Ricoh 2002 Annual Report Download - page 28

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and develop new products.
Consequently, the free cash flow generated by operating and investing activi-
ties decreased 1.6%, to ¥39.3 billion ( $295 million) .
Net cash provided by financing activities was ¥36.2 billion ( $272 m illion) ,
compared with ¥88.3 billion used in such activities a year earlier. This change
stem med from our efforts to cut interest-bearing debt dom estically and abroad
while preparing for long-term expansion from our fourth and fifth straight bond
issues, which totaled ¥60 billion ( $451 million) .
As a result of these factors, cash and cash equivalents at the close of the term
were up ¥78.0 billion from a year earlier, at ¥142.5 billion ( $1,071 m illion) .
Capital Expenditures
Additions to property, plant and equipment rose 3.2%, to ¥75.6 billion ( $568 mil-
lion) . These investm ents were primarily for establishing new manufacturing lines
and research and development facilities. Spending on sem iconductor production
declined.
Key Financial Ratios
We have provided the following ratios to facilitate analysis of the Com pany’s oper-
ations for fiscal 2000, 2001, and 2002.
Fiscal 2000 Fiscal 2001 Fiscal 2 0 0 2
Return on sales 2.9% 3.5% 3 .7 %
Return on shareholders’
investm ent 8.1% 9.7% 10.4%
Current ratio 1.32 1.00 1 .3 0
Debt-to-equity ratio
( interest-bearing debt to
shareholders’ investment) 0.95 0.97 0 .8 9
Interest coverage 9.3 14.5 1 6 .3
US$/¥
EUR/¥
FOREIGN EXCHANGE FORWARD CONTRACTS
Contract am ountsContract am ounts
Thousands of
U.S. dollarsMillions of yen
Average contractual
rates
1 2 5 .4 3
1 1 1 .7 1
¥38,482
19,885
$289,338
149,511
Market Risk
MARKET RISK EXPOSURE
Ricoh is exposed to m arket risks primarily from changes in foreign currency ex-
change rates and interest rates, which affect outstanding debt and certain assets and
liabilities denom inated in foreign currencies. In order to m anage these risks that
arise in the norm al course of business, Ricoh enters into hedging transactions pur-
suant to its policies and procedures covering such areas as counterparty exposure
and hedging practices. Ricoh does not hold or issue derivative financial instruments
for trading purposes, or to generate incom e.
Ricoh regularly assesses these market risks based on the policies and proce-
dures established to protect against adverse effects of these risks and other poten-
tial exposures, prim arily by reference to the m arket value of the financial
instrum ents. As a result of the latest assessment, Ricoh does not anticipate any
material losses in these areas.
FOREIGN CURRENCY RISK
In the ordinary course of business, Ricoh uses foreign exchange forward contracts
to manage the effects of foreign currency exchange risk on m onetary assets and
liabilities denom inated in foreign currencies. The contracts with respect to the
operating activities generally have maturities of less than six months, while the
contracts with respect to the financing activities have the sam e m aturities as
underlying assets and liabilities.
The table below provides inform ation about Ricoh’s major derivative finan-
cial instrum ents that are sensitive to foreign currency exchange rates, except for
the contracts with respect to the financial activities. For foreign exchange forward
contracts, the table presents the notional am ounts and weighted average ex-
change rates. These notional amounts generally are used to calculate the contrac-
tual payments to be exchanged under the contracts.
INTEREST RATE RISK
In the ordinary course of business, Ricoh enters into interest rate swap agreements
to reduce interest rate risk and to modify the interest rate characteristics of its out-
standing debt. These agreements prim arily involve the exchange of fixed and
floating rate interest payments over the life of the agreem ent without the ex-
change of the underlying principal am ounts.
The table on page 24 provides inform ation about Ricoh’s major derivative
and other financial instrum ents that are sensitive to changes in interest rates, in-
cluding interest rate swaps and debt obligations. For debt obligations, the table
presents principal cash flows by expected maturity date and related weighted aver-
age interest rates. For interest rate swaps, the table presents notional am ounts by
expected maturity date and weighted average interest rates. Notional amounts are
generally used to calculate the contractual payments to be exchanged under the
contract.
CREDIT RISK
Credit risk arising from the nonperformance of counterparties to meet the term s of
financial instrument contracts is generally lim ited to the am ounts by which the
counterparties’ obligations exceed the obligations of Ricoh. It is Ricoh’s policy to
only enter into financial instrument contracts with diverse high credit rated finan-
cial institutions to minim ize credit risk concentration. Therefore, Ricoh does not
expect to incur m aterial credit losses on its financial instruments.
Forward-Looking and Cautionary Statements
Certain statements contained in this annual report may constitute forward-look-
ing statem ents, which involve a number of risks, uncertainties and other factors
that would cause actual results to differ m aterially from those projected or implied
elsewhere in this annual report.