Ricoh 2005 Annual Report Download - page 22

increase of sales. Investments and other assets increased as a result of
recognizing goodwill and other intangible assets accompanying the
aforementioned acquisition. Consequently, total assets increased
¥100.8 billion to ¥1,953.6 billion ( $18,259 million) .
As for Liabilities, domestic and overseas trade payables increased.
Interest-bearing debt decreased as a result of effective utilization of
financial resource in the Ricoh Group. In addition, other current
liabilities decreased as a result of reducing bonuses and transfer to tax
reserve. Accrued pension and severance costs increased. As a result,
total liabilities decreased ¥30.7 billion to ¥1,039.5 billion ( $9,715
million) .
In Shareholders' Investment, there was no major change in common
stock or additional paid-in capital. Retained earnings, accumulated
other comprehensive income and treasury stock increased. As a result,
total shareholders' equity increased by ¥67.8 billion to ¥862.9 billion
( $8,065 million) .
Cash Flows
Although net income and accrued pension and severance costs
increased, increase of trade receivables, inventories and finance
receivables result in net cash provided by operating activities decreasing
¥22.1 billion from the previous corresponding period to ¥132.7 billion
( $1,241 million) .
Net cash used in investing activities increased ¥32.8 billion from the
end of the previous corresponding period to ¥96.1 billion ( $899
million) due to ongoing capital investment to reinforce production
lines for new products and the purchase of a printer company.
As a result of these activities, the free cash flow, which is the total of the
cash flows from operating activities and investing activities, decreased
¥55.0 billion from the previous corresponding period to ¥36.5 billion
( $342 million) of positive cash flow.
Net cash used in financing activities was incurred for reducing interest-
bearing liabilities by encouraging financing between group companies,
¥14.7 billion ( $138 million) for payment of dividends, and ¥10.6
billion ( $99 million) for acquisition of treasury stock. As a result, net
cash used in financing activities amounted to ¥56.4 billion ( $527
million) .
As a result of the above, the ending balance of cash and cash
equivalents decrease ¥16.1 billion from the end of the previous
corresponding period to ¥186.8 billion ( $1,746 million).
Capital Expenditur es
Ricoh’s capital expenditures for the fiscal years 2003, 2004 and 2005
were ¥73.9 billion, ¥75.5 billion and ¥84.7 billion ( $792 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 year 2005, Ricoh
also invested a significant amount of capital to upgrade its information
systems for its back-office operations, such as sales force automations,
procurement, accounting, operations and the management of
intellectual property. With this upgrade in the information systems,
Ricoh began implementing a new accounting system and a new
intellectual property management system since fiscal year 2003 to
better track and manage its operations. Ricoh projects that for the
fiscal year ending March 31, 2006 its capital expenditures will amount
to approximately ¥114.0 billion ( $1,065 million) , principally for the
following categories: digital and networking equipment, newly
developed toner factory and new accounting and intellectual property
management systems.
Key Financial Ratios
We have provided the following ratios to facilitate analysis of the
Company’s operations for fiscal 2003, 2004, and 2005.
* Current ratio has been adjusted for all periods presented to reflect the
reclassification of the current portion of finance receivables as a
current asset. See Note 2 to the consolidated financial statement.
Mar ket 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
21 ANNUAL REPORT 2005
Fiscal 2003 Fiscal 2004 Fiscal 2 0 0 5
Return on sales 4.2% 5.2% 4 .6 %
Return on shareholders’
investment 11.2% 12.6% 10.0%
Current ratio* 1.63 1.69 1 .5 3
Debt-to-equity ratio
( interest-bearing debt to
shareholders’ investment) 0.74 0.54 0 .4 8
Interest coverage 20.1 28.7 2 9 .4