacturing needs in the future. A rise in crude oil prices may lead to an increase in the overall cost of procuring raw materials, parts and components. This is due to the fact that the cost of oil-based parts and components, the processing costs of raw materials and fuel costs of shipping and distributing such raw materials, parts and components may increase as a result of higher crude oil prices. However, Ricoh believes that it will be able to adequately manage the impact of any such price volatility in connection with the raw materials, parts and components that are required to manufacture its products.

INTELLECTUAL PROPERTY

Ricoh holds a large number of patents and trademark rights. While Ricoh considers such intellectual property rights to be valuable assets and important for its operations, it believes that its business is not dependent to any material extent upon any single patent or trademark right, or any related group of rights it holds.

Ricoh also has many licenses and technical assistance agreements covering a wide variety of products. Such agreements grant Ricoh the right to use certain Japanese and foreign patents or the right to receive certain technical information. However, Ricoh is not materially dependent on any such single license or agreement, or any related group of licenses or agreements.

In addition, Ricoh has granted licenses and technical assistance to various companies located in and outside of Japan. In certain instances, Ricoh has entered into cross-licensing agreements with other major international electronics and electrical equipment manufacturers. None of these agreements are likely to materially affect Ricoh’s business or profitability. See Item 5.C. Patents and Licenses.

 

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GOVERNMENT REGULATIONS

Ricoh’s business activities are subject to various government regulations in the various countries in which it operates, including regulations relating to business and investment approvals, export regulations, tariffs, antitrust, intellectual property, consumer and business taxation, exchange controls and recycling requirements. Ricoh is also subject to environmental regulations in the jurisdictions in which it operates, particularly those jurisdictions in which it has manufacturing, research or similar operations. These regulations govern, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal, product recycling, and soil and ground-water contamination. These regulations are imposed by the environmental regulatory agencies in the jurisdictions in which Ricoh conducts its operations. For example, in the United States these agencies are the United States Environmental Protection Agency and the State environmental regulatory agencies in the jurisdictions in which Ricoh conducts operations.

The products sold by Ricoh are increasingly subject to a variety of environmentally-related requirements in the markets in which it operates that restrict or prohibit the types of material that are used or present in the products, require manufacturers and distributors to “take back” and either dispose of or recycle products at the end of their useful life, and require or encourage increased energy efficiency. These product-related requirements are frequently accompanied by labeling requirements intended to inform customers about the presence or absence of certain materials in products, or provide information about the recyclability of the products. These requirements affect Ricoh’s global supply chain, since supplied components must meet the applicable requirements in order for Ricoh’s products to be in compliance. For example, environmental regulations which may affect Ricoh’s businesses in the European Union include (but are not limited to) the European Union Directive on Waste Electrical and Electronic Equipment (the “WEEE Directive”), the European Union Directive on the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the “RoHS Directive”), the European Union Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (the “REACH Regulation”) and the European Union Directive on Energy-Using Products (the “EuP Directive,” also commonly known as Directive 2005/32/EC). Beginning in August 2005, the WEEE Directive, as enacted by individual European Union countries, made manufacturers or importers of electrical and electronic equipment in the European Union financially responsible for the collection, recycling, treatment, recovery and legitimate disposal of collected waste electrical and electronic equipment. The RoHS Directive prohibits the presence of more than specific concentrations of lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE) in electrical and electronic equipment that is to be sold in the European Union market from July 2006. The REACH Regulation entered into force in June 2007 and, among other things, requires the registration of chemical substances manufactured or used in products that are sold in the European Union. This regulation covers almost all forms of chemicals, and also imposes some requirements on “articles” (as defined in the REACH Regulation) manufactured in or imported into the European Union. The EuP Directive sets forth a framework for establishing eco-design requirements for energy-using products by systematically integrating environmental aspects at early stages of the product design. One of the important goals of the EuP Directive is to improve the overall environmental performance of products throughout their life-cycle. A variety of similar product-related environmental requirements have been or are expected to be enacted in other regions where Ricoh operates, including in the United States (including requirements established by individual States) and Asia. The scope of these requirements, including the types of equipment and materials covered and the nature and severity of the restrictions or prohibitions imposed, may expand as legislatures and regulators in the markets in which Ricoh operates review and amend these requirements.

 

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While Ricoh’s businesses may be affected by various government regulations, Ricoh currently operates, and expects to continue operating, its business without significant difficulty in complying with applicable government regulations.

C. Organizational Structure

As of March 31, 2012, the Ricoh group includes the Company, 223 subsidiaries and seven affiliates located worldwide. In addition, starting from fiscal year 2011, Variable Interest Entities (“VIE”) have been consolidated into Ricoh. See Note [2] (u) and Note [4] to the Consolidated Financial Statements for additional information.

The Company is the parent of the Ricoh group. The Company heads the R&D activities of Ricoh products with assistance from its subsidiaries. The Company and its subsidiaries and affiliates maintain an integrated domestic and international manufacturing and distribution structure.

 

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The following is a list of the principal subsidiaries of the Company as of March 31, 2012. None of the Company’s seven affiliates are considered material affiliates of Ricoh.

 

Company Name

  

Country of
Formation

  

Proportion of
Ownership

Interest

  

Main Businesses

(Subsidiaries)

        

Ricoh Optical Industries Co., Ltd.

   Japan    100.0   

Manufacturing optical equipment

Hasama Ricoh, Inc.

   Japan    100.0   

Manufacturing parts for office equipment

Tohoku Ricoh Co., Ltd.

   Japan    100.0   

Manufacturing office equipment

Ricoh Unitechno Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Printing Systems, Ltd.

   Japan    100.0   

Manufacturing and sale of office equipment

Ricoh Elemex Corporation

   Japan    100.0   

Manufacturing and sales of office equipment and minuteness equipment

Ricoh Microelectronics Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Keiki Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Japan Corporation

   Japan    100.0   

Sale of office equipment

Ricoh Technosystems Co., Ltd.

   Japan    100.0   

Maintenance, service and sale of office equipment

Ricoh IT Solutions Co., Ltd.

   Japan    100.0   

Development and construction of network system

Ricoh Logistics System Co., Ltd.

   Japan    100.0   

Logistics services and custom clearances

Ricoh Leasing Co., Ltd.

   Japan    51.1   

General leasing

Ricoh Creative Service Co., Ltd.

   Japan    100.0   

Management of group facility, advertisement and printing

Pentax Ricoh Imaging Co., Ltd.

   Japan    100.0   

Manufacturing and sale of digital camera

Ricoh Electronics, Inc.

   U.S.A.    100.0   

Manufacturing office equipment and related supplies

Ricoh UK Products Ltd.

   U.K.    100.0   

Manufacturing office equipment

Ricoh Industrie France S.A.S.

   France    100.0   

Manufacturing office equipment and related supplies

Ricoh Asia Industry (Shenzhen) Ltd.

   China    100.0   

Manufacturing office equipment and related supplies

Shanghai Ricoh Digital Equipment Co., Ltd.

   China    100.0   

Manufacturing and sale of office equipment

Ricoh Components Asia (Hong Kong) Co., Ltd.

  

Hong Kong,

China

   100.0   

Sale of parts for office equipment

Ricoh Components & Products (Shenzhen) Co., Ltd.

   China    100.0   

Manufacturing parts for office equipment

Ricoh Elemex (H.K.) Ltd.

  

Hong Kong,

China

   100.0   

Sale of office equipment and minuteness equipment

Ricoh Manufacturing (Thailand) Ltd.

   Thailand    100.0   

Manufacturing office equipment

Pentax Ricoh Imaging Products (Philippines) Corporation

   Philippines    100.0   

Manufacturing digital camera

Ricoh Americas Holdings, Inc.

   U.S.A.    100.0   

Holding company in the U.S.A.

Ricoh Americas Corporation

   U.S.A.    100.0   

Sale of office equipment

Ricoh Canada Inc.

   Canada    100.0   

Sale of office equipment

IKON Office Solutions, Inc.

   U.S.A.    100.0   

Sale of office equipment

Ricoh Printing Systems America, Inc.

   U.S.A.    100.0   

Manufacturing and sales of office equipment

Ricoh Production Print Solutions, LLC

   U.S.A.    100.0   

Sale of office equipment

 

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Company Name

  

Country of
Formation

  

Proportion of
Ownership

Interest

  

Main Businesses

Pentax Ricoh Imaging Americas Corporation

   U.S.A.    100.0   

Sale of digital camera

Ricoh Europe Holdings PLC

   U.K.    100.0   

Holding company in Europe

Ricoh UK Ltd.

   U.K.    100.0   

Sale of office equipment

Ricoh Deutschland GmbH

   Germany    100.0   

Sale of office equipment

Ricoh France S.A.S

   France    100.0   

Sale of office equipment

Ricoh Italia S.R.L.

   Italy    100.0   

Sale of office equipment

Ricoh Espana S.L.U.

   Spain    100.0   

Sale of office equipment

Ricoh Belgium N.V.

   Belgium    100.0   

Sale of office equipment

Ricoh Nederland B.V.

   Netherlands    100.0   

Sale of office equipment

Ricoh Europe SCM B.V.

   Netherlands    100.0   

Sale of office equipment

Ricoh Schweiz AG

   Switzerland    100.0   

Sale of office equipment

Ricoh Sverige AB.

   Sweden    100.0   

Sale of office equipment

Pentax Ricoh Imaging France S.A.S.

   France    100.0   

Sale of digital camera

Ricoh Finance Nederland B.V.

   Netherlands    100.0   

Corporate finance

Ricoh China Co., Ltd.

   China    100.0   

Sale of office equipment

Ricoh Hong Kong Ltd.

  

Hong Kong,

China

   100.0   

Sale of office equipment

Ricoh Asia Industry Ltd.

  

Hong Kong,

China

   100.0   

Sale of office equipment

Ricoh Asia Pacific Pte Ltd

   Singapore    100.0   

Sale of office equipment

Ricoh Asia Pacific Operations Ltd.

  

Hong Kong,

China

   100.0   

Sale of office equipment

Ricoh Thailand Ltd.

   Thailand    100.0   

Sale of office equipment

Ricoh India Ltd.

   India    73.6   

Sale of office equipment

Ricoh Australia Pty, Ltd.

   Australia    100.0   

Sale of office equipment

And 170 other subsidiaries

        

(Affiliates)

        

7 affiliates (none of which are material affiliates)

        

 

Notes:

(1) Proportion of ownership interest includes indirect ownership.
(2) Ricoh Leasing Co., Ltd. is the only subsidiary of the Company that is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X.
(3) IKON Office Solutions, Inc. changed its name to Ricoh USA, Inc. in April 2012.

 

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D. Property, Plant and Equipment

Ricoh manufactures its products primarily in fifteen plants in Japan and eleven plants overseas. Ricoh owns all of the buildings and the land on which its plants are located, with the exception of certain leases of land and floor space of certain of its subsidiaries. None of these leased land and floor spaces have major encumbrances on them. None of Ricoh’s plants are subject to any material environmental issues that may affect the extent to which Ricoh is able to utilize such plants. The following table gives certain information as of March 31, 2012 regarding the Company’s and its subsidiaries’ principal manufacturing and other facilities. With the exceptions of GR Advanced Materials Ltd., the manufacturing and other facilities listed below have floor space exceeding 10,000 square meters.

 

Name (Location)

  

Floor space

  

Principal activities and products manufactured

     (in thousands of
square meters)
    

Japan:

     

Ricoh Company, Ltd.

     

Ohmori Plant (Tokyo)

   54   

Parts relating to copiers

Atsugi Plant (Kanagawa)

   73   

Office equipment and other products

Numazu Plant (Shizuoka)

   105   

Paper and toner

Ikeda Plant (Osaka)

   27   

Electronic devices

Fukui Plant (Fukui)

   34   

Papers and toner

Gotenba Plant (Shizuoka)

   70   

Office equipment

Yashiro Plant (Hyogo)

   34   

Electronic devices

Ricoh Technology Center (Kanagawa)

   127   

R&D

Head Office (Tokyo)

   21   

Head office and marketing of office equipment

Research & Development Center (Kanagawa)

   17   

R&D

System Center (Tokyo)

   10   

Information system center, marketing of office equipment and other business

Ginza Office (Tokyo)

   11   

Marketing of office equipment and other business

Shin-Yokohama office (Kanagawa)

   40   

Marketing of office equipment, other business and related services

Katsuta office (Ibaraki)

   54   

R&D of production printing products

Subsidiaries:

     

Ricoh Optical Industries Co., Ltd. (Iwate)

   23   

Optical equipment

Tohoku Ricoh Co., Ltd. (Miyagi)

   64   

Office equipment, toner and parts relating to copiers and duplicators

Hasama Ricoh, Inc. (Miyagi)

   14   

Parts relating to copiers and data processing equipment

Ricoh Unitechno Co., Ltd. (Saitama)

   20   

Office equipment

Ricoh Elemex Corporation. (Aichi)

   45   

Office equipment and measuring equipment

Ricoh Microelectronics Co., Ltd. (Tottori)

   12   

Printed circuit boards and electronic components

Ricoh Keiki Co., Ltd. (Saga)

   10   

Printed circuit boards and parts relating to copiers

Ricoh Printing Systems, Ltd. (Ibaraki)

   54   

Printers and production printing products

 

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Name (Location)

  

Floor space

  

Principal activities and products manufactured

     (in thousands of
square meters)
    

Overseas:

     

Ricoh Electronics, Inc.

(Irvine, Santa Ana and Tustin, California and Lawrenceville, Georgia, U.S.A.)

   113   

Copiers, parts relating to copiers, toner and thermal paper

Ricoh UK Products Ltd. (Telford, United Kingdom)

   36   

Copiers, parts relating to copiers and toner

Ricoh Industries France S.A.S. (Colmar, France)

   49   

Copiers, parts relating to copiers and thermal paper

Ricoh Asia Industry (Shenzhen) Ltd. (Shenzhen, China)

   42   

Copiers, parts relating to copiers, and toner

Ricoh Components & Products (Shenzhen) Ltd. (Shenzhen, China)

   54   

Printed circuit boards and electronic components

Ricoh Thermal Media (Wuxi) Co., Ltd. (Shenzhen, China)

   24   

Direct thermal paper and thermal transfer ribbon

Shanghai Ricoh Digital Equipment Co., Ltd. (Shanghai, China)

   32   

Copiers, facsimile equipment and parts relating to copiers

Ricoh Manufacturing (Thailand) Ltd. (Rayong, Thailand)

   38   

Printers and parts relating to printers

GR Advanced Materials Ltd. (Scotland, United Kingdom)

   8   

Supplies relating to duplicators

Pentax Ricoh Imaging Products (Philippines) Corporation (Cebu, Philippines)

   16   

Digital camera equipment

Pentax Ricoh Imaging Products (Vietnam) Corporation (Hanoi, Vietnam)

   17   

Optical equipment

Ricoh considers its manufacturing facilities to be well maintained and believes its plant capacity is adequate for its current needs, though successive investments in manufacturing facilities are being considered for its long-term success.

Item 4.A. Unresolved Staff Comments

Not applicable.

 

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Item 5. Operating and Financial Review and Prospects

OVERVIEW

Ricoh is engaged primarily in the development, manufacturing, sales and servicing of office automation equipment, such as PPCs/MFPs, laser printers, GELJET printers, production printing products and facsimile machines, as well as semiconductor devices, digital cameras and thermal media. Ricoh supports its office automation equipment business by offering customers various “solution” systems that work with personal computers and servers, network systems, application software and related product support and after-sales services to assist customers in fully utilizing the Ricoh products that they purchase. Ricoh’s product support services include assisting customers in setting up their information technology environment or network. More recently, Ricoh has further expanded its businesses to manufacture and sell products such as projectors, LED tubes, video conference systems, thermo-sensitive media devices (such as re-writable thermal media devices), and mobile devices called EWS (which stands for “eWriter Solutions”).

Ricoh distributes its products and competes in the following four geographic areas: (1) Japan, (2) the Americas, (3) Europe and (4) Other, which includes China, Southeast Asia and Oceania. For additional information on Ricoh’s business, see Item 4.B. Information on the Company – Business Overview.

Because of the global nature of Ricoh’s operations, Ricoh’s results of operations and financial conditions are affected both by economic and political developments in Japan and the rest of the world, as well as by demand and competition in its lines of business. Furthermore, competition in the businesses Ricoh operates has increased significantly and is likely to continue increasing in the future. Recent notable trends in the office solutions business include (1) increased demand for lower-priced products such as MFPs that only print on A4-sized paper, particularly in emerging countries, (2) increased demand for comprehensive services that reduce the TCO of a product and/or that streamline the overall workflow of the business process (not just the document process), particularly in developed countries, and (3) increased demand for solutions that enable customers to reduce their environmental impact and improve the sustainability of their operations.

Historically, Ricoh’s revenues have been derived mainly from the manufacturing and sale of equipment (such as copiers and printers originally, and PPCs/MFPs more recently in light of the trends toward digitization, color printing and high volume printing). In recent years, the key factor to achieve revenue growth has been the expansion of available product lines and areas of services to respond to the increasingly diverse needs of customers. Although the global economy has not yet recovered from its recent downturn, Ricoh remains focused on achieving sustained growth to remain competitive. To achieve such growth, Ricoh has striven to broaden its revenue and earnings base by expanding its available product lines and areas of service. More specifically, in light of the recent trends, Ricoh’s strategies include (1) introducing variable product lines such as MFPs, laser printers and production printers with advanced features, (2) introducing MFPs that only print on A4-sized paper and strengthening its sales structure in emerging countries, (3) expanding and strengthening its global MDS business and IT service business by making capital investments such that the Ricoh group as a whole on a global basis is able to provide such services at a high quality level, (4) expanding its new businesses, such as its projectors and UCS businesses taking into consideration developments in the mobile and cloud communication businesses such that it can propose and create new ways of conducting business, and (5) enhancing offerings of products with environmentally-friendly features such that it can provide customers with the ability to reduce their environmental impact and improve the sustainability of their business operations (which Ricoh refers to as “Total Green Office Solution”). In addition, Ricoh’s recent entry into the eco solution business (i.e., to manufacture and sell LED tubes and provide related installation services) enables it to offer environmentally friendly and energy efficient products for the office environment. To achieve these strategies and capture the trends in the office solutions business, Ricoh focused its R&D investments on creating new products and delivering new services that provide added value for its customers during fiscal year 2012.

 

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In addition, Ricoh continues to steadily improve its operational efficiency through cost-cutting measures across its business units, which includes the reduction of production costs and the streamlining of its business structure, as well as supply chain management. As part of its strict cost management policy, Ricoh continues to analyze the cost structure of its products at the design phase so that it can minimize production costs.

While the global economy showed some signs of moderate recovery during fiscal year 2012, difficult economic conditions persisted. Economies in the U.S. and Europe showed signs of recovery; however, the debt crisis in Europe and the political instability in the Middle East and North Africa caused uncertainties to remain in the global market. In addition, in light of such uncertainties, crude oil prices increased. Despite such economic environment, Asian countries, mainly China, maintained a high level of economic growth and was a driving force of the global economy. While the Japanese economy showed some signs of a modest recovery during fiscal year 2012, in part due to the economic stimulus measures implemented by the Japanese government and the increase in exports to emerging countries, it continued to face challenging conditions as the Japanese Yen appreciated relative to other currencies (such as the U.S. Dollar and the Euro). The Japanese economy also showed signs of deflation, and the Great East Japan Earthquake and the flood in Thailand affected many Japanese companies’ operations. In addition, electricity was in short supply in Japan stemming from the Great East Japan Earthquake. Ricoh’s shipments and manufacturing of products were delayed in light of disruptions to the transportation infrastructure and the shortage of fuel and materials caused by the Great East Japan Earthquake and the flood in Thailand. While Ricoh quickly implemented measures to respond to the disruptions caused by the earthquake in Japan and the flood in Thailand, Ricoh recorded a loss of approximately ¥15.0 billion in fiscal year 2012. As a result of such extraordinary events, Ricoh missed certain business opportunities otherwise available and incurred increased air freight costs to meet delivery deadlines.

Ricoh’s consolidated net sales for fiscal year 2012 decreased by 2.0% to ¥1,903.4 billion, from ¥1,941.3 billion for fiscal year 2011, due primarily to the decrease in net sales in its Imaging & Solutions operating segment and the Industrial Products operating segment. This decrease was due mainly to the depreciation of the U.S. Dollar and the Euro against the Japanese Yen. Net sales would have increased by 1.2% excluding the effects of foreign currency exchange fluctuations. Cost of sales decreased by 0.1% for fiscal year 2012. Cost of sales decreased at a rate less than the rate at which net sales decreased as compared to the previous fiscal year, due primarily to the appreciation of Japanese Yen. Due to the appreciation of the Japanese Yen, local currency-denominated export sales of products primarily manufactured in Japan and distributed and sold by the Company to its overseas customers through its subsidiaries in the Americas and Europe caused Ricoh to generate lower sales margin in terms of Japanese Yen as these subsidiaries were not able to increase the sales price of its products to make up for the shortfall arising from the appreciation of the Japanese Yen due to the competitive environment. As a result, gross profit decreased by 4.6% for fiscal year 2012 as compared to fiscal year 2011. Selling, general and administrative expenses decreased by 3.5% as compared to fiscal year 2011, due primarily to group-wide cost reduction efforts in the manufacturing and sales operations as well as the effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. Restructuring charges for fiscal year 2012 increased by ¥29.3 billion to ¥30.1 billion from ¥0.8 billion for fiscal year 2011. Ricoh initiated restructuring activities in order to enhance competitiveness and improve profitability. The fiscal year 2012 restructuring charges of ¥30.1 billion consisted of ¥22.6 billion recorded by the Company and its domestic subsidiaries, and ¥7.5 billion recorded by its overseas subsidiaries.

 

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KEY PERFORMANCE INDICATORS

The following table shows changes for the last three fiscal years in the key performance indicators that Ricoh’s management used in assessing its performance for the last three fiscal years. Ricoh’s management considers these indicators to be important in monitoring and evaluating its performance to meet the expectation of its shareholders.

 

     For the year ended March 31,  
     2010     2011     2012  

Net sales (in billions of Yen)

     2,015.8        1,941.3        1,903.4   

Operating income to net sales ratio(1)

     3.3     3.0     (0.9 %) 

Return on assets(2)

     1.1     0.8     (2.0 %) 

Inventory turnover within months(3)

     1.70        1.79        2.03   

Interest-bearing debt (in billions of Yen)

     684.4        629.6        741.8   

 

Notes:

(1) Operating income to net sales ratio = Operating income divided by net sales.
(2) Return on assets = Net income divided by average total assets for the fiscal year.
(3) Inventory turnover within months = Inventory divided by average monthly cost of sales.

In fiscal year 2012, Ricoh’s consolidated net sales decreased by 2.0% to ¥1,903.4 billion, from ¥1,941.3 billion for fiscal year 2011, due primarily to the decrease in net sales in the Imaging & Solutions operating segment and the Industrial Products operating segment. Operating income to net sales ratio decreased by 3.9 percentage points to -0.9% from 3.0% for fiscal year 2011 due primarily to the decrease in operating income resulting from the decrease in net sales and the increase in selling, general and administrative expenses. Return on assets decreased by 2.8 percentage points to -2.0% from 0.8% for fiscal year 2011 due mainly to a decrease in net income. Inventory turnover within months increased by 0.24 points because sales volume around the fiscal year end, particularly in the Americas, was less than the sales volume targets set forth in its production plans for fiscal year 2012. Interest-bearing debt increased by ¥112.2 billion due primarily to the decrease in cash generated by its operating activities. In addition, the issuance of debt to pay severance-related expenses and other restructuring charges, and to acquire the PENTAX imaging systems business from HOYA Corporation in October 2011 also contributed to the increase in interest-bearing debt.

 

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CRITICAL ACCOUNTING POLICIES

The consolidated financial statements of Ricoh are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. On an ongoing basis, Ricoh evaluates its estimates which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different scenarios.

Ricoh considers an accounting policy to be critical if it is important to its financial condition and results, and requires significant judgments and estimates on the part of management in its application. Ricoh believes that the following represent the critical accounting policies of the Company. For a summary of the significant accounting policies, including the critical accounting policies discussed below, see Note [2] to the Consolidated Financial Statements.

Revenue Recognition

Ricoh believes that revenue recognition is critical for its financial statements because consolidated net income is directly affected by the timing of revenue recognition.

Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Generally, Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection.

Most equipment sales require that Ricoh install the product. As such, revenue is recognized at the time of delivery and installation at the customer location. Equipment revenues are based on established prices by product type and model and are net of discounts. A sales return is accepted only when the equipment is defective and does not meet Ricoh’s product performance specifications. Other than installation, there are no customer acceptance clauses in Ricoh’s sales contracts.

Post sales and rentals result primarily from maintenance contracts that are normally entered into at the time the equipment is sold. Standard service fee prices are established depending on equipment classification and include a cost value for the estimated services to be performed based on historical experience plus a profit margin thereon. As a matter of policy, Ricoh does not discount such prices. On a monthly basis, maintenance service revenues are earned and recognized by Ricoh and billed to the customer in accordance with the contract and include a fixed monthly fee plus a variable amount based on usage. The length of the contract ranges up to five years; however, most contracts can be cancelled at any time by the customer upon a short notice period.

 

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Ricoh enters into arrangements with multiple elements, which may include any combination of products, equipment, installation and maintenance. Consideration in a multiple-element arrangement is allocated at the inception of the arrangement to all deliverables on the basis of the relative selling price if both of the following criteria are met: the delivered item(s) has value to the customer on a stand-alone basis; and the delivery of the undelivered item must be probable and controlled by Ricoh if the arrangement includes the right of return. If these criteria are not met, revenue is deferred until the undelivered elements are fulfilled and accounted for as a single unit of accounting.

Allowance for Doubtful Receivables

Ricoh performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by Ricoh’s review of the customers’ credit information. Ricoh continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon its historical experience and any specific customer collection issues that Ricoh has identified. While such credit losses have historically been within Ricoh’s expectations and the provisions established, Ricoh cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. Changes in the underlying financial condition of Ricoh’s customers could result in a material impact on Ricoh’s consolidated results of operation and financial position.

The following table illustrates Ricoh’s allowance for doubtful receivables for finance receivables for fiscal years 2010, 2011 and 2012.

 

Description

   2010     2011     2012  
     (Millions of Yen)  

Finance receivables

     654,016        666,757        697,939   

Allowance for Finance receivables

     (11,919     (12,299     (10,219

Allowance ratio

     1.8     1.8     1.5

The decrease in the allowance ratio in fiscal year 2012 as compared to fiscal year 2011 was due primarily to a recovery of more than 60% of the allowance provided in fiscal year 2011 as a result of the Great East Japan Earthquake.

 

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The following table illustrates Ricoh’s allowance for doubtful receivables for trade receivables by geographic location for fiscal years 2010, 2011 and 2012.

 

Description

   Japan     Americas     Europe     Other     Total  
     (Millions of Yen)  

For the year ended March 31, 2010:

          

Trade receivables

     241,129        94,597        129,919        21,797        487,442   

Allowance for doubtful receivables

     (6,192     (3,960     (6,068     (688     (16,908

Allowance ratio

     2.6     4.2     4.7     3.2     3.5

For the year ended March 31, 2011:

          

Trade receivables

     241,443        72,129        128,950        23,299        465,821   

Allowance for doubtful receivables

     (7,930     (2,210     (6,007     (617     (16,764

Allowance ratio

     3.3     3.1     4.7     2.6     3.6

For the year ended March 31, 2012:

          

Trade receivables

     255,208        75,306        127,487        25,593        483,594   

Allowance for doubtful receivables

     (8,579     (1,832     (5,313     (656     (16,380

Allowance ratio

     3.4     2.4     4.2     2.6     3.4

In fiscal year 2011, allowance ratio increased in Japan as compared to fiscal year 2010 due to the Great East Japan Earthquake. The allowance ratio in the Americas decreased due to further recovery of financial market conditions since the 2008 crisis.

In fiscal year 2012, allowance ratio in the Americas and Europe decreased as compared to fiscal year 2011 improved collection efforts and a decrease in outstanding old debt receivables the were due.

Pension Accounting

The amounts recognized in the consolidated financial statements relating to employees’ severance payments and pension plans are determined on an actuarial basis utilizing certain assumptions in the calculation of such amounts. The assumptions used in determining net periodic costs and liabilities for employees’ severance payments and pension plans include expected long-term rate of return on plan assets, discount rate, rate of increase in compensation levels, average remaining years of service and other factors. Among these assumptions, the expected long-term rate of return on plan assets and the discount rate are two critical assumptions. Assumptions are evaluated at least annually, and events may occur or circumstances may change that may have a significant effect on the critical assumptions. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods, thereby reducing the year-to-year volatility in pension expenses. As of March 31, 2012, Ricoh recognized and reflected in its consolidated balance sheets the funded status of its pension plans (equal to the difference between the fair value of plan assets and the projected benefit obligations) in the total amount of ¥165.6 billion.

For fiscal years 2010, 2011 and 2012, Ricoh used expected long-term rates of return on pension plan assets of 3.2%, 2.9% and 2.9%, respectively. In determining the expected long-term rate of return on pension plan assets, Ricoh considers the current and projected asset allocations, as well as expected long-term investment returns and risks for each category of the plan assets based on Ricoh’s analysis of historical results. The projected allocation of the plan assets is developed in consideration of the expected long-term investment returns for each category of the plan assets. To moderate the level of volatility in pension plan asset returns and to reduce risks, approximately 25%, 50%, 20% and 5% of the plan assets are projected to be allocated to equity securities, debt securities, life insurance company general accounts and other financial instruments, respectively. As of March 31, 2012, the actual allocation of assets was generally consistent with the projected allocation stated above. The actual returns for fiscal years 2010, 2011 and 2012 were approximately 15.5% (gain), 2.2% (gain) and 4.7% (gain), respectively. The actual returns on pension plan assets may vary in future periods, depending on market conditions. The market-related value of plan assets is measured using fair values on the plan measurement date.

 

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With respect to the discount rate used in the annual actuarial valuation of the pension benefit obligations, the other critical assumption, Ricoh’s weighted average discount rates for fiscal years 2010, 2011 and 2012 were 3.7%, 3.4% and 2.9%, respectively. In determining the appropriate discount rate, Ricoh considers available information about the current yield on high-quality fixed-income investments that are currently available and are expected to be available during the period corresponding to the expected duration of the pension benefit obligations.

The following table illustrates the sensitivity to changes in the discount rate and the expected return on pension plan assets, while holding all other assumptions constant, for Ricoh’s pension plans as of March 31, 2012.

 

Change in Assumption

   Change in
Pension Benefit
Obligations
  Change in
Pre-Tax Pension
Expenses
     (Billions of Yen)

50 basis point increase / decrease in discount rate

   – /+ ¥29.5   – /+ ¥1.6

50 basis point increase / decrease in expected return on assets

   —     – /+ ¥1.5

Recovery of the Carrying Values of Impairment of Long-Lived Assets and Goodwill

As of March 31, 2012, the aggregate carrying value of Ricoh’s long-lived assets and goodwill was ¥576.6 billion, which accounted for 25.2% of Ricoh’s total consolidated assets. Ricoh believes that the recovery of long-lived assets and goodwill are critical to Ricoh’s financial statements because an impairment charge could significantly affect its results of operations.

Ricoh reviews long-lived assets with a definite life for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset or asset group to the expected future undiscounted net cashflows of the asset or asset group. If an asset or asset group is considered to be impaired, the impairment charge to be recognized is measured as the amount by which the carrying amount of the asset or asset group exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale are reported at the lower of their carrying amount or fair value less costs to sell.

Ricoh also reviews the carrying value of its goodwill for impairment annually at December 31 and when a triggering event occurs between annual impairment tests.

At first step testing, Ricoh determines the estimated fair values of each reporting units by applying income approach and cost approach that is applied only when the fair value based on it is higher than that on income approach.

 

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For purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Ricoh uses its forecasts to estimate future cash flows and includes an estimate of long-term future growth rates. Ricoh derives its discount rates using a capital asset pricing model and analyzing published rates for industries relevant to its reporting units to estimate the cost of equity financing. Ricoh uses discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in its internally developed forecasts.

For purposes of the cost approach, fair value is determined based on the estimated realization or liquidity level, which considered prices and other relevant information generated by market transactions involving comparable assets and liabilities.

Ricoh completed its annual impairment assessment of goodwill for fiscal years 2010, 2011 and 2012. For fiscal years 2010 and 2011, Ricoh and determined that no impairment charge was necessary. For fiscal year 2012, as a result of first step testing, carrying amount of production printing reporting unit exceeded its fair value estimated by using both the income approach and the cost approach due to worsening economic circumstances. Consequently, Ricoh determined that second step testing is needed for only production printing reporting unit. At second step testing of goodwill of production printing reporting unit, to determine the implied fair value of goodwill, Ricoh assigned the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination. As a result, the implied fair value of goodwill assigned to production printing reporting unit was measured at zero and Ricoh recorded impairment charge of ¥27,491 million. Ricoh also performed a reconciliation of the aggregate fair values of its reporting units to Ricoh’s adjusted market capitalization to assess the reasonableness of the estimated fair values of its reporting units. Ricoh determined its adjusted market capitalization based on the quoted price of its shares and an assumed control premium within a range of observable recent similar transactions.

While Ricoh believes that its estimates of future cashflows are reasonable, different assumptions regarding such cashflows could materially affect Ricoh’s evaluations.

Impairment of Securities

Individual securities classified as available-for-sale securities are reduced to their fair market value by a charge to income for declines in value that are not temporary. Factors considered in assessing whether impairment other than temporary impairment exists include: (1) the financial condition and near term prospects of the issuer and (2) the intent and ability of Ricoh to retain such investment for a period of time sufficient to allow for any anticipated recovery in market value. Ricoh believes that impairment of securities is critical for its financial statements because it holds significant amounts of securities, the recoverability of which or lack thereof, could significantly affect its results of operations.

Ricoh recognized asset impairment charge for its securities that could be determined to be other than temporary in the amounts of ¥0.1 billion, ¥1.8 billion and ¥5.0 billion for fiscal years 2010, 2011 and 2012, respectively. On the other hand, Ricoh believes that the decline in fair value of securities not recognized impairment charges in statement of operations are to be temporary as a result of considering above conditions. In addition, there are no significant unrealized holding losses of securities at March 31, 2012 as described in Note [5] to the Consolidated Financial Statements.

 

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Realizability of Deferred Tax Assets

Ricoh records a valuation allowance to reduce its deferred tax assets to an amount that is more likely than not to be recoverable. Ricoh considers future market conditions, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which Ricoh operates, and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event Ricoh were to determine that Ricoh would not be able to recover any portion of Ricoh’s net deferred tax assets in the future, the unrecoverable portion of the deferred tax assets would be charged to earnings during the period in which such determination is made. Likewise, if Ricoh were to later determine that it is more likely than not that the net deferred tax assets would be recoverable, the previously recorded valuation allowance would be reversed. In order to recover its deferred tax assets, Ricoh must be able to generate sufficient taxable income in the tax jurisdictions in which the deferred tax assets are located.

 

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A. Operating Results

The following table sets forth selected consolidated financial data, including data expressed as a percentage of total consolidated net sales for the periods indicated, and the change in each consolidated financial line item between the indicated fiscal years:

 

     Millions of Yen (except percentages)     Thousands of
U.S. Dollars
    % Change  
     2010     2011     2012     2012(1)     2011     2012  

Net sales

                  

Products

   ¥ 964,974        ¥ 935,280        ¥ 876,399        $ 10,687,793        (3.1     (6.3

Post sales and rentals

     951,740          901,402          920,827          11,229,597        (5.3     2.2   

Other revenue

     99,097          104,654          106,251          1,295,744        5.6        1.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2,015,811        100.0     1,941,336        100.0     1,903,477        100.0     23,213,134        (3.7     (2.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales

                  

Products

     681,863          647,155          626,426          7,639,341        (5.1     (3.2

Post sales and rentals

     434,182          427,796          448,478          5,469,244        (1.5     4.8   

Other revenue

     78,227          77,444          75,951          926,232        (1.0     (1.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1,194,272        59.2     1,152,395        59.4     1,150,855        60.5     14,034,817        (3.5     (0.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     821,539        40.8     788,941        40.6     752,622        39.5     9,178,317        (4.0     (4.6

Selling, general and administrative expenses

     753,285        37.4     729,220        37.6     703,511        37.0     8,579,402        (3.2     (3.5

Restructuring charges

     —          —          885        0.0     30,169        1.6     367,915        —          —     

Loss on impairment of goodwill

     —          —          —          —          27,491        1.4     335,256        —          —     

Loss on impairment of long-lived assets

     2,353        0.1     765        0.0     9,519        0.4     116,085        (67.5     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     65,901        3.3     58,071        3.0     (18,068     (0.9 )%      (220,341     (11.9     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other (income) expenses:

                  

Interest and dividend income

     (3,471       (2,985       (3,129       (38,159    

Interest expense

     8,139          8,528          6,979          85,110       

Foreign currency exchange loss, net

     5,159          5,956          4,355          53,110       

Loss on impairment of securities

     169          1,844          5,012          61,122       

Other, net

     (1,177       559          652          7,951       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     8,819        0.4     13,902        0.7     13,869        0.7     169,134        57.6        (0.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes and equity in earnings of affiliates

     57,082        2.8     44,169        2.3     (31,937     (1.7 )%      (389,476     (22.6     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for income taxes

     28,065        1.4     22,410        1.2     8,223        0.4     100,280        (20.1     (63.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings of affiliates

     6          (22       39          476       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income

     29,023        1.4     21,737        1.1     (40,121     (2.1 )%      (489,280     (25.1     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to noncontrolling interests

     1,979        0.1     3,107        0.2     4,439        0.2     54,134        57.0        42.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Ricoh Company, Ltd.

     27,044        1.3     18,630        1.0     (44,560     (2.3 )%      (543,414     (31.1     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     YEN           Change  

Reference: Exchange Rates*

   2010     2011     2012           2011     2012  

US$ 1

   ¥ 92.91        ¥ 85.77        ¥ 79.08          ¥ (7.14   ¥ (6.69

EURO 1

   ¥ 131.21        ¥ 113.28        ¥ 109.05          ¥ (17.93   ¥ (4.23
* These rates are the annual average exchange rates calculated by Ricoh using the daily average TTM rates published by The Bank of Tokyo-Mitsubishi UFJ, Ltd. These rates are used when consolidating the financial results of Ricoh’s overseas subsidiaries with those of the Company.

 

Note:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2012,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2012, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥82 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2012.

 

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SALES BY PRODUCT

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
     % Change  
     2010     2011     2012     2012(1)      2011     2012  

Imaging & Solutions

                      

Imaging Solutions

   ¥ 1,614,347         80.1   ¥ 1,531,219         78.9   ¥ 1,471,827         77.3   $ 17,949,110         (5.1     (3.9

Network System Solutions

     175,370         8.7        181,411         9.3        198,945         10.5        2,426,158         3.4        9.7   

Industrial Products

     101,692         5.0        106,830         5.5        96,584         5.1        1,177,854         5.1        (9.6

Other

     124,402         6.2        121,876         6.3        136,121         7.1        1,660,012         (2.0     11.7   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   ¥ 2,015,811         100.0   ¥ 1,941,336         100.0   ¥ 1,903,477         100.0   $ 23,213,134         (3.7     (2.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2012,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2012, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥82 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2012.
(2) The above consolidated financial data set forth net sales to external customers by product.

Fiscal Year 2012 Compared to Fiscal Year 2011

Net sales. Consolidated net sales for fiscal year 2012 decreased by 2.0% (or ¥37.9 billion) to ¥1,903.4 billion from ¥1,941.3 billion for fiscal year 2011. For fiscal year 2012, Ricoh recorded a decrease in net sales in the Imaging & Solutions operating segment and the Industrial Products operating segment. This decrease was due primarily to the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. Had the foreign currency exchange rates remained the same as in fiscal year 2011, Ricoh’s consolidated net sales would have increased by 1.2%.

More specifically, the 2.0% decrease in net sales was due primarily to the 6.3% decrease in sale of products, despite the 2.2% increase in sales derived from post sales and rentals and the 1.5% increase in other revenue.

Products. The 6.3% decrease in net sales derived from products was due primarily to the appreciation of the Japanese Yen relative to the U.S. Dollar and the Euro. The decrease in net sales of PPCs/MFPs and laser printers also contributed to this decrease as customers decreased their capital investments in developed countries in light of the slowly recovering economies. Ricoh’s shipments and manufacturing of products were delayed in light of disruptions to the transportation infrastructure and the shortage of fuel and materials caused by the Great East Japan Earthquake and the flood in Thailand. Ricoh missed certain business opportunities otherwise available as a result of these delays, which contributed to the decrease in net sales.

Despite such business and economic environment, Ricoh continued to introduce new product models with advanced features in not only MFPs but also production printing products during fiscal year 2012. The introduction of these new product models expanded Ricoh’s market coverage to include color cut sheets in the production printing area and increased the total number of color MFPs sold as such units were favorably received in Japan.

Post sales and rentals. Net sales derived from post sale services and rentals of equipment increased 2.2% as compared to the previous fiscal year. This increase was due primarily to the increase in net sales generated by the network system solutions business, which provides support services to assist customers establish a networked environment and customized printing solutions that satisfy customers’ individual needs. The continuing increase in the number of production printing machines that are in operation in light of Ricoh’s sales efforts also contributed to the increase in net sales derived from post sale services. While customers continued to make efforts to decrease their printing costs by reducing total printing volume, which decreased Ricoh’s sales of supplies for products and post sale services, such decrease was fully offset by the increased sales in the network system solutions business and the contribution to sales made by the increase in the number of production printing machines in operation.

 

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Other revenue. Net sales derived from other sources (such as financings and logistics) increased 1.5% as compared to the previous fiscal year due mainly to increased net sales from financing services. Net sales from financing services increased due primarily to Ricoh Leasing Co., Ltd. in Japan recording an increase in leasing volume during fiscal year 2012 in part because of the ongoing reconstruction in the areas affected by the Great East Japan Earthquake.

Cost of sales and Gross profit. Consolidated cost of sales for fiscal year 2012 decreased by 0.1% (or ¥1.5 billion) to ¥1,150.8 billion from ¥1,152.3 billion for fiscal year 2011. This decrease was due primarily to the net effect of depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen as well as the decrease in sales of products.

Consolidated gross profit for fiscal year 2012 decreased by 4.6% (or ¥36.3 billion) to ¥752.6 billion from ¥788.9 billion for fiscal year 2011. The gross profit ratio decreased from 40.6% to 39.5% due primarily to the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. Due to the appreciation of the Japanese Yen, local currency-denominated export sales of products primarily manufactured in Japan and distributed and sold by the Company to its overseas customers through its subsidiaries in the Americas and Europe caused Ricoh to generate lower sales margin in terms of Japanese Yen as these subsidiaries were not able to increase the sales price of its products to make up for the shortfall arising from the appreciation of the Japanese Yen due to the competitive environment.

Products. Cost of sales derived from products decreased by 3.2% due primarily to the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen as well as the decrease in sales of products. Due to the appreciation of the Japanese Yen, local currency-denominated export sales of products primarily manufactured in Japan and distributed and sold by the Company to its overseas customers through its subsidiaries in the Americas and Europe caused Ricoh to generate lower sales margin in terms of Japanese Yen as these subsidiaries were not able to increase the sales price of its products to make up for the shortfall arising from the appreciation of the Japanese Yen due to the competitive environment. As a result, despite ongoing cost reduction efforts made by Ricoh, such as efforts to decrease production costs, the gross profit ratio of products decreased from 30.8% to 28.5%.

Post sales and rentals. Cost of sales derived from post sale services and rentals of equipment increased by 4.8% due primarily to the increase in sales derived from post sale services, such as support and maintenance services and sales of supplies for machines. Due primarily to the decrease in sales prices for post sale services and rentals that Ricoh implemented to remain competitive in the market environment where customers made efforts to decrease their printing costs, gross profit ratio of post sale services and rentals decreased from 52.5% to 51.3%.

 

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Other revenue. Cost of sales derived from other sources (such as financings and logistics) decreased by 1.9% despite the increase in net sales. This decrease was mainly due to the decrease in financing costs as interest rates remained low in Japan. As a result, gross profit ratio of other revenue improved from 26.0% to 28.5%

Selling, general and administrative expenses. Consolidated selling, general and administrative expenses for fiscal year 2012 decreased by 3.5% (or ¥25.7 billion) to ¥703.5 billion from ¥729.2 billion for fiscal year 2011. This decrease was due primarily to group-wide cost reduction efforts in the manufacturing and sales operations as well as the effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Restructuring charges. Consolidated restructuring charges for fiscal year 2012 increased by ¥29.3 billion to ¥30.1 billion from ¥0.8 billion for fiscal year 2011. Ricoh initiated restructuring activities in order to enhance competitiveness and improve profitability. The fiscal year 2012 restructuring charges of ¥30.1 billion consisted of ¥22.6 billion recorded by the Company and its domestic subsidiaries, and ¥7.5 billion recorded by its overseas subsidiaries. See Note [21] to the Consolidated Financial Statements for additional information.

Operating income (loss). Consolidated operating income (loss) for fiscal year 2012 decreased by ¥76.0 billion to a loss of ¥18.0 billion from an income of ¥58.0 billion for fiscal year 2011. Operating income (loss) as a percentage of net sales decreased by 3.9 percentage points from 3.0% for fiscal year 2011 to -0.9% for fiscal year 2012. This decrease in operating income compared to fiscal year 2011 was due primarily to the decrease in gross profit resulting from the decrease in net sales and the increase in selling, general and administrative expenses.

Interest and dividend income. Consolidated interest and dividend income for fiscal year 2012 increased slightly by ¥0.2 billion to ¥3.1 billion from ¥2.9 billion for fiscal year 2011.

Interest expense. Consolidated interest expense for fiscal year 2012 decreased by ¥1.6 billion to ¥6.9 billion from ¥8.5 billion for fiscal year 2011. Despite an increase in interest-bearing debt in fiscal year 2012, Ricoh’s interest expense decreased as fiscal year 2012 was the first fiscal year to enjoy the full benefits of the tender offer for and subsequent purchase and retirement of high-interest bearing bonds issued by IKON before maturity in the amount of ¥25.1 billion in December 2010.

Foreign currency exchange loss, net. Consolidated foreign currency exchange loss, net included in other (income) expenses for fiscal year 2012 decreased by ¥1.6 billion to ¥4.3 billion from ¥5.9 billion for fiscal year 2011. This decrease was due primarily to Ricoh’s foreign exchange hedging activities which Ricoh engaged in to hedge the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

 

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Loss on impairment of securities. Consolidated loss on impairment of securities for fiscal year 2012 increased by ¥3.2 billion to ¥5.0 billion from ¥1.8 billion for fiscal year 2011. This increase in loss on impairment of securities was attributable to the decrease in the stock markets in fiscal year 2012.

Other, net. Consolidated other, net included in other (income) expenses for fiscal year 2012 increased by ¥0.1 billion to an expense of ¥0.6 billion from an expense of ¥0.5 billion for fiscal year 2011.

Provision for income taxes. Total consolidated provision for income taxes for fiscal year 2012 decreased by ¥14.2 billion to ¥8.2 billion from ¥22.4 billion for fiscal year 2011. The expected statutory tax benefit rate during fiscal year 2012 was -41%. However, Ricoh actually recognized income tax expense at an effective tax rate of 26%. This decline in expected tax benefits in fiscal year 2012 primarily resulted from (1) a reduction to net deferred tax assets that existed on November 30, 2011 that had to be re-measured using new tax rates in accordance with the change in Japanese tax law, (2) not being able to recognize a tax benefit for impairment losses on goodwill and (3) an increase in the valuation allowance for certain deferred tax assets. See Note [9] to the Consolidated Financial Statements for additional information.

Equity in earnings (losses) of affiliates. Consolidated equity in earnings (losses) of affiliates for fiscal year 2012 increased by ¥61 million to an income of ¥39 million from a loss of ¥22 million for fiscal year 2011. See Note [6] to the Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests. Consolidated net income attributable to noncontrolling interests for fiscal year 2012 increased by ¥1.3 billion to ¥4.4 billion from ¥3.1 billion for fiscal year 2011. This increase was due primarily to the improved performance of Ricoh Leasing Co., Ltd. for fiscal year 2012.

Net income (loss) attributable to Ricoh Company, Ltd. Consolidated net income (loss) attributable to the Company for fiscal year 2012 decreased by ¥63.1 billion to a loss of ¥44.5 billion from an income of ¥18.6 billion for fiscal year 2011. This decrease was due primarily to a decrease in operating income of ¥76.0 billion, which was partially offset by a decrease in the provision for income taxes by ¥14.2 billion.

 

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Operating Segments

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2011     2012     2012(1)    

Imaging & Solutions

            

Net sales

   ¥ 1,712,630        100.0   ¥ 1,670,772        100.0   $ 20,375,268        (2.4

Operating expenses

     1,580,344        92.3        1,614,475        96.6        19,688,719        2.2   

Operating income

   ¥ 132,286        7.7   ¥ 56,297        3.4   $ 686,549        (57.4

Industrial Products

            

Net sales

   ¥ 112,243        100.0   ¥ 101,315        100.0   $ 1,235,549        (9.7

Operating expenses

     111,237        99.1        103,057        101.7        1,256,793        (7.4

Operating income (loss)

   ¥ 1,006        0.9   ¥ (1,742     (1.7 )%    $ (21,244     —     

Other

            

Net sales

   ¥ 121,876        100.0   ¥ 136,121        100.0   $ 1,660,012        11.7   

Operating expenses

     126,787        104.0        142,131        104.4        1,733,305        12.1   

Operating loss

   ¥ (4,911     (4.0 )%    ¥ (6,010     (4.4 )%    $ (73,293     —     

Corporate and Elimination

            

Net sales

   ¥ (5,413     ¥ (4,731     $ (57,695  

Operating expenses

     64,897          61,882          754,659     

Operating loss

   ¥ (70,310     ¥ (66,613     $ (812,354  

Consolidated

            

Net sales

   ¥ 1,941,336        100.0   ¥ 1,903,477        100.0   $ 23,213,134        (2.0

Operating expenses

     1,883,265        97.0        1,921,545        100.9        23,433,475        2.0   

Operating income (loss)

   ¥ 58,071        3.0   ¥ (18,068     (0.9 )%    $ (220,341     —     

 

Notes:

(1) The above segment financial data set forth under the heading “Thousands of U.S. Dollars 2012,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2012, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥82 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2012.
(2) The above segment financial data, which set forth net sales, operating expenses and operating income (loss) for each operating segment, include both transactions with external customers as well as intersegment transactions. Notwithstanding the foregoing, all net sales recorded in the Imaging & Solutions operating segment and the Other operating segment reflect sales to external customers only, as none of the products in the Imaging & Solutions operating segment or the Other operating segment were sold to other Ricoh group companies that conduct businesses in the other operating segments. Accordingly, the segment net sales figures for the Imaging & Solutions operating segment set forth in the above table are the aggregate of the sales figures for the Imaging Solutions product category and the Network System Solutions product category set forth in the “SALES BY PRODUCT” table included under Item 5.A. Operating Results.

Imaging & Solutions

Net sales in the Imaging & Solutions operating segment for fiscal year 2012 decreased by 2.4% (or ¥41.9 billion) to ¥1,670.7 billion from ¥1,712.6 billion for fiscal year 2011. This decrease was due primarily to the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. Excluding the net effect of the foreign currency exchange rate fluctuations, sales in the Imaging & Solutions operating segment would have increased by 1.0% (or ¥16.6 billion) for fiscal year 2012 as compared to fiscal year 2011.

 

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More specifically, sales in the Imaging Solutions product category for fiscal year 2012 decreased by 3.9% (or ¥59.4 billion) to ¥1,471.8 billion from ¥1,531.2 billion for fiscal year 2011. This decrease was due primarily to the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. The decrease in net sales of PPCs/MFPs and laser printers also contributed to this decrease as customers decreased their capital investments in developed countries in light of the slowly recovering economies. Ricoh’s shipments and manufacturing of products were delayed in light of disruptions to the transportation infrastructure and the shortage of fuel and materials caused by the Great East Japan Earthquake and the flood in Thailand. Ricoh missed certain business opportunities otherwise available as a result of these delays, which also contributed to the decrease in net sale. Despite such adverse business and economic conditions, Ricoh continued to introduce new MFPs and production printing products with advanced features during fiscal year 2012. The introduction of these new product models expanded Ricoh’s market coverage to include color cut sheets in the production printing area and increased the total number of color MFPs sold as such units were favorably received in Japan.

Sales in the Network System Solutions product category for fiscal year 2012 increased by 9.7% (or ¥17.5 billion) to ¥198.9 billion from ¥181.4 billion for fiscal year 2011. Sales in the solutions business (such as support services that help customers establish networked environments using Ricoh’s imaging solutions products and software solutions to optimize total printing costs) continued to increase in Japan and Europe for fiscal year 2012 as customers continued to seek products that streamlined the process of document scanning, indexing and distribution by integrating hardware and software.

For fiscal year 2012, the cost of sales in the Imaging & Solutions operating segment decreased in line with the decrease in sales. Due primarily to the appreciation of the Japanese Yen, local currency-denominated export sales of products primarily manufactured in Japan and distributed and sold by the Company to its overseas customers through its subsidiaries in the Americas and Europe caused a decrease in gross profit as these subsidiaries were not able to increase the sales price of its products to make up for the shortfall arising from the appreciation of the Japanese Yen due to the competitive environment. In addition, operating expenses for this operating segment increased for fiscal year 2012 due primarily to an impairment loss on goodwill and long-lived assets for the production printing business in the amount of ¥37.0 billion and severance-related expenses and other restructuring charges in the amount of ¥29.7 billion. As a result, operating expenses in the Imaging & Solutions operating segment for fiscal year 2012 increased by 2.2% (or ¥34.1 billion) to ¥1,614.4 billion from ¥1,580.3 billion for fiscal year 2011.

As a result of the above, operating income for the Imaging & Solutions operating segment for fiscal year 2012 decreased sharply by 57.4% (or ¥76.0 billion) to ¥56.2 billion from ¥132.2 billion for fiscal year 2011.

Industrial Products

Net sales in the Industrial Products operating segment for fiscal year 2012 decreased by 9.7% (or ¥10.9 billion) to ¥101.3 billion from ¥112.2 billion for fiscal year 2011. This decrease was due primarily to the decrease in sales of semiconductor devices and electronic components. With respect to semiconductor devices, Ricoh experienced a decrease in net sales because of the downturn in the Japanese market for analog one-chip LSIs for cellular phones and power and battery management ICs. With respect to electronic components, sales of ECUs (embedded controller unit) and PCBs (printed circuit board) decreased due primarily to decreased customer demand.

 

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Operating expenses in this operating segment for fiscal year 2012 decreased by 7.4% (or ¥8.2 billion) to ¥103.0 billion from ¥111.2 billion for fiscal year 2011. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. However, operating expenses did not decrease in line with the decrease in net sales as the cost of sales ratio in respect of semiconductor devices increased in light of the fact that the decrease in production volume (in response to decrease in demand) made it difficult for Ricoh to fully cover the fixed costs associated with the manufacturing of such devices. In addition, the increase in the cost of sales ratio in respect of thermal media also contributed to operating expenses not decreasing in line with the decrease in net sales. The cost of sales ratio in respect of thermal media increased due primarily to the fact that production costs for such products in Europe did not decrease in line with the decrease in sales as Ricoh fell short of reaching its cost reduction targets in the manufacturing process for such devices. Consequently, gross profit decreased as compared to fiscal year 2011 due primarily to decreased net sales as well as the increased cost of sales ratio. In addition, severance-related expenses and other restructuring charges in the amount of ¥1.4 billion also contributed to operating expenses not decreasing in line with the decrease in net sales.

As a result of the above, the segment results for the Industrial Products operating segment for fiscal year 2012 decreased to an operating loss of ¥1.7 billion from an operating income of ¥1.0 billion for fiscal year 2011.

Other

Net sales in the Other operating segment for fiscal year 2012 increased by 11.7% (or ¥14.3 billion) to ¥136.1 billion from ¥121.8 billion for fiscal year 2011. This increase was due primarily to the increase in sales of digital cameras as a result of the acquisition of the PENTAX imaging systems business from HOYA Corporation in October 2011. The increase in net sales from the financing business conducted by Ricoh Leasing Co., Ltd. in Japan also contributed to the increase in net sales in this operating segment. Net sales from the financing business increased as leasing volume increased during fiscal year 2012 in part because of the ongoing reconstruction in the areas affected by the Great East Japan Earthquake. While sales from logistics decreased due to the decrease in logistical services provided to PPC/MFP dealers as such dealers purchased fewer PPCs/MFPs during fiscal year 2012, such decrease was completely offset by the net sales increases derived from the digital camera and financing businesses.

Operating expenses in this operating segment for fiscal year 2012 increased by 12.1% (or ¥15.4 billion) to ¥142.1 billion from ¥126.7 billion for fiscal year 2011. This increase was due primarily to the acquisition of the PENTAX imaging systems business from HOYA Corporation. Despite the contributions to gross profit from the acquisition of the PENTAX imaging systems business, gross profit in the Other operating segment decreased due primarily to the decreased profitability of Ricoh’s digital camera business (excluding the PENTAX imaging systems business) as Ricoh decreased the sales price of its cameras to boost customer demand. Selling, general and administrative expenses increased due primarily to the increase in research and development activities undertaken by Ricoh to create new products and services that followed the fiscal year 2012 introduction of projectors and UCSs. Severance-related expenses and other restructuring charges in the amount of ¥0.4 billion also contributed to the increase in operating expenses.

As a result of the above, operating loss for the Other operating segment for fiscal year 2012 increased by ¥1.1 billion to ¥6.0 billion as compared to ¥4.9 billion for fiscal year 2011.

 

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Geographic Information by Geographic Origin

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2011     2012     2012(1)    

Japan

            

Net sales

   ¥ 1,286,335        100.0   ¥ 1,274,596        100.0   $ 15,543,854        (0.9

Operating expenses

     1,257,207        97.7        1,293,454        101.5        15,773,829        2.9   

Operating income (loss)

   ¥ 29,128        2.3   ¥ (18,858     (1.5 )%    $ 229,976        —     

The Americas

            

Net sales

   ¥ 523,896        100.0   ¥ 475,393        100.0   $ 5,797,476        (9.3

Operating expenses

     529,157        101.0        501,785        105.6        6,119,329        (5.2

Operating loss

   ¥ (5,261     (1.0 )%    ¥ (26,392     (5.6 )%    $ (321,854     —     

Europe

            

Net sales

   ¥ 419,952        100.0   ¥ 410,628        100.0   $ 5,007,659        (2.2

Operating expenses

     392,499        93.5        392,935        95.7        4,791,890        0.1   

Operating income

   ¥ 27,453        6.5   ¥ 17,693        4.3   $ 215,768        (35.6

Other

            

Net sales

   ¥ 273,485        100.0   ¥ 283,741        100.0   $ 3,460,256        3.8   

Operating expenses

     261,125        95.5        276,081        97.3        3,366,841        5.7   

Operating income

   ¥ 12,360        4.5   ¥ 7,660        2.7   $ 93,415        (38.0

Corporate and Elimination

            

Net sales

   ¥ (562,332     ¥ (540,881     $ (6,596,110  

Operating expenses

     (556,723       (542,710       (6,618,415  

Operating income (loss)

   ¥ (5,609     ¥ 1,829        $ (22,305  

Consolidated

            

Net sales

   ¥ 1,941,336        100.0   ¥ 1,903,477        100.0   $ 23,213,134        (2.0

Operating expenses

     1,883,265        97.0        1,921,545        100.9        23,433,475        2.0   

Operating income (loss)

   ¥ 58,071        3.0   ¥ (18,068     (0.9 )%    $ (220,341     —     

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2012,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2012, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥82 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2012.
(2) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each geographic area by geographic origin, include both transactions with external customers as well as transactions between geographic areas.

Japan

Sales in Japan for fiscal year 2012 decreased by 0.9% (or ¥11.8 billion) to ¥1,274.5 billion from ¥1,286.3 billion for fiscal year 2011. This decrease was due primarily to the decrease in export sales of PPCs/MFPs from Japan to the markets in the Americas and Europe. This is because (1) the Japanese Yen appreciated relative to the U.S. Dollar and the Euro, (2) customer demand for such Ricoh products decreased in light of the slow rate of economic recovery in such countries and (3) Ricoh missed certain business opportunities otherwise available as its shipments and manufacturing of products were delayed in light of disruptions to the transportation infrastructure and the shortage of fuel and materials caused by the Great East Japan Earthquake and the flood in Thailand. In addition, sales of semiconductor devices and electrical components decreased due to a decrease in market demand for such products, which also contributed to the decrease in sales in Japan.

 

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Operating expenses in Japan for fiscal year 2012 increased by 2.9% (or ¥36.2 billion) to ¥ 1,293.4 billion from ¥1,257.2 billion for fiscal year 2011. This increase was due primarily to severance-related expenses and other restructuring charges in the amount of ¥26.5 billion and an impairment loss on goodwill and long-lived assets in the amount of ¥15.1 billion.

As a result of the above, operating income (loss) in Japan for fiscal year 2012 decreased by ¥47.9 billion to a loss of ¥18.8 billion from an income of ¥29.1 billion for fiscal year 2011.

The Americas

Net sales in the Americas for fiscal year 2012 decreased by 9.3% (or ¥48.5 billion) to ¥475.3 billion from ¥523.8 billion for fiscal year 2011. Although Ricoh expanded its sales network in recent years through its acquisition of IKON, overall sales in the Americas geographic areas decreased in fiscal year 2012 due primarily to the decrease in customer demand and the appreciation of the Japanese Yen against the U.S. Dollar.

Operating expenses in the Americas for fiscal year 2012 decreased by 5.2% (or ¥27.4 billion) to ¥501.7 billion from ¥529.1 billion for fiscal year 2011. This decrease in operating expenses was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Operating expenses did not decrease in line with the decrease in net sales, however, as Ricoh recorded an impairment loss on goodwill and long-lived assets in the amount of ¥18.1 billion and severance-related expenses and other restructuring charges in the amount of ¥1.5 billion as part of operating expenses in fiscal year 2012.

As a result of the above, operating loss for fiscal year 2012 increased by ¥21.1 billion to ¥26.3 billion from ¥5.2 billion for fiscal year 2011.

Europe

Sales in Europe for fiscal year 2012 decreased by 2.2% (or ¥9.3 billion) to ¥410.6 billion from ¥419.9 billion for fiscal year 2011. This decrease in sales was due primarily to the appreciation of the Japanese Yen against the Euro.

Operating expenses in Europe for fiscal year 2012 increased slightly by 0.1% (or ¥0.5 billion) to ¥392.9 billion from ¥392.4 billion for fiscal year 2011. This increase was due primarily to severance-related expenses and other restructuring charges in the amount of ¥5.8 billion and an impairment loss on goodwill and long-lived assets in the amount of ¥1.9 billion. Such increase completely offset the decrease in cost of sales resulting from the appreciation of the Japanese Yen against the Euro.

As a result of the above, operating income for fiscal year 2012 decreased by 35.6% (or ¥9.8 billion) to ¥17.6 billion from ¥27.4 billion for fiscal year 2011.

 

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Other

Net sales in the Other geographic area, which includes China, Southeast Asia and Oceania, increased for fiscal year 2012 by 3.8% (or ¥10.3 billion) to ¥283.7 billion from ¥273.4 billion for fiscal year 2011. This increase was due primarily to the increase in sales in the emerging markets as Ricoh introduced lower-priced PPCs/MFPs (such as those that print on A4-sized paper only) in such markets and expanded its sales network by employing additional personnel to engage in sales promotional activity for such products. As a result, sales in the Other geographic area increased.

Operating expenses in the Other geographic area for fiscal year 2012 increased by 5.7% (or ¥14.9 billion) to ¥276.0 billion from ¥261.1 billion for fiscal year 2011. This increase was due primarily to the increase in cost of sales resulting from the increase in sales. Selling, general and administrative expenses also increased due mainly to increased sales promotion expenses as Ricoh expanded its sales force to capture future growth in these markets. In addition, severance-related expenses and other restructuring charges in the amount of ¥0.3 billion also contributed to the increase in operating expenses for this geographic area.

As a result of the above, operating income for fiscal year 2012 decreased by 38.0% (or ¥4.7 billion) to ¥7.6 billion from ¥12.3 billion for fiscal year 2011.

Fiscal Year 2011 Compared to Fiscal Year 2010

Net sales. Consolidated net sales for fiscal year 2011 decreased by 3.7% (or ¥74.5 billion) to ¥1,941.3 billion from ¥2,015.8 billion for fiscal year 2010. For fiscal year 2011, Ricoh recorded a decrease in net sales in the Imaging & Solutions operating segment and the Other operating segment. This decrease was due primarily to decreased demand for Ricoh products in light of the slow economic recovery after the global economic downturn and the increase in global competition. In addition, sales in Japan were adversely affected by the Great East Japan Earthquake because sales normally peak in March in Japan.

The net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen also adversely affected Ricoh’s consolidated net sales in fiscal year 2011 as compared to fiscal year 2010. Had the foreign currency exchange rates remained the same as in fiscal year 2010, Ricoh’s consolidated net sales would have increased by 1.9%.

More specifically, the 3.7% decrease was due primarily to the 3.1% decrease in sale of products and the 5.3% decrease in sale of post sales and rentals, which completely offset the 5.6% increase in sales of other revenue.

Products. The 3.1% decrease in net sales derived from products was due primarily to the decrease in net sales of PPCs/MFPs and laser printers resulting primarily from the decrease in capital spending by customers in a slowly recovering economic environment, and the appreciation of the Japanese Yen. In light of such situation, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which also decreased in net sales. Despite such economic environment, Ricoh continued to introduce new product models with advanced features during fiscal year 2011 and recorded an increase in the number of color MFP units sold as such products were favorably received by customers who wished to expand their office digital color networking capacity and enhance the security features of their office equipment.

 

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Post sales and rentals. Net sales derived from post sale services and rentals of equipment decreased 5.3% as compared to the previous fiscal year due primarily to a decrease in sales of post sale services, such as maintenance services, as well as a decrease in sales of supplies for PPCs/MFPs, laser printers and GELJET printers. The decrease in sales of post sale services and supplies was also due in part to the price decrease that Ricoh implemented for its maintenance services to remain competitive. Sales of post sales services also decreased because of customers’ tendencies to reduce capital investments in office equipment. In light of the prevailing economic conditions, customers also made efforts to decrease their printing costs by reducing the volume of color printing, which decreased Ricoh’s sales of value-added supplies for color products and post sale services. While sales in the network solutions business, such as support services that assist customers establish networked and secured environments in connection with Ricoh’s imaging solutions products, solution software, MDS and IT services (which are IKON’s strengths) contributed to the sale of post sales and rentals, the contribution made by such sales in the network solutions business was not sufficient to fully absorb the decrease in sales of post sale services and supplies.

Other revenue. Net sales derived from other sources (such as financings and logistics) increased 5.6% as compared to the previous fiscal year due mainly to increased net sales from financing services and logistics. Net sales from financing services increased due primarily to Ricoh Leasing Co., Ltd. in Japan recording an increase in leasing volume during fiscal year 2011. The increase in financing services activities in the overseas market also contributed to the increase in other revenue.

Cost of sales and Gross profit. Consolidated cost of sales for fiscal year 2011 decreased by 3.5% (or ¥41.9 billion) to ¥1,152.3 billion from ¥1,194.2 billion for fiscal year 2010. This decrease was due primarily to the decrease in sales of products as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Consolidated gross profit for fiscal year 2011 decreased by 4.0% (or ¥32.6 billion) to ¥788.9 billion from ¥821.5 billion for fiscal year 2010. This decrease in gross profit primarily reflects the decrease in net sales in Ricoh’s two operating segments as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Products. Cost of sales derived from products decreased by 5.1% due primarily to the decrease in sales of products as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. In light of ongoing cost reductions and increased sales of value-added high-margin products, gross profit ratio of products improved from 29.3% to 30.8%.

Post sales and rentals. Cost of sales derived from post sale services and rentals of equipment decreased by 1.5% due primarily to the decrease in sales from post sale services, such as maintenance services, as well as the decrease in sales of supplies for PPCs/MFPs, laser printers and GELJET printers. Due primarily to the decrease in sales price for post sales and rentals that Ricoh had to implement to remain competitive, gross profit ratio of post sales and rentals decreased from 54.5% to 52.5%.

 

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Other revenue. Cost of sales derived from other sources (such as financings and logistics) decreased by 1.0% despite the increase in net sales. This decrease was mainly due to the decrease in financing costs in light of interest rates being low in Japan. As a result, gross profit ratio of other revenue improved from 21.1% to 26.0%

Selling, general and administrative expenses. Consolidated selling, general and administrative expenses for fiscal year 2011 decreased by 3.2% (or ¥24.0 billion) to ¥729.2 billion from ¥753.2 billion for fiscal year 2010. This decrease was due primarily to group-wide cost reduction efforts in the manufacturing and sales operations as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Operating income. Consolidated operating income for fiscal year 2011 decreased by 11.9% (or ¥7.9 billion) to ¥58.0 billion from ¥65.9 billion for fiscal year 2010. Operating income as a percentage of net sales decreased by 0.3 percentage points from 3.3% for fiscal year 2010 to 3.0% for fiscal year 2011. This decrease in operating income compared to fiscal year 2010 was due primarily to the decrease in gross profit resulting from the decrease in net sales, which was partially offset by the decrease in selling, general and administrative expenses, as group-wide cost reduction efforts in the manufacturing and sales operations contributed to a decrease in such expenses.

Interest and dividend income. Consolidated interest and dividend income for fiscal year 2011 decreased by ¥0.5 billion to ¥2.9 billion from ¥3.4 billion for fiscal year 2010. This decrease in interest and dividend income was attributable to lower interest rates reflecting the adverse financial market conditions on a global basis.

Interest expense. Consolidated interest expense for fiscal year 2011 increased by ¥0.4 billion to ¥8.5 billion from ¥8.1 billion for fiscal year 2010. This increase in interest expense reflected the increase in the average outstanding amount of bonds of the Company in fiscal year 2011, which lower interest rates could not fully offset.

Foreign currency exchange loss, net. Consolidated foreign currency exchange loss, net included in other (income) expenses for fiscal year 2011 increased by ¥0.8 billion to ¥5.9 billion from ¥5.1 billion for fiscal year 2010. This increase was primarily due to the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. For additional information on Ricoh’s foreign exchange hedging activities, see Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Loss on impairment of securities. Consolidated loss on impairment of securities for fiscal year 2011 increased by ¥1.7 billion to ¥1.8 billion from ¥0.1 billion for fiscal year 2010. This increase was attributable to a certain non-listed companies whose financial status deteriorated significantly in fiscal year 2011.

Other, net. Consolidated other, net included in other (income) expenses changed to an expense of ¥0.5 billion for fiscal year 2011 from an income of ¥1.1 billion for fiscal year 2010.

 

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Provision for income taxes. Total consolidated provision for income taxes for fiscal year 2011 decreased by ¥5.6 billion to ¥22.4 billion from ¥28.0 billion for fiscal year 2010. The effective tax rate was 50.7% for fiscal year 2011 compared to 49.2% for fiscal year 2010. This increase in the effective tax rate was due primarily to an increase in the deferred tax asset valuation allowance for tax benefits from operating loss carry forwards at certain consolidated subsidiaries that Ricoh believes are unlikely to be realized. See Note [9] to the Consolidated Financial Statements for additional information.

Equity in earnings (losses) of affiliates. Consolidated equity in earnings (losses) of affiliates for fiscal year 2011 decreased by ¥28 million to loss of ¥22 million from income of ¥6 million for fiscal year 2010. See Note [6] to the Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests. Consolidated net income attributable to noncontrolling interests for fiscal year 2011 increased by ¥1.2 billion to ¥3.1 billion from ¥1.9 billion for fiscal year 2010. This increase was due primarily to the improved performance of Ricoh Leasing Co., Ltd. for fiscal year 2011.

Net income attributable to Ricoh Company, Ltd. Consolidated net income attributable to the Company for fiscal year 2011 decreased by ¥8.4 billion to ¥18.6 billion from ¥27.0 billion for fiscal year 2010. This decrease was due primarily to a decrease in operating income of ¥7.9 billion and an increase in other expenses of ¥5.1 billion, which were partially offset by a decrease in the provision for income taxes of ¥5.6 billion.

 

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Operating Segments

 

     Millions of Yen (except for percentages)     % Change  
     2010     2011    

Imaging & Solutions

          

Net sales

   ¥ 1,789,717        100.0   ¥ 1,712,630        100.0     (4.3

Operating expenses

     1,649,390        92.2     1,580,344        92.3     (4.2

Operating income

   ¥ 140,327        7.8   ¥ 132,286        7.7     (5.7

Industrial Products

          

Net sales

   ¥ 106,128        100.0   ¥ 112,243        100.0     5.8   

Operating expenses

     107,483        101.3        111,237        99.1     3.5   

Operating income (loss)

   ¥ (1,355     (1.3 )%    ¥ 1,006        0.9     —     

Other

          

Net sales

   ¥ 124,402        100.0   ¥ 121,876        100.0     (2.0

Operating expenses

     127,849        102.8        126,787        104.0        (0.8

Operating income

   ¥ (3,447     (2.8 )%    ¥ (4,911     (4.0 )%      —     

Corporate and Elimination

          

Net sales

   ¥ (4,436     ¥ (5,413    

Operating expenses

     65,188          64,897       

Operating income (loss)

   ¥ (69,624     ¥ (70,310    

Consolidated

          

Net sales

   ¥ 2,015,811        100.0   ¥ 1,941,336        100.0     (3.7

Operating expenses

     1,949,910        96.7        1,883,265        97.0        (3.4

Operating income

   ¥ 65,901        3.3   ¥ 58,071        3.0     (11.9

 

Notes:

The above segment financial data, which set forth net sales, operating expenses and operating income (loss) for each operating segment, include both transactions with external customers as well as intersegment transactions. Notwithstanding the foregoing, all net sales recorded in the Imaging & Solutions operating segment and the Other operating segment reflect sales to external customers only, as none of the products in the Imaging & Solutions operating segment or the Other operating segment were sold to other Ricoh group companies that conduct businesses in the other operating segments. Accordingly, the segment net sales figure for the Imaging & Solutions operating segment set forth in the above table is the aggregate of the sales figures for the Imaging Solutions product category and the Network System Solutions product category set forth in the “SALES BY PRODUCT” table included under Item 5.A. Operating Results.

Imaging & Solutions

Net sales in the Imaging & Solutions operating segment for fiscal year 2011 decreased by 4.3% (or ¥77.1 billion) to ¥1,712.6 billion from ¥1,789.7 billion for fiscal year 2010. This decrease was due primarily to lower sales generated in the Imaging Solutions product category.

More specifically, sales in the Imaging Solutions product category for fiscal year 2011 decreased by 5.1% (or ¥83.1 billion) to ¥1,531.2 billion from ¥1,614.3 billion for fiscal year 2010. This decrease was due primarily to the decrease in net sales of PPCs/MFPs and laser printers, and the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. The decrease in net sales of PPCs/MFPs and laser printers was due primarily to the decrease in customer demand for Ricoh products in a slowly recovering economic environment as well as customers’ tendencies to decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products. In addition, Ricoh’s decision to lower sales prices of certain products to stimulate sales in the sluggish and competitive market also contributed to the decrease in net sales.

 

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Sales in the Network System Solutions product category for fiscal year 2011 increased by 3.4% (or ¥6.1 billion) to ¥181.4 billion from ¥175.3 billion for fiscal year 2010. Sales in the solutions business, such as support services that assist customers establish networked environments using Ricoh’s imaging solutions products and software solutions to optimize total printing costs, continued to increase in the overseas markets in fiscal year 2011. Sales in the solutions business increased because customers sought products that streamlined the process of document scanning, indexing and distribution by integrating hardware and software. In addition, with the assistance from IKON, Ricoh increased sales in its MDS business in the U.S., Europe and Japan in fiscal year 2011.

For fiscal year 2011, the cost of sales in the Imaging & Solutions operating segment decreased due primarily to the decrease in net sales, group-wide cost reduction efforts in manufacturing and the net effect of the appreciation of the Japanese Yen relative to the U.S. Dollar and the Euro. However lower pricing which resulted from high competition affected to decrease in gross profit. Due primarily to group-wide cost reduction efforts in sales operations as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen, selling, general and administrative expenses decreased. As a result, operating expenses in the Imaging & Solutions operating segment for fiscal year 2011 decreased by 4.2% (or ¥69.0 billion) to ¥1,580.3 billion from ¥1,649.3 billion for fiscal year 2010.

As a result of the above, operating income for the Imaging & Solutions operating segment for fiscal year 2011 decreased by 5.7% (or ¥8.1 billion) to ¥132.2 billion from ¥140.3 billion for fiscal year 2010.

Industrial Products

Net sales in the Industrial Products operating segment for fiscal year 2011 increased by 5.8% (or ¥6.1 billion) to ¥112.2 billion from ¥106.1 billion for fiscal year 2010. This increase was due primarily to the increase in sales of optical equipment and electronic components. In optical equipment, sales of lens used in projectors increased. In electronic components, Ricoh experienced an increase in net sales because the domestic market for systems controller units showed signs of recovery in fiscal year 2011.

Operating expenses in this segment for fiscal year 2011 increased by 3.5% (or ¥3.8 billion) to ¥111.2 billion from ¥107.4 billion for fiscal year 2010. This increase was due primarily to the increase in cost of sales resulting from the increase in net sales. In addition, the cost of sales ratio of optical equipments and electronic components to net sales improved as a result of the group-wide cost reduction efforts. In addition, sales of electronic component products with higher gross profit ratios increased, which contributed to the overall increase in gross profit. Due to group-wide cost reduction efforts in sales operations as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen, selling, general and administrative expenses decreased.

As a result of the above, operating income (loss) for the Industrial Products operating segment for fiscal year 2011 was ¥1.0 billion (of income) from ¥1.3 billion (of loss) for fiscal year 2010.

 

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Other

Net sales in the Other operating segment for fiscal year 2011 decreased by 2.0% (or ¥2.6 billion) to ¥121.8 billion from ¥124.4 billion for fiscal year 2010. This decrease was due primarily to the decrease in net sales of digital cameras in the overseas market as customer demand for Ricoh’s new digital camera products was weak. Net sales from the financing business conducted by Ricoh Leasing Co., Ltd. in Japan increased as leasing volume increased during fiscal year 2011 reflecting the fact that the Japanese economy experienced a moderate recovery. Net sales from logistics also increased due to an increase in services provided to dealers of PPCs/MFPs. Such net sales increases derived from the finance and logistics businesses, however, did not completely offset the decrease in net sales of digital cameras.

Operating expenses in this segment for fiscal year 2011 decreased by 0.8% (or ¥1. 1 billion) to ¥126.7 billion from ¥127.8 billion for fiscal year 2010. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. However, the increase in gross profit was offset by the increase in selling, general and administrative expenses due primarily to advertisement expenses used to promote the new digital cameras introduced in fiscal year 2011.

As a result of the above, operating loss for the Other operating segment for fiscal year 2011 increased by ¥1.5 billion to ¥4.9 billion as compared to ¥3.4 billion for fiscal year 2010.

 

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Geographic Information by Geographic Origin

 

     Millions of Yen (except for percentages)     % Change  
     2010     2011    

Japan

          

Net sales

   ¥ 1,273,299        100.0   ¥ 1,286,335        100.0     1.0   

Operating expenses

     1,240,031        97.4        1,257,207        97.7        1.4   

Operating income

   ¥ 33,268        2.6   ¥ 29,128        2.3     (12.4

The Americas

          

Net sales

   ¥ 560,220        100.0   ¥ 523,896        100.0     (6.5

Operating expenses

     572,653        102.2        529,157        101.0        (7.6

Operating income (loss)

   ¥ (12,433     (2.2 )%    ¥ (5,261     (1.0 )%      —     

Europe

          

Net sales

   ¥ 462,044        100.0   ¥ 419,952        100.0     (9.1

Operating expenses

     431,805        93.5        392,499        93.5        (9.1

Operating income

   ¥ 30,239        6.5   ¥ 27,453        6.5     (9.2

Other

          

Net sales

   ¥ 246,307        100.0   ¥ 273,485        100.0     11.0   

Operating expenses

     231,829        94.1        261,125        95.5        12.6   

Operating income

   ¥ 14,478        5.9   ¥ 12,360        4.5     (14.6

Corporate and Elimination

          

Net sales

   ¥ (526,059     ¥ (562,332    

Operating expenses

     (526,408       (556,723    

Operating income

   ¥ 349        ¥ (5,609    

Consolidated

          

Net sales

   ¥ 2,015,811        100.0   ¥ 1,941,336        100.0     (3.7

Operating expenses

     1,949,910        96.7        1,883,265        97.0        (3.4

Operating income

   ¥ 65,901        3.3   ¥ 58,071        3.0     (11.9

 

Notes:

The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each geographic area by geographic origin, include both transactions with external customers as well as transactions between geographic areas.

Japan

Sales in Japan for fiscal year 2011 increased by 1.0% (or ¥13.1 billion) to ¥1,286.3 billion from ¥1,273.2 billion for fiscal year 2010. This increase was due primarily to the increase in exports from Japan as a result of increased demand in the overseas markets. Increased sales of semiconductor devices as well as optical equipment also contributed to the increase in sales in Japan. Such increases in sales were partially offset by the decrease in net sales of PPCs/MFPs and laser printers, which was due primarily to (1) the decrease in customer demand for such Ricoh products in light of the slowly recovering economic environment and (2) customers’ tendencies to decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products. Furthermore, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which also contributed to the decrease in net sales.

Operating expenses in Japan for fiscal year 2011 increased by 1.4% (or ¥17.2 billion) to ¥ 1,257.2 billion from ¥1,240.0 billion for fiscal year 2010. This increase was due primarily to the increase in cost of sales resulting from the increase in net sales. Selling, general and administrative expenses decreased due primarily to ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts. Due primarily to the appreciation of the Japanese Yen against the U.S. Dollar and the Euro, operating income ratio decreased from 2.6% to 2.3%.

 

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In addition, as a result of the Great East Japan Earthquake on March 11, 2011, Ricoh suffered damages to its equipment, manufacturing, sales, services and R&D sites in the affected areas. Although Ricoh established a taskforce for emergency disaster control shortly after the earthquake took place and worked hard to achieve full recovery, the sales and shipments of products were delayed widely in Japan due to the disruption to the transportation infrastructure as well as the shortage of supply of fuel. The effect of the earthquake on Ricoh’s financial results for fiscal year 2011 is estimated to be approximately ¥9.4 billion of operating losses consisting of the following: (1) estimated lost profits due to lost business opportunities amounting to ¥4.4 billion, (2) bad debt expense for trade receivables and finance receivables amounting to ¥3.4 billion, (3) losses due to write-downs of inventories and property, plant and equipment amounting to ¥1.2 billion and (4) other amounting to ¥0.4 billion.

As a result of the above, operating income in Japan for fiscal year 2011 decreased by 12.4% (or ¥4.1 billion) to ¥29.1 billion from ¥33.2 billion for fiscal year 2010.

The Americas

Net sales in the Americas for fiscal year 2011 decreased by 6.5% (or ¥36.4 billion) to ¥523.8 billion from ¥560.2 billion for fiscal year 2010. Although net sales in the Americas increased due primarily to the improved sales structure and expanded sales channel Ricoh gained through its acquisition of IKON, overall sales in the Americas geographic areas decreased due to the appreciation of the Japanese Yen against the U.S. Dollar.

Operating expenses in the Americas for fiscal year 2011 decreased by 7.6% (or ¥43.5 billion) to ¥529.1 billion from ¥572.6 billion for fiscal year 2010. This decrease in operating expenses was due primarily to synergies derived from IKON’s successful efforts in getting customers to switch to Ricoh products from other manufacturers’ products.

As a result of the above, operating loss for fiscal year 2011 decreased by ¥7.2 billion to ¥5.2 billion from ¥12.4 billion for fiscal year 2010.

Europe

Sales in Europe for fiscal year 2011 decreased by 9.1% (or ¥42.1 billion) to ¥419.9 billion from ¥462.0 billion for fiscal year 2010. This decrease in sales was due primarily to the appreciation of the Japanese Yen against the Euro.

Operating expenses in Europe for fiscal year 2011 decreased by 9.1% (or ¥39.4 billion) to ¥392.4 billion from ¥431.8 billion for fiscal year 2010. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. In addition, selling, general and administrative expenses decreased at a higher percentage of decrease than the decrease in net sales due mainly to the decrease in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

As a result of the above, operating income for fiscal year 2011 decreased by 9.2% (or ¥2.8 billion) to ¥27.4 billion from ¥30.2 billion for fiscal year 2010.

 

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Other

Net sales in the Other geographic area, which includes China, Southeast Asia and Oceania, increased for fiscal year 2011 by 11.0% (or ¥27.1 billion) to ¥273.4 billion from ¥246.3 billion for fiscal year 2010. This increase was due primarily to the increase in sales in the emerging markets, including China and India. Ricoh strengthened its sales force mainly in such emerging markets to respond to increased customer demand. Consequently, despite the appreciation of the Japanese Yen, sales in the Other geographic area increased.

Operating expenses in the Other geographic area for fiscal year 2011 increased by 12.6% (or ¥29.3 billion) to ¥261.1 billion from ¥231.8 billion for fiscal year 2010. This increase was due primarily to the increase in cost of sales resulting from the increase in sales. Selling, general and administrative expenses also increased due mainly to prior investment for future growth and the appreciation of the Japanese Yen.

As a result of the above, operating income for fiscal year 2011 decreased by 14.6% (or ¥2.1 billion) to ¥12.3 billion from ¥14.4 billion for fiscal year 2010.

 

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B. Liquidity and Capital Resources

Cashflows

The following table summarizes Ricoh’s cashflows for each of the three fiscal years ended March 31, 2010, 2011 and 2012, as reported in the Consolidated Statements of Cashflows in the accompanying Consolidated Financial Statements.

 

     (Billions of Yen)
For the year ended March 31,
 
     2010     2011     2012  

Net cash provided by operating activities

     187.3        128.6        11.2   

Net cash used in investing activities

     (89.5     (91.9     (112.4

Net cash provided by (used in) financing activities

     (113.4     (93.0     87.8   

Net increase (decrease) in cash and cash equivalents

     (19.6     (64.9     (16.0

Cash and cash equivalents at beginning of year

     256.7        237.1        172.2   

Cash and cash equivalents at end of year

     237.1        172.2        156.2   

Operating Cashflows

As compared to fiscal year 2011, net cash provided by operating activities for fiscal year 2012 decreased by ¥117.4 billion due primarily to (1) the appreciation of the Japanese Yen against the U.S. Dollar and the Euro during fiscal year 2012, which caused a decrease in cash collections of local currency-denominated export sales of products primarily manufactured in Japan and distributed and sold by the Company to its overseas customers through its subsidiaries in the Americas and Europe as these subsidiaries were not able to increase the sales price of its products to make up for the shortfall arising from the appreciation of the Japanese Yen due to the competitive environment, (2) Ricoh losing business opportunities and incurring increased air freight costs to meet delivery deadlines as disruptions to the transportation infrastructure and the shortage of fuel and materials caused by the Great East Japan Earthquake and the flood in Thailand delayed Ricoh’s shipments and manufacturing of products and (3) Ricoh expending additional funds for its manufacturing operations towards the end of the fiscal year in anticipation of increased demand for its products, which failed to materialize. In addition, severance payments and other restructuring charges also contributed to the decrease in cash provided by operating activities.

As compared to fiscal year 2010, net cash provided by operating activities during fiscal year 2011 decreased by ¥58.7 billion due primarily to the decrease in cash collections from customers in Japan. Cash collections from customers in Japan decreased because (1) Ricoh experienced lower customer demand for PPCs/MFPs, laser printers and semiconductor devices in light of the economic downturn and (2) Ricoh decreased the sales price of certain products to remain competitive in a highly competitive market environment. In addition, the further appreciation of the Japanese Yen against the U.S. Dollar and the Euro decreased overseas sales, thereby decreasing cash collections from customers.

 

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Investing Cashflows

For fiscal year 2012, net cash used in investing activities consisted mainly of ¥73.2 billion of expenditures for tangible fixed assets, ¥14.8 billion for the purchase of business, net of cash acquired (which was used primarily for the acquisition of the PENTAX imaging systems business from HOYA Corporation to further expand not only Ricoh’s camera business but also its consumer products and services business), and ¥14.5 billion of expenditures for intangible fixed assets. Expenditures for tangible fixed assets in fiscal year 2012 consisted primarily of ¥9.3 billion for mold and die as well as jigs used in the production of PPCs/MFPs and laser printers, ¥8.3 billion for the construction of an additional toner manufacturing plant and related equipment to increase the production capacity of polymerized PxP toners and other products, and ¥8.2 billion to increase the production capacity and improve the production efficiency of Ricoh’s manufacturing subsidiaries (¥4.7 billion of which was used in Japan and ¥3.5 billion of which was used overseas). Expenditures for intangible fixed assets in fiscal year 2012 consisted primarily of ¥3.5 billion to upgrade the IT system, which aimed to improve the administrative and development efficiency of the Ricoh group. Net cash used in investing activities increased in fiscal year 2012 compared to fiscal year 2011 due primarily to the acquisition of the business discussed above, net of cash acquired.

For fiscal year 2011, net cash used in investing activities consisted mainly of ¥66.9 billion of expenditures for tangible fixed assets and ¥18.8 billion of expenditures for intangible fixed assets. Expenditures for tangible fixed assets in fiscal year 2011 consisted primarily of ¥8.1 billion to construct the new building to house the Ricoh Technology Center, ¥5.6 billion for mold casts used in the manufacturing of MFPs, production printing equipment and printers and ¥4.6 billion to construct the second plant to manufacture polymerized PxP toners. Expenditures for intangible fixed assets in fiscal year 2011 consisted primarily of ¥7.9 billion to purchase and implement the Enterprise Resource Planning (“ERP”) system, which was aimed to improve the efficiency of sales administration and accounting across the Ricoh group. Net cash used in investing activities increased in fiscal year 2011 compared to fiscal year 2010 due primarily to the increase in expenditures for intangible fixed assets, as discussed above.

For fiscal year 2010, net cash used in investing activities consisted mainly of ¥66.9 billion of expenditures for property, plant and equipment, ¥13.4 billion of expenditures for intangible fixed assets and ¥4.7 billion for the acquisition of new subsidiaries, net of cash acquired. Net cash used in investing activities decreased in fiscal year 2010 mainly because Ricoh did not make any major acquisitions that required the investment of cash.

 

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Financing Cashflows

For fiscal year 2012, net cash provided by financing activities consisted primarily of ¥70.0 billion in proceeds from the issuance of short-term borrowings and ¥64.8 billion in proceeds from the issuance of long-term indebtedness, net of cash repaid, which was partially offset by net cash used in financing activities consisting primarily of ¥23.9 billion to pay dividends and ¥22.4 billion to repay outstanding long-term debt securities. The repayment of outstanding long-term debt securities in the amount of ¥22.4 billion consisted primarily of ¥20.0 billion to repay upon maturity in March 2012 the 6th series of unsecured straight bonds issued by the Company and ¥2.2 billion to repay the outstanding zero coupon convertible bonds of the Company in December 2011. While the total amount of indebtedness increased in fiscal year 2012, interest expense decreased as Ricoh reduced the outstanding long-term debt securities of IKON (which had a higher interest rate) and replaced such borrowing with borrowings in Japan (which have lower interest rates). Due primarily to the increase in short-term borrowings and long-term indebtedness compared to fiscal year 2011, net cash provided by financing activities exceeded the net cash used in financing activities for fiscal year 2012.

For fiscal year 2011, net cash used in financing activities consisted primarily of ¥87.9 billion to repay outstanding long-term debt securities, ¥87.1 billion to repay outstanding long-term indebtedness, ¥31.5 billion of net decrease in short-term borrowings and ¥23.9 billion to pay dividends, which were partially offset by ¥79.7 billion of proceeds received from the issuance of long-term debt securities and ¥58.6 billion of proceeds received from long-term indebtedness. The Company issued the 9th series of unsecured straight bonds in the amount of ¥40.0 billion and the 10th series of unsecured straight bonds in the amount of ¥20.0 billion in June 2010. Ricoh Leasing Co., Ltd. issued the 13th series of unsecured straight bonds in the amount of ¥20.0 billion in May 2010. Proceeds from the issuance of long-term debt securities totaled ¥79.7 billion net of issuance costs. In December 2010, ¥52.8 billion aggregate principal amount of zero coupon convertible bonds (constituting a portion of the total outstanding principal amount thereof) were redeemed before maturity, upon the exercise of put options granted to the holders of the bonds. Ricoh redeemed bonds issued by IKON by way of a tender offer and subsequent retirement of bonds before maturity in the amount of ¥25.1 billion. Ricoh Leasing Co., Ltd. repaid unsecured straight bonds in the amount of ¥10.0 billion in December 2010 upon maturity. Repayments of long-term debt securities totaled ¥87.9 billion. As compared to fiscal year 2010, net cash used in financing activities decreased in fiscal year 2011 primarily because short-term borrowings decreased by a smaller amount in fiscal year 2011 compared to fiscal year 2010.

For fiscal year 2010, net cash used in financing activities consisted primarily of ¥105.2 billion of net decrease in short-term borrowings, ¥66.5 billion to repay long-term indebtedness, ¥22.8 billion to pay dividends and ¥20.0 billion to repay outstanding long-term debt securities, which were partially offset by ¥55.0 billion of proceeds received from the issuance of long-term debt securities and ¥46.9 billion of proceeds received from long-term indebtedness. As compared to fiscal year 2009, net cash used in financing activities increased in fiscal year 2010 as Ricoh repaid some of its outstanding interest-bearing debt by using the additional cash generated from operations as a result of various cost cutting efforts and applying additional cash and cash equivalents on hand.

 

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Cash and Asset-Liability Management

Ricoh has in recent years tried to achieve greater efficiencies in the utilization of cash balances held by its subsidiaries pursuant to its policy of ensuring adequate financing and liquidity for its operations and growth, and maintaining the strength of its balance sheet. One method that Ricoh has implemented to achieve greater efficiency is building up its group cash management system in Japan, the United States and Europe. This cash management system functions as an arrangement whereby Ricoh’s funds are pooled together and cash resources are lent and borrowed from one group company to another company, with finance companies located in Japan, the United States, the United Kingdom and the Netherlands coordinating this arrangement. This pooling-of-funds arrangement has reduced the occurrence of excess accumulation of cash in one group company while another group company engages in unnecessary borrowing from third party institutions to meet its cash requirements. As such, the pooling-of-funds arrangement has reduced interest expense and related costs paid to third parties in connection with borrowings to finance operations.

Ricoh also enters into various derivative financial instrument contracts in the normal course of its business and in connection with the management of its assets and liabilities. In order to hedge against the potentially adverse impacts of foreign currency fluctuations on its assets and liabilities denominated in foreign currencies, Ricoh enters into foreign currency contracts and foreign currency options. Another form of derivative financial contracts that Ricoh enters into is interest rate swap agreements to hedge against the potentially adverse impacts of fair value or cashflow fluctuations on its outstanding debt interests. Ricoh uses these derivative instruments to reduce its risk and to protect the market value of its assets and liabilities in conformity with Ricoh’s policy. Ricoh does not use derivative financial instruments for trading or speculative purposes, nor is it a party to leveraged derivatives. Detailed discussion of these derivative contracts is provided in Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Ricoh also engages in limited securitization activities through its domestic leasing affiliate, Ricoh Leasing Co., Ltd. For a discussion of such activities, see Note [4] to the Consolidated Financial Statements.

Sources of Funding

Ricoh’s principal sources of funding are a combination of cash and cash equivalents on hand, various lines of credit and the issuance of commercial paper and long-term debt securities. In assessing its liquidity and capital resources needs, Ricoh places importance on the balances of cash and cash equivalents in the balance sheet and operating cashflows in the cashflow statements.

As of March 31, 2012, Ricoh had ¥156.2 billion in cash and cash equivalents and ¥675.1 billion in aggregate borrowing facilities. Of the ¥675.1 billion in aggregate borrowing facilities, ¥544.0 billion was available to be borrowed by Ricoh as of March 31, 2012. As of March 31, 2012, the amounts available by bank loans and commercial paper were ¥347.0 billion and ¥197.1 billion, respectively. Ricoh Leasing Co., Ltd. has committed credit lines with several banks having credit ratings satisfactory to Ricoh in the aggregate amount of ¥50.0 billion. This ¥50.0 billion committed credit line amount of Ricoh Leasing Co., Ltd. is included in the ¥675.1 billion figure for aggregate borrowing facilities.

 

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The Company, Ricoh Leasing Co., Ltd. and certain overseas subsidiaries raise capital by issuing commercial paper and long-term debt securities in various currencies. Ricoh Leasing Co., Ltd. and certain overseas subsidiaries of the Company issue commercial paper to meet their short-term funding requirements. Utilization of such capacity depends on Ricoh’s financing needs, investor demand and market conditions, as well as the ratings outlook for Ricoh’s securities. Interest rates for commercial paper issued by the Company and its subsidiaries ranged from 0.11% to 0.38%, interest rates for bank loans ranged from 0.33% to 9.88% and interest rates for long-term debt securities ranged from 0.57% to 7.30% during fiscal year 2012. For fiscal year 2012, the Company and its subsidiaries did not have any medium-term note programs.

The Company obtains ratings from the following major rating agencies: Standard & Poor’s Rating Services, a division of McGraw-Hill Companies, Inc. (“S&P”), Moody’s Investors Services (“Moody’s”), and another local rating agency in Japan. As of March 31, 2012, S&P assigned long-term and short-term credit ratings for the Company of A and A-1, respectively, and Moody’s assigned a short-term credit rating for the Company of P-1.

While some of its subsidiaries may be restricted from paying dividends for various reasons, such as capital adequacy requirements, Ricoh does not expect such restrictions to have a significant impact on its ability to meet its cash obligations.

As is customary in Japan, substantially all of the bank loans are subject to general agreements with each lending bank which provide, among other things, that the bank may request additional security for loans if there is reasonable and probable cause for the necessity of such additional security and the bank may treat any security furnished, as well as any cash deposited in such bank, as security for all present and future indebtedness. The Company has never been requested to furnish such additional security. In some cases, the Company’s long-term debt securities contain customary covenants, including a “limitation on liens” covenant. The Company was in compliance with the covenants in its bank agreements and securities as of March 31, 2012. The Company is not subject to any covenants limiting its ability to incur additional indebtedness. For additional detail regarding these securities, see Note [11] to the Consolidated Financial Statements.

 

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Cash Requirements and Commitments

Ricoh believes that its cash and cash equivalents and funds expected to be generated from its operations are sufficient to meet its cash requirements at least through fiscal year 2013. Even if there were a decrease in cashflows from operations as a result of fluctuations in customer demands from one year to another due to unexpected changes in global economic conditions, Ricoh believes that current funds on hand along with funds available under existing borrowing facilities would be sufficient to finance its anticipated operations. In addition, Ricoh believes that it is able to secure adequate resources to fund ongoing operating requirements and investments related to the expansion of existing businesses and the development of new projects through its access to the financial and capital markets. While interest rates of such instruments may fluctuate, Ricoh believes that the effect of such fluctuations will not significantly affect Ricoh’s liquidity, mainly due to the adequate amount of Ricoh’s cash and cash equivalents on hand, stable cashflow generated from its operating activities and group-wide cash management system.

Ricoh expects that its capital expenditures for fiscal year 2013 will amount to approximately ¥83.0 billion, which will principally be used for investments in manufacturing facilities of digital and networking equipment with new engines, toners, thermal media and optical equipment. In addition, Ricoh is obligated to repay long-term indebtedness in the aggregate principal amount of ¥105.1 billion during fiscal year 2013, and in the aggregate principal amount of ¥406.4 billion during fiscal years 2014 through 2016.

The Company and certain of its subsidiaries have various employee pension plans covering all of their employees. As described in Note [12] to the Consolidated Financial Statements, the unfunded portion of these employee pension plans amounted to ¥165.6 billion as of March 31, 2012. The unfunded amount was recorded as an asset of ¥4.7 billion and a liability of ¥170.3 billion on the consolidated balance sheet of Ricoh as of March 31, 2012. The amounts contributed to pension plans for fiscal years 2010, 2011 and 2012 were ¥14.5 billion, ¥14.4 billion and ¥12.1 billion, respectively.

Ricoh believes that its cashflow from operating and investing activities together with existing lines of credit and borrowing facilities constitute adequate sources of funding to satisfy its liquidity needs and future obligations as described above. Ricoh’s management is of the opinion that Ricoh’s working capital is sufficient for its present requirements.

As of March 31, 2012, ¥70.4 billion of cash and cash equivalents are held by Ricoh’s foreign subsidiaries. If these funds are needed for Ricoh’s operations in Japan, Ricoh would be required to accrue and pay Japanese taxes to repatriate these funds. However, Ricoh’s intent is to permanently reinvest these funds outside of Japan and Ricoh’s current plans do not make it necessary for it to repatriate them to fund its operations in Japan.

 

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C. Research and Development, Patents and Licenses

Research and Development

Since its formation, Ricoh’s basic management philosophy has been to contribute to society by developing and providing innovative and useful products with an emphasis on the relationship between people and information. Based on this management philosophy, Ricoh undertakes a variety of R&D activities to develop new technologies, products and systems to facilitate better communication. The Research and Development Group and the Corporate Technology Development Group function as the headquarters of Ricoh’s R&D activities, which are conducted at its R&D bases throughout Japan and certain satellite R&D bases overseas. Ricoh conducts a wide range of R&D activities, from seeds research (i.e., early stage research) to research in elemental technologies, product applications and manufacturing technologies, including environmental technologies.

In Japan, Ricoh conducts basic and advanced research in connection with optical technologies, new materials, devices, information electronics, environmental technologies and software technologies as well as elemental development for new products. In addition, Ricoh has established satellite R&D bases in the United States, China and India through which it conducts R&D activities that focus on developing products that can be marketed globally and that take into consideration the needs of such particular geographic area. All aspects of Ricoh’s research efforts are focused on developing products and services that are suitable for the new work environment. Ricoh also engages in R&D activities to protect the environment in every stage of each of its products’ life cycles to realize Ricoh’s three core values of “harmonizing with the environment (i.e., reducing and minimizing environmental impact),” “simplifying your life and work (i.e., enhancing user friendliness and striving towards simplification),” and “supporting knowledge management (i.e., offering solutions to process information).” For fiscal years 2010, 2011 and 2012, Ricoh’s consolidated R&D expenditures totaled ¥109.3 billion, ¥110.5 billion and ¥119.0 billion, respectively.

Out of total consolidated R&D expenditures of ¥119.0 billion for fiscal year 2012, ¥89.7 billion was used for R&D activities relating to the Imaging & Solutions operating segment. Ricoh’s R&D activities in the Imaging & Solutions operating segment continued to include (1) designing new optical designs for copiers, printers and production printing products, (2) developing imaging data processing technology, (3) developing electrophotographic supply technology, (4) advancing elemental technology for the next-generation of image producing engines, (5) developing cutting edge software technology and (6) developing applications for the advancement of IT solutions.

Out of total consolidated R&D expenditures of ¥119.0 billion for fiscal year 2012, ¥10.3 billion was used for R&D activities relating to the Industrial Products operating segment. In the Industrial Products operating segment, Ricoh’s R&D activities continued to include (1) designing ASICs and ASSPs for imaging, audio and communication use, (2) developing methods to utilize electronic design automation, (3) developing optical element technologies and new recording methods and (4) research and development for supply parts such as thermal media.

Out of total consolidated R&D expenditures of ¥119.0 billion for fiscal year 2012, ¥2.2 billion was used for R&D activities relating to the Other operating segment. In this segment, Ricoh continued to develop its image capturing device technology for digital cameras and its related applications technology.

 

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In addition, Ricoh continues to engage in the development of its fundamental research fields, which focus on R&D activities that can be applied to various products and that are difficult to categorize into a specific operating segment. Out of total consolidated R&D expenditures of ¥119.0 billion for fiscal year 2012, ¥16.8 billion was used for R&D activities relating to fundamental research fields. Such R&D activities include R&D in nanotechnology, micro-machining, general technologies in measuring, analysis and simulation, new materials and devices, next-generation image display technologies, manufacturing technology, system software modules, photonics technology for high speed and high quality image processing, the next-generation of office systems and office solutions, and environmental technologies.

For a summary of Ricoh’s R&D expenditures for fiscal years 2010, 2011 and 2012, see Note [23] to the Consolidated Financial Statements.

Patents and Licenses

Ricoh owns approximately 45,300 patents as of March 31, 2012 on a worldwide basis, and has a large number of licenses under various agreements with Japanese and foreign companies. Although patents and licenses are important to Ricoh, it does not believe that the expiration of any single patent or group of related patents or the termination of any licensing agreement or group of related licensing agreements will materially affect its business.

 

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The following table lists some of the important patent and licensing agreements which the Company is currently a party to:

 

Counterparty

   Country
and
Region
  

Summary of the Contract

  

Contract Term

International

Business Machines

Corporation

   USA    Comprehensive cross license patent agreement relating to the information processing technology area (reciprocal agreement)    March 28, 2007 to expiration date of the patent subject to the agreement
ADOBE Systems Incorporated    USA    Patent licensing agreements relating to development on printer software and sales (the counterparty as the licensee)    January 1, 1999 to March 31, 2015

Lemelson Medical,

Education & Research Foundation Limited Partnership

   USA    Patent licensing agreement relating to computer image analysis and other products (the counterparty as the licensee)    March 31, 1993 to expiration date of the patent subject to the agreement
Canon Inc.    Japan    Patent licensing agreement relating to office equipment (reciprocal agreement)    October 1, 1998 to expiration date of the patent subject to the agreement
Kyocera Mita Corporation    Japan    Patent licensing agreement relating to method of controlling multi function peripheral (the Company as the licensor)    January 1, 2007 to December 31, 2011
Sony Corporation    Japan    Patent licensing agreements relating to optical disks (the Company as the licensor ) and digital cameras (reciprocal agreement)    April 1, 2009 to March 31, 2018
Hitachi, Ltd.    Japan    Patent licensing agreement relating to optical record and playback equipment, and multi function peripheral (reciprocal agreement)    January 1, 2007 to December 31, 2013
Brother Industries, Ltd.    Japan    Patent licensing agreement relating to digital photography (the Company as the licensor)    October 1, 2009 to September 30, 2014
Quantum Storage Inc.    Taiwan    Patent licensing agreement relating to optical disc (the Company as the licensor)    February 22, 2011 to February 22, 2016
Hewlett-Packard Company    USA    Comprehensive cross license patent agreement relating to the document processing system area (reciprocal agreement)    October 31, 2011 to expiration date of the patent subject to the agreement

D. Trend Information

See “OVERVIEW” above and “Cautionary Statement With Respect to Forward-Looking Statements” in this Annual Report.

E. Off-Balance Sheet Arrangements

Ricoh acts as a guarantor for some of its employees’ housing loans, whose arrangements are not included on Ricoh’s consolidated balance sheets. As of March 31, 2012, the total amount of such guarantees was ¥14 million.

 

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F. Tabular Disclosure of Contractual Obligations

The following table sets forth Ricoh’s contractual obligations as of March 31, 2012.

 

     Millions of Yen
Payments due by period
 
      Total      Less than
1 year
     1-3 years      3-5 years      More than
5 years
 

CONTRACTUAL OBLIGATIONS

              

Long-term Debt Obligations

   ¥ 630,595       ¥ 105,160       ¥ 319,090       ¥ 165,773       ¥ 40,572   

Interest Expense Associated with Long-term Debt Obligations

     15,430         5,757         6,113         2,551         1,009   

Capital (Finance) Lease Obligations

     1,507         925         271         217         94   

Operating Lease Obligations

     78,297         22,650         34,112         12,979         8,556   

Purchase Obligations

     45,218         45,218         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   ¥ 771,047       ¥ 179,710       ¥ 359,586       ¥ 181,520       ¥ 50,231   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ricoh expects to contribute ¥13.0 billion to its pension plan during fiscal year 2013 and is currently unable to predict funding requirements for periods beyond fiscal year 2013 due to uncertainties related to changes in actuarial assumptions, return on plan assets and changes to plan membership.

Ricoh had operating lease commitments with rental payments totaling ¥47.8 billion for fiscal year 2012.

G. Safe Harbor

See “Cautionary Statement With Respect to Forward-Looking Statements.”

 

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Directors and Corporate Auditors of the Company as of June 26, 2012 were as follows:

 

Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Masamitsu Sakurai

(January 8, 1942)

  

Chairman of the Board and Director

   Apr. 1966   

Joined the Company

      May 1984   

President of Ricoh UK Products Ltd.

      Apr. 1990   

General Manager of Purchasing Division

      June 1992   

Director

      Apr. 1993   

President of Ricoh Europe B.V.

      June 1994   

Managing Director

      Apr. 1996   

President and Representative Director

      June 2005   

Representative Director

      June 2005   

President

      June 2005   

Chairman of the Board (Current)

      Apr. 2007   

Chairman (Current)

      Apr. 2007   

Chairman of Japan Association of Corporate Executives

      Apr. 2011   

Director (Current)

  

 

Principal business activities and other principal directorships performed outside of Ricoh:

  

Director of COCA-COLA WEST COMPANY, LIMITED

Director of Saga Television Station Co., Ltd.

Director of OMRON Corporation.

Director of Yamaha Motor Co., Ltd.

Shiro Kondo

(October 7, 1949)

  

Representative Director

   Apr. 1973   

Joined the Company

      July 1999   

Deputy General Manager of Imaging System Business Group

      June 2000   

Senior Vice President

      Oct. 2000   

General Manager of Imaging System Business Group

      June 2002   

Executive Vice President

      Oct. 2004   

General Manager of MFP Business Group

      June 2005   

Director

      June 2005   

Corporate Executive Vice President

      Apr. 2007   

Representative Director (Current)

      Apr. 2007   

President (Current)

      Apr. 2007   

CEO (Chief Executive Officer) (Current)

   Principal business activities and other principal directorships performed outside of Ricoh:
  

Representative of Asahi Mutual Life Insurance Company

 

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Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Zenji Miura

(January 5, 1950)

  

Representative Director

   Apr. 1976   

Joined the Company

      Jan. 1993   

President of Ricoh France S.A.

      Apr. 1998   

Deputy General Manager of Finance and Accounting Division

      Oct. 2000   

Senior Vice President

      Oct. 2000   

General Manager of Finance and Accounting Division

      June 2003   

Executive Vice President

      June 2004   

Managing Director

      June 2005   

Director

     

June 2005

June 2005

  

Corporate Executive Vice President

CFO (Chief Financial Officer) (Current)

      Apr. 2006   

CIO (Chief Information Officer)

      Apr. 2006   

General Manager of Corporate Planning Division

      Feb. 2008   

In charge of Internal Management and Control Division (Current)

      July 2008   

General Manager of Finance and Accounting Division

      Apr. 2009   

CSO (Chief Strategy Officer)

      Apr. 2009   

General Manager of CRGP Office

      Apr. 2009   

Deputy General Manager of Global Marketing Taskforce

      June 2009   

General Manager of Global Marketing Support Division

      June 2009   

General Manager of Trade Affairs & Export/Import Administration Division

      Apr. 2011   

Representative Director (Current)

      Apr. 2011   

Deputy President (Current)

      Oct. 2011   

General Manager of Imaging Systems Business Group (Current)

      Oct. 2011   

Representative Director, President and CEO (Chief Executive Officer) of Pentax Ricoh Imaging Co., Ltd.

      Apr. 2012   

Representative Director, Chairman of Pentax Ricoh Imaging Co., Ltd. (Current)

      Apr. 2012   

Chairman and CEO (Chief Executive Officer) of Ricoh Americas Holdings, Inc, (Current)

      May 2012   

General Manager of Americas Marketing Group (Current)

  

 

Principal business activities and other principal directorships performed outside of Ricoh:

  

Director of Nippon Venture Capital Co., Ltd.

  

Corporate Auditor of COCA-COLA WEST COMPANY, LIMITED

Hiroshi Kobayashi

(July 2, 1948)

  

Director

   Apr. 1974   

Joined the Company

      Apr. 2002   

General Manager of Corporate Planning Division

      June 2002   

Senior Vice President

      June 2004   

Executive Vice President

      Oct. 2004   

General Manager of LP Business Group

      June 2005   

Corporate Senior Vice President

      Apr. 2007   

General Manager of Printer Business Group

      Apr. 2008   

General Manager of Office Business Planning Center

      Apr. 2009   

General Manager of Corporate Technology Development Group

      Apr. 2009   

Chairman of Ricoh Software Research Center (Beijing) Co., Ltd.

      June 2010   

President of Ricoh Innovations, Inc.

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

      July 2010   

In charge of environmental management

      July 2010   

In charge of Internal Legal & Intellectual Property (Current)

      Apr. 2011   

Chairman of Ricoh Innovations, Inc.

      June 2012   

CHO (Chief Human Resource Officer) (Current)

      June 2012   

In charge of Corporate Social Responsibility (Current)

 

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Table of Contents

Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Shiro Sasaki

(December 23, 1949)

  

Director

   Apr. 1972   

Joined the Company

      Apr. 2000   

President of Gestetner Holdings PLC

      Apr. 2002   

President of NRG Group PLC

      June 2004   

Group Executive officer, Senior Vice President

      Apr. 2006   

Chairman of Ricoh Europe B.V.

      Apr. 2006   

Chairman of NRG Group PLC

      Apr. 2007   

Chairman of Ricoh Europe, PLC

      Apr. 2007   

Chairman of Ricoh Europe (Netherlands) B.V.

      June 2009   

General Manager of Europe Marketing Group

      June 2010   

Director (Current)

      Apr. 2011   

Corporate Executive Vice President (Current)

      Apr. 2011   

General Manager of Production Printing Business Group (Current)

      Apr. 2011   

Chairman and CEO (Chief Executive Office) of Ricoh Production Print Solutions, LLC (Current)

      Apr. 2011   

General Manager of Trade Affairs & Export/Import Administration Division (Current)

      June 2012   

CMO (Chief Marketing Officer) (Current)

Nobuo Inaba

(November 11, 1950)

  

Director

   Apr. 1974   

Joined the Bank of Japan

      May 1992   

Director, Head of Securities Division, Credit and Market Management Department of the Bank of Japan

      May 1994   

Director, Head of Planning Division Policy Planning Office of the Bank of Japan

      May 1996   

Deputy Director-General, Policy Planning Office of the Bank of Japan

      Apr. 1998   

Deputy Director-General (Adviser), Policy Planning Office of the Bank of Japan

      Apr. 2000   

Adviser to the Governor Monetary Policy Studies Department, Policy Planning Office of the Bank of Japan

      June 2001   

Director-General, Information System Services Department of the Bank of Japan

      June 2002   

Director-General, Bank Examination and Surveillance Department of the Bank of Japan

      May 2004   

Executive Director, Financial System Stability of the Bank of Japan

      May 2008   

Joined the Company

      May 2008   

Executive Advisor

      Apr. 2010   

President of Ricoh Institute of Sustainability and Business (Current)

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

      June 2012   

CIO (Chief Information Officer) (Current)

 

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Table of Contents

Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Yohzoh Matsuura

(April 15, 1956)

  

Director

   Apr. 1980   

Joined the Company

      Oct. 2004   

General Manager of Imaging Engine Development Division

      Apr. 2008   

Corporate Vice President

      Apr. 2010   

Corporate Senior Vice President

      July 2010   

General Manager of MFP Business Group (Current)

      Apr. 2011   

General Manager of Controller Development Division

      June 2012   

Director (Current)

      June 2012   

Corporate Executive Vice President (Current)

      June 2012   

In charge of environmental management (Current)

Yoshinori Yamashita

(August 22, 1957)

  

Director

   Apr. 1980   

Joined the Company

      Apr. 2008   

President of Ricoh Electronics, Inc.

      Apr. 2010   

Group Executive officer, Corporate Vice President

      Apr. 2011   

Corporate Senior Vice President

      Apr. 2011   

General Manager of Corporate Planning Division (Current)

      June 2012   

Director (Current)

      June 2012   

Corporate Executive Vice President (Current)

Kunihiko Satoh

(October 21, 1956)

  

Director

   Mar. 1979   

Joined the Company

      June 2005   

Corporate Vice President

      Apr. 2007   

Group Executive officer, Corporate Vice President

      Apr. 2009   

Associate Director

      Apr. 2009   

Representative Director, President of Ricoh Kansai Co., Ltd.

      Oct. 2011   

Corporate Senior Vice President

      Oct. 2011   

Representative Director, President and CEO (Chief Executive Officer) of Ricoh Japan Corporation (Current)

      Oct. 2011   

General Manager of Japan Marketing Group (Current)

      June 2012   

Director (Current)

      June 2012   

Corporate Executive Vice President (Current)

 

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Table of Contents

Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Eiji Hosoya

(February 24, 1945)

  

Outside Director

   Apr. 1968   

Joined Japanese National Railways

      Apr. 1987   

General Manager of Investment Planning Dept., Corporate Planning Headquarters of East Japan Railway Company

      June 1990   

General Manager of Management Administration Dept., Corporate Planning Headquarters of East Japan Railway Company

      June 1993   

Director of East Japan Railway Company

      June 1996   

Executive Director of East Japan Railway Company

      June 2000   

Executive Vice President of East Japan Railway Company

      June 2000   

General Manager of Life-style Business Development Headquarters of East Japan Railway Company

      Apr. 2002   

Vice Chairman of Japan Association of Corporate Executives

      June 2003   

Director, Chairman and Representative Executive Officer of Resona Holdings, Inc.

      June 2003   

Director, Chairman and Representative Executive Officer of Resona Bank, Ltd.

      June 2005   

Representative Director and Chairman of Resona Bank, Ltd.

      June 2009   

Director and Chairman of Resona Bank, Ltd. (Current)

      June 2010   

Outside Director (Current)

      June 2011   

Outside Director of Mitsui Fudosan Co., Ltd. (Current)

      Apr. 2012   

Director, Chairman and Executive Officer of Resona Holdings Inc, (Current)

Mochio Umeda

(August 30, 1960)

  

Outside Director

   Jan. 1988   

Joined Arthur D. Little (Japan) Inc.

      Oct. 1994   

Director of Arthur D. Little, Inc.

      May 1997   

Founded MUSE Associates, LLC.

      May 1997   

President of MUSE Associates, LLC. (Current)

      June 2010   

Outside Director (Current)

      Aug. 2000   

Founded Pacifica Fund I, LP.

      Aug. 2000   

Managing Director of Pacifica Fund I, LP. (Current)

      Mar. 2012   

Outside Director of ASATSU-DK INC. (Current)

 

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Table of Contents

Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Kunio Noji

(November 17, 1946)

  

Outside Director

   Apr.1969   

Joined KOMATSU LTD.

      June 1997   

Director of KOMATSU LTD.

      June 2001   

Managing Director and President of Production Division and e-Komatsu Technical Center of KOMATSU LTD.

      Apr. 2003   

Director and Senior Executive Officer, President of Construction & Mining Equipment Marketing Division of KOMATSU LTD.

      Apr. 2005   

Supervising Construction & Mining Equipment Business and e-Komatsu technical Center of KOMATSU LTD.

      July 2006   

General Manager of KOMATSU Way Division of KOMATSU LTD

      June 2007   

President and CEO of KOMATSU LTD. (Current)

      June 2012   

Outside Director (Current)

Yuji Inoue

(April 4, 1948)

  

Senior Corporate Auditor

   Apr. 1971   

Joined the Company

      Jan. 1997   

Deputy General Manager of Finance and Accounting Division

      Apr. 1998   

General Manager of Finance and Accounting Division

      Oct. 1998   

General Manager of Business Department of Ricoh Leasing Co., Ltd

      June 1999   

Managing Director of Ricoh Leasing Co., Ltd

      Apr. 2000   

Representative Director, President of Ricoh Leasing Co., Ltd.

      June 2000   

Senior Vice President

      June 2004   

Managing Director

      June 2005   

Corporate Senior Vice President

      June 2005   

Representative Director, President and Chief Executive Officer of Ricoh Leasing Co., Ltd

      June 2009   

Senior Corporate Auditor (Current)

Mitsuhiro Shinoda

(November 23, 1953)

  

Corporate Auditor

   Apr. 1978   

Joined the Company

      Oct. 2000   

General Manager of Group Management Department of Corporate Planning Division

      Apr. 2001   

General Manager of Audit Office

      June 2003   

General Manager of Finance Department of Finance and Accounting Division

      Nov. 2004   

General Manager of Internal Management & Control Office of Finance and Accounting Division

      Apr. 2007   

General Manager of Internal Management & Control Division

      July 2010   

General Manager of Management Center Chubu Sales Division of Ricoh Japan Corporation

      June 2011   

Corporate Auditor (Current)

 

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Table of Contents

Name

(Date of Birth)

  

Current Position

(Function/Business area)

  

Date

  

Business Experience

Takao Yuhara

(June 7, 1946)

  

Outside Corporate Auditor

   Apr. 1969   

Joined Nippon Chemical Industrial Co., Ltd.

      May 1971   

Joined SONY CORPORATION

      Mar. 1987   

Vice President of Sony International (Singapore) Ltd.

      Apr. 1996   

Vice President of Display Company of SONY CORPORATION

      June 2002   

Corporate Executive officer and General Manager of Corporate Planning Division of SONY CORPORATION

      June 2003   

Corporate Executive officer and Group CFO (Chief Financial Officer) of SONY CORPORATION

      June 2004   

In charge of Corporate Executive Finance and IR of Sony Corporation

      Dec. 2007   

Managing Executive Officer of ZENSHO CO., LTD. (ZENSHO CO., Ltd. is changed its name to ZENSHO HOLDINGS CO., Ltd. in October. 2011)

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