Ricoh 2000 Annual Report Download - page 27

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net income and more efficient asset management.
Net cash used in investing activities was ¥28.5 billion ($277 million), a 68.1%
decline. We allocated most of this cash to plant and equipment expenditures.
The free cash flow generated by operating and investing activities totaled
¥107.2 billion ($1,040 million), a sixfold increase. This allowed us to reimburse
corporate bonds and debts and maintain dividends.
Our cash flow for the year included additional deposits of ¥50.0 billion ($485
million) based on corporate bond underwriting contracts. Financing activities re-
flected the repayment of corporate bonds for this amount.
Therefore, cash and cash equivalents at the close of fiscal 2000 were ¥111.8
billion ($1,086 million), down ¥18.8 billion or 14.4%. This amount included a
foreign exchange fluctuation effect of ¥4.7 billion ($46 million).
Capital Expenditures
Additions to property, plant and equipment fell 17.2%, to ¥58.4 billion ($567 mil-
lion). These investments were mainly in dies and other regular production areas.
Key Financial Ratios
We have provided the following ratios to facilitate analysis of the Company’s oper-
ations for fiscal 1998, 1999, and 2000:
Fiscal 1998 Fiscal 1999 Fiscal 2000
Return on sales 2.1% 2.1% 2.9%
Return on shareholders’
investment 6.7% 6.4% 8.1%
Current ratio 1.04 1.27 1.32
Debt-to-equity ratio
(interest-bearing debt to
shareholders’ investment) 1.42 1.34 0.95
Interest coverage 7.8 6.8 9.3
US$/¥
EUR/¥
FOREIGN EXCHANGE FORWARD CONTRACTS
Contract amountsContract amounts
Thousands of
U.S. dollarsMillions of yen
Average contractual
rates
105.02
107.83
¥ 37,494
10,621
$ 364,019
103,117
Market Risk
MARKET RISK EXPOSURE
Ricoh is exposed to market risks primarily from changes in foreign currency ex-
change rates and interest rates, which affect outstanding debt and certain assets and
liabilities denominated in foreign currencies. In order to manage these risks that
arise in the normal 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 income.
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, 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.
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 monetary assets and
liabilities denominated in foreign currencies. The contracts with respect to the
INTEREST RATE RISK
In the ordinary course of business, Ricoh enters into interest rate swap agree-
ments to reduce interest rate risk and to modify the interest rate characteristics of
its outstanding debt. These agreements primarily involve the exchange of fixed
and floating rate interest payments over the life of the agreement without the ex-
change of the underlying principal amounts.
The table on page 23 provides information about Ricoh’s major derivative
and other financial instruments 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 amounts 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 terms
of financial instrument contracts is generally limited to the amounts 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 fi-
nancial institutions to minimize credit risk concentration. Therefore, Ricoh does
not expect to incur material credit losses on its financial instruments.
Year 2000
The Year 2000 problem did not harm Ricoh’s operations. Related preparatory
costs did not materially affect the performances of the parent company or
its consolidated subsidianes and affiliates.
Forward-Looking and Cautionary Statements
Certain statements contained in this annual report may constitute forward-look-
ing statements, which involve a number of risks, uncertainties and other factors
that would cause actual results to differ materially from those projected or im-
plied elsewhere in this annual report.
operating activities generally have maturities of less than six months, while the
contracts with respect to the financing activities have the same maturities as
underlying assets and liabilities.
The table below provides information about Ricoh’s major derivative finan-
cial instruments 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 amounts and weighted average ex-
change rates. These notional amounts generally are used to calculate the contrac-
tual payments to be exchanged under the contracts.