Ricoh 2010 Annual Report Download - page 27

26
ANNUAL REPORT 2010
To Our Shareholders
and Customers
Corporate Social
Responsibility
Financial
Section
Fiscal 2010 Highlights
and Progress of MTP
RICOH NOW
and distributors of office equipment. In addition, as digital and
other new technology develops and as new office equipment
products using these newly developed technologies gain increased
market acceptance, Ricoh may find itself competing with new
competitors that develop such new technologies, including
computer software and hardware manufacturers and distributors.
Accordingly, it is possible that new competitors or alliances among
existing and new competitors may emerge and rapidly acquire
significant market share. While Ricoh believes it is a leading
manufacturer and distributor in the document imaging and
management industry and it intends to maintain its position, no
assurances can be made that it will continue to compete effectively
in the future. Pricing pressures or loss of potential customers
resulting from Ricoh’s failure to compete effectively may adversely
affect Ricoh’s financial results and condition.
Ricoh Is Subject to the Risks of
International Operations and the Risks of
Overseas Expansion
A substantial portion of Ricoh’s manufacturing and marketing
activity is conducted outside of Japan, including in the United
States, Europe, and in developing and emerging markets such as
China. There are a number of risks inherent in doing business in
such overseas markets, including the following:
• unfavorable political or economical factors;
• fluctuations in foreign currency exchange rates;
• potentially adverse tax consequences;
• unexpected legal or regulatory changes;
• lack of sufficient protection for intellectual property rights;
• difficulties in recruiting and retaining personnel, and managing
international operations; and
• less developed infrastructure.
Ricoh’s inability to manage successfully the risks inherent in its
international activities could adversely affect its business, financial
condition and operating results. In addition, while Ricoh plans to
continue to expand its business worldwide and increase overseas
sales, because of the risks associated with conducting an
international operation (including the risks listed above), there can
be no assurances that Ricoh’s overseas expansion will be
successful or have a positive effect on Ricoh’s financial results and
condition.
Economic Trends in Ricoh’s Major Markets
May Adversely Affect Ricoh’s Sales
Demand for Ricoh’s products is affected by cyclical changes in the
economies of Ricoh’s major markets, including Japan, the United
States and Europe. Economic downturns and declines in
consumption in Ricoh’s major markets may adversely affect Ricoh’s
financial results and condition.
Foreign Exchange Fluctuations
Affect Ricoh’s Results
Local currency-denominated financial results in each of the
Company’s subsidiaries around the world are translated into
Japanese Yen by applying the average market rate during each
financial period and recorded on Ricoh’s consolidated statements of
income. Local currency-denominated assets and liabilities are
translated into Japanese Yen by applying the market rate at the end
of each financial period and recorded on Ricoh’s consolidated
balance sheets. Accordingly, the financial results, assets and
liabilities are subject to foreign exchange fluctuations.
In addition, operating profits and losses are highly sensitive to the
fluctuations in the value of the Japanese Yen because the high
volume of Ricoh's production and sales activities in the Americas,
Europe and Other, such as China, results in a large proportion of
revenues and costs denominated in local currencies. Although
Ricoh engages in hedging transactions such as forward contracts
with several financial institutions having credit ratings satisfactory
to Ricoh to minimize the negative effects of short-term fluctuations
in foreign exchange rates among major currencies such as the U.S.
Dollar, the Euro and Japanese Yen, mid-to-long-term volatile
changes in the exchange rate levels make it difficult for Ricoh to
execute planned procurement, production, logistics, and sales
activities and may adversely affect Ricoh’s financial results and
condition.
Crude Oil Price Fluctuations Affect
Ricoh’s Results
Many of the parts or materials used in manufacturing Ricoh’s
products are made from oil. If the price of crude oil rises, the
purchase price of such product parts or materials may increase as
well. Furthermore, a rise in the price of crude oil may lead to an
increase in shipping and handling costs due in part to a rise in the
cost of fuel and the cost of utilities. Ricoh may not be able to pass
these incremental costs onto the sales price of its products. Such
fluctuations in crude oil prices may therefore adversely affect
Ricoh’s financial position and results of operations.