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ECONOM IC
ECONOM IC

Table of contents

  • Page 1
    E C O N O M I C

  • Page 2
    ...work. [Economic] Annual Report* Sustainability Report (Economic) • Management policy • Management results • Financial status E C O N O M I C * Printed report is available only in English. Japanese version can be found on our Web site. (http://www.ricoh.co.jp/IR/financial _data/annual_report...

  • Page 3
    ... Policy 1 Corporate Profile Corporate Profile 2 Ricoh Company, Ltd., is a leading global manufacturer of office automation equipment. Our lineup includes copiers, multifunctional and other printers, fax machines, personal computers, optical disc products, and related supplies and services...

  • Page 4
    ...million), the Ricoh Group achieved the highest sales and income ever. In fiscal 2006, the Ricoh Group launched a number of color MFPs and color laser printers in Japan and the rest of the world to fortify product lines and aggressively offer solutions to customers. As a result, both sales and income...

  • Page 5
    ...to increase our corporate value. In the office solutions segment, we are confident that we can further solidify our business foundation by taking full advantage of the strengths of the Ricoh Group such as full product line merchandising, close contacts with customers in sales and service, ability to...

  • Page 6
    ... laser printers, to fortify the product lines. We have succeeded in securing larger market shares by introducing the imagio Neo C600Pro (Aficio Color 5560 overseas), a new-generation color MFP that can copy or print 55 sheets per minute, the imagio MP C3000/ C2500 series, which realizes high image...

  • Page 7
    ..."Basic Policies Concerning Internal Control System" (refer to page 58). We will work to achieve sustainable growth and higher corporate value based on the policies. General Information by Business Area Achieving High Targets We anticipate that customers' needs will become increasingly Ricoh's Core...

  • Page 8
    ... Digital copiers, color copiers, analog copiers, facsimiles, diazo copiers, MFPs (multifunctional printers), printers, scanners, and related supplies, maintenance services, software, etc. Sales of Imaging Solutions (Billions of Yen) (FY) 2005 2006 0 500 1,000 the demand for high speed, networking...

  • Page 9
    ..., sale of non-core business in Japan affected sales. As a result, sales of this segment fell by 3.7% from the previous fiscal year to ¥157.2 billion ($1,343 million). Environmental Financial Section Ricoh Technology Portal, a strategic solutions sales center in New York ANNUAL REPORT 2006 8

  • Page 10
    ... Easy-to-read screen Easy-to-open trays Accessible scanner Tilting operation panel Easily recognized lamps Toner bottle that can be replaced with one hand Easy-to-see paper output unit Readily distinguishable tones Supports reader software Voice-activated controls 9 ANNUAL REPORT 2006

  • Page 11
    ... Rehabilitation Act of the United States T he development of a new, unprecedented function naturally involves many issues, including cost. For the development of the new series, the Ricoh Group used a management technique employing IPD, or integrated product development. T his system allowed us to...

  • Page 12
    ... functions in facsimile machines and scanners. T he rapid spread of networks and IT after 2000 has made system integration another desirable feature in copiers. As a result, MFP (multifunctional printer) development has expanded into yet another new field. In past years, the Ricoh Group has met the...

  • Page 13
    ...development system. Copy Fax Scan Print SDK application SDK application MFP/LP class Javaâ„¢ VM Platform Embedded Software Architecture SDK API MFP/LP core OS MFP/LP common architecture SDK application Solutions Architecture: Designed to maintain compatibility between multiple copier/laser printer...

  • Page 14
    ... substance use, etc. The Ricoh Group currently uses EPS, an integration technique developed in Sweden, to calculate integrated environmental effect. Environmental managemental to sustain the earth as it was meant to be while maintaining business growth In order to continuously reduce environmental...

  • Page 15
    ... management. T he Ricoh Group launched a full-fledged recycled machine business in 2004, through the teamwork of North American and South and Central American group companies in the Americas. In June 2005, Ricoh Industry Mexico (RIM), a production plant, began refurbishing used photocopiers...

  • Page 16
    ...s Topics Ricoh Tokyo headquarters move to Ginza, to integrate sales offices Ricoh's corporate headquarters has moved to a new building (8-13-1 Ginza, Chuo-ku), where it shares facilities with sales offices. T he new building is a 25story structure with 50,000 m2 of floor space. Ricoh leases floors...

  • Page 17
    ... Resolution on Basic Policies Concerning Internal Control System Ricoh's Global Network Senior Management Corporate Data 17 23 25 27 28 29 General Information by Business Area Ricoh's Core Values 30 55 56 58 Solutions 60 61 62 Environmental Financial Section ANNUAL REPORT 2006 16

  • Page 18
    ...Group is prom oting the optim ization of the custom ers' total printing cost. Although the sales of personal com puters and servers decreased, net sales in the Office Solutions increased by 6.9% from the previous corresponding period to ¥1,637.2 billion ( $13,993 m illion) . 17 ANNUAL REPORT 2006

  • Page 19
    ...-developed drive Network System Solutions The sales of Solution Business such as support and services continue to increase both in Japan and overseas due to our successful prom otion of optim izing the custom ers' total printing cost. However, the sales of personal com puters and servers continue...

  • Page 20
    ....5 billion, ¥84.7 billion and ¥102.0 billion ( $871 m illion) , respectively. Ricoh directs a significant portion of its capital expenditures towards digital and networking equipm ent, such as digital plain paper copiers ( "PPCs") , m ulti-functional printers ( "MFPs") and 19 ANNUAL REPORT 2006

  • Page 21
    ...,957 $ 857,299 85,470 1,577,376 $2,520,145 Ricoh's Core Values $ 68,479 $ 10,957 INTEREST RA TE SWAPS Notional am ounts ( Millions) Type of swap Average receive rate Average pay rate Total 2007 2008 Millions of Yen Expected m aturity date 2012 and 2009 2010 2011 thereafter Fair Value ¥ 37,000...

  • Page 22
    .... In fiscal year 2006, Ricoh also m ade a strategic capital expenditure to consolidate som e of its operations to the headquarters and dom estic research and developm ent facilities and offices at the Ricoh Technology Center, and develop a color toner factory in Japan. Ricoh projects that for the...

  • Page 23
    ...rates and estim ated fair value. Notional am ounts are generally used to calculate the contractual paym ents to be exchanged under the contract. EQUITY PRICE RISK Ricoh...,795 $1,376 Ricoh's Core Values 51,709 202,676 1,470 $257,231 Solutions Environmental Financial Section ANNUAL REPORT 2006 22

  • Page 24
    ... 422,923 191,539 ¥ 1,660,496 295,536 475,005 149,783 ¥ 1,628,017 344,580 487,459 284,765 Return on sales Return on shareholders' investm ent 2.2% 7.0 2.1% 6.7 2.1% 6.4 Common Stock Price Range ( in yen and dollars) : High Low ¥ 1,530 1,050 ¥ 1,900 1,270 ¥ 1,634 969 23 ANNUAL REPORT 2006

  • Page 25
    ...2 3 ,0 7 2 ,7 7 8 - - 2.9% 8.1 3.5% 9.7 3.7% 10.4 4.2% 11.2 5.2% 12.6 4.6% 10.0 Solutions ¥ 2,525 1,078 ¥ 2,495 1,627 ¥ 2,735 1,563 ¥ 2,470 1,637 ¥ 2,365 1,607 ¥ 2,345 1,782 ¥ 2 ,3 6 0 1 ,6 4 6 $ 2 0 .1 7 1 4 .0 7 Environmental Financial Section ANNUAL REPORT 2006 24

  • Page 26
    ...statem ents are an integral part of these balance sheets. 4 1 5 ,4 3 5 3 6 ,4 1 9 5 2 ,0 2 8 5 1 ,9 3 4 7 9 ,1 7 5 9 4 ,4 0 6 7 2 9 ,3 9 7 ¥ 2 ,0 4 1 ,1 8 3 3 ,5 5 0 ,7 2 6 3 1 1 ,2 7 4 4 4 4 ,6 8 4 4 4 3 ,8 8 0 6 7 6 ,7 0 9 8 0 6 ,8 8 9 6 ,2 3 4 ,1 6 2 $ 1 7 ,4 4 6 ,0 0 9 25 ANNUAL REPORT 2006

  • Page 27
    ...term Liabilities: Long-term indebtedness Accrued pension and severance costs Deferred incom e taxes 226,567 92,672 48,767 368,006 1 9 5 ,6 2 6 9 7 ,0 2 0 5 1 ,3 7 4 3 4 4 ,0 2 0 5 2 ,8 9 0 1 ,6 7 2 ,0 1 7 8 2 9 ,2 3 1 4 3 9 ,0 9 4 2 ,9 4 0 ,3 4 2 4 5 2 ,0 5 1 Ricoh's Core... ANNUAL REPORT 2006 26

  • Page 28
    ...Ricoh Com pany, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2004, 2005 and 2006 2004 Millions of Yen 2005 Thousands of U.S. Dollars 2006 2006 Net Sales: Products Post sales and rentals...Foreign currency exchange ( gain...integral part of these statem ents. 27 ANNUAL REPORT 2006

  • Page 29
    ... um pension ...Solutions Treasury stock: Beginning balance Purchase of treasury stock; 5,731,150 shares in 2004, 6,179,522 shares in 2005 and 5,048,765 shares in 2006 Sales of treasury stock; 6,873 shares in 2004, 24,810 shares in 2005 and 33,760 shares in 2006 Issuance of treasury stock in exchange...

  • Page 30
    ... of treasury stock Other, net Net cash used in financing activities 13,349 ( 31,509) ( 10,728) 1,000 ( 23,910) ( 11,136) ( 11,411) ( 490) ( 74,835) 72,206 ( 60,613) ( 38,052) 18,000 ( 22,000) ( 14,793) ( 10,624) ( 563) ( 56,439) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET...

  • Page 31
    ... such as Gestetner, Lanier and Savin. Ricoh m anufactures its products prim arily in 15 plants in Japan and 6 plants overseas, which are located in the United States, United Kingdom , France and China. General Information by Business Area 2 . SIGNIFICANT ACCOUNTING AND REPORTING POLICIES The accom...

  • Page 32
    ... the sale of equipm ent under sales-type leases is recognized as product sales at the inception of the lease. Other revenue consists prim arily of interest incom e on sales-type leases and directfinancing leases, which are recognized as Other revenue over the life of each respective lease using the...

  • Page 33
    ... U.S. Dollars Solutions rem aining service period of active em ployees expected to receive benefits under the plan. The expected long-term rate of return on plan assets used for pension accounting is determ ined based on the historical longterm rate of return on plan assets. The discount rate is...

  • Page 34
    ...2005 U.S. Dollars 2006 2006 Capital lease obligations incurred Issuance of treasury stock in exchange for subsidiary's stock Transfer of m arketable equity securities to em ployee retirem ent benefit trust ¥ 75 ¥ 3,930 865 2,545 ¥ 2 6 1 $ 2 ,2 3 1 905 7 ,7 3 5 3,648 - - - ( t) Use of...

  • Page 35
    ...These leases are accounted for as sales-type leases in conform ity with SFAS 13. Sales revenue from sales-type leases is recognized at the inception of the leases. Inform ation pertaining to Ricoh's lease receivables as of March 31, 2005 and 2006 is as follows: Financial Section ANNUAL REPORT 2006...

  • Page 36
    ...related to securitization transactions com pleted during the years ended March 31, 2005 and 2006 were as follows: 2005 Ricoh Leasing Com pany, Ltd. has also extended certain other types of loans as part of its business activity, which are prim arily residential housing loans to individuals in Japan...

  • Page 37
    ...: A vailable-for-sale securities Investm ent securities: A vailable-for-sale securities Non-m arketable equity securities ¥24,205 6,949 ¥31,154 ¥138 ¥162 $ 1 ,3 8 5 ¥ 2 9 ,9 3 4 6 ,4 8 5 ¥ 3 6 ,4 1 9 $ 2 5 5 ,8 4 6 5 5 ,4 2 7 $ 3 1 1 ,2 7 3 Financial Section ANNUAL REPORT 2006 36

  • Page 38
    ... as follows: Millions of Yen Cost Fair value Thousands of U.S. Dollars Cost Fair value Due within one year Due after one year through five years ¥ 161 6 ,0 0 0 ¥ 6 ,1 6 1 ¥ 161 6 ,0 5 0 ¥ 6 ,2 1 1 $ 1 ,3 7 6 5 1 ,2 8 2 $ 5 2 ,6 5 8 $ 1 ,3 7 6 5 1 ,7 0 9 $ 5 3 ,0 8 5 37 ANNUAL REPORT 2006

  • Page 39
    ... by Business Area Ricoh's Core Values Solutions 6 . INVESTMENTS IN AND ADV ANCES TO AFFILIATES The investm ents in and advances to affiliates prim arily relate to 20% to 50% owned com panies. Included in these com panies is Coca-Cola West Japan Co., Ltd., a 21.2% owned affiliate. The com m on stock...

  • Page 40
    ...2006 2006 Sales Costs and expenses...2006 Accum ulated am ortization Net carrying am ount Other intangible assets subject to amortization: Software Trade nam e and custom...( 7 6 ,4 1 0 ) ( 5 5 1 ,5 1 3 ) $ 3 9 0 ,9 2 3 1 6 0 ,7 2 6 1 1 2 ,2 5 7 6 6 3 ,9 0 6 1 2 ,8 0 3 $ 6 7 6 ,7 0 9 39 ANNUAL REPORT 2006

  • Page 41
    To Our Shareholders and Customers Gross carrying am ount of software was increased for the year ended March 31, 2006 m ainly due to the capitalization of costs to develop back-office inform ation system s. The aggregate am ortization expense of other intangible assets subject to am ortization for ...

  • Page 42
    ... U.S. Dollars 2006 2006 Assets: Accrued expenses Property, plant and equipm ent Accrued pension and severance costs Net operating loss carryforwards Other ¥ 20,717 3,458 33,781 5,993 27,400 91,349 Less- Valuation allowance ( 7,079) ¥ 84,270 Liabilities: Sales-type leases Undistributed earnings...

  • Page 43
    .... Calculation of related unrecognized deferred tax liability is not practicable. General Information by Business Area Ricoh's Core Values 9 . SHORT-TERM BORROWINGS Short-term borrowings as of March 31, 2005 and 2006 consist of the following: Weighted average interest rate 2005 Millions of...

  • Page 44
    ...proposals for approval. In addition, as is custom ary in Japan, substantially all of the bank borrowings are subject...annual m aturities of long-term indebtedness subsequent to March 31, 2006 are as follows: Thousands of Years ending March 31 Millions of Yen U.S. Dollars 2007 2008 2009 2010 2011 2012...

  • Page 45
    ... ined by the current basic rate of pay. Under the term s of the dom estic em ployee's pension fund ( "EPF") plan, the governm ent m andated welfare pension insurance benefit was included and com m ingled with the prim ary corporate benefit provided by Ricoh. These contributory and non contributory...

  • Page 46
    ... ended March 31, 2004, 2005 and 2006 were as follows: 2004 2005 2006 Discount rate Rate of com pensation increase Expected long-term return on plan assets 2.6% 3.4% 2.5% 2.9% 5.3% 2.9% 3 .0 % 5 .0 % 3 .2 % The net periodic benefit costs of the pension plans for the three years ended March 31...

  • Page 47
    ... 2006. This liability represents the excess of the accum ulated benefit obligations over the fair value of plan assets and severance costs already recognized before recording the m inim um pension liability. This excess is prim arily attributable to a substantial reduction in the discount rate used...

  • Page 48
    ... net incom e Net unrealized gains ( losses) Minim um pension liability adjustm ent Other com prehensive incom e ( loss) 45 193 238 156 ¥13,985 ( 17) ( 80) ( 97) ( 129) ¥( 4,011) 28 113 141 27 ¥9,974 1,024 148 1,172 ( 347) ( 60) ( 407) 677 88 765 ¥12,419 ¥( 3,378) ¥9,041 47 ANNUAL REPORT 2006

  • Page 49
    ... ,4 7 2 ) 216 (243) (27) ( 5 ,1 9 5 ) ¥ ( 8 ,9 6 0 ) ¥ 1 4 ,8 7 6 5 ,3 5 4 ( 1 ,2 1 7 ) 4 ,1 3 7 (311) 351 40 7 ,0 0 9 ¥ 2 6 ,0 6 2 General Information by Business Area Thousands of U.S. Dollars Ricoh's Core Values 2006: Foreign currency translation adjustm ents Unrealized gains ( losses) on...

  • Page 50
    ... ents are held to reduce the risk relating to the variability in exchange rates on assets and liabilities denom inated in foreign currencies. Changes in the fair value of these instrum ents are included in other ( incom e) expenses on the consolidated statem ent of incom e. 49 ANNUAL REPORT 2006

  • Page 51
    ...) for the years ended March 31, 2004, 2005 and 2006, respectively, under cancelable and noncancelable operating lease agreem ents for office space and m achinery and equipm ent. The m inim um rental paym ents required under operating lease that have lease term s in excess of one year as of March 31...

  • Page 52
    ... in the sum m ary of significant accounting policies, as discussed in Note 2. Ricoh's operating segm ents are com prised of Office Solutions, including copiers and related supplies, com m unications and inform ation system s, Industrial Products, including therm al m edia and sem iconductors...

  • Page 53
    ... Our Shareholders and Customers Thousands of Millions of Yen 2004 2005 U.S. Dollars 2006 2006 Total AssetsOffice Solutions Industrial Products Other Elim ination Corporate assets Consolidated Expenditure for segm ent assetsOffice Solutions Industrial Products Other Corporate assets Consolidated...

  • Page 54
    ... Related Inform ation", Ricoh discloses this inform ation as supplem ental inform ation in light of the disclosure requirem ents of the Japanese Securities and Exchange Law, which a Japanese public com pany is subject to. Thousands of Millions of Yen 2004 2005 U.S. Dollars 2006 2006 SalesJapan...

  • Page 55
    ... of the Com pany, com pleted the sale of its content distribution business to Giga Networks Co., Ltd., a subsidiary of Faith, Inc. The sale price was ¥12.0 billion. The Com pany expects to recognize a gain on this sale equal to ¥5.0 billion. Environmental Financial Section ANNUAL REPORT 2006 54

  • Page 56
    ... consolidated balance sheets of Ricoh Com pany, Ltd. ( a Japanese corporation) and subsidiaries as of March 31, 2005 and 2006, and the related consolidated statem ents of ... financial statem ents. Tokyo, Japan April 26, 2006, except for note 19 which is as of May 31, 2006 55 ANNUAL REPORT 2006

  • Page 57
    ... environmental conservation activities, implementation of which we believe to be as significant as our business operations. Ricoh's management philosophy was formally introduced in 1986 based on the Company's corporate philosophy in order to establish and nurture the corporate culture and system so...

  • Page 58
    ... Conduct by revising the Ricoh Business Code of Conduct to reflect more responsible corporate activities that achieve harmony with society and the global environment together with the establishment of the Ricoh Group CSR Charter. Please refer to Ricoh's Web site for details. 57 ANNUAL REPORT 2006

  • Page 59
    ... are collated retained and m anaged in com pliance with applicable laws, regulations and internal rules. Docum ents are kept so that they can be retrieved and produced in response to a request from directors and corporate auditors. 3 . Regulations and other str uctur es r egar ding r isk management...

  • Page 60
    ... to orders given by directors. In addition, decisions concerning personnel assessm ents or personnel changes regarding said em ployees shall be m ade only after hearing the opinions of the auditors. 5 . Systems to ensur e cor r ect business standar ds in the Ricoh gr oup composed of the company and...

  • Page 61
    ... Ricoh Leasing Company, Ltd. Ricoh Logistics System Co., Ltd. Mexico Ricoh Mexicana, S.A. de C.V . Ireland NRG Gestetner Ireland Limited Korea Sindo Ricoh Co., Ltd. Panama Lanier de Panama, S.A. Israel Gestetner ( Israel) Limited Sales and Other Puerto Rico NRG Distribution Corporation Lanier...

  • Page 62
    Senior Management As of June 28,2006 Boar d of Dir ector s Repr esentative Dir ector s Masam itsu Sakurai Executive Officer s Pr esident Masam itsu Sakurai Gr oup Executive Officer s Makoto Hashim oto Yuji...Hisashi Takata Kenichi Matsubayashi Kunihiko Satoh Soichi Nagam atsu 61 ANNUAL REPORT 2006

  • Page 63
    ...Ricoh Building, 8-13-1 Ginza, Chuo-ku, Tokyo 104-8222 Japan Tel: + 81-3-6278-2111 Fax: + 81-3-6278-2997 Date of Establishment February 6, 1936 Number of Shar es Author ized 1,500,000,000 shares Number of Shar es Issued ( as of Mar ch 3 1 , 2 0 0 6 ) 744,912,078 shares Stock Listings Tokyo, Osaka...

  • Page 64
    ... IC Ricoh Company, Ltd. IR Department, Corporate Communication Center Ricoh Building, 8-13-1 Ginza, Chuo-ku, Tokyo 104-8222 Japan Phone: +81-3-6278-5254 Facsimile: +81-3-3543-9329 e-mail [email protected] http://www.ricoh.com/ir/ NPO Color Universal Design Organization has certified this report...