Ricoh 2004 Annual Report Download - page 22

Cash Flows
Although net income and depreciation and amortization increased, increase
of trade receivables and inventories, and the payment of corporate tax
resulted in net cash provided by operating activities decreasing by ¥30.8
billion from the previous corresponding period to ¥154.9 billion ($1,490
million).
While investment continued for the enhancement of new-product lines,
factors such as reduced fund investments resulted in the net cash used in
investing activities decreasing by ¥34.8 billion from the previous
corresponding period to ¥63.3 billion ($609 million).
As a result of the above factors, free cash flow generated by operating
and investing activities increased ¥3.9 billion to ¥91.5 billion ($880
million).
Effective use of financial resources was promoted throughout the group
and every effort was made to reduce interest-bearing debt. Consequently, net
cash used in financing activities reached a level of ¥74.8 billion ($720
million). Note that this expenditure includes dividend payments of ¥11.1
billion ($107 million) and ¥11.4 billion ($110 million) to secure treasury
stock.
As a result of these factors, cash and cash equivalents at the close of the
term increased ¥13.7 billion with respect to the previous period to ¥203.0
billion ($1,952 million).
Capital Expenditures
Ricoh’s capital expenditures for fiscal 2002, 2003 and 2004 were
¥75.6billion, ¥73.9 billion and ¥75.5 billion ($726 million), respectively.
Ricoh directs a significant portion of its capital expenditures towards digital
and networking equipment, such as digital plain paper copiers (“PPCs”),
multi-functional printers (“MFPs”) and laser printers, and manufacturing
facilities to maintain or enhance competitiveness in the industry. In fiscal
2004, Ricoh also invested a significant amount of capital to upgrade its
information systems for its back-office operations, such as procurement,
accounting, and the management of intellectual property. With this
upgrade in the information systems, Ricoh is installing a new accounting
system and a new intellectual property management system during fiscal
2004 to better track and manage its operations. Ricoh projects that for fiscal
2005 its capital expenditures will amount to approximately ¥74.5 billion.
Key Financial Ratios
We have provided the following ratios to facilitate analysis of the Company’s
operations for fiscal 2002, 2003, and 2004.
Market Risk
MARKET RISK EXPOSURE
Ricoh is exposed to market risks primarily from changes in foreign currency
exchange rates and interest rates, which affect outstanding debt and certain
assets and liabilities denominated in foreign currencies. To a lesser extent,
Ricoh is also exposed to equity price risk. In order to manage these risks
that arise in the normal course of business, Ricoh enters into various
hedging transactions pursuant 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
income.
Ricoh regularly assesses these market risks based on the policies and
procedures established to protect against adverse effects of these risks and
other potential exposures, primarily by reference to the market value of the
financial instruments. As a result of the latest assessment, Ricoh does not
anticipate any material losses in these areas for the fiscal 2004, and there
are no material quantitative changes in market risk exposure at March
31,2004. In the normal course of business, Ricoh also faces risks that are
either non-financial or nonquantifiable. Such risks principally include
credit risk and legal risk, and are not represented in the tables.
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Fiscal 2002 Fiscal 2003 Fiscal 2004
Return on sales 3.7% 4.2% 5.2%
Return on shareholders’
investment 10.4% 11.2% 12.6%
Current ratio 1.30 1.40 1.44
Debt-to-equity ratio
(interest-bearing debt to
shareholders’ investment) 0.89 0.74 0.54
Interest coverage 16.3 20.1 28.7