Ricoh 2006 Annual Report Download - page 18

Management's Discussion and Analysis of Fiscal 2006 Results
Revenues
The Ricoh Group’s consolidated net sales for fiscal year 2006
( extending from April 1, 2005 to March 31, 2006) increased 5.6% from
the previous corresponding period to ¥1,915.0 billion ( $16,368
million) . This m arks the twelfth consecutive year of year-on-year
revenue growth. During this period, the average yen exchange rates
were at ¥113.26 against the U.S. dollar ( down ¥5.68) and ¥137.86
against the euro ( down ¥2.61) . Accordingly, the sales would have
increased by 3.8% excluding the effects of such foreign currency
fluctuations.
As for sales, dom estic sales of Imaging Solutions increased by 3.8%
from the previous corresponding period. This was primarily due to the
continuous increase in sales of digital PPCs( plain paper copiers) , MFPs
( m ultifunctional printers) and laser printers - especially color
products. On the other hand, sales of personal computers and servers,
optical equipments, which were in sluggish demand, and som e of
Other decreased. As a result, domestic sales decreased by 0.1% from the
previous corresponding period to ¥972.0 billion ( $8,308 million) .
Overseas sales of Imaging Solutions increased. Influenced by the
depreciation of the yen, the sales of Im aging Solutions increased by
12.1% from the previous corresponding period. In the Americas, the
increase in sales was largely driven by sales of digital PPCs, color PPCs,
MFPs and laser printers had good result. In Europe and Other, the sales
of these products also increased. The increase in sales of the Industrial
Products was due to the recovery of dem and for semiconductor, which
was offset by a decrease in the optical discs business as we withdrew
from a part of the business during the previous fiscal year. As a result,
overseas net sales increased by 12.1% from the previous corresponding
period to ¥943.0 billion ( $8,060 million) . Excluding effects of foreign
currency fluctuations, net sales in overseas would have increased by
8.2% from the previous corresponding period.
Ricoh has expanded the presentation of net sales and cost of sales in
the consolidated statem ents of incom e from fiscal year 2006 to present
separate line-item s for ( i) Products, ( ii) Post sales and rentals and ( iii)
Other revenue. Consolidated statements of incom e for the fiscal years
2004 and 2005 have also been presented to conform to current
presentation.
Operating Income
Gross profit increased by 6.0% from the previous corresponding period
to ¥799.6 billion ( $6,834 m illion) . This increase was primarily due to
the effect of new launched products, increased sales of value-added
high-margin products such as MFPs and laser printers, a com pleted
cost m anagem ent system from the product development stage and
successful im plem entation of effective cost-cutting activities for
logistics, m anufacturing and so on.
Selling, general and administrative expenses increased by 4.6% from
the previous corresponding period to ¥647.5 billion ( $5,535 m illion) .
This consisted of strategic expenses as follows: R&D expenses of ¥110.3
billion ( $943 m illion, 5.8% compared to the sales) including new
product developments, increased sales expenses accom panying the
increased sales; integration of headquarters operations and domestic
R&D facilities and offices; enhanced sales and m arketing structure
overseas; expenses on Inform ation Technologies for the core operating
system development in Japan, overseas and so on.
As a result, operating income increased by 12.2% from the previous
corresponding period to ¥152.0 billion ( $1,299 m illion) .
Income befor e Income Taxes:
In the other ( incom e) expenses, we had financial improvement and an
increase in gain from foreign exchange. As a result, incom e before
incom e taxes increased 15.4% from the previous corresponding period
to ¥156.1 billion ( $1,335 m illion) .
Net Income
Incom e taxes were affected by tax exem ption of R&D expenses and
expenditures for Inform ation Technologies.
As a result, net income for the period increased by 16.7% to ¥97.0
billion ( $829 m illion) , recording the best net income.
We raised cash dividends paid per share of comm on stock to ¥22.00
( $0.19) , an increase for the sixth consecutive year.
Segment Information
CONSOLIDATED SALES BY PRODUCT LINE
1 . Office Solutions
The sales of color PPCs, MFPs and laser printers in Japan and overseas
increased. We responded to our custom ers needs to improve or upgrade
the technology used in their business, which are accom panied by the
advancem ent of digitalized and networked and computerized
information, coloration and massive quantities. In order to support the
efficient and effective management of custom ers’ TDV ( total document
volume) , the Ricoh Group is promoting the optimization of the
customers’ total printing cost. Although the sales of personal
computers 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 million) .
17 ANNUAL REPORT 2006