Ricoh Americas Corporation 5 Dedrick Place, West Caldwell, New Jersey 07006, U.S.A. Phone: +1-973-882-2000 Facsimile: +1-973-882-2506 http://www.ricoh-usa.com/
Ricoh Europe PLC 66 Chiltern Street, London W1U 4AG, United Kingdom Phone: +44-20-7465-1000 Facsimile: +44-20-7224-5740 http://www.ricoh-europe.com/
Ricoh Asia Pacific Pte Ltd. 260 Orchard Road #15-01/02 The Heeren, Singapore 238855 Phone :+65-830-5888 Facsimile: +65-830-5830 http://www.ricoh.com.sg/
Ricoh China Co., Ltd. 17F., Huamin Empire Plaza, No.728 Yan An West Road, Shanghai, China Phone: +86-21-5238-0222 Facsimile: +86-21-5238-2070 http://www.ricoh.com.cn/
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 as a color universal design due to its easy-to-see features based on careful color selection. RICOH GROUP SUSTAINABILITY REPORT (ECONOMIC) 2007
Earning the public’s trust Activity reports from 3 perspectives: “environment,” “corporate social responsibility,” and “economic”
Being a good corporate citizen means striving to be a val- ued and respected member of society by contributing to its sustainable growth. To this end, the Ricoh Group be- lieves in being outstanding in all areas of the environment, the economy, and corporate social responsibility as well as openly communicating its activities. The Ricoh Group publishes information on its activities in reports written from three different perspectives: the environment, the economy, and corporate social responsibility. This report provides our shareholders, customers, and other stake- holders with information on our management policies, business performance in fi scal 2007, and fi nancial condi- tion to facilitate a better understanding of what we do and how we work.
Annual Report and Other Reports
Economic Environment Corporate Social Responsibility
R I C O H G R O U P
S UST AINABILITY
REPO RT
(ENVIRONMENT)
Sustainability Report Sustainability Report Sustainability Report （Economic） （Environment） （Corporate Social Responsibility） • Management policy • Concept of sustainable environmental • Concept of CSR • Management results management • Integrity in corporate activities • Financial status • Improving our products • Harmony with the environment • Improvements made at business sites • Respect for people • Basis for sustainable environmental • Harmony with society management • Social contribution of environmental conservation/Environmental communication
■ How to Obtain Ricoh's Corporate Information • IR (Investor Relations) http://www.ricoh.com/IR/ • Sustainable environment management http://www.ricoh.com/environment/index.html • Corporate social responsibility http://www.ricoh.com/csr/ • Social contribution http://www.ricoh.com/about/csr_environment/sc.html
1 ANNUAL REPORT 2007 Corporate Profile
Ricoh Company, Ltd., is a leading global manufacturer of offi ce automa- Editorial Policy 1 tion equipment. Our lineup includes copiers, multifunctional and other Corporate Profile 2 printers, facsimiles, personal computers, optical disc products, and re- Financial Highlights 2 lated supplies and services, as well as digital cameras and advanced Contents 2 electronic devices. 3 We are rapidly building a solid presence worldwide as a provider of com- To Our Shareholders and Customers investors Customers prehensive document solutions that help customers streamline their busi- nesses and cut operating costs. Highlights 7 The Ricoh Group includes Ricoh Company, Ltd. and 322 subsidiaries and affi liates – 114 companies in Japan and 208 overseas, together em- ploying around 81,000 people. Business Strategy 11
●Cautionary Statement Ricoh bases the estimates in this annual report on information currently available to management, which Corporate Governance 18 involves risks and uncertainties that could cause actual results to differ materially from those projected. Corporate Social Responsibility
Financial Highlights CSR / Environmental Management 19
Ricoh Company, Ltd., and consolidated subsidiaries for fiscal 2007 and fiscal 2006
Thousands of Millions of yen % change U.S. dollars Brand Communications 21 2006 2007 2007 2007/2006
For the year: ￥1,909,238 ￥2,068,925 ＄17,533,263 8.4％ Net sales
Japan ￥966,224 ￥1,002,251 ＄8,493,653 3.7％ Financial Section 22
Overseas ￥943,014 ￥1,066,674 ＄9,039,610 13.1％
Net income ￥97,057 ￥111,724 ＄946,814 15.1％
Per share data (in yen and dollars): Net income
Basic ￥132.33 ￥153.10 ＄1.30 15.7％
Diluted ￥132.33 ￥151.89 ＄1.29 14.8％
Cash dividends ￥24.00 ￥28.00 ＄0.24 16.7％ declared
At year-end: Total assets ￥2,041,183 ￥2,243,406 ＄19,011,915 9.9％
Shareholders' equity ￥960,245 ￥1,070,913 ＄9,075,534 11.5％
※ As a result of the sale of business, the operating results from the discontinued business have been reclassifi ed from fi scal 2003 to 2006 in this report.
ANNUAL REPORT 2007 2 To Our Shareholders and Customers
13 consecutive years of net sales increase, the fi scal 2007 was ¥153.10 (US$1.30) and the return on and both net sales and profi ts break record shareholder’s equity (ROE) was 11.0%. The annual divi- highs dend declared for the fi scal 2007 was ¥28.00 per share (US$0.24), marking the seventh year in a row of dividend The consolidated sales of the Ricoh group for the fi scal year increase. ended March 31, 2007 were ¥2,068.9 billion (US$17,533 million), an increase of 8.4% over the previous fi scal year. Cash generated amid business investment In the thirteenth consecutive year of sales growth, sales exceeded ¥2 trillion for the fi rst time. Operating income As for cash fl ow, while internal reserves grew as a result rose 17.4% over the previous fi scal year to ¥174.3 billion of increased assets accompanying business expansion (US$1,477 million) and net income rose 15.1% to ¥111.7 and business investments as acquisition of shares of sub- billion (US$946 million), with both sales and profi ts sidiaries, free cash fl ow, which is the total cash fl ow pro- breaking records. duced by operating activities and investment, was ¥51.8 In fi scal 2007, sales of multifunctional printers (MFPs) and billion(US$439 million). laser printers – mainly of color products – continued to rise Total assets rose ¥202.2 billion from the previous fi scal from the previous fi scal year both in Japan and overseas. year , reaching ¥2,243.4 billion (US$19,011 million), as Sales of IT services on the back of the expanded solutions business expanded. Shareholders’ equity increased ¥110.6 business also grew. The Industrial Products and Other ar- billion from the previous fi scal year to ¥1,070.9 billion eas also increased sales. (US$9,075 million) due to the increase of retained earn- Gross profi ts on sales rose thanks to increased sales of value- ings. The equity ratio improved 0.7 points over the previ- added products such as color MFPs and to the fruits of ous fi scal year to 47.7% ongoing cost reduction activities as well as positive foreign exchange fl uctuation. Executing 15th Mid-term Management Plan Also, selling, general and administrative expenses remained high due to the energy poured into research and devel- Since its 13th Mid-term Management Plan, the Ricoh opment and the development of core operating systems. Group has strived to reform its business structure for Of- There were also increased costs associated with the deploy- fi ce Solutions, its main business segment, to "not only ment of policies for strengthening solution proposals and manufacture and sell copiers and printers but to support expanding business areas. Despite this, the ratio of sell- improvement and innovation in the customer's operations ing, general and administrative expenses to sales decreased by providing devices and systems." compared to the previous fi scal year, in part thanks to the Also, based on the recognition that effi cient and effective initial results of structural reforms such as core business input/output, storage and search of total document volume effi ciency enhancement. (TDV) – including not only copies but also printed docu- With these successful results, Ricoh increased profi ts and ments – are becoming critical issue for our customers, in improved the profi t margin. Net income per share for the 14th Mid-term Management Plan Ricoh implemented
3 ANNUAL REPORT 2007 To Our Shareholders and Customers Customers
its major strategy "of expanding the revenue and earnings in that market. OurTo Shareholders and framework by the realization of TDV," and business has In the low-end business printer market, Ricoh is creating been executed accordingly. a new color market by introducing new products such as In the 15th mid-term Plan, there are no changes in the di- color laser printers and GELJET printers that further ad- rection of this strategy and business structure reform, but vance Ricoh's unique GELJET technology. efforts were made to expand corporate value by even more In the development of printing solutions, Ricoh has been Highlights seeing from the customers’ perspective and continuing to increasing its accounts through total cost of ownership provide value that meets their expectations. (TCO) solutions that combine copiers and printers, and In the Offi ce Solutions segment, Ricoh recognizes that it through the high marks it receives for its worldwide sup- can meet further needs of a greater number of customers port and service organization. While developing document and establish a solid business foundation by fully utiliz- solutions to improve workfl ow, Ricoh is also strengthen-
ing all the Ricoh Group's capacities and strengths – a full ing support and solution sales organizations at its Japa- BusinessStrategy lineup of products, sales and service customer contacts, nese, American, and European technology centers, which the ability to provide solutions, global operations, and im- provide software linking digital copiers with operating age processing and image processing fusion technologies. systems and which support the proposal and introduction Ricoh designates "printing" as an area within the Offi ce of use environments optimized for them. Solution segment that has particular growth opportunities In Industrial Products, management resources are being and concentrates management resources on the most criti- concentrated on businesses with prospects for growth, Corporate Governance cal areas. such as expansion of sales, design and development bases In the Industrial Products business too, management re- for semiconductor business in Asia. sources are being concentrated on business with prospects Furthermore, Ricoh continued to strengthen its profi t for growth. Also, in both Offi ce Solutions and Industri- foundation in order to realize growth strategies in the fi s- al Products, Ricoh is working to expand its business in cal year. CSR emerging markets. In sales and service, Ricoh further strengthened its domes-
In order to attain customer value and raise its profi tabil- tic and overseas sales and service networks, for example Environmental Management ity in each business, differentiation through technology is by acquiring the European operations of Danka Business critical, so Ricoh continues to aggressively strengthen its Systems PLC for offi ce equipment sales and services. technologies. As for research and development, Ricoh is improving ef- As for the results of fi scal 2007, Ricoh continued to intro- fi ciency in this area by strengthening the cross-functional duce new color MFPs and color laser printers in Japan and (inter-departmental) development structure at its Ricoh Brand Communications overseas, and the product lineup was further fi lled out. Technology Center, where design and development func- For the high-end production printing market, in addi- tions are concentrated. tion to further strengthening its products, Ricoh forged an agreement with IBM Corporation to establish InfoPrint Solutions Company, a joint venture, to expand its business Financial Section
ANNUAL REPORT 2007 4 Attaining even higher targets continuing to provide customer value that contributes to knowledge creation and to greater productivity of "custom- We forecast that customer needs will diversify more and ers working any time, anywhere." Ricoh will continue to more and that competition in the transition to color and in press forward with its businesses as a corporation growing solutions marketing will intensify. With the market envi- and developing by making its relationships of trust with all ronment changing so much, the Ricoh Group understands its stakeholders even stronger and by earning the support that in order to continue to grow and develop, it is essential of society as a whole. to strengthen our corporate competitiveness by "creating new values for the customers" and "improving manage- Change in top management ment efficiency". To create customer value, in addition to increasing the Since Masamitsu Sakurai became president in 1996, Ricoh implementation of "customer satisfaction management," has worked to advance the evolution of office equipment which aggressively seeks new value, Ricoh is pursuing in the information society and to increase corporate value three core values of "simplifying knowledge creation," through the aggressive development of global businesses. "creating solutions that fit," and "harmonizing with the To attain perpetual value creation that starts with the cus- environment." In other words, Ricoh will strive even more tomer and is based on high-level technology, and to grow to enhance the ease of use of Ricoh products and services, as a global corporation, Ricoh will take the next steps with support the knowledge creation activities of our business new leadership. customers and provide environmentally sustainable prod- On April 1, 2007, Shiro Kondo became a representative ucts and services. director and president and CEO, and Masamitsu Saku- In addition, we continue to pursue high-efficiency man- rai became a representative director and chairman of the agement in order to increase profitability. Besides struc- board. We appreciate this opportunity to report to all our tural reform aimed at making Ricoh work processes more shareholders and customers. efficient and raising the profitability of each Ricoh busi- ness, Ricoh is increasing management efficiency by even June, 2007 more carefly selecting businesses and focusing on those. Moreover, Ricoh is further strengthening the business base, harvesting the fruits of ongoing advanced investment already made and linking these to profits. Thus, by taking the profits created this way and aggres- sively directing them into investments in growth areas and in technology strengthening, Ricoh is working to expand sales and profits and further increase corporate value. Based on its group vision "Winners in the 21st Century," the Ricoh Group seeks to earn a high level of trust by
ANNUAL REPORT 2007 To Our Shareholders and Customers Customers To OurTo Shareholders and Highlights BusinessStrategy Corporate Governance CSR Environmental Management
Shiro Kondo Masamitsu Sakurai President and Chief Executive Offi cer Chairman Brand Communications Financial Section
ANNUAL REPORT 2007 6 FY2007 Highlights of Consolidated Statements Performance
■ Net Sales, operating income, net income, operating income ratio, net income ratio trend ¥2.0 trillion （sales）
Net sales increased in all business segments, especially color MFPs and laser printers. Overall sales rose 8.4% from the previous fiscal year. This was the first time that group consolidated sales exceeded 2 trillion yen, and Ricoh achieved increased sales for the 13th year in a row. Thanks to, among other things, increased sales of high - value - added products and the fruits of on-going cost reduction activities, operating income rose 17.4% form the previous fiscal year, to ¥174.3 billion, and net income rose 15.1% to ¥111.7 billion, both the highest levels on record. ● Sales by area (billions of yen) （％） Operating income ratio Overseas Japan 8 1,002.2 8.2 8.4 1,066.6 (51.6％) (48.4％) 7 7.5 7.3 7.8 6 Net income ratio The Americas 5 5.4 426.4 5.2 5.1 4 4.6 (20.6％) 4.2 FY2007 Europe 507.1 ●A Japan (left scale) ●C Operating income (right scale) (24.5％) ●B Overseas (left scale) ●D Net income (right scale) Operating income Net sales Net income Other 2 (billions of yen) 068.9 (billions of yen) 133.0 3 4 2, (6.5％) 0 7. 909. 6
2,000 1, 200 80 773. 732. 1, 1, ● (billions of yen) 1, Sales by category 1 1 3 1,066. 3 943.0 Other Office Solutions 1,500 841. 150 866. 174. 4 5 842. 161.0 1,774.4 1 7 (7.8％) (85.8％) 145. 148. 131. 129. 7 Industrial Products
1,000 2 100 ●B 133.3 FY2007 2 2 111.
1 (6.4％) 6 97.0 91.7 1,002. 5 966. 966. 83.1 907. 889.
500 72. 50
Network System Solutions Imaging Solutions 194.3 1,580.1 ●A ●C ●Ｄ 0 0 (9.4％) (76.4％) 2003 2004 2005 2006 2007 (FY)
（％） Consolidated dividend payout ratio ■ Net income per share (EPS) , dividends, 20 17.8 18.1 18.3 consolidated dividend payout ratio trend 15 14.0 14.6 10
（Yen）●A Net Income per share (left scale) （Yen） 150 ●B Dividends declared per share (right scale) 30 16.7％ (increase in dividends) 153.10 28.0 20 100 132.33 With profits reaching their highest level ever, the annual divi- 24.0 123.63 112.64 20.0
dend declared was increased ¥4.0 from the previous fiscal year, 99.79 18.0 10
to ¥28.0. 50 14.0 The consolidated dividend payout ratio rose to 18.3%.
●A ●B 0 0 2003 2004 2005 2006 2007 (FY)
ANNUAL REPORT 2007 Review of Operations Customers
■ Total assets, shareholders’ equity, return on OurTo Shareholders and （％） Return on shareholders’equity (ROE) assets, return on shareholders’ equity (ROE) 12 11.0 12.6 10.0 10.6 11.2 9 Return on assets 11.0％ （ROE） 6.4 7.4 7.6 8.1 6 6.9
Total assets rose ¥202.2 billion from the previous fi scal year, (billions of yen) ●A Total assets ●B Shareholders’ equity Highlights 4 2,000 6 9
reaching ¥2,243.4 billion, due to increased accounts receivable 7 2,243.
through business expansion, increased fi nance receivables, in- 1,500 2,041.1 1,953. 1,884. 1,852. 5 creased inventory, and so on. Although interest-bearing liabili- 1,000 657. 9 ties decreased thanks to strengthened cash management, busi- 1 960.2 500 1,070.9 862. ness investment procurement exceeded this and the result was 795. ●A ●B 0 an increase of ¥34.3 billion from the previous period. Share- 2003 2004 2005 2006 2007 (End of March)
holders’ equity was ¥1,070.9 billion, an increase of ¥110.6 bil- BusinessStrategy lion from the previous fi scal year.
■ Operating cash fl ow, investment cash fl ow,
(billions of yen) ●A Operating cash flow ●B Investing cash flow ●C Free cash flow free cash fl ow 200
150 182.7 ¥51.8 billion (free cash flow) 173.4 167.2 Corporate Governance 151.0 100 129.1 Net income, depreciation costs, and other internal reserves in- 87.6 50 84.7 creased from the previous fi scal year, but business investment 53.4 ●A ●C 51.8 0 33.0 such as acquisition of shares in subsidiaries and increased assets ●B accompanying expanded business resulted in a decrease of ¥1.5
-50 -63.4 billion in free cash fl ow, which is the total cash fl ow from op- CSR -96.0 -97.9
-100 -115.4 -120.0 erating activities and investment activities, for income of ¥51.8
2003 2004 2005 2006 2007 billion. Environmental Management (FY)
（Yen） Common stock price 3,000
2,500
2,000
1,500 Brand Communications
1,000
500
0 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2003 2004 2005 2006 2007 Financial Section
ANNUAL REPORT 2007 8 FY2007 Highlights by Business Categories
Business outline Office Solutions Color MFP Laser printers GELJET printers Office Solutions comprises Imaging Solutions and Network System Solutions. In addition to providing office equipment, information equip- ment products, maintenance services, and related consumables for improved productivity of the IPSiO GX5000 customer's workplace, Ricoh also provides sup- Network System Solutions port services that include IT services construc- tion, network environment operation, and user support. We are developing our business based on printing solutions with a focus on black and imagio MP C2500 IPSiO SP C411 white to color (B to C)tradition and total cost of ●Products ownership (TCO) proposals, and on document Imaging Solutions: Digital copiers, color copiers, multifunction printers (MFPs), printers, solutions that provide improved document work analog copiers, digital duplicators, facsimiles, diazo copiers, scanners, and other equip- flow. We are also aiming to enlarge our printing ment and related supplies, maintenance services, software, etc. business, targeting at the high end and low end Network System Solutions: Personal computers, servers, network devices, network software, application software, support and services, etc. as separate areas.
Industrial Products Business outline Semiconductors Thermal media Electronic component Thermal media manufacture and sales, optical equipment manufacture and sales, semiconduc- tor manufacture and sales, electronic component mm manufacture and sales, and measuring equip- ment manufacture and sales. Management re- 3-axis acceleration sensors Point cards and apparel tags Motherboards for incorporation sources are focused on businesses with prospects
●Products for growth. Thermal media, optical equipment, semiconductors, electronic components, measuring equipment, etc.
Other Business outline Digital cameras Optical discs Supplying optical discs and digital cameras, pro- viding leasing and logistic services, etc.
Caplio R6 Secure CD-Rs CriptDisc
●Products Optical discs, digital cameras, etc.
ANNUAL REPORT 2007 Review of Operations Customers
FY2007 overview New color MFP products garner high To OurTo Shareholders and marks world-wide. In Imaging Solutions, through Office Solutions sales (¥billions) such measures as enhancing our ●A Imaging Solution ●B Network System Solution On January 30, 2007, Afi cio C2500 was 199.1 (FY) named Pick of the Year in the multifunction product lineup and strengthen- A B 2005 ● 1,332.2 ● 1,531.4 copier category by Buyers Laboratory Inc. ing our solution sales structure, 190.5 2006 1,446.6 1,637.2 (BLI), a global offi ce automation equipment both black and white and color 194.3 evaluation agency. Highlights product sales increased in Ja- 2007 1,580.1 1,774.4 Also, in March, Afi cio MP C4500 eamed the pan and overseas. Sales of color 0 500 1,000 1,500 2,000 highest score in the MFP evaluation catego- MFPs rose signifi cantly world- ry of InfoWorld magazine, a well-known busi- wide thanks to the contribution of the new-generation color MFPs. As a ness magazine for the American IT industry. result, Imaging Solutions sales increased by 9.2% from the previous fi scal With continued high marks, Ricoh MFPs are year to ¥1,580.1 billion. drawing ever more attention. The increase in sales of software and IT services due to the expansion of
solution business. Sales of personal computers and servers increased slightly BusinessStrategy in the Japan market. As a result, Network System Solutions sales increased 2.0% from the previous fi scal year to ¥194.3 billion. Following on this, sales in Offi ce Solutions increased 8.4% over the previous year to ¥1,774.4 billion. InfoWorld magazine, February 12, 2007, Issue 7
FY2007 overview New thermal media plant established in Jiangsu Province, China Corporate Governance Semiconductor and thermal Industrial Products sales (¥billions) (FY) In order to strengthen production and sales media sales showed a solid 2005 119.4 of bar code labels and other high-value- 2006 120.6 increase. Sales of measuring added thermal media, whose Chinese equipment, which entered a 2007 133.3 0 50 100 150 market is growing rap- period of demand, also in- idly, Ricoh established CSR creased, and sales of electronic components were up over the previous year. Ricoh Thermal Media Optical equipment sales fell slightly due to stagnation of demand. As a re- (Wuxi) Co., Ltd. in Feb- Environmental Management sult, sales in Industrial Products increased 10.6% over the previous fi scal ruary 2006. year to ¥133.3 billion.
FY2007 overview GR DIGITAL wins the Reporters Club Prize
Other sales (¥billions)
Digital camera sales increased The GR DIGITAL compact digital camera won Brand Communications
(FY) both in Japan and overseas, 2005 156.5 the Camera Grand Prix 2006 Special Prize and leasing businesses showed 2006 151.3 sponsored by the Camera Reporters Club. a solid trend in Japan. As a re- 2007 161.0 This title was added to 0 50 100 150 sult, Other sales increased by the iF award 2006 and TIPA award 2006 previ- 6.4% from the previous fi scal year, to ¥161 billion. ously received. Financial Section
ANNUAL REPORT 2007 10 Office Solutions Business Strategy
To become an Office Solutions provider in the 21st century leading in global markets through the creation of customer value
President and CEO Shiro Kondo
Setting targets higher than ever before Growth areas in the printing
Document and executing a growth strategy for Volume Office high-end the global market. High Production printing The Ricoh Group has made every effort to move beyond being only an offi ce equipment manufacturer, and aims to Mid ＋ ＊ be an Offi ce Solutions provider that supports customers in MFP LP their efforts to improve offi ce productivity.
Low GEL GET printers In the 15th Mid-term Management Plan (from April 2005 Low-end MFP/LP Office low-end ＊ Laser Printers to March 2008), Ricoh set a growth strategy aimed at Market Business, Core System／ Office higher targets and has been executing that strategy while Personal Production aggressively allocating business resources to the core Offi ce Solution business. Ricoh has the strong advantage of Offi ce Solutions Business capability, such as a comprehensive prod- transition and total cost of ownership (TCO) reduction uct line, customer support through sales and service net- while expanding and strengthening the product lineup. works, ability to provide solutions, global operations, and Ricoh has also taken steps to enter the high-end production image processing and image processing fusion technologies. printing market and strengthen its GELJET printers and By fully utilizing these strengths, Ricoh can meet the evolv- low-end color laser printer, thus expanding both the range ing needs of today’s customers and further establish a solid and size of the business domain. business foundation. Furthermore, in order to move forward with the develop- In this context, printing has been identifi ed as an area that ment of solutions that improve document workfl ow for presents outstanding opportunities for growth, and a higher customers, Ricoh is strengthening its solutions sales struc- portion of business resources will be shifted to this area and ture and solutions platforms, and is steadily building up its strategies executed in this area. transactions with large corporate customers, particularly Ricoh continues to provide printing solutions for our cus- major global accounts. tomers as in the form of black and white to color (B to C)
11 ANNUAL REPORT 2007 Office Segment Growth Strategy Customers
Offi ce solution strategies in FY2007 OurTo Shareholders and
1 Black and white to color (BtoC) transition
Introducing new color MFPs and Main Color MFP lineup accelerating the shift to color Highlights
imagio Neo C600Pro By strengthening the lineup of color ma- （ Overseas name:Aficio 5560C） chines with space-saving designs and costs as low as those of black and white ma- imagio Neo C600 （ Overseas name:Aficio 3360C） chines, Ricoh is developing a strategy to imagio MP C3500 not merely replace black and white with （ Overseas name:Aficio MP C3500） color machines but rather a B to C tran- Color printing speed sition strategy to meet customers' color needs. For copiers/MFPs, the propor- imagio MP C4500 BusinessStrategy （ Overseas name:Aficio MP C4500） tion of color models continues to climb steadily. This fi scal year, Ricoh has fi lled imagio MP C3000 imagio MP C2500 （ Overseas name:Aficio MP C3000） out its lineup of color machines for offi ces （ Overseas name:Aficio MP C2500） by introducing to the market such models as the new generation color MFP models imagio Neo C200 （ Domestic only）
"Afi cio MP C4500/C3500," "Afi cio MP imagio MP C1500 C3000/C2500" and "Afi cio MP C615," （Overseas name:Aficio MP C615） Aficio 3224C （ Overseas only） and the "Afi cio SP C811" high-speed color Corporate Governance laser printer.
Monochrome printing speed Trend in shift to color ＊As of May 1, 2007
（％） Japan Overseas
60 CSR 52％ 50 44％ Aficio MP C4500/C3500 series implements energy-saving 40 36％ 31％ 34％ 32％ "color QSU" technology with IH fusing 28％ Environmental Management 30 29％ 20 17％ QSU (quick start up) is a unique Ricoh technology Fixing belt 10 Heating roller 6％ developed to save energy that enables starting up 0 03/3 04/3 05/3 06/3 07/3 quickly from Power Save mode. The "Afi cio MP ※ Copiers/MFPs hardware sales value base C4500/C3500" series incor- porates "color QSU" technol- IH coil Paper ogy that uses Induction Heat- Fixing roller Pressure roller Brand Communications ing (IH) fusing. Compared to Line of magnetic force A5 paper previous models, it provides B5 paper superior energy saving per-
formance by greatly short- Magnetic field ening the recovery time and control board reduces total energy costs Heating roller by about 50%. IH coil Ferrite roller Financial Section
ANNUAL REPORT 2007 12 2 Solutions
Providing higher value through Evolution of MFPs 4-tiered solution structure Digital generation-III
In order to meet customers' needs, such as Document Solution building document management systems 2003 to include both paper and electronic doc- 2001 ument, improving office work efficiency, Digital generation-II reducing costs, saving energy, and so on, 1998 IT function Intelligent MFP Printing 1995 Solution Ricoh defines its solution structure in four Digital generation-I Next tiered and is making efforts to reform its generation 1991 MFP Color copier business structure. As for the promoting 1987 Networking Network printing solutions, we have developed copier System ～1987 business on a global scale by proposing Multifunctional copier total cost of ownership (TCO) reduc- Digital copier tion solutions utilizing copiers/MFPs Stand- Analog copier Alone and printers together, and have earned Multifunctional copier Networked copier Operational process innovation a strong reputation for our worldwide support and services. In addition, in de- Ricoh document highway Concept GW architecture veloping document solutions to improve 4-tiered solutions structure customers’ workflow, we provide software Computerized Document Management System Storage, tool kits to link MFPs with mainframe retrieval, and computer systems, improve the support Fusing unique image and Distribution, utilization of Digitization of MFP storage, and documents information processing paper retrieval of structure of technology centers to propose Document technologies and documents documents attaining efficient, the optimum environment, and support Solutions Output of cutting-edge document Scanned data, Electronic data the introduction of those systems in Ja- management faxed data Printout Data Internet pan, the Americas and Europe. And we faxed continuously strengthen the sales struc- ture for solutions. Efficient Printing Flow Client 4 Achieving ideal printing 3 1 Ready Printing environments that match to print Establishing a document Printer the customer business 2 Solutions Out of toner solution division in the U.S. environment Printing an Printer other job In June 2006, Ricoh established the Printer DS&S＊ Division to provide global so-
lution services at Ricoh Corporation Providing equipment that Printer Digital camera Scanner (changed to Ricoh Americas Corporation Network gets a jump on the network era and uses from April 2007) in New Jersey. This System image and information division will provide leading-edge docu- processing technology
ment solutions using Ricoh hardware, Expansion of Business software and IT networks with consistent global quality. Providing leading Copier Printer Facsimile Stand-Alone products of copier, ＊ Document Solutions and Service printer and facsimile, Equipment which form the core of our business
Alliance with Adobe Systems Inc. "@Remote" remote management solutions
In May 2006, Ricoh and Adobe Systems Inc. (California, "@Remote" is a solution that determines the state of copi- U.S.A.) agreed to strengthen their cooperative relation- ers and printers on a network at a distance in real time and ship for document solutions and to carry out joint product provides accurate and speedy support and service. development and global marketing activities. This agree- This makes possible unified management of a global cor- ment makes it possible for Ricoh to include Adobe PDF™ poration’s branches and provides efficient operation of of- support in its products and to provide document solutions fice equipment through a complete support organization. with greater flexibility, security, and efficiency.
13 ANNUAL REPORT 2007 3 Entering into the production printing market
Full-scale entry into the market Production printing market strategy finally begun The production printing market is recog- Acquiring abilities for the production printing market
nized as a high growth market with fore- Corporate printing market Commercial printing market casts of expanding variable data printing Commercial printing General office Production printing market (VDP) and print on demand (POD), (offset printing) Customers and a shift away from demand for com- To OurTo Shareholders and mercial printing. The Ricoh Group is TDV downsizing New TDV creation TDV transition Decentralization of Basic Industrial Printing Offset TDV movement entering this fi eld in earnest and aims TDV Increasing by Integration of Basic Industrial Printing and POD
for top market share. This fi scal year, we Gaining TDV ＊1 Gaining TDV have taken various steps to strengthen our product capacity for the production printing market, including introducing InfoPrint Solutions Company Highlights the Afi cio SP9100Pro printer for main- ●Solutions, technology, and software frame systems and the Afi cio MP1350 Ricoh Printing Systems ●Customer base ●World-wide Acquiring high-speed MFP. ● High-end printing 24/7 service network technology customer base, network and Ricoh ● Strengthening the line-up for products for software ● Imaging products and software Production Printing (higher speed, reliability and print quality) Acquiring hardware and ● Manufacturing development ability ● Solution ● Service and support network BusinessStrategy Aficio MP 1350 Ricoh’s core competence ＊1 Total Document Volume
Development of new printing protocol for mainframe systems Joint venture with IBM
In January 2007, Ricoh and IBM Cor- In November 2006, Ricoh developed the unique Ricoh Host Print Protocol (RHPP) poration agreed to establish InfoPrint for securing high reliability in printing forms from mainframe systems. Solutions Company as a joint venture. By using the RHPP linked with the printers and form servers, du-
This entity will fuse Ricoh's strengths in Corporate Governance plicate and skipped pages are prevented and, in the unlikely event hardware and software development with of power being lost, printing IBM's strengths in service, software, and automatically resumes from IT solutions, to provide higher customer the correct page. value in the production printing market. Securing high reliability pro-
motes opening and down- CSR sizing the host printer and reduces total system operat-
ing costs. Environmental Management
Aficio SP9100 Pro-HG with RHPP
IBM Executive Vice President Nicholas Donofrio (left) Alliance with EFI (Electronics For Imaging, Inc.) and Ricoh President and CEO Masamitsu Sakurai (current chairman) (right) Brand Communications In April 2006, Ricoh and EFI, Inc. (California, U.S.A.) agreed to jointly conduct product development and global marketing activities in the fi eld of solutions for the print-on-demand market. In order to provide total workfl ow solutions with high- er value added for this expanding market, the two companies have set up a com- prehensive joint organization for production, sales, and even customer support. Financial Section
ANNUAL REPORT 2007 14 4 Strengthening low-end products
Expanding business area from office to business low-end With the advance of IT and with the ris- porates Ricoh's advanced GEL JET tech- ing popularity of home offi ces and of the nology for higher resolution and faster concept of ubiquity, the low-end business printing. printer market is expected to grow. By embracing higher value added through a "Aficio GX series" new generation of GEL JET models strengthened lineup, by shifting to color and to MFPs, and by making proposals Further strengthening the features of GEL JET printers, high print quality on ordi- optimized for customers' needs, Ricoh nary paper, high-speed printing, and high-speed duplex printing, the Afi cio GX intends to build and expand this market. 3050 (IPSiO GX 3000 in Japan) has been favor- This fi scal year, Ricoh is creating a new ably received as a business printer for easy color low-end business color printer market by printing in general offi ces, stores, ticket windows, launching such products as the "Afi cio SP and the like. It has received high marks, for ex- C411" color laser printer, which supports ample receiving the "Pick of the Year" from BLI of a wide range of uses from general offi ce the USA in the color ink jet printer category.
applications to commercial applications, Afi cio GX 3050 series and the “Afi cio GX series,” which incor-
5 Strengthening organization for targeting global major accounts
With worldwide manufacturing, sales, Solution case study 1 Unilever and support, the Ricoh Group boasts top share in the copier/MFP market in every With such well-known brands as Knorr, Hellmann's, Dove, Lipton, and Surf, Uni- region of the world. In April 2005, Ricoh lever is the largest consumer goods manufacturer in the world. Every day it sells established Ricoh Global Services, with 150 million items in 150 countries. In February 2004, Unilever selected the Ricoh branches in Europe, the Americas, Asia- Group's NRG (headquartered in the U.K.) as document technology partner for the Pacifi c, China, and Japan – and we are Unilever Europe 5-year plan. Ricoh was cited for its cutting-edge product lineup, focusing on document solution proposals superior solution proposal capacity, and core print service competitiveness. NRG aimed at global major companies. has placed a total of over 4000 units in Unilever's branch companies across Europe Ricoh Global Services thoroughly ana- and has reduced costs 30% compared to the previous system. lyzes a corporation's document manage- ment structure and costs and proposes Solution case study 2 Fortis Bank improvements that greatly enhance pro- ductivity, reduce costs, improve infor- Fortis Bank, one of Europe's largest fi nancial institutions, solicited solutions for en- mation security, and raise operational hancing its operating effi ciency so as to strengthen its business in the Benelux effi ciency. In addition to this proposal countries. The Ricoh Group's NRG Benelux (headquartered in Belgium) developed capability, Ricoh earns high marks for its a solution fi nely tuned to the needs of Fortis Bank, and was selected from among comprehensive strengths that include the 15 companies, later delivering 1628 units. The main challenges for this project were range of its product lineup and its sup- system integration among the 1400 branches in Belgium and the Netherlands and port organization. Ricoh is winning over security that at the touch of a button. With Ricoh's engineering support, NRG was major global clients one after another. able to complete installation of the new system.
Ricoh group brands around the world R
15 ANNUAL REPORT 2007 FY2007 Topics
Research and development
Semiconductor devices significantly boost print First automatic duplex printing by digital stencil speeds printer Customers
Ricoh Printing Systems has developed a device for production Tohoku Ricoh released the "Satelio DUO 8" in March 2007. OurTo Shareholders and printers that doubles resolution and raises print speed 30% or This printer provides picture quality equal to a laser printer and more. It quadruples the number of lasers drawing the image and incorporates a high-sensitivity master that reduces soiling at the attains high speed and high resolution. rear and newly developed one-drum double-sided platemaking to become the first digital stencil printer to automatically print
both sides at a high-speed 240 Highlights pages per minute (A4, 120 pages for duplex).
Structural diagram of newly developed one-drum duplex platemaking
Completion of plant for "PxP toner" Semiconductor business developing bases in overseas markets In October 2006, Ricoh completed construction of its PxP ton- er production plant at the Ricoh Numazu plant. This toner is a In April 2006, Ricoh established Ricoh Electronic Device Korea, BusinessStrategy unique Ricoh polymerized toner using polyester and features su- Ltd. a sales company; in July, Ricoh Electronics Devices Shanghai perior picture quality. Its low fixing temperature contributes to Co., Ltd., a design and development company; and in January 2007, Electronic Device Com- printer energy savings by the Ricoh Electronic pany Taipei Office, a sales office. Devices Korea, Ltd. printer. (REDK) Ricoh has put together an orga-
nization for serious development Ricoh Electronics Devices Shanghai in the growing Asian semicon- Co., Ltd. (REDDS) Electronic Devices Company Taipei Office
ductor market. (REDT) Corporate Governance
Management
Acquisition of European operation of Danka Ricoh rated No. 1 in IT strength CSR Business Systems Ricoh won first place overall in the "Corporate IT Strength" In October 2006, Ricoh's regional headquarters in Europe, Ricoh ranking of "Nikkei Computer" magazine. Based on surveys of 178 Europe B.V., concluded a contract to aqcuire the European of- listed and unlisted companies, Ricoh received the highest ratings Environmental Management fice automation equipment sales and service network of Danka for its IT investment, user support, and other comprehensive IT Business Systems PLC (Florida, U.S.A.). In February 2007, this strength. network was added to the Ricoh Group as Infotec Europe B.V. ＊ Details can be found in the October 2, 2006, edition of "Nikkei Computer."
High marks for environmental management Ricoh one of "world's top 100 sustainable companies" for third year in a row Brand Communications Ricoh won second prize in the "10th Environmental Management Survey" carried out by the Nippon Keizai (Nikkei) Newspaper In January 2007, Ricoh was selected one of Canada Corporate Company and announced in December 2006. Also, in the "Envi- Knights' "Global 100 Most Sustainable Corporations in the ronmental rankings" announced in April 2006 by the Tohmatsu World". The Global 100 evaluates 1800 global corporations on Evaluation and Certification Organization Co., Ltd. (TECO), their performance in three areas – the environment, society, and Ricoh received the top AAA ranking for the second year in a row. governance – and the caliber of their top management, long-term financial performance, etc. This was Ricoh’s third inclusion in as Financial Section many years.
ANNUAL REPORT 2007 16 New technologies
Optical devices support both Wireless USB technology for office Intelligent desk supports next-generation DVD formats knowledge creation support Ricoh is developing wireless USB commu- Ricoh has developed optical parts that can nication technology for copiers, printers, The newly developed "Interactive Station" play back optical signals for both next- etc. and is aiming to commercialize wire- is a digital display device with built-in pro- generation DVD formats, Blu-ray and less USB units. Ricoh aims to leverage its jector that allows you to write on the screen HD DVD. This lens makes it possible for unique technology as an advantage in the with a marker and that can then record a single player to play back media of both anticipated conversion of offices to wire- your writing digitally. Ricoh plans to seek formats. Ricoh aims plans to improve and less. out partners for commercialization and to commercialize this technology. carry out thorough user testing.
High-speed data transmission 480Mbps Development for insourcing Wireless USB Wireless connection Protocol High Base control frequency band section analog
Product under development
Principal awards
Several products selected as "Pick of the year" by BLI One Ricoh product after another was honored, including the Aficio MP3500 and MP7500 in the MFP category, the Aficio SP C411DN in the color laser printer category, "Color Printer Line of the Year", and the Priport HQ9000 in the digital printing press category.
2006 Best awards from U.S. evaluation organization BERTL Specifically, their evaluation of the "Aficio 3035" and other photocopiers and related products. Buyers Laboratory Inc. "Pick of the year"
"Aficio MP3000" ranked five stars by BERTL In July, 2006, Ricoh was awarded an unprecedented five stars in the BERTL rankings.
"imagio MP C1500" wins Energy Conservation Grand Prize In January 2007, Ricoh won the top prize at the "17th Energy Conservation Prizes" held by the Energy Conservation Center Foundation.
"Aficio MP C1500" wins the EPIF2006 Eco-Awards silver medal "imagio MP C1500" wins Energy Saving Grand Prize In October 2006, the Eco Products International Exposition 2006 was held in Singapore. Ricoh was in a category by itself as an office equipment manufacturer.
"No.1 Color Laser Printer in Customer Satisfaction Among Business Users" J.D. Power Asia Pacific 2006 Japan Printer Satisfaction StudySM. Study based on a total of 1,679 responses from users at offices with 30 or more employees. www.jdpower.co.jp
Best Java™ application award from Sun Microsystems In May 2006, Ricoh Europe B.V. was awarded the Duke Prize by Sun Microsystems of the United States. "Aficio MP C1500" wins Eco-Awards silver medal NRG Benelux wins Leopold Prize In May 2006, the Belgian Minister of the Economy presented the award to NRG Benelux President Michel Bosschere.
Ricoh Corporation, Brandweek Customer Loyalty Award silver medal This is a prestigious award given in the United States to companies with superior annual sales performance and customer satisfaction.
"Caplio R5" and "Caplio500 G wide" win iF award 2007 No. 1 in J.D. Power's customer satisfaction study German international design competition award for superior industrial design in Japan.
17 ANNUAL REPORT 2007 Corporate Governance
Basic thinking on corporate governance Corporate governance internal control system diagram The Ricoh Group, based on its corporate ide- als and the spirit of strict conformance with the General shareholders meeting
law, approaches corporate governance with the Customers Appointed/dismissed Appointed/dismissed Appointed/dismissed aim of securing management transparency and
Manager Judges the appropriateness of OurTo Shareholders and strengthening its competitiveness, and works accounting audits Board of Board of auditors Accounting auditor Nomination and Compensation Committee for sustainable growth and expanding corporate directors value. Ricoh sets its stakeholders as four groups Outside director Inside director – customers, shareholders, employees, and soci- ety – and make policies are made clear to each. Group management committee Operations Ricoh uses the auditor system and, by strength- Headquarters functions audits ening the board of directors and through the ex- Audit Office Highlights Finance and Accouting Division Accounting audits
ecutive officer system, Ricoh works to strength s s s CSR Division etc. top management and management execution. Furthermore, by appointing directors from out- ・Internal control system construction support side the company, Ricoh strives to secure trans- ・Internal audits parency and impartial decision making in top Operations audits management. The names, compensation, etc. of
Affiliated companies Affiliated companies Accounting audits directors and executive officers are studied and Business execution department Business execution department Business execution department
decided by a unique standing organ, the "Nom- BusinessStrategy ination and Compensation Committee."
Basic policy of internal control system ② Efforts are being made to improve business processes and construct a framework for standardized The Company made the following revisions regarding basic policy on construction of internal control internal control throughout the entire Ricoh Group, with the goal of “complying with laws, norms, systems at the Board of Directors’ Meeting held on April 25, 2007. and internal rules,” “improved of business effectiveness and efficiency,” “maintaining high reliability 1. System to ensure the efficient implementation of directors’ duties and compliance with of financial reporting,” and “preservation of assets,” including compliance to the section 404 of the laws and Articles of Incorporation Sarbanes-Oxley Act of 2002, financial product transaction laws, and other laws and regulations. The company promotes a sense of alertness in execution of management and execution of business, ③ For internal auditing, an internal auditing department shall perform fair and objective examination and in addition uses the following management structures in order to further improve its quality and and evaluation of how each division is executing its business based on legal compliance and ratio- speediness. nal criteria, and provide advice or recommendation for improvement. Corporate Governance ① Management transparency and fairness of decision-making are strengthened by the presence of ④ Ricoh has established a special department for strengthening and enhancing the functions of ①, ②, outside directors. and ③ above in a unified manner. Also, in order to construct and improve the internal control sys- ② As part of the strengthening of management oversight functions by the Board of Directors, the tem of the Group, an "Internal Control Committee" that meets periodically to deliberate and decide "Nomination and Compensation Committee,” a permanent organization composed of outside direc- on these matters has been established within the Group Management Committee (GMC). tors and resolutions concerning the regulation of the nomination, dismissal and compensation of 5. Systems to ensure correct business standards in the Ricoh group composed of the directors and executive officers, etc. company and its affiliates ③ The executive officer system, its division of duties clarified, is speeding up the decision-making Ricoh and each affiliate in the Ricoh Group shall devise a system that will ensure the adherence to cor- process through the attribution of authority to each business division. rect business standards to improve business performance and enhance the prosperity of each Group
④ The “Group Management Committee” (GMC) is a decision-making organization delegated by the company, while keeping mutual respect for their independence, as follows: CSR Board of Directors, and composed of executive officers who meet certain qualifications. The GMC ① The company's board of directors and the “Group Management Committee” (GMC) make decisions operates so as to accelerate consideration and decision-making from the perspective of the opti- and perform management oversight for the Ricoh Group as a whole. To ensure the efficacy of mum management of the entire Group, concerning proposals on the most appropriate strategies for such efforts, they establish management regulations concerning affiliated companies, and set up
direction of each business division and the entire Group, within the limits granted to it. relevant administrative organization in order to manage the Group. Environmental Management ⑤ The “Disclosure Committee” is an independent organization that assures the accuracy, timeliness, ② The “Ricoh group Standard” (RGS) represents a set of common rules to be followed by the entire and comprehensiveness of disclosure of corporate information, and it performs checks on the pro- Group. cess for the production of disclosed information. 6. Matters regarding employees whom auditors request to assist them in the performance 2. Systems related to the retention and management of information related to the imple- of their duties mentation of directors’ duties Internal Audit system shall be established to assist work duties through directives from auditors, and to Records and proposals related decisions by directors in the course of their duties are collated and man- select employees who shall assist the auditors in their work. aged in compliance with applicable laws, regulations and internal rules. Documents are kept so that 7. Matters related to the independence of auditors’ staff from directors described in No. they can be retrieved and produced in response to request from directors and corporate auditors. 6 above 3. Regulations and other structures regarding risk management for losses When an employee (as in No. 6 above) assists auditors in their work, he or she shall not be subject ① The occurrence of losses shall be proactively prevented based on regulations for risk manage- to order given by directors. In addition, decisions concerning personnel assessments or personnel ment. changes regarding said employees shall be made only after hearing the opinions of the auditors. Brand Communications ② Should losses nevertheless arise, efforts shall be made to minimize damage (loss) based on stan- 8. Systems to enable directors or employees to report to auditors, and other systems dards for initial reaction. related to reporting to auditors ③ In order to manage losses as a Group, comprehensively and in a unified fashion, a division respon- Directors or employees shall report to auditor matters concerning laws and regulations, as well as "im- sible for integrated management will be created that will thoroughly cover all aspects globally. portant matters decided by directors which affect the entire company," "the results of internal audits," 4. Systems to ensure appropriate compliance with laws, and Articles of Incorporation "the status of reporting via the internal reporting system," and "matters which auditors have sought concerning the performance of employee’s duties. report about." ① In order to thoroughly implement the "Ricoh Group CSR Charter”, which sets forth the principles 9. Systems established to ensure the efficacious performance of auditing responsibili- of corporate behavior with regard to CSR including compliance, and the “Ricoh Group Code of ties by auditors Conduct", which shows the general rules of conduct for Ricoh Group employees, the Special Auditors shall perform audits thoroughly by attending the board of directors meeting and man- Committee is in the process of setting up a "Hot Line" for reporting incidents and seeking advice, agement meetings, receiving reports on exercise of function from the directors and executive worldwide, and provides training. Every effort is being made to enhance compliance domestically officers, reviewing important resolution documents, and investigating the status of operations of Financial Section and overseas. division and group companies.
ANNUAL REPORT 2007 18 Corporate Social Responsibility (CSR)
Developing compliance and deserving trust
The Ricoh Group approaches corporate social Sustainable society responsibility activities with the aim to be "a
RicohGroup The most attractive Voluntary responsibilities company ety." As of fi scal 2007, Ricoh has made clear the to society Employees three directions of its corporate social responsi- Fundamental responsibilities bility approach, ① making compliance efforts, to society
Ensuring the trust Stakeholders
of society Communication Partner ② endeavors to create appeal, and ③ collabora- Compliance efforts companies Partner companies tion with partners, and is moving forward with ・Approach to earning trust Society PDCA theme-by-theme.
[Social contribution activities] ICHIMURA Nature Class munal living, learn autonomy, indepen- Supporting vocational training learns through experience of dence, collaboration and cooperation, and for young players in a football agriculture consideration. In fi scal 2007, 56 children team Based on its philosophy of "gaining the took part in the ICHIMURA Nature Ricoh Espana S.A. (RES), a sales subsid- strength to live from the land" through Class Kanto, in Kanagawa Prefecture. So iary, not only sponsors Ricoh Premia, a experience of agriculture, the ICHIMU- far, 243 children have taken part in all. football club in Barcelona, but also helps RA Nature Class operates as a non-profi t with education and vocational training organization in two locations, in Kanaga- for the young players in the team. Foot- wa and Saga Prefectures. Over the course ball is a national sport in Spain, but it is of eight months, class members learn diffi cult for young players who cannot many things about nature while growing become professional players to fi nd em- vegetables. For example, by cooking and ployment, and this has become a social eating produce they have grown them- issue. This project is the fi rst innovative selves, they cultivate the importance of attempt in Spain to address the issue, working hard, a feeling of gratitude, etc., and has been reported on many times in and from their joint activities and com- Harvesting burdock newspapers and on TV. The project has been running for a year, and about half of "Participating in the U.N. Global Compact" the players who participated in the proj- President (now chairman) Sakurai attends a discussion with U.N. Secretary-General Kofi Annan ect work now at RES. Intended for the corporate world, the Global Compact was launched in 1999 by United Nations Secretary-General Annan with nine principles＊ in the three fi elds of human rights, labor standards, and the environment. Ricoh joined in 2002, the second Japanese company to do so. In May 2006, Secretary-General Annan came to Japan and met with 25 executives from Japanese companies taking part in the Compact. Ricoh President Masamitsu Sakurai (now Chairman) attended and spoke about the Ricoh Group Corporate Social Responsibility Charter, the Ricoh Group Code of Conduct, and the promotion of CSR management. ＊In 2004, an anti-corruption principle was added to make 10 principles.
19 ANNUAL REPORT 2007 Sustainable Environmental Management
Enhancing sustainable environmental management to become an ever-growing corporation
The Ricoh Group will pursue both environmental conservation fi scal year 2000 levels by 2050. Based on this recognition, we have and profi t generation at an even higher level and enhance its sus- set mid-to long-term targets, and put into effect a specifi c envi- tainable environmental management. Through these efforts, the ronmental action plan accordingly. As for the prevention of global Customers
Group intends to contribute to achieving a sustainable society and warming, we recognize that this is also an important factor a cor- OurTo Shareholders and to become a corporation that continues growing. The Ricoh Group poration can continue developing, and in anticipation of an expan- describes its vision for an ideal society and global environment as sion in the scale of business, we have set a higher goal of reducing the “Three P’s Balance.” In its Extra-Long-Term Environmental total emissions by 12% by the end of fi scal 2010, compared with Vision the Group also expresses its recognition that advanced na- the goal for Japan of a 6% reduction set out in the Kyoto Protocol, tions need to reduce their environmental impact to one-eighth the and are promoting activities to be conducted by all employees.
How to Set Environmental Goals （％） Integrated Environmental Impact Reduction Goals Highlights 100 Setting goals using the back-casting method 90 Encouraging all employees to 2007 goal 15% reduction participate in environmental 80 Environmental 2010 2050 Ideal society activities 70 Action Plan for Long-Term Extra-Long-Term we should 2010 goal 20% reduction Fiscal 2005 Environmental Environmental pursue Three 60 and Thereafter Goals Vision P’s Balance 50 Technical innovation effect 40 30 Goals are set based on the Major All aspects of 2050 Extra-Long-Term direction and the Earth are 20 Environmental Vision goals well balanced. 10
Integrated environmental impact 0 2000 2007 2010 2020 2030 2040 2050 （FY） BusinessStrategy
Signature of joint declaration Ricoh included in SRI funds & Company (U.S.A.) and SAM Group concerning climate change and indexes＊ (Switzerland), for fi ve consecutive years. Ricoh agrees with and has signed the In Japan, Ricoh’s stocks are incorporated In addition, for the last four years, Ricoh joint declaration of GROCC＊ concern- in many eco funds and SRI funds. Also, has made the FTSE4 Good Global Index, ing climate change. In addition to pro- the Morningstar Socially Responsible In- published by FTSE Group, a joint venture tecting the global environment, this joint vestment Index has included Ricoh since between The Financial Times (U.K.) and declaration states that, from an economic the London Stock Exchange.
its establishment in 2003. In addition, Corporate Governance common sense standpoint, all govern- Ricoh has been a constituent member ＊As of May 1, 2007 ments, corporations, and civil societies of the Dow Jones Sustainability Indexes should take measures to aggressively re- (DJSI), which are provided by Dow Jones duce CO2 emissions.
＊ GROCC: Global Roundtable on Climate Change [Social contribution activities] CSR Domestic recycling business Project to restore tropical forests and orangutan habitats goes into the black Ricoh supports a project to restore tropical forests in Sabah on Borneo in Malaysia, Environmental Management The Ricoh Group positions resource the home of many wild animals, including orangutans. This is part of the "Kinabatan- conservation and recycling as a pillar gan - Corridor of Life" of the WWF, which restores forests, where in the past tropi- of environmental conservation activi- cal forests were drastically reduced by the expansion of plantations and excessive ties and is active in the recycled copier greenwood lumbering, and enlarges the habitat of wild animals threatened with ex- business, supplying products collected tinction. Together with the forest restoration, the livelihoods of nearby residents are from the fi eld to the market once again. secured through such means as eco Borneo island tropical forest transition diagram In fi scal 2006, the tours. The aim is to regenerate forests ●A Forest section ●B Non-forest section 1985 2005 where animals and humans can coex- Brand Communications number of recycled ●A ●A ist. Also, because many watersheds machines sold in Ja- ●B ●B pan came to around are wetlands and fl ood areas, where 10,000 and this put regeneration is usually diffi cult, the that business into reforestation know-how gained here the black for the can be put to use in other tropical ar- eas, so there are great expectations fi rst time since its Materials supplied by: WWF Malaysia globally for this project as a model. In the 1970s, tropical forests covered about 86% of Borneo Island. Financial Section inception in 1998. With the expansion of oil palm plantations, they now coverless than 50% of the island. imagio Neo 452RC
ANNUAL REPORT 2007 20 Brand Communications
TV commercials
Ricoh television commercials have been aired over 5,000 times in the Americas, mainly during Major League Baseball games. ●Stan and Jerry Series
■ Broadcast period: April-September 2006
Newspaper and magazine advertising
Some Ricoh ads that highlight Ricoh’s product lineup and diverse activities in the area of IT and the environment.
J a p a n The Americas
E u r o p e
Facilities and events sponsored
Ricoh Women's British Open Ricoh Arena (U.K.) World Cup Ski Jump Tournaments Ricoh is sponsoring the "Women's British Ricoh Arena, the home stadium of the Open," one of the four major ladies' golf tour- English Premier League's Coventry Foot- Since 1994, Ricoh has been the official naments in the world. ball Club, opened its doors in August sponsor of the FIS World Cup Ski Jump The tournament takes place 2005. Featuring meeting rooms, exhibi- tournament, an event in August 2007. This is the tion hall and hotel, this facility is steadily with an 80-year his- first time a woman’s golf growing into a Brit- tory. tournament is being held at ish landmark. St. Andrew’s, known as the "Home of Golf."
Berlin Marathon ATP Tournaments Ricoh Europe B.V. co-sponsored the Ricoh has been an official sponsor of events Berlin Marathon in September 2006, of the ATP (Association of Tennis Profes- with Ricoh banners flying along the sionals), which holds 64 tournaments in 30 course. countries, since 2005.
21 ANNUAL REPORT 2007 Financial Section Customers Management's Discussion and Analysis of Fiscal 2007 Results 23 To OurTo Shareholders and
Selected Financial Data 29
Consolidated Balance Sheets 31 Highlights Consolidated Statements of lncome 33
Consolidated Statements of Shareholders' Investment 34
Consolidated Statements of Cash Flows 35
Notes to Consolidated Financial Statements 36 BusinessStrategy
Management's Report on Internal Control Over Financial Reporting 64
Report of Independent Registered Public Accounting Firm 65
Corporate Social Responsibility 67 Corporate Governance
Ricoh's Global Network 69
Senior Management 70 CSR
Corporate Data 71 Environmental Management Brand Communications Financial Section
ANNUAL REPORT 2007 22 Management's Discussion and Analysis of Fiscal 2007 Results
Sales Income before Income Taxes Consolidated net sales of Ricoh Group for fiscal year 2007 (April 1, In the other (income) expenses, both interest expenses and income 2006 to March 31, 2007) increased by 8.4% to ¥2,068.9 billion($17,533 increased as a result of higher market interest rates as compared to the million) from the previous corresponding period. This marks the previous corresponding period. The foreign exchange gains in the thirteenth consecutive year-on-year revenue increase and the first time previous corresponding period was relatively higher. Consequently, the the Group achieved sales exceeding ¥2 trillion. During this period, the other (income) expenses decreased. average yen exchange rates were ¥117.02 against the U.S. dollar (down As a result, income from continuing operations before income taxes ¥3.76) and ¥150.08 against the euro (down ¥12.22). Sales would have increased by 14.2% from the previous corresponding period, to ¥174.5 increased by 5.2% if not for the effects of foreign currency fluctuations. billion($1,479 million). Sales in all the segments such as the Office Solutions, Industrial Products and Other increased. The increase in sales in the Office Solutions was due mainly to continuous growth in sales of digital plain Net Income paper copiers (PPCs), multifunctional printers (MFPs) and printers, The effective tax rate was the same level as previous corresponding mainly for color products. Sales of IT services also increased resulting period, 36.9% due to tax credits resulting from R&D expenses. from the expansion of the solutions business. As for Industrial Income from discontinued operations was ¥5.5 billion($47 million), Products, sales in semiconductors, electronic components and thermal net of tax. Income from discontinued operations consisted of the gain media businesses increased. Other areas experiencing increased its sales on the sale of the content delivery service operation and income from of financing business as well as digital cameras. As a result, domestic operations from the beginning of this fiscal year to the sale. The sale sales increased by 3.7% from the previous corresponding period, to amount of the content delivery service was ¥12.0 billion($102 million). ¥1,002.2 billion($8,494 million). Overseas sales also increased by As a result, net income from continuing operations increased by 11.8% 13.1% from the previous corresponding period, to ¥1,066.6 from the previous corresponding period, to ¥106.2 billion($900 billion($9,040 million). Both domestic and overseas sales exceeded ¥1 million). Net income from all business operations including trillion for the first time ever. discontinued business operations increased by 15.1% from the previous corresponding period, to ¥111.7 billion ($947 million). This marks the highest net income achieved for two consecutive years and the amount Operating Income exceeded ¥100.0 billion for the first time in the Ricoh's history. Gross profit increased by 8.5% from the previous corresponding period, The performance of the European office equipment sales and services to ¥862.4 billion($7,309 million). This increase was primarily due to operations acquired from Danka Business Systems PLC as of January the increased sales of value-added high-margin products such as MFPs 31, 2007 was included in Ricoh Group's financial statements for this in addition to ongoing cost management controls. Foreign currency fiscal year. fluctuations also served as a factor behind the profit increase. A year-end cash dividend of ¥15.00 per share was approved at the Ordinary Selling, general and administrative expenses increased by 6.4% from General Meeting of Shareholders held on June 27, 2007. Combined the previous corresponding period, to ¥688.0 billion($5,831 million). with the interim dividend of ¥13.00 per share, the total dividend for the R&D expenses remained high level due to its focus on developing new fiscal year ended March 31, 2007 was ¥28.00($0.24) per share. products and the development of core operating systems. Additionally due to our accelerated efforts in implementing measures for enhancing our capabilities to provide solutions and expanding business spheres, Segment Information operating expenses increased. Ricoh did start to see the positive effect of its structural reform initiatives such as enhancing the efficiency of the CONSOLIDATED SALES BY PRODUCT LINE core operations. Consequently, the percentage of selling, general and 1. Office Solutions administrative expenses against total sales decreased by 0.5 percentage Net sales in the Office Solutions segment which consists of Imaging points from the previous corresponding period, to 33.3%. R&D expenses Solutions and Network System Solutions increased by 8.4% from the increased by ¥4.5 billion from the previous corresponding period, to previous corresponding period, to ¥1,774.4 billion ($15,038 million) ¥114.9 billion ($974 million, 5.6% of total sales). despite stiff competition against other manufacturers regarding the As a result, operating income increased by 17.4% from the previous color equipment and solutions business. The breakdown of sales for corresponding period, to ¥174.3 billion ($1,478 million). Imaging Solutions and Network System Solutions is as shown below.
23 ANNUAL REPORT 2007 The sales would have increased by 4.9% excluding the effects of foreign solutions business. The sales of personal computers and PC servers currency fluctuations. increased slightly in Japan. As a result, sales in this category increased Customers Our Shareholders and Our Shareholders
by 2.0% from the previous corresponding period, to ¥194.3 To Imaging Solutions billion($1,647 million). Sales of PPCs, MFPs and laser and GELJET printers, mainly color 2. Industrial Products equipment, increased both in Japan and overseas due to its expanding Net sales in the Industrial Products segment increased by 10.6% from product lines and enhanced solution sales structures. The new color the previous corresponding period, to ¥133.3 billion($1,130 million). MFP products launched as a standard new-generation color model
Sales in semiconductors, thermal media, electronic components as well Highlights played a large role in this sales increase. Overall sales increased by 9.2% as measuring equipments increased. from the previous corresponding period, to ¥1,580.1 billion($13,391 million). 3. Other The sales would have increased by 5.3% excluding the effects of foreign Net sales in this category increased by 6.4% from the previous currency fluctuations. corresponding period, to ¥161.0 billion($1,365 million). Sales of digital cameras in both Japan and the overseas markets increased in addition Network System Solutions to good performance of financing services in Japan. The increase in sales of IT services was due to the expansion of Business Strategy SALES BY PRODUCT LINE 2006 2007 Percentage of Percentage of Thousands of Millions of Yen net sales Millions of Yen net sales U.S.Dollars Office Solutions Imaging Solutions ¥1,446,635 75.8% ¥1,580,155 76.4% $13,391,144 Network System Solutions 190,593 10.0 194,312 9.4 1,646,712 Industrial Products 120,636 6.3 133,387 6.4 1,130,398 Corporate Governance Other 151,374 7.9 161,071 7.8 1,365,009 Total ¥1,909,238 100.0% ¥2,068,925 100.0% $17,533,263 * As a result of the sale of a business, the operating results from the discontinued operations have been reclassified in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". CSR CONSOLIDATED SALES BY GEOGRAPHIC AREA economy. The Office Solutions segment focused on strengthening sales structures and expanding product lines in order to provide the best 1. Japan solutions to meet the diverse range of customer needs for color, Management Environmental While the Japanese economy was on the upswing, consumers' spending networking and high-speed products. As a result, sales of PPCs, MFPs remained flat. In this market circumstances, Ricoh launched its new and laser and GELJET printers exceeded the last fiscal year's level in products and offered a wide range of solutions in an effort to cultivate a both color and black/white product categories, bringing overall sales in growing customers' needs for solutions and color products in the office the Office Solutions segment up 10.1% over sales for the previous solutions market. This effort resulted in a significant sales increase in corresponding period. Sales in the Industrial Products segment also Brand Strategy color MFPs and color printers and increase in sales of IT services with increased due to the favorable performance of the electronic component the previous corresponding period. In the Industrial Products, sales in business. These factors combined resulted in a 10.1% increase in the thermal media, semiconductors, electronic components and measuring sales in the Americas. The increase in sales in this area would have equipments increased. Sales in the Other increased due to the favorable increased by 6.5% excluding the effects of foreign currency fluctuations. performance of financing business as well as digital cameras. Overall sales in Japan increased by 3.7% from the previous corresponding 3. Europe period. As the European economy remaining on a steady footing, the Office Solutions segment proceeded with strengthening sales structures and Financial Section 2. The Americas expanding product lines in order to provide the best solutions to meet a The slump in the US housing market has precipitated a decline in the diverse range of customers' needs. As a result, sales of PPCs, MFPs and
ANNUAL REPORT 2007 24 laser and GELJET printers exceeded last year's level in both color and experienced economic evolution, with the Chinese economic black/white product categories, bringing overall sales in the Office continuous rapid growth despite a slight slowdown in some areas. Solutions segment up 16.3% over the previous corresponding period. Against this backdrop, the Office Solutions segment achieved higher Sales in the Industrial Products also increased due to the favorable sales of PPCs, MFPs and laser and GELJET printers, largely for color performance of the thermal media business. These factors all resulted products, in comparison with the previous corresponding period due to in a 16.6% increase in sales in Europe. The increase in sales in this area the increasing demand for color products. Sales in the Industrial would have increased by 7.2% excluding the effects of foreign currency Products segment also increased due to the favorable performance of fluctuations. the semiconductor business. These factors all resulted in a 10.1% increase in overall sales in this area. The sales increase in this area 4. Other would have increased by 5.0% excluding the effects of foreign currency Other including China, other Asian countries and Oceania generally fluctuations.
SALES BY GEOGRAPHIC AREA 2006 2007 Percentage of Percentage of Thousands of Millions of Yen net sales Millions of Yen net sales U.S.Dollars Japan ¥ 966,224 50.6% ¥ 1,002,251 48.4% $8,493,653 The Americas 387,412 20.3 426,453 20.6 3,614,008 Europe 434,800 22.8 507,158 24.5 4,297,949 Other 120,802 6.3 133,063 6.5 1,127,653 Total ¥1,909,238 100.0% ¥2,068,925 100.0% $17,533,263 * As a result of the sale of a business, the operating results from the discontinued operations have been reclassified in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
Financial Position Cash Flows In assets, trade receivables, inventories and finance receivables Net cash provided by operating activities decreased by ¥6.1 billion from increased along with the expansion of business from the end of the the previous corresponding period, to ¥167.2 billion($1,418 million). previous period. Cash and cash equivalents securities temporarily While net income and depreciation and amortization increased, trade increased at a high level at the end of this period in preparation for the receivables and finance receivables increased due to the business joint venture company to be commenced with IBM Corporation. expansion. Investments and other assets increased due to the increase in goodwill Net cash used in investing activities decreased by ¥4.6 billion from the resulted from the acquisition of the European operations acquired from previous corresponding period, to ¥115.4 billion($978 million), due Danka Business Systems PLC. As a result, total assets increased by primarily to the decrease in capital investments. Net cash used in ¥202.2 billion to ¥2,243.4 billion($19,012 million). investing activities included the acquisition of new subsidiaries from As for liabilities, trade payables and other current liabilities increased Danka Business Systems PLC as well as the proceeds from the sale of from the end of the previous period. Despite our effort to reduce interest- discontinued operations. bearing debt through the enhancement of cash management in Japan, As a result, free cash flow generated by operating activities and the Americas and Europe, the financing for business investments investment activities decreased by ¥1.5 billion from the previous exceeded the reduction. As a result, total liabilities increased by ¥87.5 corresponding period, to ¥51.8 billion($440 million). billion to ¥1,115.6 billion($9,454 million). While net cash used in financing activities was ¥59.9 billion in the In shareholders' investment, there was no major change in common previous corresponding period, net cash provided from financing stock or additional paid-in capital. Accumulated other comprehensive activities was ¥9.2 billion($79 million). The increase in net cash was income increased due to the increase in cumulative translation due mainly to the proceeds from issuance of convertible bonds (¥55.2 adjustments. As a result, total shareholders' investment increased by billion, issued on December 7, 2006). ¥110.6 billion to ¥1,070.9 billion($9,076 million) due to the increase in As a result of the above, the ending balance of cash and cash retained earnings resulting from earning profit. equivalents increased by ¥68.6 billion from the end of the previous corresponding period, to ¥255.7 billion($2,167 million).
25 ANNUAL REPORT 2007 on 1.48 Loans on 1.48 Loans ovril od - Convertible Bonds ovril od - Convertible Bonds 24,000 24,000 od 1.32% INTEREST RATE SWAPS T 1.32% Bonds T Bonds No. 133fairvalueadjustment) (Excluding CapitalLeaseObligationsandSFAS LONG-TERM INDEBTEDNESS maintain orenhance itscompetitivenessintheindustry. Ricoh MFPs andlaserGELJETprinters, andmanufacturingfacilitiesto expenditures towardsdigitalandnetworking equipment,suchasPPCs, respectively. Ricohdirectsasignificantportionofitscapital ¥84.6 billion,¥102.0billionand¥85.8 billion($727million), Ricoh’s capitalexpendituresforfiscalyears2005,2006and2007were Capital Expenditures otal otal oinlaonsAeaeAeae21 n Fair 2013and Fair 2013and Average Average Notional amounts Average Average Notional amounts 45 45 US$ 190 US$ 190 ¥ 90,000 ¥ 90,000 Mlin)Tp fsa eev aepyrt oa 0820 0021 02teefe Value thereafter 2012 2011 2010 2009 Value 2008 thereafter Total 2012 payrate 2011 receiverate 2010 Typeofswap 2009 (Millions) 2008 Total payrate receiverate Typeofswap (Millions) Receive floating/Payfixed Receive fixed/Payfloating Receive floating/Payfixed Receive floating/Payfixed Receive fixed/Payfloating Receive floating/Payfixed Receive fixed/Payfixed Receive fixed/Payfixed .4 0.95% 0.64% 5.90 4.64% 6.00 0.61 5.62% 0.95% 1.92 0.64% .05.90 4.64% 6.00 0.61 5.62% 1.92 a aeTtl20 0921 0121 hratrValue thereafter 2012 2011 2010 2009 Value 2008 thereafter 2012 Total 2011 pay rate 2010 2009 2008 Total pay rate vrg 03adFair 2013and Fair and 2013 Average Average $2,727,415 $ 550,839 1,708,305 $762,712 ¥321,835 ¥ 64,999 $190,085 ¥ 22,430 ¥ 90,000 468,271 201,580 203,390 55,256 45,017 24,000 5,312 $ 7528$5,5 5254$8,9 5294$2 $2,669,610 $127 $562,924 $182,992 $592,534 $653,551 $735,288 000¥500 500¥2,0 -¥ ¥ 1 ¥ - ¥- ¥20,000 ¥15,000 ¥45,000 ¥ 10,000 ¥ - ¥ - ¥ 22,430 ¥ - ¥ - ¥ - ¥ 227 ¥ ¥- ¥- ¥- 22,430 ¥ ¥- - ¥ -$ 1005$ -$1,924 $- - $ $- $190,085 $- $ - 5,4 4,8 2,4 8249,5 2 1,698,846 127 94,653 98,254 423,042 441,686 650,542 ¥315,014 ¥63,900 ¥15 ¥ - ¥66,425 ¥21,593 - ¥69,919 ¥ ¥77,119 9,999 ¥ ¥86,764 ¥20,000 ¥25,000 ¥10,000 8,4 3136$2,1 1942$ -$ $ 8 $ - - $ $169,492 $127,119 $381,356 $84,746 6745,1 9991,9 1191 200,464 15 11,169 11,594 49,919 52,119 76,764 507-----51 - - - - - 45,017 476$1,6 1942$8,3 541,525 $ - $ - $ 84,737 $ $169,492 $211,864 84,746 ,1 6 - - - - - 5,312 media. equipment withnewengines,toners, semiconductorsandthermal investments inmanufacturingfacilities ofdigitalandnetworking to approximately¥90.0billion($763million),principallyfor: projects thatforfiscalyear2008,itscapitalexpenditureswillamount ------087-8,4 777-4,381 - 67,797 84,746 - 50,847 ,0 000800-517 - 8,000 10,000 - 6,000 Thousand ofU.S.Dollars Thousand ofU.S.Dollars Millions ofYen Millions ofYen Expected maturitydate Expected maturitydate Expected maturitydate Expected maturitydate -- -- ANNUAL REPORT2007 6,7 429,237 - 468,271 526-50,650 - 55,256 26
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers Key Financial Ratios risk exposure at March 31,2007. In the normal course of business, We have provided the following ratios to facilitate analysis of the Ricoh also faces risks that are either non-financial or nonquantifiable. Company's operations for fiscal years 2005, 2006, and 2007. Such risks principally include credit risk and legal risk, and are not represented in the tables. 2005 2006 2007 Return on sales 4.6% 5.1% 5.4% FOREIGN CURRENCY RISK Return on shareholders’ In the ordinary course of business, Ricoh uses foreign exchange forward investment 10.0% 10.6% 11.0% contracts to manage the effects of foreign currency exchange risk on Current ratio 1.53 1.53 1.63 monetary assets and liabilities denominated in foreign currencies. The Debt-to-equity ratio contracts with respect to the operating activities generally have (interest-bearing debt to maturities of less than six months, while the contracts with respect to shareholders’ investment) 0.48 0.40 0.39 the financing activities have the same maturities as the underlying Interest coverage 28.5 28.9 24.5 assets and liabilities. * As a result of the sale of a business, the operating results from the discontinued operations The table provides information about Ricoh's material derivative have been reclassified in accordance with Statement of Financial Accounting Standards financial instruments that are sensitive to foreign currency exchange ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". rates. The table relating to foreign exchange forward contracts presents the notional amounts, weighted average exchange rates and estimated fair value. These notional amounts generally are used to calculate the Market Risk contractual payments to be exchanged under the contracts.
MARKET RISK EXPOSURE INTEREST RATE RISK Ricoh is exposed to market risks primarily from changes in foreign In the ordinary course of business, Ricoh enters into interest rate swap currency exchange rates and interest rates, which affect outstanding agreements to reduce interest rate risk and to modify the interest rate debt and certain assets and liabilities denominated in foreign characteristics of its outstanding debt. These agreements primarily currencies. To a lesser extent, Ricoh is also exposed to equity price risk. involve the exchange of fixed and floating rate interest payments over In order to manage these risks that arise in the normal course of the life of the agreement without the exchange of the underlying business, Ricoh enters into various hedging transactions pursuant to its principal amounts. policies and procedures covering such areas as counterparty exposure The table provides information about Ricoh's major derivative and and hedging practices. Ricoh does not hold or issue derivative other financial instruments that are sensitive to changes in interest financial instruments for trading purposes or to generate income. rates, including interest rate swaps and debt obligations. For debt Ricoh regularly assesses these market risks based on the policies and obligations, the table presents principal cash flows by expected maturity procedures established to protect against adverse effects of these risks date, related weighted average interest rates and estimated fair value. and other potential exposures, primarily by reference to the market For interest rate swaps, the table presents notional amounts by expected value of the financial instruments. As a result of the latest assessment, maturity date, weighted average interest rates and estimated fair value. Ricoh does not anticipate any material losses in these areas for fiscal Notional amounts are generally used to calculate the contractual year 2007, and there are no material quantitative changes in market payments to be exchanged under the contract.
FOREIGN EXCHANGE FORWARD CONTRACTS Millions of Yen Thousand of U.S. Dollars Average contractual Contract Estimated Contract Estimated rates amounts fair value amounts fair value US$/¥ 116.22 ¥10,344 ¥ 128 $87,661 $1,085 EUR/¥ 155.54 8,710 (76) 73,814 (644) US$/EUR 0.75 7,806 (71) 66,153 (602)
27 ANNUAL REPORT 2007 Marketable securitiesconsistofadiversifiedpoolequitysecurities. subject toequitypriceriskarisingfromchangesintheirmarketprices. Ricoh hasarelativelysmallportionofmarketablesecuritieswhichare EQUITY PRICERISK material creditlossesonitsfinancialinstruments. concentration ofcreditrisk.Therefore,Ricohdoesnotexpecttoincur having creditratingssatisfactorytoRicohminimizethe instrument contractswithadiversifiedgroupoffinancialinstitutions obligations ofRicoh.ItisRicoh'spolicytoonlyenterintofinancial to theamountsbywhichcounterparties'obligationsexceed to meetthetermsoffinancialinstrumentcontractsisgenerallylimited however, creditriskarisingfromthenonperformanceofcounterparties nonperformance bycounterpartiestothefinancialinstrument; Ricoh isalsoexposedtocredit-relatedlossesintheeventof CREDIT RISK te 4 4 ,5 2,059 2,059 243 543,305 243 417,466 64,110 49,261 Other Equity Securities T Debt Securities securities asofMarch31,2007. available-for-sale securitiesandthefairvaluesformarketrisksensitive The tableprovidesinformationaboutcontractualmaturitiesfor investments. Ricoh's overallinvestmentpolicyistoinvestinhighly-liquid,lowrisk tl¥560¥059$471,864$597,788 ¥70,539 ¥55,680 otal u ihi n er¥7 16$,9 $1,492 $1,492 ¥176 ¥176 Due afteroneyear Due withinoneyear hog ieyas6006005,4 50,932 50,847 6,010 6,000 through fiveyears otVleCs Value Cost Value Cost Millions ofYen Fair ANNUAL REPORT2007 huado U.S.Dollars Thousand of 28
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers Selected Financial Data
Ricoh Company, Ltd. and Consolidated Subsidiaries For the Years Ended March 31 1998 1999 2000 For the Year: Net sales ¥1,403,348 ¥1,425,999 ¥1,447,157 Cost of sales 838,440 857,423 867,148 Selling, general and administrative expenses 475,201 495,029 491,088 Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates 68,428 53,054 70,393 Provision for income taxes 40,210 24,555 28,363 Income from continuing operations 30,131 30,655 41,928 Income from discontinued operations, net of tax - - - Net income 30,131 30,655 41,928
Capital expenditures 94,117 70,469 58,356 Depreciation and amortization 61,971 67,456 61,946
Per Share Data (in yen and dollars): Net income Basic ¥ 44.97 ¥ 44.33 ¥ 60.61 Diluted 41.35 40.94 56.06 Cash dividends paid 11.50 11.00 11.00
At Year-End: Total assets ¥1,606,496 ¥1,628,017 ¥1,543,320 Long-term indebtedness 295,536 344,580 307,962 Shareholders' investment 475,005 487,459 541,506 Working capital 149,783 284,765 297,502
Return on sales 2.1% 2.1% 2.9% Return on shareholders' investment 6.7 6.4 8.1
Common Stock Price Range (in yen and dollars): High ¥ 1,900 ¥ 1,634 ¥ 2,525 Low 1,270 969 1,078
* As a result of the sale of a business, the operating results from the discontinued operations have been reclassified in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" from fiscal year 2003 to 2006.
29 ANNUAL REPORT 2007 Thousand of Million of Yen U.S. Dollars Customers
2001 2002 2003 2004 2005 2006 2007 2007 and Our Shareholders To
¥1,538,262 ¥1,672,340 ¥1,732,012 ¥1,773,306 ¥1,807,406 ¥1,909,238 ¥2,068,925 $17,533,263 924,893 972,394 991,911 1,013,249 1,058,232 1,114,238 1,206,519 10,224,737 508,264 570,251 610,380 614,652 618,065 646,416 688,026 5,830,729 97,765 113,950 119,708 138,472 130,983 152,766 174,519 1,478,975 43,512 51,147 49,089 54,768 48,840 56,165 64,326 545,136 53,228 61,614 71,648 89,049 80,537 95,022 106,224 900,203 Highlights --865 2,717 2,606 2,035 5,500 46,610 53,228 61,614 72,513 91,766 83,143 97,057 111,724 946,814
73,329 75,676 73,948 75,504 84,699 102,049 85,800 727,119 62,142 73,782 76,476 76,897 78,120 84,089 89,632 759,593
¥ 76.85 ¥ 88.27 ¥ 99.79 ¥ 123.63 ¥ 112.64 ¥ 132.33 ¥ 153.10 $ 1.30 Business Strategy 71.02 82.46 96.81 123.63 112.64 132.33 151.89 1.29 11.50 12.00 14.00 15.00 20.00 22.00 25.00 0.21
¥1,704,791 ¥1,832,928 ¥1,884,922 ¥1,852,793 ¥1,953,669 ¥2,041,183 ¥ 2,243,406 $19,011,915 217,743 332,995 345,902 281,570 226,567 195,626 236,801 2,006,788 556,728 633,020 657,514 795,131 862,998 960,245 1,070,913 9,075,534 121,446 323,168 372,770 418,511 358,233 359,515 464,480 3,936,271 Corporate Governance
3.5% 3.7% 4.2% 5.2% 4.6% 5.1% 5.4% – 9.7 10.4 11.2 12.6 10.0 10.6 11.0 –
¥ 2,495 ¥ 2,735 ¥ 2,470 ¥ 2,365 ¥ 2,345 ¥ 2,360 ¥ 2,775 $ 23.52 CSR 1,627 1,563 1,637 1,607 1,782 1,646 1,991 16.87 Environmental Management Environmental Brand Strategy Financial Section
ANNUAL REPORT 2007 30 Consolidated Balance Sheets
Ricoh Company, Ltd. and Consolidated Subsidiaries March 31, 2006 and 2007 Thousands of Millions of Yen U.S. Dollars ASSETS 2006 2007 2007 Current assets: Cash and cash equivalents ¥ 187,055 ¥ 255,737 $ 2,167,263 Time deposits 1,470 1,417 12,008 Marketable securities 162 177 1,500 Trade receivables- Notes 75,678 66,474 563,339 Accounts 391,972 450,231 3,815,517 Less- Allowance for doubtful receivables (16,031) (16,555) (140,297) Current maturities of long-term finance receivables, net 178,882 193,087 1,636,331 Inventories- Finished goods 104,218 113,379 960,839 Work in process and raw materials 65,027 70,975 601,483 Deferred income taxes and other 55,110 65,170 552,288 Total current assets 1,043,543 1,200,092 10,170,271
Property, plant and equipment, at cost: Land 46,721 47,007 398,364 Buildings 217,302 227,900 1,931,356 Machinery and equipment 622,038 636,577 5,394,720 Construction in progress 11,541 12,512 106,034 Total 897,602 923,996 7,830,475 Less- Accumulated depreciation (629,359) (659,328) (5,587,525) Net property, plant and equipment 268,243 264,668 2,242,949
Investments and other assets: Long-term finance receivables, net 415,435 435,874 3,693,847 Investment securities 36,419 74,836 634,203 Investments in and advances to affiliates 52,028 15,608 132,271 Goodwill 51,934 72,048 610,576 Other intangible assets 79,175 81,925 694,280 Lease deposits and other 94,406 98,355 833,517 Total investments and other assets 729,397 778,646 6,598,695 Total ¥ 2,041,183 ¥ 2,243,406 $ 19,011,915 The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
31 ANNUAL REPORT 2007 Thousands of Customers
Millions of Yen U.S. Dollars and Our Shareholders To LIABILITIES AND SHAREHOLDERS’ INVESTMENT 2006 2007 2007 Current liabilities: Short-term borrowings ¥ 82,520 ¥ 91,673 $ 776,890 Current maturities of long-term indebtedness 103,131 87,174 738,763 Trade payables- Notes 25,591 25,000 211,864 Accounts 313,561 342,211 2,900,093 Highlights Accrued income taxes 40,936 46,194 391,475 Accrued expenses and other 118,289 143,360 1,214,915 Total current liabilities 684,028 735,612 6,234,000
Long-term liabilities: Long-term indebtedness 195,626 236,801 2,006,788 Accrued pension and severance costs 97,020 99,028 839,220 Business Strategy Deferred income taxes 51,374 44,183 374,432 Total long-term liabilities 344,020 380,012 3,220,441
Minority interests 52,890 56,869 481,941
Commitments and contingent liabilities (Note 17) Corporate Governance
Shareholders’ investment: Common stock; Authorized – 1,500,000,000 shares in 2006 and 2007 Issued and outstanding - 744,912,078 shares and 729,552,274 shares in 2006 and 744,912,078 shares and 729,987,673 shares in 2007 135,364 135,364 1,147,153 CSR Additional paid-in capital 186,450 186,454 1,580,119 Retained earnings 665,394 752,398 6,376,254
Accumulated other comprehensive income 4,099 26,998 228,797 Management Environmental Treasury stock at cost; 15,359,804 shares in 2006 and 14,924,405 shares in 2007 (31,062) (30,301) (256,788) Total shareholders’ investment 960,245 1,070,913 9,075,534 Total ¥ 2,041,183 ¥ 2,243,406 $ 19,011,915 Brand Strategy Financial Section
ANNUAL REPORT 2007 32 Consolidated Statements of Income
Ricoh Company, Ltd. and Consolidated Subsidiaries Thousands of For the Years Ended March 31, 2005, 2006 and 2007 Millions of Yen U.S. Dollars 2005 2006 2007 2007 Net sales: Products ¥ 1,067,736 ¥ 1,108,746 ¥1,189,548 $10,080,915 Post sales and rentals 627,991 693,138 768,965 6,516,653 Other revenue 111,679 107,354 110,412 935,695 Total 1,807,406 1,909,238 2,068,925 17,533,263 Cost of sales: Products 713,057 738,962 783,681 6,641,364 Post sales and rentals 259,591 293,559 335,444 2,842,746 Other revenue 85,584 81,717 87,394 740,627 Total 1,058,232 1,114,238 1,206,519 10,224,737 Gross profit 749,174 795,000 862,406 7,308,525 Selling, general and administrative expenses 618,065 646,416 688,026 5,830,729 Operating income 131,109 148,584 174,380 1,477,797 Other (income) expenses: Interest and dividend income (2,242) (2,896) (5,501) (46,619) Interest expense 4,686 5,244 7,350 62,288 Foreign currency exchange (gain) loss, net (1,547) (3,748) 1,199 10,161 Other, net (771) (2,782) (3,187) (27,008) Total 126 (4,182) (139) (1,178) Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates 130,983 152,766 174,519 1,478,975 Provision for income taxes: Current 39,279 60,857 66,523 563,754 Deferred 9,561 (4,692) (2,197) (18,619) Total 48,840 56,165 64,326 545,136 Income from continuing operations before minority interests and equity in earnings of affiliates 82,143 96,601 110,193 933,839 Minority interests 4,726 4,185 5,508 46,678 Equity in earnings of affiliates 3,120 2,606 1,539 13,042 Income from continuing operations 80,537 95,022 106,224 900,203 Income from discontinued operations, net of tax 2,606 2,035 5,500 46,610 Net income ¥ 83,143 ¥ 97,057 ¥ 111,724 $ 946,814
Yen U.S. Dollars Per share of common stock: 2005 2006 2007 2007 Basic: Income from continuing operations ¥ 109.11 ¥ 129.56 ¥ 145.56 $ 1.23 Income from discontinued operations, net of tax 3.53 2.77 7.54 0.06 Net income 112.64 132.33 153.10 1.30 Diluted: Income from continuing operations ¥ 109.11 ¥ 129.56 ¥ 144.41 $ 1.22 Income from discontinued operations, net of tax 3.53 2.77 7.48 0.06 Net income 112.64 132.33 151.89 1.29 Cash dividends paid per share ¥ 20.00 ¥ 22.00 ¥ 25.00 $ 0.21
Per American Depositary Share, each representing 5 shares of common stock: Basic: Income from continuing operations ¥ 545.55 ¥ 647.80 ¥ 727.80 $ 6.17 Income from discontinued operations, net of tax 17.65 13.85 37.70 0.32 Net income 563.20 661.65 765.50 6.49 Diluted: Income from continuing operations ¥ 545.55 ¥ 647.80 ¥ 722.05 $ 6.12 Income from discontinued operations, net of tax 17.65 13.85 37.40 0.32 Net income 563.20 661.65 759.45 6.44 Cash dividends paid per share ¥ 100.00 ¥ 110.00 ¥ 125.00 $ 1.06 The accompanying notes to consolidated financial statements are an integral part of these statements.
33 ANNUAL REPORT 2007 Consolidated Statements of Shareholders’ Investment
Millions of Yen Ricoh Company, Ltd. and Consolidated Subsidiaries Common Additional Retained Accumulated other Treasury Total shareholders’ For the Years Ended March 31, 2005, 2006 and 2007 stock paid-in earnings comprehensive stock investments Customers
capital income (loss) and Our Shareholders Balance at March 31, 2004 ¥ 135,364 ¥ 186,599 ¥ 515,372 ¥（30,272） ¥（11,932） ¥ 795,131 To Adjustment for change in fiscal year end of consolidated subsidiaries － － 777 （1,665）－ （888） Balance at April 1, 2004,as adjusted 135,364 186,599 516,149 （31,937）（11,932） 794,243 Gain (loss) on disposal of treasury stock （48）（48） Dividends declared and approved （14,777）（14,777） Comprehensive income Net income 83,143 83,143 Highlights Net unrealized holding gains on available-for-sale securities 765 765 Minimum pension liability adjustments 27 27 Net unrealized gains on derivative instruments 141 Cumulative translation adjustments 9,041 9,041 Total comprehensive income 93,117 Net changes in treasury stock （9,537）（9,537） Balance at March 31, 2005 ¥ 135,364 ¥186,551 ¥ 584,515 ¥（21,963） ¥（21,469） ¥ 862,998 Gain (loss) on disposal of treasury stock （101）（101） Dividends declared and approved （16,178）（16,178） Comprehensive income
Net income 97,057 97,057 Business Strategy Net unrealized holding gains on available-for-sale securities 4,137 4,137 Minimum pension liability adjustments 7,009 7,009 Net unrealized gains on derivative instruments 40 40 Cumulative translation adjustments 14,876 14,876 Total comprehensive income 123,119 Net changes in treasury stock （9,593）（9,593） Balance at March 31, 2006 ¥135,364 ¥186,450 ¥665,394 ¥4,099 ¥ （31,062） ¥960,245 Cumulative effect of adjustment from applying SAB108 － － （6,464）－ － （6,464） Balance at April 1, 2006,as adjusted 135,364 186,450 658,930 4,099 （31,062） 953,781
Gain (loss) on disposal of treasury stock 4 4 Corporate Governance Dividends declared and approved （18,256） （18,256） Comprehensive income Net income 111,724 111,724 Net unrealized holding gains on available-for-sale securities 73 73 Minimum pension liability adjustments 970 970 Net unrealized losses on derivative instruments （185）（185） Cumulative translation adjustments 24,774 24,774 CSR Total comprehensive income 137,356 Adjustment to initially apply SFAS 158 （2,733）（2,733） Net changes in treasury stock 761 761 Environmental Management Environmental Balance at March 31, 2007 ¥135,364 ¥186,454 ¥752,398 ¥26,998 ¥（30,301） ¥1,070,913
Thousands of U.S. Dollars
Common Additional Retained Accumulated other Treasury Total shareholders’ stock paid-in earnings comprehensive stock investments capital income (loss) Balance at March 31, 2006 $1,147,153 $1,580,085 $5,638,932 $ 34,737 $（263,237） $8,137,669 Cumulative effect of adjustment from applying SAB108 － － （54,780）－ － （54,780） Brand Strategy Balance at April 1, 2006,as adjusted 1,147,153 1,580,085 5,584,153 34,737 （263,237） 8,082,890 Gain (loss) on disposal of treasury stock 34 34 Dividends declared and approved （154,712） （154,712） Comprehensive income Net income 946,814 946,814 Net unrealized holding gains on available-for-sale securities 619 619 Minimum pension liability adjustments 8,220 8,220 Net unrealized losses on derivative instruments （1,568）（1,568） Cumulative translation adjustments 209,949 209,949 Total comprehensive income 1,164,034 Financial Section Adjustment to initially apply SFAS 158 （23,161）（23,161） Net changes in treasury stock 6,449 6,449 Balance at March 31, 2007 $1,147,153 $1,580,119 $6,376,254 $228,797 $（256,788） $9,075,534 The accompanying notes to consolidated financial statements are an integral part of these statements.
ANNUAL REPORT 2007 34 Consolidated Statements of Cash Flows
Ricoh Company, Ltd. and Consolidated Subsidiaries Thousands of For the Years Ended March 31, 2005, 2006 and 2007 Millions of Yen U.S. Dollars 2005 2006 2007 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income ¥ 83,143 ¥ 97,057 ¥ 111,724 $ 946,814 Income from discontinued operations, net of tax (2,606) (2,035) (5,500) (46,610) Income from continuing operations 80,537 95,022 106,224 900,203 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 78,120 84,089 89,632 759,593 Equity in earnings of affiliates, net of dividends received (1,966) (1,431) (711) (6,025) Deferred income taxes 9,561 (4,692) (2,197) (18,619) Losses on disposals and sales of property, plant and equipment 4,056 920 3,722 31,542 Pension and severance costs, less payments 4,306 3,340 (773) (6,551) Changes in assets and liabilities, net of effects from acquisition- (Increase) decrease in trade receivables (26,418) 13,411 (15,919) (134,907) (Increase) decrease in inventories (12,885) 3,726 (1,494) (12,661) Increase in finance receivables (30,294) (30,029) (28,047) (237,686) (Decrease) increase in trade payables 27,364 (4,442) 2,199 18,636 (Decrease) increase in accrued income taxes and accrued expenses and other (13,740) 2,505 11,175 94,703 Other, net 10,529 11,060 3,486 29,542 Net cash provided by operating activities 129,170 173,479 167,297 1,417,771 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 721 3,085 463 3,924 Expenditures for property, plant and equipment (84,074) (101,788) (85,747) (726,669) Payments for purchases of available-for-sale securities (79,431) (138,607) (97,158) (823,373) Proceeds from sales of available-for-sale securities 118,120 141,620 96,087 814,297 (Increase) decrease in time deposits (484) (136) 64 542 Proceeds from sales of discontinued operations – – 12,000 101,695 Acquisitions of subsidiaries, net of cash acquired (43,214) – (23,200) (196,610) Other, net (7,719) (24,225) (17,941) (152,042) Net cash used in investing activities (96,081) (120,051) (115,432) (978,237) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term indebtedness 72,206 63,751 60,157 509,805 Repayment of long-term indebtedness (60,613) (93,752) (49,115) (416,229) (Decrease) increase in short-term borrowings, net (38,052) 39,618 8,362 70,864 Proceeds from issuance of long-term debt securities 18,000 10,000 65,274 553,169 Repayment of long-term debt securities (22,000) (52,000) (55,000) (466,102) Dividends paid (14,793) (16,178) (18,240) (154,576) Payment for purchase of treasury stock (10,624) (10,653) (799) (6,771) Other, net (563) (775) (1,357) (11,500) Net cash provided by (used in) financing activities (56,439) (59,989) 9,282 78,661 CASH FLOWS OF DISCONTINUED OPERATIONS Net, operating cash flows: 3,610 3,390 838 7,102 Net, investing cash flows: (117) (14) (13) (110) Net, financing cash flows: – – – – Effect of exchange rate change on cash and cash equivalents from discontinued operations – – – – Net increase in cash and cash equivalents from discontinued operations 3,493 3,376 825 6,992 EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS 1,200 3,383 6,710 56,864 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,657) 198 68,682 582,051 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 203,039 186,857 187,055 1,585,212 ADJUSTMENT FOR CHANGE IN FISCAL YEAR END OF CONSOLIDATED SUBSIDIARIES 2,475 – – – CASH AND CASH EQUIVALENTS AT END OF YEAR ¥ 186,857 ¥ 187,055 ¥ 255,737 $ 2,167,263 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: CASH PAID DURING THE YEAR FOR- Interest ¥ 5,402 ¥ 5,717 ¥ 8,222 $ 69,678 Income taxes 40,803 44,854 66,603 564,432 The accompanying notes to consolidated financial statements are an integral part of these statements.
35 ANNUAL REPORT 2007 Notes to Consolidated Financial Statements Ricoh Company,Ltd. and Consolidated Subsidiaries
1. NATURE OF OPERATIONS Customers
Ricoh Company, Ltd. (the “Company”) was established in 1936 and is Ricoh distributes its products primarily through domestic (Japanese) and Our Shareholders To headquartered in Tokyo, Japan. The Company and its consolidated and foreign sales subsidiaries. Overseas, Ricoh owns and distributes not subsidiaries (“Ricoh” as a consolidated group) is a world-wide supplier only Ricoh brand products but also other brands, such as Gestetner, of office automation equipment, including copiers, facsimile machines, Lanier and Savin. data processing systems, printers and related supplies. Ricoh is also Ricoh manufactures its products primarily in 15 plants in Japan and 6 well known for its state-of-the-art electronic devices, digital plants overseas, which are located in the United States, United photographic equipment and other products. Kingdom, France and China. Highlights
2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accompanying consolidated financial statements of Ricoh have the product has been shipped to and accepted by the customer or the been prepared in conformity with U.S. generally accepted accounting service has been provided, (3) the sales price is fixed or determinable principles. Significant accounting and reporting policies are and (4) amounts are reasonably assured of collection. summarized below: Products sales is recognized at the time of delivery and installation at the customer location. Equipment revenues are based on established
(a) Basis of Presentation prices by product type and model and are net of discounts. A sales Business Strategy The accompanying consolidated financial statements for each of the return is accepted only when the equipment is defective and does not years in the three year period ended March 31, 2007 are presented in meet Ricoh’s product performance specifications. Other than Japanese yen, the functional currency of the Company and its domestic installation, there are no customer acceptance clauses in the sales subsidiaries. The translation of Japanese yen into U.S. Dollar contract. equivalents for the year ended March 31, 2007 is included solely for the Post sales and rentals result primarily from maintenance contracts that convenience of readers outside Japan and has been made using the are normally entered into at the time the equipment is sold. Standard exchange rate of ¥118 to US$1, the approximate rate of exchange service fee prices are established depending on equipment classification prevailing at the Federal Reserve Bank of New York on March 31, 2007. and include a cost value for the estimated services to be performed
The books of the Company and its domestic subsidiaries are maintained based on historical experience plus a profit margin thereon. As a Corporate Governance in conformity with Japanese accounting principles and practices, while matter of policy, Ricoh does not discount such prices. On a monthly foreign subsidiaries maintain their books in conformity with the basis, maintenance service revenues are earned and recognized by standards of their country of domicile. Ricoh and billed to the customer in accordance with the contract and The accompanying consolidated financial statements reflect necessary include a fixed monthly fee plus a variable amount based on usage. adjustments, not recorded in the books, to present them in conformity The length of the contract ranges up to five-years, however, most with U.S. generally accepted accounting principles. contracts are cancelable at any time by the customer upon a short CSR notice period. Leases not qualifying as sales-type leases or direct (b) Principles of Consolidation financing leases are accounted for as operating leases and related
The accompanying consolidated financial statements include the revenue is recognized over the lease term. Management Environmental accounts of Ricoh. Investments in entities in which Ricoh has the Ricoh enters into arrangements with multiple elements, which may ability to exercise significant influence over the entities’ operating and include any combination of products, equipment, installation and financial policies (generally 20 to 50% ownership) are accounted for on maintenance. Ricoh allocates revenue to each element based on its an equity basis. All significant intercompany balances and transactions relative fair value if such element meets the criteria for treatment as a have been eliminated in consolidation. separate unit of accounting as prescribed in Emerging Issues Task Force The accounts of certain consolidated subsidiaries have been included Issue (“EITF”) 00-21, “Revenue Arrangements with Multiple on the basis of fiscal periods ended within three months prior to March Deliverables”. Pursuant to EITF 00-21, the delivered item in a multiple Brand Strategy 31. element arrangement should be considered a separate unit of At the beginning of fiscal year 2005, the Company changed the year end accounting if all of the following criteria are met: (1) a delivered item of certain overseas subsidiaries from December 31 to March 31. As a has value to customers on a stand-alone basis, (2) there is objective and result, unappropriated retained earnings increased by ¥777 million and reliable evidence of fair value of an undelivered item, and (3) the accumulated other comprehensive income (loss) in shareholders’ delivery of the undelivered item must be probable and controlled by investment decreased by ¥1,665 million. Ricoh if the arrangement includes the right of return. The price charged when the element is sold separately generally determines fair (c) Revenue Recognition value. Otherwise, revenue is deferred until the undelivered elements are Ricoh generates revenue principally through the sale of equipment, fulfilled as a single unit of accounting. Financial Section supplies and related services under separate contractual arrangements Revenue from the sale of equipment under sales-type leases is for each. Ricoh recognizes revenue when (1) it has a firm contract, (2) recognized as product sales at the inception of the lease. Other revenue
ANNUAL REPORT 2007 36 consists primarily of interest income on sales-type leases and direct- these contracts is reported as a component of accumulated other financing leases, which are recognized as Other revenue over the life of comprehensive income (loss) and reclassified into earnings in the same each respective lease using the interest method. period the hedged item or transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in (d) Foreign Currency Translation earnings. For all derivative instruments that are not designated as part For foreign operations with functional currencies other than the of a hedging relationship and for designated derivative instruments that Japanese yen, assets and liabilities are translated at the exchange rates do not qualify for hedge accounting, the contracts are recorded at fair in effect at each fiscal year-end, and income and expenses are translated value with the gain or loss recognized in current period earnings. at the average rates of exchange prevailing during each fiscal year. The resulting translation adjustments are included as a part of accumulated (g) Allowance for Doubtful Trade Receivables and Finance other comprehensive income (loss) in shareholders’ investment. Receivables All foreign currency transaction gains and losses are included in other Ricoh records allowances for doubtful receivables that are based upon income and expenses in the period incurred. historical experience and specific customer collection issues. The estimated amount of probable credit losses in its existing receivables is (e) Cash Equivalents determined from write-off history adjusted to reflect current economic Cash and cash equivalents include highly liquid investments with conditions and specific allowances for receivables including maturities of three months or less at the date of purchase such as time nonperforming leases, impaired loans or other accounts for which deposits and short-term investment securities which are available-for Ricoh has concluded it will be unable to collect all amounts due sale at any time, present insignificant risk of changes in value due to according to original terms of the lease or loan agreement. Account being readily convertible into cash and have an original maturity of balances net of expected recovery from available collateral are charged- three months or less, such as money management funds and free off against the allowances when collection is considered remote. financial funds. (h) Securities (f) Derivative Financial Instruments and Hedging Activities Ricoh applies SFAS No.115, “Accounting for Certain Investments in As discussed further in Note 16, Ricoh manages its exposure to certain Debt and Equity Securities” which requires all investments in debt and market risks, primarily foreign currency and interest rate risks, through marketable equity securities to be classified as either held-to-maturity, the use of derivative instruments. As a matter of policy, Ricoh does not trading, or available-for-sale securities. As of March 31, 2006 and 2007, enter into derivative contracts for trading or speculative purposes. all of Ricoh’s investments in debt and marketable equity securities are In accordance with Statement of Financial Accounting Standards classified as available-for-sale securities. Those available-for-sale (“SFAS”) No.133, “Accounting for Derivative Instruments and Hedging securities are reported at fair value with unrealized gains and losses, net Activities” as amended, Ricoh recognizes all derivative instruments as of related taxes, excluded from earnings and reported in accumulated either assets or liabilities in the consolidated balance sheets and other comprehensive income (loss). Available-for-sale securities, which measures those instruments at fair value. When Ricoh enters into a mature or are expected to be sold in one year, are classified as current derivative contract, it makes a determination as to whether or not for assets. accounting purposes the derivative is part of a hedging relationship. In Individual securities classified as available-for-sale securities are general, a derivative may be designated as either (1) a hedge of the fair reduced to fair market value by a charge to income for other than value of a recognized asset or liability or an unrecognized firm temporary declines in value. Factors considered in assessing whether commitment (“fair value hedge”), (2) a hedge of the variability of the an indication of other than temporary impairment exists with respect to expected cash flows associated with an existing asset or liability or a available-for-sale securities include: length of time and extent of forecasted transaction (“cash flow hedge”), or (3) a foreign currency decline, financial condition and near term prospects of issuer and fair value or cash flow hedge (“foreign currency hedge”). Ricoh intent and ability of Ricoh to retain its investments for a period of time formally documents all relationships between hedging instruments and sufficient to allow for any anticipated recovery in market value. hedged items, as well as its risk-management objective and strategy for The cost of the securities sold is computed based on the average cost of undertaking various hedge transactions. This process includes linking each security held at the time of sale. all derivatives that are designated as fair value, cash flow, or foreign Non-marketable equity securities owned by Ricoh primarily relate to currency hedges to specific assets and liabilities on the consolidated less than 20% owned companies and are stated at cost. balance sheet or to specific firm commitments or forecasted transactions. (i) Inventories For derivative contracts that are designated and qualify as fair value Inventories are mainly stated at the lower of average cost or net hedges including foreign currency fair value hedges, the derivative realizable values. Inventory costs include raw materials, labor and instrument is marked-to-market with gains and losses recognized in manufacturing overheads. current period earnings to offset the respective losses and gains recognized on the underlying exposure. For derivative contracts that (j) Property, Plant and Equipment are designated and qualify as cash flow hedges including foreign For the Company and its domestic subsidiaries, depreciation of property, currency cash flow hedges, the effective portion of gains and losses on plant and equipment is computed principally by using the declining-
37 ANNUAL REPORT 2007 balance method over the estimated useful lives. Most of the foreign software, patents, customer relationships and tradenames are amortized subsidiaries have adopted the straight-line method for computing on a straight line basis over 3 years to 20 years. Any acquired intangible Customers depreciation, which currently accounts for approximately 30% of the asset determined to have an indefinite useful life is not amortized, but and Our Shareholders To consolidated depreciation expense. The depreciation period generally instead is tested annually for impairment based on its fair value until its ranges from 5 years to 50 years for buildings and 2 years to 12 years for life would be determined to no longer be indefinite. machinery and equipment. Ricoh completed its annual assessment of the carrying value of Effective rates of depreciation for the years ended March 31, 2005, 2006 indefinite-lived intangible assets, including goodwill for the years ended and 2007 are summarized below: March 31, 2005, 2006 and 2007 and determined that no impairment charge was necessary. 2005 2006 2007 Highlights Buildings 8.5% 8.9% 9.8% (m) Pension and Retirement Allowances Plans Machinery and equipment 43.8 40.5 40.8 The measurement of pension costs and liabilities is determined in accordance with SFAS No.87, “Employers’ Accounting for Pensions” Certain leased buildings, machinery and equipment are accounted for and SFAS No.158, “Employers’ Accounting for Defined Benefit Pension as capital leases in conformity with SFAS No.13, “Accounting for and Other Postretirement Plans.” Under SFAS 158, Ricoh recognized Leases.” The aggregate cost included in property, plant and equipment the funded status (i.e., the difference between the fair value of plan and related accumulated depreciation as of March 31, 2006 and 2007 assets and the projected benefit obligations) of its pension fund plans as were as follows: of the end of fiscal year’s consolidated balance sheets, with a corresponding adjustment in initially applying SFAS 158 to
Thousands of Business Strategy Millions of Yen U.S. Dollars accumulated other comprehensive income (loss), net of tax. The 2006 2007 2007 expected long-term rate of return on plan assets used for pension accounting is determined based on the historical long-term rate of Aggregate cost ¥6,895 ¥7,341 $62,212 return on plan assets. The discount rate is determined based on the Accumulated depreciation 4,911 5,761 48,822 rates of return of high-quality fixed-income investments currently available and expected to be available during the period to maturity of The related future minimum lease payments and the present value of the pension benefits. the net minimum lease payments as of March 31, 2007 were ¥1,735 million ($14,703 thousand) and ¥1,623 million ($13,754 thousand), (n) Income Taxes respectively. Income taxes are accounted for under the asset and liability method. Corporate Governance Ordinary maintenance and repairs are charged to expense as incurred. Deferred tax assets and liabilities are recognized for the future tax Major replacements and improvements are capitalized. When consequences attributable to differences between the financial properties are retired or otherwise disposed of, the property and related statement carrying amounts of existing assets and liabilities and their accumulated depreciation accounts are relieved of the applicable respective tax bases and operating loss and tax credit carryforwards. amounts, and any differences are included in earnings. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those CSR (k) Capitalized Software Costs temporary differences and carryforwards are expected to be realized or In accordance with Statement of Position (“SOP”) 98-1, “Accounting settled. The effect on deferred tax assets and liabilities of a change in tax for the Costs of Computer Software Developed or Obtained for Internal Management Environmental rates is recognized in income in the period that includes the enactment Use”, Ricoh capitalizes qualifying cost of computer software. Costs date. incurred during the application development stage as well as upgrades and enhancements that results in additional functionality are (o) Research and Development Expenses and Advertising capitalized. The capitalized software is amortized on a straight line basis over their estimated useful lives. Costs Research and development expenses and advertising costs are expensed as incurred. (l) Goodwill and Other Intangible Assets Brand Strategy SFAS No.141, “Business Combinations” requires the use of only the purchase method of accounting for business combinations and refines (p) Shipping and Handling Costs the definition of intangible assets acquired in a purchase business Shipping and handling costs, which mainly include transportation to combination. SFAS No.142, “Goodwill and Other Intangible Assets” customers, are included in selling, general and administrative expenses eliminates the amortization of goodwill and instead requires annual on the consolidated statements of income. impairment testing thereof. SFAS 142 also requires acquired intangible (q) Impairment or Disposal of Long-Lived Assets assets with a definite useful life to be amortized over their respective Long-lived assets and acquired intangible assets with a definite life are estimated useful lives and reviewed for impairment when an indication reviewed for impairment whenever events or changes in circumstances of impairment is identified in accordance with SFAS No.144, Financial Section indicate that the carrying amount of an asset or group of assets may not “Accounting for the Impairment or Disposal of Long-Lived Assets”. be recoverable. Recoverability of assets to be held and used is assessed by Other intangible assets with definite useful lives, consisting primarily of
ANNUAL REPORT 2007 38 comparing the carrying amount of an asset or asset group to the (v) Adoption of SAB 108 expected future undiscounted net cash flows of the asset or group of The Securities and Exchange Commission of the U.S. issued Staff assets. If an asset or group of assets is considered to be impaired, the Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior impairment charge to be recognized is measured as the amount by Year Misstatements when Quantifying Misstatements in Current Year which the carrying amount of the asset or group of assets exceeds fair Financial Statements” in September 2006. SAB 108 requires companies value. Long-lived assets meeting the criteria to be considered as held for to quantify misstatements using both the balance sheet approach and sale are reported at the lower of their carrying amount or fair value less the income statement approach (“dual” method), and to evaluate the costs to sell. importance of misstatements taking into account relevant quantitative and qualitative factors. Historically, the Company used the income (r) Earnings Per Share statement (“rollover”) approach to quantify misstatements. Upon Basic net income per share of common stock is calculated by dividing adoption, SAB 108 permits the Company to adjust the cumulative effect net income by the weighted-average number of shares of common stock of misstatements that were previously considered immaterial under the outstanding during the period. The calculation of diluted net income rollover method that are now considered material under the dual per share of common stock is similar to the calculation of basic net method. SAB 108 is effective for fiscal years ending after November 15, income per share, except that the weighted-average number of shares 2006. The Company adopted SAB 108 in the fourth quarter of fiscal outstanding includes the additional dilution from potential common year 2007. stock equivalents such as convertible bonds. The Company and some of its domestic consolidated subsidiaries previously set the residual value of tangible fixed assets at 5% of (s) Non-cash Transactions acquisition cost in principle using the standards provided in the The following non-cash transactions have been excluded from the Corporate Tax Law. However, based on an evaluation of residual values consolidated statements of cash flows: realized from disposition of property, plant and equipment, Ricoh Thousands of concluded that the residual value of substantially all long lived assets is Millions of Yen U.S. Dollars negligible at the end of useful life. This misstatement was considered 2005 2006 2007 2007 immaterial to the Company’s historical consolidated financial statements using the income statement approach. Capital lease obligations incurred ¥ 865 ¥ 261 ¥ 54 $ 458 Accordingly, Ricoh recorded an increase in accumulated depreciation of Issuance of treasury stock in exchange ¥11,464 million ($97,153 thousand) and an increase in deferred tax for subsidiary’s stock 2,545 905 -- (included in “Lease deposits and other”) of ¥4,675 million ($39,619 thousand) as of April 1, 2006 with a reduction of the beginning of year (t) Use of Estimates balance of retained earnings of ¥6,464 million ($54,780 thousand). Management of Ricoh has made a number of estimates and (w) New Accounting Standards assumptions that affect the reported amounts of assets, liabilities, In February 2006, the FASB issued SFAS No. 155, “Accounting for revenues and expenses, including impairment losses of long-lived assets Certain Hybrid Financial Instruments - an amendment of SFAS No. 133 and the disclosures of fair value of financial instruments and and 140”. SFAS 155 amends SFAS 133 and SFAS 140, “Accounting for contingent assets and liabilities, to prepare these financial statements in Transfers and Servicing of Financial Assets and Extinguishments of conformity with U.S. generally accepted accounting principles. Actual Liabilities”. SFAS 155 permits fair value re-measurement for any hybrid results could differ from those estimates. financial instrument that contains an embedded derivative, and Ricoh has identified five areas where it believes assumptions and establishes a requirement to evaluate interests in securitized financial estimates are particularly critical to the consolidated financial assets to identify interests that are freestanding derivatives or that are statements. These are determination of the allowance for doubtful hybrid financial instruments that contain an embedded derivative. SFAS receivables, impairment of securities, impairment of long-lived assets 155 is effective for fiscal years beginning after September 15, 2006 and including goodwill, realizability of deferred tax assets and pension is required to be adopted by Ricoh in fiscal year beginning April 1, 2007. accounting. The Company is currently evaluating the effect that the adoption of (u) Discontinued Operations SFAS 155 will have on its consolidated results of operations and On May 31, 2006, the Company’s subsidiary San-Ai Co., Ltd. sold its financial condition. digital content distribution business to Giga Networks Co., Ltd. (former In March 2006, the FASB issued SFAS No. 156, “Accounting for Mobile Alliance Co., Ltd.). As a result of the sale, the operating result of Servicing of Financial Assets - an amendment of FASB Statement No. the business units sold were reclassified to discontinued operations 140”. SFAS 156 amends SFAS 140, to clarify the accounting for servicing pursuant to the requirement on SFAS 144, because Ricoh has no assets and servicing liabilities. Among other provisions, the new significant continuing involvement in the operating sold. accounting standard requires all separately recognized servicing assets Reclassifications have been made to the prior year's consolidated and servicing liabilities to be initially measured at fair value, if statements of income and consolidated statements of cash flows to practicable. SFAS 156 is effective for the fiscal years beginning after conform the presentation used for the year ended March 31, 2007. September 15, 2006 and is required to be adopted by Ricoh in fiscal year beginning April 1, 2007. The Company is currently evaluating the effect
39 ANNUAL REPORT 2007 that the adoption of SFAS 156 will have on its consolidated results of to be adopted by Ricoh in fiscal year beginning April 1, 2008. The operations and financial condition. Company is currently evaluating the effect that the adoption Customers
In September 2006, the FASB issued SFAS No. 157, “Fair Value measurement date provisions will have on its consolidated results of and Our Shareholders To Measurements”, which defines fair value, establishes a framework for operations and financial condition. measuring fair value, and expands disclosures about fair value In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option measurements. SFAS 157 applies under other accounting for Financial Assets and Financial Liabilities-including an amendment pronouncements that require or permit fair value measurements, where of FASB statement No.115”. SFAS 159 permits entities to choose to fair value is the relevant measurement attribute. The standard does not measure many financial instruments and certain other items at fair require any new fair value measurements. SFAS 157 is effective for fiscal value. Unrealized gains and losses on items for which the fair value
years beginning after November 15, 2007, and is required to be adopted option has been elected will be recognized in earnings. SFAS 159 is Highlights by Ricoh in fiscal year beginning April 1, 2008. The Company is effective for fiscal year beginning after November 15, 2007, and is currently evaluating the effect that the adoption of SFAS 157 will have required to be adopted by Ricoh in fiscal year beginning April 1, 2008. on its consolidated results of operations and financial condition. The Company is currently evaluating the effect that the adoption of In September 2006, the FASB issued SFAS 158. SFAS158 requires SFAS 159 will have on its consolidated results of operations and companies to recognize an asset or liability for the overfunded or financial condition. underfunded status of their benefit plans in their financial statements In July 2006, the FASB released FASB Interpretation (“FIN”) No. 48, and to recognize changes in that funded status in comprehensive “Accounting for Uncertainty in Income Taxes, an interpretation of FASB income (loss) in the year in which the changes occur. SFAS 158 also Statement No. 109”. FIN 48 clarifies the accounting and reporting for requires the measurement date for plan assets and liabilities to coincide uncertainties in income tax law. FIN 48 prescribes a comprehensive Business Strategy with the sponsor’s year-end. The standard provides two transition model for the financial statement recognition, measurement, alternatives related to the change in measurement date provisions. The presentation and disclosure of uncertain tax positions taken or expected recognition of an asset and liability related to the funded status to be taken in income tax returns. FIN 48 shall be effective for fiscal provision is effective for fiscal years ending after December 15, 2006. years beginning after December 15, 2006 and is required to be adopted The effect of adoption of SFAS 158 on Ricoh’s financial condition as of by Ricoh in fiscal year beginning April 1, 2007. The Company is March 31, 2007 has been included in the accompanying consolidated currently evaluating the effect that the adoption of FIN 48 will have on financial statement. The change in measurement date provisions is its consolidated results of operations and financial condition. effective for fiscal years ending after December 15, 2008 and is required Corporate Governance 3. ACQUISITION
In January 2007, Ricoh Europe B.V. , which is a wholly-owned the estimated fair value of such net assets. The amount of consideration subsidiary of the Company acquired the European operations of Danka paid in excess of the estimated fair value of the net assets acquired of Business Systems PLC (now known as Infotec Europe B.V. ) for total ¥18,658 million ($158,119 thousand) was recorded as goodwill which
cash consideration of ¥27,132 million ($229,932 thousand) including is not tax deductible. Assets, liabilities and operations of Infotec Europe CSR direct acquisition costs. Ricoh made the acquisition to strengthen its B.V. have been included in the accompanying consolidated financial sales and service network in major countries in Europe. statements since the acquisition date. Ricoh used the purchase method of accounting to account for the The following table reflects the January 31, 2007 condensed balance Management Environmental acquisition and, accordingly, the purchase price has been allocated to sheet of Infotec Europe B.V., as adjusted to give effect to the purchase the tangible and intangible net assets of Infotec Europe B.V. based on method accounting adjustments:
Thousands of Millions of Yen U.S. Dollars Cash and cash equivalents ¥ 3,839 $ 32,534 Receivables and other assets 22,385 189,703 Brand Strategy Property and equipment 1,434 12,153 Identifiable intangible assets 4,883 41,381 Goodwill 18,658 158,119 Liabilities (24,067) (203,958) ¥ 27,132 $ 229,932 Financial Section
ANNUAL REPORT 2007 40 Identifiable intangible assets of Infotec Europe B.V. primarily comprised Goodwill arising from the acquisition of Infotec Europe B.V. has all customer relationships of ¥4,700 million ($39,831 thousand), which been allocated to the Office Solutions segment. were estimated to have a remaining useful life of 10 years to 18 years.
4. DISCONTINUED OPERATIONS Summarized selected financial information for the years ended March during the year ended March 31, 2007 is as follows: 31, 2005, 2006 and 2007 for the discontinued operations reclassified Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Net sales ¥ 6,702 ¥ 5,852 ¥ 1,487 $ 12,602 Income from discontinued operations before gain on disposal of discontinued operations and provision for income taxes 4,400 3,433 866 7,339 Gain on disposal of discontinued operations --8,830 74,831 Provision for income taxes 1,794 1,398 4,196 35,559 Income from discontinued operations, net of tax ¥ 2,606 ¥ 2,035 ¥ 5,500 $ 46,610
The carrying amounts of assets and liabilities of the disposal group classified as discontinued operations were immaterial for the years ended March 31, 2005 and 2006.
5. FINANCE RECEIVABLES
Finance receivables as of March 31, 2006 and 2007 are comprised primarily of customers primarily through certain overseas subsidiaries. These leases are lease receivables and installment loans. accounted for as sales-type leases in conformity with SFAS 13. Sales revenue Ricoh’s products are leased to domestic customers primarily through Ricoh from sales-type leases is recognized at the inception of the leases. Leasing Company, Ltd., a majority-owned domestic subsidiary and to overseas
Information pertaining to Ricoh’s lease receivables as of March 31, 2006 and 2007 is as follows: Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Minimum lease payments receivable ¥ 603,698 ¥ 636,174 $5,391,305 Estimated non-guaranteed residual value 4,144 5,000 42,373 Unearned income (50,797) (52,341) (443,568) Allowance for doubtful receivables (15,023) (12,520) (106,102) Lease receivables, net 542,022 576,313 4,884,008 Less-Current portion of lease receivable, net (177,414) (191,529) (1,623,127) Amounts due after one year, net ¥ 364,608 ¥ 384,784 $3,260,881
41 ANNUAL REPORT 2007 As of March 31, 2007, the minimum lease payments receivable due in each of Ricoh sold finance lease receivables in prior years through securitization the next five years and thereafter are as follows: transactions. Servicing assets or liabilities related to securitization transactions Customers Our Shareholders and Our Shareholders
initiated were not recorded, because the servicing fees adequately compensate To Thousands of Years ending March 31 Millions of Yen U.S. Dollars Ricoh. Ricoh’s retained interests are subordinate to the investor’s interests. Their value is subject to credit and interest rate risk on the sold financial assets. 2008 ¥210,959 $1,787,788 The investors and Special Purpose Entities that hold the lease receivables have 2009 172,541 1,462,212 limited recourse to Ricoh’s retained interest in such receivables for failure of 2010 130,468 1,105,661 debtors to pay. Ricoh determines the value of the retained interests by 2011 79,963 677,653 discounting the future cash flows. Those cash flows are estimated based on 2012 32,718 277,271 credit losses and other information as available and are discounted at a rate Highlights 2013 and thereafter 9,525 80,720 which Ricoh believes is commensurate with the risk free rate plus a risk Total ¥636,174 $5,391,305 premium.
Ricoh Leasing Company, Ltd. has also extended certain other types of loans as Key economic assumptions used in measuring the fair value of retained part of its business activity, which are primarily residential housing loans to interests related to securitization transactions completed during the years ended current and former employees in Japan secured by the underlying real estate March 31, 2006 and 2007 are as follows: properties. Loan terms range from 15 years to 30 years with monthly 2006 2007 repayments. The total balance of these loans, net of allowance for doubtful receivables, as of March 31, 2006 and 2007 was ¥52,295 million and ¥52,648 Expected credit losses 0.35% – 0.50% 0.50% – 0.65% Business Strategy million ($446,169 thousand), respectively. The current portion of loans Discount rate 2.00% – 3.00% 2.00% – 3.00% receivable was ¥1,468 million and ¥1,559 million ($13,212 thousand), Annual prepayment rate 5.07% – 5.33% 5.07% – 5.33% respectively, as of March 31, 2006 and 2007, and was included in short-term finance receivables, net in the accompanying consolidated balance sheets. Loan activity for the years ended March 31, 2005, 2006 and 2007 is as follows: Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Extension of new loans ¥12,456 ¥12,657 ¥11,883 $100,703 Corporate Governance Repayment of outstanding loans 13,001 10,495 11,621 98,483
The impacts of 10% and 20% adverse changes to the key economic assumptions on the fair value of retained interests as of March 31, 2007 are presented below.
Thousands of CSR Millions of Yen U.S. Dollars 2007 2007 Environmental Management Environmental Carrying value of retained interests (included in lease deposits and other in the consolidated balance sheet) ¥5,888 $49,898 Expected credit losses: +10% (46) (390) +20% (92) (780) Discount rate: +10% (22) (186)
+20% (44) (373) Brand Strategy Annual prepayment rate: +10% (415) (3,517) +20% (831) (7,042)
The hypothetical scenario does not reflect expected market conditions and interest is calculated without changing any other assumption; in reality, should not be used as a prediction of future performance. As the figures changes in one factor may result in changes in another, which might magnify indicate, changes in fair value may not be linear. Also, in the above table, the or counteract the sensitivities. effect of a variation in a particular assumption on the fair value of the retained Financial Section
ANNUAL REPORT 2007 42 The following table summarizes certain cash flows received from and paid to the special purpose entities for all securitization activity for the years ended March 31, 2005, 2006 and 2007: Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Servicing fees received ¥ 22 ¥ 22 ¥ 21 $ 178 Repurchases of delinquent or ineligible assets 4,060 2,575 2,776 23,525
The components of all receivables managed and securitized, amounts of delinquencies and the components of net credit losses as of March 31, 2006 and 2007, and for the years then ended, are as follows: Millions of Yen 2006 2007 Principal amount of Principal amount of Total principal receivables 4 months Total principal receivables 4 months amount of receivables or more past due Net credit losses amount of receivables or more past due Net credit losses Principal amount outstanding ¥601,594 ¥919 ¥2,401 ¥ 633,324 ¥ 1,619 ¥ 2,808 Less-Receivables securitized (44,549) (44,491) Receivables held in portfolio ¥557,045 ¥ 588,833
Thousands of U.S. Dollars 2007 Principal amount of Total principal receivables 4 months amount of receivables or more past due Net credit losses Principal amount outstanding $5,367,153 $13,720 $23,797 Less-receivables securitized (377,042) Receivables held in portfolio $4,990,110
6. SECURITIES Marketable securities and investment securities as of March 31, 2006 and 2007 consist of the following: Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Marketable securities: Available-for-sale securities ¥162 ¥ 177 $ 1,500 Investment securities: Available-for-sale securities ¥29,934 ¥70,362 $596,288 Non-marketable equity securities 6,485 4,474 37,915 ¥36,419 ¥74,836 $634,203
43 ANNUAL REPORT 2007 Due afteroneyearthroughfiveyears Due withinoneyear The contractualmaturitiesofdebtsecuritiesclassifiedasavailable-for-sale asofMarch31,2007,regardlesstheirbalanc 2007: 2007: individual securitieshavebeeninacontinuousunrealizedlosspositionatMarch31,2007areasfollows: Gross unrealizedholdinglossesonavailable-for-sale securitiesandthefairvalueofrelatedsecurities,aggregatedbyin Other non-currentsecuritiesmainlyincludeinvestmenttrustsconsistingofinmarketabledebtandequity Non-current: Current: holding lossesandfairvalueasofMarch31,20062007arefollows: The currentandnoncurrentsecuritytypesofavailable-for-sale securities,andtherespectivecost,grossunrealized holdingg te 7 171 0 1 0 – 171 – Other 1 Corporate debt Other qiyscrte 804¥576¥3 ¥23,713 ¥37 ¥15,716 ¥8,034 Equity securities Corporate debt Noncurrent: Noncurrent: euiis6005 6,050 – 50 6,000 securities euiis¥6 –¥ ¥161 ¥– ¥– ¥161 securities A A vailable-for-sale: vailable-for-sale: Equity securities Equity securities Cost 1,0 1,6 7¥29,934 ¥37 ¥15,766 ¥14,205 12¥ –¥162 ¥– ¥– ¥162 nelzduraie aruraie nelzdFi nelzduraie Fair unrealized unrealized Fair unrealized unrealized Fair unrealized unrealized odn an holdinglosses gains holding rs rs rs rs rs Gross Gross Gross Gross Gross Gross 2006 au Cost value iloso e ThousandsofU.S.Dollars Millions ofYen 5,0 1,0 12¥032$7,6 1717$,0 $596,288 $1,203 $127,127 $470,364 ¥70,362 $543,305 ¥142 $1,203 $127,042 ¥15,001 $417,466 ¥55,503 ¥64,110 ¥142 ¥14,991 ¥49,261 ,0 0–6005,4 5–50,932 – 85 50,847 6,010 – 10 6,000 17¥ –¥7 150$ –$1,500 $– $1,492 $– $– $– $1,500 ¥177 $1,492 ¥– ¥176 ¥– ¥– ¥– ¥177 ¥176 4 4 ,5 2,051 – – 2,051 242 – – 242 1 odn an holdinglosses gains holding arvlehliglse arvleholdinglosses Fairvalue holdinglosses Fair value holdinglosses Fairvalue holdinglosses Fair value 072007 2007 616¥,8 5,3 $52,424 $1,492 $52,339 – $1,492 ¥6,186 – ¥176 ¥6,176 ¥ 176 $1,203 $6,373 72¥12–– – ¥142 ¥ 752 ,0 ,1 08750,932 50,847 6,010 6,000 –– otFi au otFairvalue Cost Fairvalue Cost esta 2mnh 12monthsorlonger Less than12months 12monthsorlonger Less than12months iloso e ThousandsofU.S.Dollars Millions ofYen au Cost value unrealized unrealized Gross Gross Thousands ofU.S.Dollars Millions ofYen 18––8 odn an holdinglosses gains holding ANNUAL REPORT2007 vestment categoryandlengthoftimethat e sheetclassification,areasfollows: ains, grossunrealized . value 44
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers Proceeds from the sales of available-for-sale securities were ¥118,120 Effective October 1, 2005, UFJ Holdings, Inc. (“UFJ”) and Mitsubishi million, ¥141,620 million and ¥96,087 million ($814,297 thousand) Tokyo Financial Group, Inc. completed a merger, in which the UFJ for the years ended March 31, 2005, 2006 and 2007, respectively. shares of common stock owned by the Company were exchanged for The realized gains on the sales of available-for-sale securities for the shares of common stock of the newly merged entity, Mitsubishi UFJ year ended March 31, 2006 was ¥1,053 million. There were no Financial Group, Inc. (“MUFG”). As a result of this merger and significant realized gains of available-for-sale securities for the years common stock exchange, Ricoh recognized a gain on securities of ¥992 ended March 31, 2005 and 2007. There were no significant realized million between the cost of UFJ shares surrendered and the current losses of available-for-sale securities for the years ended March 31, 2005, market value of MUFG shares in “Other, net” as other (income) 2006 and 2007. expenses on its consolidated statements of income for the year ended March 31, 2006.
7. INVESTMENTS IN AND ADVANCES TO AFFILIATES
The investments in and advances to affiliates primarily relate to 20% to Financial Position 50% owned companies. Included in these companies is SINDO RICOH Thousands of CO., LTD., a 20.0% owned affiliate. The common stock of this company Millions of Yen U.S. Dollars is publicly traded. The carrying value of the investment in this company 2006 2007 2007 was equal to its underlying book value and amounted to ¥12,212 Assets: million and ¥13,816 million ($117,085 thousand) as of March 31, 2006 Current assets ¥112,312 ¥63,626 $539,203 and 2007, respectively. The quoted market value of Ricoh’s investment Other assets 174,529 20,791 176,195 in this company was ¥13,635 million ($115,551 thousand) as of March 31, 2007. ¥286,841 ¥84,417 $715,398 Ricoh’s equity in the underlying net book values of the other 20% to 50% owned companies is approximately equal to their individual Liabilities and shareholders’ investment: carrying values of ¥39,816 million and ¥1,792 million ($15,186 Current liabilities ¥ 29,084 ¥ 10,217 $ 86,585 thousand) at March 31, 2006 and 2007, respectively. Other liabilities 20,335 3,399 28,805 On July 1, 2006, “Coca-Cola West Japan Co., Ltd. (former affiliate Shareholders’ investment 237,422 70,801 600,008 company)” and “Kinki Coca-Cola Bottling Co., Ltd (former unrelated ¥286,841 ¥ 84,417 $715,398 company).” established a joint holding company “Coca-Cola West Holdings Co., Ltd.” As a result, proportion of ownership interest of Coca- Cola West Holdings Co., Ltd. by Ricoh decreased under 20% and Operations according to Accounting Principles Board (“APB”) Opinion No. 18 Thousands of “The Equity Method of Accounting for Investments in Common stock,” Millions of Yen U.S. Dollars Ricoh excluded the Coca-Cola West Holdings Co., Ltd from affiliate 2005 2006 2007 2007 company on October 1, 2006. Since then, assets, liabilities and Sales ¥330,362 ¥320,537 ¥193,753 $1,641,975 operations of Coca-Cola West Holdings Co., Ltd. have been excluded Costs and expenses 315,729 309,164 186,199 1,577,958 from the accompany consolidated financial statements. Net income ¥ 14,633 ¥ 11,373 ¥ 7,554 $ 64,017 Summarized financial information for all affiliates as of March 31, 2006 and 2007 and for the years ended March 31, 2005, 2006 and 2007 The significant transactions of Ricoh with these affiliates for the years is as follows: ended March 31, 2005, 2006 and 2007, and the related account balances at March 31, 2006 and 2007 are summarized as follows:
Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Transactions: Sales ¥19,365 ¥20,205 ¥16,158 $136,932 Purchases 27,286 25,617 28,993 245,703 Dividend income 1,154 1,175 828 7,017
45 ANNUAL REPORT 2007 Other intangibleassetsnotsubjecttoamortization T Other intangibleassetsnotsubjecttoamortization Other intangibleassetssubjecttoamortization: T Other intangibleassetssubjecttoamortization: The informationforintangibleassetssubjecttoamortizationandnotisasfollo 8. GOODWILLANDOTHERINTANGIBLE ASSETS Account balances: the consolidatedfinancialstatements. Unrealized profitsregardingtheabovetransactionswereeliminatedin tlohritnil ses¥79,175 otal otherintangibleassets otal otherintangibleassets te 204(,4)13,134 T (8,940) Other ¥45,738 T ¥(43,593) 22,074 ¥89,331 T Other T Software 2,706 Payables Software ¥3,493 Receivables tl1224(457 77,677 otal (64,527) rade nameandcustomerbase 142,204 18,805 (11,994) 30,799 otal rade nameandcustomerbase 2006 rs arigAcmltdNtcryn rs arigAcmltdNetcarrying Accumulated carrying Gross Netcarrying Accumulated Gross carrying iloso e U.S.Dollars Millions ofYen mutaotzto mutaon mriainamount amortization amount amount amortization amount 351$30,008 ¥3,541 072007 2007 ,1 22,127 2,611 Thousands of 2006 method. September 30,2006,thedatethatRicohceasedusingequity million ($297,492thousand)ofCoca-ColaWest HoldingsCo.,Ltd.asof thousand). Thisamountincludedundistributedearningsof¥35,104 by theequitymethodinamountof¥46,667million($395,483 undistributed earningsof20%to50%ownedcompaniesaccountedfor As ofMarch31,2007,consolidatedretainedearningsincluded 1,498 Millions ofYen rs arigAcmltdNetcarrying Accumulated Gross carrying ,8,3 7221 683,059 (702,271) 1,385,331 1093¥5,5)¥45,244 ¥(55,659) ¥100,903 8510$4166 $383,424 $(471,686) $855,110 3,9 1102 138,449 161,186 (101,042) (129,542) 239,492 290,729 80,601 (82,868) 163,469 mutaotzto amount amortization amount 820(193 16,337 19,020 (11,923) (15,286) 28,260 34,306 Thousands ofU.S.Dollars 2007 2007 ANNUAL REPORT2007 ws: $694,280 ¥81,925 11,220 1,324 46
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers Gross carrying amount of software was increased for the year ended The changes in the carrying amounts of goodwill for the year ended March 31, 2007 mainly due to the capitalization of costs to develop March 31, 2006 and 2007, are as follows: back-office information systems. Thousands of The aggregate amortization expense of other intangible assets subject to Millions of Yen U.S. Dollars amortization for the years ended March 31, 2005, 2006 and 2007 was 2006 2007 2007 ¥11,327 million, ¥16,624 million and ¥17,200 million ($145,763 thousand). The future amortization expense for each of the next five Balance at beginning of year ¥47,502 ¥51,934 $440,119 years relating to intangible assets currently recorded in the consolidated Goodwill acquired during the year 1,783 20,172 170,949 balance sheets is estimated to be the following at March 31, 2007: Goodwill sold during the year - 608 5,153 Foreign exchange impact 2,649 550 4,661 Thousands of Balance at end of year ¥51,934 ¥72,048 $610,576 Years ending March 31 Millions of Yen U.S. Dollars 2008 ¥18,282 $154,932 As of March 31, 2007, all of the carrying value of goodwill was allocated 2009 16,001 135,602 to the Office Solutions segment. 2010 10,293 87,229 2011 7,299 61,856 2012 5,497 46,585
9. INCOME TAXES Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates and provision for income taxes for the years ended March 31, 2005, 2006 and 2007 are as follows: Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates: Domestic ¥ 84,162 ¥105,785 ¥107,749 $ 913,127 Foreign 46,821 46,981 66,770 565,847 ¥130,983 ¥152,766 ¥174,519 $1,478,975 Provision for income taxes: Current: Domestic ¥ 28,079 ¥ 43,584 ¥ 47,530 $ 402,797 Foreign 11,200 17,273 18,993 160,958 39,279 60,857 66,523 563,754 Deferred: Domestic 6,945 (2,178) (741) (6,280) Foreign 2,616 (2,514) (1,456) (12,339) 9,561 (4,692) (2,197) (18,619) Consolidated provision for income taxes ¥ 48,840 ¥ 56,165 ¥ 64,326 $ 545,136
47 ANNUAL REPORT 2007 Total income taxes are allocated as follows: Thousands of Customers
Millions of Yen U.S. Dollars and Our Shareholders To 2005 2006 2007 2007 Provision for income taxes relating to continuing operations ¥ 48,840 ¥ 56,165 ¥ 64,326 $545,136 Provision for income taxes relating to discontinued operations 1,794 1,398 4,196 35,559 Shareholders’ investment: Foreign currency translation adjustments 3,378 1,266 (50) (424) Unrealized gains on securities 407 2,472 25 212
Unrealized gains (losses) on derivatives 97 27 (128) (1,085) Highlights Minimum pension liability adjustment 129 5,195 693 5,873 Adjustment to initially apply SFAS 158 – – 1,066 9,034 ¥ 54,645 ¥ 66,523 ¥ 70,128 $594,305
The Company and its domestic subsidiaries are subject to a National Corporate tax of 30%, an inhabitant tax of approximately 6% and a deductible Enterprise tax approximately 8%, which in the aggregate resulted in the normal statutory tax rate of approximately 41%. The normal statutory tax rate differs from the effective tax rate for the years ended March 31, 2005, 2006 and 2007 as a result of the following: 2005 2006 2007 Business Strategy Normal statutory tax rate 41% 41% 41% Nondeductible expenses 1 0 0 Tax benefits not recognized on operating losses of certain consolidated subsidiaries 1 2 1 Utilization of net operating loss carryforward not previously recognized (3) (2) (1) Tax credit for increased research and development expense (3) (4) (3) Other, net (0) (0) (1) Effective tax rate 37% 37% 37%
Nondeductible expenses include directors’ bonuses and entertainment expenses. Corporate Governance The tax effects of temporary differences and carryforwards giving rise to the consolidated deferred tax assets and liabilities as of March 31, 2006 and 2007 are as follows: Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 CSR Assets: Accrued expenses ¥ 21,417 ¥ 22,622 $191,712
Property, plant and equipment 3,014 7,197 60,992 Management Environmental Accrued pension and severance costs 30,888 25,139 213,042 Net operating loss carryforwards 4,941 9,574 81,136 Other 29,601 32,813 278,076 89,861 97,345 824,958 Less- Valuation allowance (8,197) (12,399) (105,076)
¥ 81,664 ¥ 84,946 $ 719,881 Brand Strategy Liabilities: Sales-type leases ¥ (6,460) $(6,463) $ (54,771) Undistributed earnings of foreign subsidiaries and affiliates, etc. (18,618) (21,170) (179,407) Net unrealized holding gains on available-for-sale securities (6,613) (5,664) (48,000) Basis difference of acquired intangible assets (9,372) (8,358) (70,831) Other (13,498) (7,506) (63,610) ¥(54,561) ¥ (49,161) $(416,619)
Net deferred tax assets ¥ 27,103 ¥ 35,785 $ 303,263 Financial Section
ANNUAL REPORT 2007 48 Net deferred tax assets as of March 31, 2006 and 2007 are included in the consolidated balance sheets as follows: Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Deferred income taxes and other (Current Assets) ¥40,632 ¥44,682 $378,661 Lease deposits and other (Non-current Assets) 38,053 35,652 302,136 Accrued expenses and other (Current Liabilities) (208) (366) (3,102) Deferred income taxes (Long-Term Liabilities) (51,374) (44,183) (374,432) ¥27,103 ¥35,785 $303,263
The net changes in the total valuation allowance for the years ended deferred tax assets are deductible, Ricoh believes it is more likely than March 31, 2005, 2006 and 2007 were a decrease of ¥1,931 million, an not that the benefits of these deductible differences, net of the existing increase of ¥1,118 million and an increase of ¥4,202 million ($35,610 valuation allowance will be realized. The amount of the deferred tax thousand), respectively. The increase for the year ended March 31, 2007 asset considered realizable, however, would be reduced if estimates of included an increase ¥1,463 million ($12,398 thousand) resulting from future taxable income during the carryforward period are reduced. deferred tax assets from acquisitions. The valuation allowance As of March 31, 2007, certain subsidiaries had net operating losses primarily relates to deferred tax assets of the consolidated subsidiaries carried forward for income tax purposes of approximately ¥27,289 with net operating loss carryforwards for tax purposes that are not million ($231,263 thousand) which were available to reduce future expected to be realized. income taxes, if any. Approximately ¥1,911 million ($16,195 In assessing the realizability of deferred tax assets, Ricoh considers thousand) of the operating losses will expire within 3 years and ¥9,410 whether it is more likely than not that some portion or all of the million ($79,746 thousand) will expire within 4 years to 7 years. The deferred tax assets will not be realized. The ultimate realization of remainder principally have an indefinite carryforward period. deferred tax assets is dependent upon the generation of future taxable Ricoh has not recognized a deferred tax liability for certain portion of income during the periods in which those temporary differences the undistributed earnings of its foreign subsidiaries of ¥215,390 become deductible and whether loss carryforwards are utilizable. Ricoh million ($1,825,339 thousand) as of March 31, 2007 because Ricoh considers the scheduled reversal of deferred tax liabilities, projected considers these earnings to be permanently reinvested. Calculation of future taxable income, and tax planning strategies in making this related unrecognized deferred tax liability is not practicable. assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the
10. SHORT-TERM BORROWINGS Short-term borrowings as of March 31, 2006 and 2007 consist of the following: Weighted average Thousands of interest rate Millions of Yen U.S. Dollars 2006 2007 2006 2007 2007 Borrowings, principally from banks 3.8% 2.4% ¥16,056 ¥21,682 $183,746 Commercial paper 3.1 3.7 66,464 69,991 593,144 ¥82,520 ¥91,673 $776,890
These short-term borrowings included borrowings, principally from thousand) as of March 31, 2006 and 2007, respectively. Unused lines of banks and commercial paper denominated in foreign currencies credit amounted to ¥703,949 million and ¥693,791 million ($5,879,585 amounting to ¥ 55,212 million and ¥ 57,480 million ($487,119 thousand) as of March 31, 2006 and 2007, respectively, of which thousand) as of March 31, 2006 and 2007, respectively. ¥252,843 million and ¥237,854 million ($2,015,712 thousand) related The Company and certain of its subsidiaries enter into the contracts to commercial paper and ¥154,458 million and ¥129,855 million with financial institutions regarding lines of credit and overdrawing. ($1,100,466 thousand) related to medium-term notes programs at Those same financial institutions hold the issuing programs of prevailing interest rates and the unused portion is available for commercial paper and medium-term notes. Ricoh had aggregate lines immediate borrowings. of credit of ¥801,630 million and ¥806,526 million ($6,834,966
49 ANNUAL REPORT 2007 11. LONG-TERM INDEBTEDNESS Customers
Long-term indebtedness as of March 31, 2006 and 2007 consists of the followings: and Our Shareholders To Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Bonds- 0.87%, straight bonds, payable in yen, due March 2007 ¥ 35,000 ¥ – $ – 1.34%, straight bonds, payable in yen, due March 2009 25,000 25,000 211,864 0.73%, straight bonds, payable in yen, due June 2006 issued by a consolidated subsidiary 10,000 ––Highlights 0.70%, straight bonds, payable in yen, due June 2007 issued by a consolidated subsidiary 10,000 10,000 84,746 2.10%, straight bonds, payable in yen, due October 2009 issued by a consolidated subsidiary 10,000 10,000 84,746 1.11%, straight bonds, payable in yen, due March 2010 issued by a consolidated subsidiary 10,000 10,000 84,746 1.30%, straight bonds, payable in yen, due December 2010 issued by a consolidated subsidiary – 9,999 84,737 Euro Yen Zero Coupon Convertible Bonds, due December 2011 – 55,256 468,271 Medium-term notes, 0.17% weighted average, due through 2015 issued by a consolidated subsidiary 10,000 –– Total bonds 110,000 120,255 1,019,110
Unsecured loans- Business Strategy Banks and insurance companies,1.48% weighted average, due through 2012 183,956 200,983 1,703,246 Secured loans- Banks, insurance companies and other financial institution, 0.83% weighted average, due through 2013 795 597 5,059 Capital lease obligations (see Note 2(j)) 3,453 1,623 13,754 Total 298,204 323,458 2,741,169 SFAS 133 fair value adjustment 553 517 4,381 Less- Current maturities included in current liabilities (103,131) (87,174) (738,763)
¥195,626 ¥236,801 $2,006,788 Corporate Governance
Secured loans are collateralized by land, buildings and lease receivables other things, that the banks may request additional security for these with a book value of ¥3,186 million ($27,000 thousand) as of March loans if there is reasonable and probable cause and may treat any 31, 2007. security furnished to the banks as well as cash deposited as security for All bonds outstanding as of March 31, 2007 are redeemable at the all present and future indebtedness. Ricoh has never been requested to option of Ricoh at 100% of the principal amounts under certain submit such additional security. CSR conditions as provided in the applicable agreements. The aggregate annual maturities of long-term indebtedness subsequent
Bonds are subject to certain covenants such as restrictions on certain to March 31, 2007 are as follows: Management Environmental additional secured indebtedness, as defined in the agreements. Ricoh presently is in compliance with such covenants as of March 31, 2007. Thousands of The Company issued Euro Yen Zero Coupon Convertible Bonds of Years ending March 31 Millions of Yen U.S. Dollars ¥55,275 million ($468,432 thousand) in December 2006. Bondholders are able to acquire common stock under certain circumstances. As of 2008 ¥ 87,147 $ 738,534 March 31, 2007, the conversion price was ¥2,800 per share and 19,741 2009 77,521 656,958 2010 70,149 594,483 thousand shares would have been issued on conversion of all Brand Strategy convertible debt. The conversion price shall be adjusted for certain 2011 21,780 184,576 events such as a stock split, consolidation of stock or issuance of stock at 2012 66,571 564,161 less than the current market price of the shares. 2013 and thereafter 290 2,458 As is customary in Japan, substantially all of the bank borrowings are Total ¥323,458 $2,741,169 subject to general agreements with each bank which provide, among Financial Section
ANNUAL REPORT 2007 50 12. PENSION AND RETIREMENT ALLOWANCE PLANS The Company and certain of its subsidiaries have various contributory and comprehensive income at adoption represents the unrecognized net actuarial noncontributory employees’ pension fund plans in trust covering substantially loss, unrecognized prior service cost, and unrecognized transition obligation, all all of their employees. Under the plans, employees are entitled to lump-sum of which were previously netted against the plans’ funded status in the payments at the time of termination or retirement, or to pension payments. consolidated balance sheets pursuant to the provisions of SFAS 87. These Contributions to above pension plans have been made to provide future pension amounts will be subsequently recognized as net periodic benefit cost pursuant payments in conformity with an actuarial calculation determined by the to Ricoh’s historical accounting policy for amortizing such amounts. current basic rate of pay. Furthermore, actuarial gains and losses that arise in subsequent periods and are On March 31, 2007, Ricoh adopted the recognition and disclosure provisions of not recognized as net periodic benefit cost in the same periods will be SFAS No.158, “Employers’ Accounting for Defined Benefit Pension and Other recognized as a component of other comprehensive income. Those amounts Postretirement Plans,” for the measurement of pension liabilities. Under SFAS will be subsequently recognized as a component of total net periodic benefit cost 158, Ricoh recognized the funded status (i.e., the difference between the fair on the same basis as the amounts recognized in accumulated other value of plan assets and the projected benefit obligations) of its pension fund comprehensive income at adoption of SFAS 158. plans in the consolidated balance sheets as of March 31, 2007, with a The changes in the consolidated balance sheets as of March 31, 2007 arising corresponding adjustment in initially applying SFAS 158 to accumulated other from the adoption of SFAS 158 are set out below: comprehensive income, net of tax. The adjustment to accumulated other
Millions of Yen Before application After application Adjustments of SFAS 158 of SFAS 158 Lease deposits and other ¥ 97,645 ¥ 710 ¥ 98,355 Net deferred tax assets 36,287 (502) 35,785 Accrued expenses and other 138,946 4,414 143,360 Accrued pension and severance costs 99,681 (653) 99,028 Minority interests 57,689 (820) 56,869 Accumulated other comprehensive income 29,731 (2,733) 26,998
Thousands of U.S. Dollars Before application After application Adjustments of SFAS 158 of SFAS 158 Lease deposits and other $ 827,500 $ 6,017 $ 833,517 Net deferred tax assets 307,517 (4,254) 303,263 Accrued expenses and other 1,177,508 37,407 1,214,915 Accrued pension and severance costs 844,754 (5,534) 839,220 Minority interests 488,890 (6,949) 481,941 Accumulated other comprehensive income 251,958 (23,161) 228,797
The changes in the benefit obligation and plan assets of the pension plans for the years ended March 31, 2006 and 2007 are as follows: Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Change in benefit obligations: Benefit obligations at beginning of year ¥343,623 ¥368,813 $3,125,534 Service cost 14,691 15,687 132,941 Interest cost 10,192 11,121 94,246 Plan participants’ contributions 517 682 5,780 Actuarial loss 10,437 963 8,161 Settlement (654) (142) (1,203) Benefits paid (14,408) (16,473) (139,602) Foreign exchange impact 4,415 9,817 83,195 Benefit obligations assumed in connection with business acquisition - 7,503 63,585 Benefit obligations at end of year ¥368,813 ¥397,971 $3,372,636
51 ANNUAL REPORT 2007 Thousands of Millions of Yen U.S. Dollars Customers 2006 and Our Shareholders
2007 2007 To Change in plan assets: Fair value of plan assets at beginning of year ¥ 237,500 ¥ 294,936 $2,499,458 Actual return on plan assets 49,560 6,889 58,381 Employer contribution 13,853 14,725 124,788 Plan participants’ contributions 517 682 5,780 Settlement - (57) (483) Benefits paid (9,855) (10,924) (92,576) Highlights Foreign exchange impact 3,361 7,957 67,432 Plan assets acquired in connection with business acquisition - 6,372 54,000 Fair value of plan assets at end of year ¥ 294,936 ¥320,580 $2,716,780 Funded status ¥ (73,877) ¥(77,391) $ (655,856)
Amounts recognized in the consolidated balance sheets as of March 31, 2007 consist of: Thousands of
Millions of Yen U.S. Dollars Business Strategy Lease deposits and other ¥ 25,161 $213,229 Accrued expenses and other (4,414) (37,407) Accrued pension and severance costs (98,138) (831,678) Net amount recognized ¥(77,391) $(655,856)
Amounts recognized in accumulated other comprehensive income as of March 31, 2007 consist of: Thousands of
Millions of Yen U.S. Dollars Corporate Governance Net actuarial loss ¥ 64,990 $550,763 Prior service cost (50,232) (425,695) Net asset at transition, net of amortization (82) (695) Net amount recognized ¥ 14,676 $124,373 CSR The funded status as of March 31, 2006, reconciled to the net amount Amounts recognized in the consolidated balance sheets as of March 31, 2006 recognized in the consolidated balance sheet at that date, is consist of: summarized as follows: Management Environmental Millions of Yen Millions of Yen Prepaid benefit cost ¥ 18,170 Funded status ¥(73,877) Accrued benefit liability (94,765) Unrecognized net actuarial loss 64,714 Intangible assets 55 Unrecognized prior service cost (54,212) Accumulated other comprehensive income (loss) 12,632 Unrecognized net asset at transition, net of amortization (533) Net amount recognized ¥(63,908) Brand Strategy Net amount recognized ¥(63,908) Financial Section
ANNUAL REPORT 2007 52 The accumulated benefit obligations are as follows: Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Accumulated benefit obligations ¥354,060 ¥376,203 $3,188,161
Weighted-average assumptions used to determine benefit obligations at March 31, 2006 and 2007 are as follows: 2006 2007 Discount rate 2.8% 3.1% Rate of compensation increase 5.4% 5.3%
Weighted-average assumptions used to determine the net periodic benefit cost for the years ended March 31, 2005, 2006 and 2007 are as follows: 2005 2006 2007 Discount rate 2.9% 3.0% 2.8% Rate of compensation increase 5.3% 5.0% 5.4% Expected long-term return on plan assets 2.9% 3.2% 3.1%
The net periodic benefit costs of the pension plans for the years ended March 31, 2005, 2006 and 2007 consisted of the following components: Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Service cost ¥14,762 ¥14,691 ¥15,687 $132,941 Interest cost 9,218 10,192 11,121 94,246 Expected return on plan assets (6,571) (7,645) (9,186) (77,847) Net amortization 1,648 1,833 (1,420) (12,034) Settlement benefit (980) (140) (18) (153) Total net periodic pension cost ¥18,077 ¥18,931 ¥16,184 $137,153
The projected benefit obligations and the fair value of plan assets for the assets for the pension plans with accumulated benefit obligations in pension plans with projected benefit obligations in excess of plan assets, excess of plan assets are as follows: and the accumulated benefit obligations and the fair value of plan
Thousands of Millions of Yen U.S. Dollars 2006 2007 2007 Plans with projected benefit obligations in excess of plan assets: Projected benefit obligations ¥222,095 ¥240,593 $2,038,924 Fair value of plan assets 129,327 150,746 1,277,508 Plans with accumulated benefit obligations in excess of plan assets: Accumulated benefit obligations ¥190,144 ¥221,023 $1,873,076 Fair value of plan assets 118,214 145,278 1,231,169
Ricoh’s benefit plan asset allocation at March 31, 2006 and 2007 were as follows: 2006 2007 Equity securities 51.7% 51.5% Debt securities 21.1% 17.0% Life insurance company general accounts 20.5% 24.2% Other 6.7% 7.3%% Total 100.0% 100.0%
53 ANNUAL REPORT 2007 13. SHAREHOLDERS’INVESTMENT The followingbenefitpayments,whichreflectexpectedfutureservice, respectively. million ($(33,102)thousand)and¥(82)($(695)thousand), next fiscalyearare¥3,666million($31,068thousand),¥(3,906) comprehensive income(loss)intonetperiodicpensioncostoverthe pension fundplansthatwillbeamortizedfromaccumulatedother actuarial loss,priorservicecostandnetassetattransitionforRicoh’s pension plansfortheyearendingMarch31,2008.Theestimatednet Ricoh expectstocontribute¥13,990million($118,559thousand)its Ricoh usesaDecember31measurementdateforthepensionplans. payment obligationsastheybecomepayable. mutual fundsarereadilymarketableandcanbesoldtofundbenefit securities anddomesticinternationalequitysecurities.These underlying investmentsareindomesticandinternationalfixedincome addresses diversificationbytheuseofmutualfundinvestmentswhose prohibit directinvestmentinderivativefinancialinstruments.Ricoh investments inmutualfundsanddebtequitysecurities management policies.Itsriskpoliciespermit investment goalsaretomaximizereturnssubjectspecificrisk not usetargetallocationsfortheindividualassetcategories.Ricoh’s Ricoh’s investment policiesandstrategiesforthepensionbenefitsdo and 2007. subsidiaries includedinplanassetswereimmaterialatMarch31,2006 Common stockandbondsoftheCompanycertainitsdomestic retained earningsinprincipleuponapprovalofshareholders. to transferanamountofcommonstockoradditionalpaid-incapital to stock andadditionalpaid-incapital.TheLawalsopermitsacompany approval ofshareholdersfortransferringonamountbetweencommon The CorporationLawofJapanrequiresacompanytoobtainthe respectively, andarerestrictedfrombeingused asdividends. ¥17,156 millionand¥17,318($146,763thousand), included inretainedearningsasofMarch31,2006and2007were reserves underthelawsofrespectivecountries.Legal subsidiaries arealsorequiredtoappropriatetheirearningslegal legal reserveequalsto25%ofcommonstock.Certainforeign required whenthetotalamountofadditionalpaid-incapitaland additional paid-incapitalorlegalreserve.Nofurtherappropriationis the Companyanditsdomesticsubsidiariesbeappropriatedasan cash dividendsandotherdistributionsfromretainedearningspaidby The CorporationLawofJapanprovidesthatanamountequalto10% er nigMrh3 iloso e U.S.Dollars MillionsofYen Years endingMarch31 as appropriate,areexpectedtobepaid: 31, 2007. and amountedto¥407,599million($3,454,229thousand)asofMarch distribution isthatrecordedintheCompany’s non-consolidatedbooks The amountofretainedearningslegallyavailablefordividend 2007. been reflectedintheconsolidatedfinancialstatementsasofMarch31, record asofMarch31,2007.Thedeclarationthisdividendhasnot million ($92,797thousand),whichwouldbepaidtoshareholdersof dividend (¥15pershare)onthecommonstocktotaling¥10,950 on June27,2007,theshareholdersapproveddeclarationofacash month period.AttheOrdinaryGeneralMeetingofShareholdersheld to shareholdersofrecordattheendeachsuchfiscalorinterimsix- the endofeachinterimsix-monthperiod.Suchdividendsarepayable end ofeachfiscalperiodoraredeclaredbytheBoardDirectorsafter Semiannual cashdividendsareapprovedbytheshareholdersafter 021,1 163,670 161,127 882,661 170,831 161,670 the Company. 19,313 Meeting ofShareholdersinaccordancewiththestandardsprescribedby $156,949 19,013 corresponding totheirtenuresthroughtheaboveOrdinaryGeneral 104,154 20,158 Directors andCorporateAuditorsfinalretirementallowances 19,077 June 27,2007.Ontheabolishment,Companywillpayincumbent ¥18,520 closing ofthe107thOrdinaryGeneralMeetingShareholdersheldon applied toDirectorsandCorporateAuditors,wasabolishedatthe system forexecutivesoftheCompany, fixedremuneration,whichhad unfunded retirementallowancesplans.The employee's pensionfund(“EPF”)planareprimarilycoveredby Employees ofcertaindomesticsubsidiariesnotcoveredbythe 2013– 2017 2012 2011 2010 2009 2008 ANNUAL REPORT2007 Thousands of 54
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers 14. OTHER COMPREHENSIVE INCOME (LOSS) Tax effects allocated to each component of other comprehensive income (loss) are as follows: Millions of Yen Before-tax Tax Net-of-tax amount expense amount 2005: Foreign currency translation adjustments ¥12,419 ¥ (3,378) ¥ 9,041 Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year 1,024 (347) 677 Less- Reclassification adjustment for (gains) losses realized in net income 148 (60) 88 Net unrealized gains (losses) 1,172 (407) 765 Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year 45 (17) 28 Less- Reclassification adjustment for (gains) losses realized in net income 193 (80) 113 Net unrealized gains (losses) 238 (97) 141 Minimum pension liability adjustments 156 (129) 27 Other comprehensive income (loss) ¥13,985 ¥(4,011) ¥ 9,974
2006: Foreign currency translation adjustmentss ¥16,142 ¥(1,266) ¥14,876 Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year 8,662 (3,308) 5,354 Less- Reclassification adjustment for (gains) losses realized in net income (2,053) 836 (1,217) Net unrealized gains (losses) 6,609 (2,472) 4,137 Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year (527) 216 (311) Less- Reclassification adjustment for (gains) losses realized in net income 594 (243) 351 Net unrealized gains (losses) 67 (27) 40 Minimum pension liability adjustments 12,204 (5,195) 7,009 Other comprehensive income (loss) ¥35,022 ¥(8,960) ¥26,062
2007: Foreign currency translation adjustments ¥24,724 ¥ 50 ¥24,774 Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year 197 (65) 132 Less- Reclassification adjustment for (gains) losses realized in net income (99) 40 (59) Net unrealized gains (losses) 98 (25) 73 Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year (749) 307 (442) Less- Reclassification adjustment for (gains) losses realized in net income 436 (179) 257 Net unrealized gains (losses) (313) 128 (185) Minimum pension liability adjustments 1,663 (693) 970 Other comprehensive income (loss) ¥26,172 ¥ (540) ¥25,632
55 ANNUAL REPORT 2007 Thousands of U.S. Dollars Before-tax Tax Net-of-tax Customers
amount expense amount and Our Shareholders To 2007: Foreign currency translation adjustments $209,525 $ 424 $209,949 Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year 1,669 (551) 1,119 Less- Reclassification adjustment for (gains) losses realized in net income (839) 339 (500) Net unrealized gains (losses) 831 (212) 619
Unrealized gains (losses) on derivatives: Highlights Unrealized holding gains (losses) arising during the year (6,347) 2,602 (3,746) Less- Reclassification adjustment for (gains) losses realized in net income 3,695 (1,517) 2,178 Net unrealized gains (losses) (2,653) 1,085 (1,568) Minimum pension liability adjustments 14,093 (5,873) 8,220 Other comprehensive income (loss) $221,797 $ (4,576) $217,220
Changes in accumulated other comprehensive income (loss) are as follows:
Thousands of Business Strategy Millions of Yen U.S. Dollars 2005 2006 2007 2007 Foreign currency translation adjustments: Beginning balance ¥(19,411) ¥(12,219) ¥ 2,657 $ 22,517 Adjustment for change in fiscal year end of consolidated subsidiaries (1,849) – – – Change during the year 9,041 14,876 24,774 209,949 Ending balance ¥(12,219) ¥ 2,657 ¥ 27,431 $ 232,466 Unrealized gains (losses) on securities: Corporate Governance Beginning balance ¥ 4,026 ¥ 4,791 ¥ 8,928 $ 75,661 Change during the year 765 4,137 73 619 Ending balance ¥ 4,791 ¥ 8,928 ¥ 9,001 $ 76,280 Unrealized gains (losses) on derivatives: Beginning balance ¥ (24) ¥ 117 ¥ 157 $ 1,331
Change during the year 141 40 (185) (1,568) CSR Ending balance ¥ 117 ¥ 157 ¥ (28) $ (237) Minimum pension liability adjustments: Environmental Management Environmental Beginning balance ¥(14,863) ¥(14,652) ¥ (7,643) $ (64,771) Adjustment for change in fiscal year end of consolidated subsidiaries 184 – –– Change during the year 27 7,009 970 8,220 Adjustment to initially apply SFAS 158 - – 6,673 56,551 Ending balance ¥(14,652) ¥ (7,643) ¥ – $ – Pension liability adjustments:
Adjustment to initially apply SFAS 158 ¥ – ¥ – ¥ (9,406) $ (79,712) Brand Strategy Ending balance ¥ – ¥ – ¥ (9,406) $ (79,712) Total accumulated other comprehensive income (loss) Beginning balance ¥(30,272) ¥(21,963) ¥ 4,099 $ 34,737 Adjustment for change in fiscal year end of consolidated subsidiaries (1,665) – –– Change during the year 9,974 26,062 25,632 217,220 Adjustment to initially apply SFAS 158 – – (2,733) (23,161) Ending balance ¥(21,963) ¥ 4,099 ¥ 26,998 $ 228,797 Financial Section
ANNUAL REPORT 2007 56 15. PER SHARE DATA
Dividends per share shown in the consolidated statements of income are Thousands of shares computed based on dividends paid for the year. 2005 2006 2007 A reconciliation of the numerator and the denominators of the basic Weighted average number of and diluted per share computations for income before cumulative effect shares of common stock outstanding 738,160 733,434 729,745 Effect of dilutive securities: of accounting change, cumulative effect of accounting change, net of Euro Yen Zero Coupon Convertible tax and net income is as follows: Bonds-Due December 2011 – – 5,758 Diluted shares of common stock outstanding 738,160 733,434 735,503
Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Income from continuing operations ¥80,537 ¥95,022 ¥106,224 $900,203 Income from discontinued operations 2,606 2,035 5,500 46,610 Net income- 83,143 97,057 111,724 946,814 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds-Due December 2011 – – (8) (68) Diluted net income ¥83,143 ¥97,057 ¥111,716 $946,746
Yen U.S. Dollars 2005 2006 2007 2007 Earnings per share: Basic: Income from continuing operations ¥109.11 ¥129.56 ¥145.56 $1.23 Income from discontinued operations, net of tax 3.53 2.77 7.54 0.06 Net income 112.64 132.33 153.10 1.30 Diluted: Income from continuing operations ¥109.11 ¥129.56 ¥144.41 $1.22 Income from discontinued operations, net of tax 3.53 2.77 7.48 0.06 Net income 112.64 132.33 151.89 1.29
16. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Policy However, Ricoh does not expect any counterparties to fail to meet their Ricoh enters into various derivative financial instrument contracts in obligations because these counterparties are financial institutions with the normal course of business in connection with the management of satisfactory credit ratings. Ricoh utilizes a number of counterparties to its assets and liabilities. minimize the concentration of credit risk. Ricoh uses derivative instruments to reduce risk and protect market Foreign Exchange Risk Management value of assets and liabilities in conformity with the Ricoh’s policy. Ricoh conducts business on a global basis and holds assets and Ricoh does not use derivative financial instruments for trading or liabilities denominated in foreign currencies. Ricoh enters into foreign speculative purposes, nor is it a party to leveraged derivatives. exchange contracts and foreign currency options to hedge against the All derivative instruments are exposed to credit risk arising from the potentially adverse impacts of foreign currency fluctuations on those inability of counterparties to meet the terms of the derivative contracts. assets and liabilities denominated in foreign currencies.
57 ANNUAL REPORT 2007 17. COMMITMENTSANDCONTINGENTLIABILITIES qualifying ascashflowhedgesareincludedinaccumulatedother Changes inthefairvalueofderivativeinstrumentsdesignatedand Cash FlowHedges swap matchthetermsofhedgeddebtobligations. March 31,2005,2006and2007asthecriticaltermsofinterestrate excluded fromtheassessmentofhedgeeffectivenessforyearsended income. Thereisnohedgingineffectivenessnorarenetgainsorlosses included inother(income)expensesontheconsolidatedstatementsof hedged itemsdesignatedandqualifyingasfairvaluehedgesare Changes inthefairvalueofderivativeinstrumentsandrelated Fair Value Hedges fluctuations oninterestofitsoutstandingdebt. potential adverseimpactsofchangesinfairvalueorcashflow Ricoh entersintointerestrateswapagreementstohedgeagainstthe Interest RateRiskManagement follows; have leasetermsinexcessofoneyearasMarch31,2007are The minimumrentalpaymentsrequiredunderoperatingleasethat and equipment. cancelable operatingleaseagreementsforofficespaceandmachinery 31, 2005,2006and2007,respectively, undercancelableandnon- and ¥40,722million($345,102thousand)fortheyearsendedMarch Ricoh maderentalpaymentstotaling¥39,000million,¥42,046million ($9,254 thousand). guarantees includingemployeeshousingloansof¥1,092million As ofMarch31,2007,Ricohwasalsocontingentlyliableforcertain thousand). equipment andotherassetsaggregating¥6,734million($57,068 commitments foracquisitionorconstructionofproperty, plantand As ofMarch31,2007,Ricohhadoutstandingcontractual er nigMrh3 iloso e U.S.Dollars MillionsofYen Years endingMarch31 the consolidatedstatementofincome. value oftheseinstrumentsareincludedinother(income)expenseson and liabilitiesdenominatedinforeigncurrencies.Changesthefair to reducetheriskrelatingvariabilityinexchangeratesonassets Derivative instrumentsnotdesignatedashedgingareheld Undesignated DerivativeInstruments as ofMarch31,2007. thousand) ofthebalanceaccumulatedothercomprehensiveincome expenses duringthenext12monthsapproximately¥23million($195 Ricoh expectsthatitwillreclassifyintoearningsthroughother interest rateswapmatchthetermsofhedgeddebtobligations. ended March31,2005,2006and2007asthecriticaltermsof losses excludedfromtheassessmentofhedgeeffectivenessforyears loans ispaid.Therenohedgingineffectivenessnorarenetgainsor These amountsarereclassifiedintoearningsasinterestonthehedged comprehensive income(loss)ontheconsolidatedbalancesheets. 0261552,076 61,195 101,941 142,559 6,145 107,746 7,221 $169,966 12,029 financial positionortheresultsofoperationsRicoh. 16,822 12,714 from suchlitigationwillnotmateriallyaffecttheconsolidated ¥19,702 the opinionofmanagement,ultimateliability, ifany, resulting parties tolitigationinvolvingroutinematters,suchaspatentrights.In As ofMarch31,2007,theCompanyandcertainitssubsidiarieswere T 2013 andthereafter 2012 2011 2010 2009 2008 tl¥463$632,483 ¥74,633 otal ANNUAL REPORT2007 Thousands of 58
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers 18. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
(a) Cash and cash equivalents, Time deposits, Trade (d) Long-term indebtedness receivables, Short-term borrowings, The fair value of each of the long-term indebtedness instruments is Current maturities of long-term indebtedness, Trade based on the quoted price in the most active market or the present value of future cash flows associated with each instrument discounted payables and Accrued expenses using the current borrowing rate for similar instruments of comparable The carrying amounts approximate fair values because of the short maturity. maturities of these instruments. (e) Interest rate swap agreements (b) Marketable securities and Investment securities The fair value of interest rate swap agreements is estimated by The fair value of the marketable securities and investment securities is obtaining quotes from brokers. principally based on quoted market price. (f) Foreign currency contracts and Foreign currency (c) Installment loans The fair value of installment loans is based on the present value of options future cash flows using the current rate for similar instruments of The fair value of foreign currency contracts and foreign currency comparable maturity. options is estimated by obtaining quotes from brokers. The estimated fair value of the financial instruments as of March 31, 2006 and 2007 is summarized as follows:
Millions of Yen Thousands of U.S. Dollars 2006 2007 2007 Carrying Estimated Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Amount Fair Value Marketable securities and Investment securities ¥ 36,581 ¥ 36,581 ¥ 75,013 ¥ 75,013 $ 635,703 $ 635,703 Installment loans 52,295 52,404 52,648 52,697 446,169 446,585 Long-term indebtedness (195,626) (195,731) (236,801) (229,981) (2,006,788) (1,948,992) Interest rate swap agreements, net 1,175 1,175 751 751 6,364 6,364 Foreign currency contracts, net (1,147) (1,147) 633 633 5,364 5,364 Foreign currency options, net (270) (270) (2) (2) (17) (17)
Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
19. SEGMENT INFORMATION
The operating segments presented below are the segments of Ricoh for cameras. which separate financial information is available and for which a The following tables present certain information regarding Ricoh’s measure of profit or loss is evaluated regularly by Ricoh’s management operating segments and operations by geographic areas for the years in deciding how to allocate resources and in assessing performance. ended March 31, 2005, 2006 and 2007. During the year ended March The accounting policies of the segments are substantially the same as 31, 2007, a subsidiary of the Company sold its content distribution those described in the summary of significant accounting policies, as business. As a result of such sale, sales and operating income of such discussed in Note 2. business of ¥6,702 million and ¥4,397 million, ¥5,852 million and Ricoh’s operating segments are comprised of Office Solutions, ¥3,430 million and ¥1,487 million ($12,602 thousand) and ¥865 including copiers and related supplies, communications and million ($7,331 thousand) were reclassified as a discontinued information systems, Industrial Products, including thermal media operation and was excluded from the segment data for all periods in and semiconductors, and Other, including optical discs and digital accordance with SFAS 144.
59 ANNUAL REPORT 2007 (a) Operating Segment Information Customers Thousands of Our Shareholders and Our Shareholders
Millions of Yen U.S. Dollars To 2005 2006 2007 2007 Sales: Office Solutions ¥1,531,428 ¥1,637,228 ¥1,774,467 $15,037,856 Industrial Products 121,914 123,200 138,112 1,170,441 Other 156,570 151,374 161,071 1,365,008 Intersegment transaction (2,506) (2,564) (4,725) (40,042) Highlights Consolidated ¥1,807,406 ¥1,909,238 ¥2,068,925 $17,533,263
Operating expenses: Office Solutions ¥1,335,059 ¥1,434,279 ¥1,549,156 $13,128,441 Industrial Products 121,872 124,108 135,164 1,145,458 Other 165,126 148,692 158,868 1,346,339 Intersegment transaction (2,475) (2,594) (4,727) (40,059) Unallocated expense 56,715 56,169 56,084 475,288
Consolidated ¥1,676,297 ¥1,760,654 ¥1,894,545 $16,055,466 Business Strategy
Operating income: Office Solutions ¥196,369 ¥202,949 ¥225,311 $1,909,415 Industrial Products 42 (908) 2,948 24,983 Other (8,556) 2,682 2,203 18,669 Elimination and unallocated expense (56,746) (56,139) (56,082) (475,271) Consolidated ¥131,109 ¥148,584 ¥174,380 $1,477,797
Other income(expenses) ¥ (126) ¥ 4,182 ¥ 139 $ 1,178 Corporate Governance Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates ¥130,983 ¥152,766 ¥174,519 $1,478,975
Thousands of Millions of Yen U.S. Dollars CSR 2005 2006 2007 2007
Total assets: Management Environmental Office Solutions ¥1,358,136 ¥1,426,635 ¥1,570,757 $13,311,500 Industrial Products 72,406 84,595 93,346 791,068 Other 125,278 114,925 112,255 951,314 Elimination (10,174) (2,088) (1,327) (11,246) Corporate assets 408,023 417,116 468,375 3,969,280 Consolidated ¥1,953,669 ¥2,041,183 ¥2,243,406 $19,011,915 Brand Strategy Expenditure for segment assets: Office Solutions ¥70,638 ¥ 90,383 ¥72,465 $614,110 Industrial Products 8,509 7,451 8,580 72,712 Other 3,449 2,361 2,630 22,288 Corporate assets 2,103 1,854 2,125 18,008 Consolidated ¥84,699 ¥102,049 ¥85,800 $727,119 Financial Section
ANNUAL REPORT 2007 60 Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Depreciation: Office Solutions ¥53,439 ¥57,326 ¥62,862 $532,729 Industrial Products 7,450 6,631 6,099 51,686 Other 2,632 2,352 2,072 17,559 Corporate assets 3,272 1,156 1,399 11,856 Consolidated ¥66,793 ¥67,465 ¥72,432 $613,831
Unallocated expense represents expenses for corporate headquarters. Intersegment sales are not separated by operating segment because they are immaterial. Corporate assets consist primarily of cash and cash equivalents and marketable securities maintained for general corporate purposes.
(b) Geographic Information Sales which are attributed to countries based on location of customers and long-lived assets by location for the years ended March 31, 2005, 2006 and 2007 are as follows: Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Sales: Japan ¥ 966,273 ¥ 966,224 ¥1,002,251 $ 8,493,653 The Americas 325,597 387,412 426,453 3,614,008 Europe 408,906 434,800 507,158 4,297,949 Other 106,630 120,802 133,063 1,127,653 Consolidated ¥1,807,406 ¥1,909,238 ¥2,068,925 $17,533,263
Property, plant and equipment : Japan ¥ 195,052 ¥210,973 ¥ 199,308 $1,689,051 The Americas 17,744 18,111 18,102 153,407 Europe 25,352 26,783 28,345 240,212 Other 9,262 12,376 18,913 160,280 Consolidated ¥ 247,410 ¥268,243 ¥ 264,668 $2,242,949
61 ANNUAL REPORT 2007 te xess¥ 16 ¥4,182 ¥(126) T Income beforeincometaxes,minorityinterests,equityinearningsof Other expenses Operating income: Operating expenses: Sales: Japanese publiccompanyissubjectto. discloses thisinformationassupplementalinlightofthedisclosurerequirementsJapaneseSecuritiesandE 2007. InadditiontothedisclosurerequirementsunderSFAS No.131,“DisclosureaboutSegmentsofanEnterpriseandRelatedIn The followinginformationshowsnetsalesandoperatingincomerecognizedbygeographicoriginfortheyearsendedMarch31,20 (c) AdditionalInformation otal assets: te 63979,102 ¥2,041,183 417,116 235,897 (152,438) 66,319 ¥1,953,669 408,023 240,726 (143,410) 228,568 206,979 15,005 21,412 ¥148,584 11,906 15,268 ¥131,109 24,372 1,100 13,810 185,283 417,341 ¥1,760,654 (2,657) 162,042 ¥1,676,297 378,108 391,271 Consolidated Corporate assets 316,651 Elimination (530,311) Other ¥1,909,238 Europe (490,002) The Americas ¥1,807,406 (529,211) Consolidated (492,659) Elimination ofintersegmentprofit Other Europe The Americas Consolidated Elimination ofintersegmentsales Other Europe The Americas Consolidated Elimination ofintersegmentsales T Other T Europe T The Americas T aa 11710¥1,220,780 ¥1,187,190 ¥95,799 ¥83,678 ¥152,766 ¥130,983 ¥1,310,233 ¥1,296,335 Japan affiliates andcumulativeeffectofaccountingchange Japan Japan Japan tl1398200,288 173,948 438,753 415,643 393,376 330,461 1,406,032 1,380,013 otal otal otal otal nesget8,4 104,045 4,449 89,647 3,310 7,630 7,486 413,087 392,216 Intersegment Intersegment Intersegment Intersegment xenlcsoes8,0 96,243 84,301 434,304 412,333 385,746 322,975 External customers External customers External customers xenlcsoes¥ 9777¥992,945 ¥987,797 External customers 052006 2005 iloso e U.S.Dollars Millions ofYen 1,1 $934,864 ¥ 110,314 10663 $8,700,534 ¥1,026,663 22346$19,011,915 ¥2,243,406 $10,865,127 ¥1,282,085 $16,055,466 ¥1,894,545 $11,963,161 $17,533,263 ¥1,411,653 ¥2,068,925 7,1 $1,478,975 $1,178 ¥ 174,519 $1,477,797 ¥ 139 ¥ 174,380 ,2,6 12,898,025 1,521,967 1948 (1,520,915) (179,468) (5,551,898) (655,124) (5,619,847) (663,142) 0,0 4,306,780 3,637,814 508,200 3,610,246 429,262 426,009 4,197,492 495,304 6,7 3,969,280 860,593 468,375 2,667,924 2,169,907 101,550 314,815 256,049 2,131,237 4,054,068 3,458,898 251,486 478,380 408,150 2,280,025 1,364,322 915,703 269,043 160,990 4,337,246 108,053 511,795 072007 2007 ANNUAL REPORT2007 757148,788 283,178 178,915 17,557 33,415 21,112 808 (67,949) (8,018) ,5 27,568 3,253 ,9 30,466 3,595 xchange Law, whicha formation”, Ricoh 05, 2006and Thousands of 62
CSR To Our Shareholders and Financial Section Brand Strategy Corporate Governance Business Strategy Highlights Environmental Management Customers Intersegment sales between geographic areas are made at cost plus profit. Operating income by geographic area is sales less expense related to the area’s operating revenue. No single customer accounted for 10% or more of the total revenues for the periods ended as of March 31, 2005, 2006 and 2007.
20. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME The following amounts were charged to selling, general and administrative expenses for the years ended March 31, 2005, 2006 and 2007: Thousands of Millions of Yen U.S. Dollars 2005 2006 2007 2007 Research and development costs ¥110,471 ¥110,381 ¥114,985 $974,449 Advertising costs 16,441 15,725 14,456 122,508 Shipping and handling costs 14,043 16,058 19,280 163,390
21. SUBSEQUENT EVENT On June 1, 2007, Ricoh and IBM Corporation (“IBM”) completed formation of a joint venture company based on IBM’s Printing Systems Division to provide output solutions for production printing area. Initially, Ricoh acquired 51% of the joint venture. Ricoh will progressively acquire the remaining 49% over the next three years as the joint venture becomes a fully owned subsidiary. Ricoh paid $725 million (including management fee $35 million) in cash at the closing. The cash payment was consideration for the initial 51% acquisition of the joint venture by Ricoh as well as a prepayment for the remaining 49% to be acquired and certain royalties and services to be provided by IBM to InfoPrint Solutions Company. Final consideration for this transaction will be determined at the end of the three-year period based upon the participation in the profits and losses recorded by the equity partners.
63 ANNUAL REPORT 2007 Management's Report on Internal Control Over Financial Reporting
Ricoh's management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Securities Exchange Act of 1934, as amended. Ricoh's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Ricoh; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Ricoh are being made only in accordance with authorizations of management and directors of Ricoh; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Ricoh's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with internal control policies or procedures may deteriorate.
Ricoh's management assessed the effectiveness of Ricoh's internal control over financial reporting as of March 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management's assessment included evaluating the design of Ricoh's internal control over financial reporting and testing of the operational effectiveness of Ricoh's internal control over financial reporting.
Based on such assessment, management concluded that, as of March 31, 2007, Ricoh's internal control over financial reporting was effective based on the criteria issued by COSO.
KPMG AZSA & Co., an independent registered public accounting firm, has issued an audit report on our assessment of the effectiveness of Ricoh's internal control over financial reporting as of March 31, 2007.
Shiro Kondo President and Chief Executive Officer
Zenji Miura Corporate Executive Vice President and Chief Financial Officer
June 29,2007
ANNUAL REPORT 2007 64 Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Ricoh Company, Ltd.:
We have audited the accompanying consolidated balance sheets of Ricoh Company, Ltd. (a Japanese corporation) and subsidiaries as of March 31, 2006 and 2007, and the related consolidated statements of income, shareholders’ investment and cash flows for each of the years in the three-year period ended March 31, 2007, expressed in yen. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ricoh Company, Ltd. and subsidiaries as of March 31, 2006 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2007, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Ricoh Company, Ltd. and subsidiaries’ internal control over financial reporting as of March 31, 2007, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 29, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.
As described in note 2 to the consolidated financial statements, the Company changed its method of quantifying errors in 2006 in accordance with Securities and Exchange Commission Staff Accounting Bulletin No.108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
The accompanying consolidated financial statements as of and for the year ended March 31, 2007 have been translated into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial statements, expressed in yen, have been translated into dollars on the basis set forth in Note 2 to the consolidated financial statements.
Tokyo, Japan June 29, 2007
65 ANNUAL REPORT 2007 Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Ricoh Company, Ltd.: Customers Our Shareholders and Our Shareholders
We have audited management's assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that To Ricoh Company, Ltd. (a Japanese corporation) and subsidiaries maintained effective internal control over financial reporting as of March 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit. Highlights
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial Business Strategy reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Corporate Governance Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that Ricoh Company, Ltd. and subsidiaries maintained effective internal control over financial reporting CSR as of March 31, 2007, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Ricoh Company, Ltd. and subsidiaries Environmental Management Environmental maintained, in all material respects, effective internal control over financial reporting as of March 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ricoh Company, Ltd. and subsidiaries as of March 31, 2006 and 2007, and the related consolidated statements of income, shareholders’
investment and cash flows for each of the years in the three-year period ended March 31, 2007, expressed in yen, and our report dated June 29, 2007 Brand Strategy expressed an unqualified opinion on those consolidated financial statements.
Tokyo, Japan June 29, 2007 Financial Section
ANNUAL REPORT 2007 66 Corporate Social Responsibility
Corporate Philosophy/Management Philosophy/Ricoh General Principles on the Environment
The Ricoh Group’s corporate philosophy was Ricoh introduced the Ricoh General Principles on the established by its founder, Environment, which are based on its management philosophy, in 1992 and revised them in 1998 and 2004. Kiyoshi Ichimura. He explained the philosophy as These principles show Ricoh’s commitment to sustain- follows: Everyone starts by loving himself/herself. As able management and are widely disclosed to the public time passes, however, this feeling grows and through various media, including websites. Based expands to include all people, plants, and animals in on these principles, Ricoh Group companies have the world. This philosophy drives the Ricoh Group independently established and managed their own toward better sustainable management. rules regarding the environment according to their business type. Corporate Philosophy Ricoh Group Environmental Principles Love your neighbor Love your country Love your work Basic Policy –The Spirit of Three Loves– As a global citizen, Ricoh group is obligation-con- scious of environmental conservation. In addition, we strive to honor our environmental responsibilities and concentrate company-wide efforts in environmental conservation activities, implementation of which we believe to be as significant as our business opera- Ricoh’s management philosophy was formally tions. introduced in 1986 based on the Company’s corporate philosophy in order to establish and nurture the corporate culture and system so that survival in a time filled with increasing change, Action Guidelines information-oriented societies, diverse values, and more intense competition could be ensured. 1. Complying with domestic and international regulations as a mat- ter of course, we dutifully fulfill our responsibilities, setting goals toward minimizing the environmental consequences of business Management Philosophy practice in keeping up with broader social expectations. In ach- ieving these goals, we endeavor to create economic values.
2. We take steps to develop and promote technology that will en- Our Purpose able us to reduce negative environmental consequences, and proactively utilize such innovations. To constantly create new value 3. In all our business activities, we strive for awareness of environ- for the world at the interface of people mental impact, thereby involving all Ricoh employees in imple- and information menting continuous improvements to prevent pollution, use ener- gy and natural resources more efficiently.
4. To provide our products and services, we spare no effort to re- Our Goal duce environmental effects in all stages of product lifecycle, from procurement, manufacturing, sale, and logistics, to usage, recy- To be a good global corporate citizen cling, and disposal. with reliability and appeal 5. We at Ricoh wish each employee to be attentive to a broader range of social issues and mindful of enhancing environmental awareness through proactive learning processes, designed to commit the employee to environmental conservation activities Our Principles according to his or her responsibility.
To think as an entrepreneur 6. Coordinating closely with every country and region, we contri- To put ourselves in the other bute to wider society, for whom we actively disclose information, person’s place participate, and assist in environmental conservation activities. To find personal value in our work
Established in February,1992; revised in October, 2004.
67 ANNUAL REPORT 2007 Corporate Social Responsibility
The Ricoh Group CSR Charter
As the Ricoh Group’s role and influence as activities, the Ricoh Group now covers was established on January 1, 2004 in a global citizen and a member of society many countries around the world and is response to the need for common values increases, so too does its social responsibilities. made up of people with various values. The and activity principles that can be shared As a result of the enhanced globalization Ricoh Group CSR Charter, which enshrines globally across the Group. and group management of its corporate the Group’s corporate activity principles,
To grow as a respected enterprise, the Ricoh Group must fully discharge its corporate social responsibility (CSR) from a consistent global perspective and throughout every aspect of its operations. To ensure this, the following principles are to be observed, with the proper social awareness and understanding, compliant with both the letter and the spirit of national laws and the rules of international conduct.
Integrity in Corporate Activities Respect for People 1. Every company in the Ricoh Group will develop and 6. Every company in the Ricoh Group will, quite apart from corpor- provide useful products and services, with high quality, ate group activities, maintain a working safety, reliability and ease of use, while maintaining se- environment that is safe and that makes it easier for its staff to curity of information and giving proper consideration to do perform their duties, respecting their richly individual charac- the environment. teristics and encouraging their autonomy and creativity. 2. Every company in the Ricoh Group will compete fairly, 7. Every company in the Ricoh Group will respect the rights of openly and freely, maintaining normal and healthy rela- all those connected with it, and will seek to create a cheer- tionships with political institutions, government adminis- ful working environment, free of discrimination. tration, citizens and organizations. 8. No company in the Ricoh Group will permit forced labor or child la- 3. Every company in the Ricoh Group will take bor, and none will tolerate the infringement of human rights. responsibility for managing and safeguarding its own information and that of its customers. Harmony with Society 9. Every company in the Ricoh Group will, as a good corpor- Harmony with the Environment ate citizen, actively engage in activities that contribute to 4. Every company in the Ricoh Group will take society. responsibility, as a citizen of the world, working 10. Every company in the Ricoh Group will respect the culture voluntarily and actively to preserve the environment. and customs of its country or region, and will operate so 5. Every company in the Ricoh Group, and all employees of as to contribute to their development. each company, will seek to implement technological in- 11. Every company in the Ricoh Group will engage in the fullest pos- novations that reflect environmental concerns and will sible communications with society, seeking actively to pro- participate in ongoing activities to preserve the environ- vide the proper and unbiased disclosure of ment. corporate information.
Ricoh Group Code of Conduct
Ricoh established the Ricoh Group Code together with the establishment of the of Conduct by revising the Ricoh Business Ricoh Group CSR Charter. Please refer to Code of Conduct to reflect more responsible Ricoh’s Web site for details. corporate activities that achieve harmony with society and the global environment
ANNUAL REPORT 2007 68 Ricoh’s Global Network As of March 31, 2007
Japan Mexico Portugal Ricoh Elemex (Shenzhen) Co., Ltd. Ricoh Mexicana, S.A. de C.V. Ricoh Portugal, Unipessoal, Lda Shanghai Ricoh office Equipment Co., Ltd. Production Panama Ireland Ricoh Panama, S.A. NRG Gestetner Ireland Limited Tohoku Ricoh (Fuzhou) Printing Tohoku Ricoh Co., Ltd. Products Co., Ltd. Hasama Ricoh, Inc. Puerto Rico Israel Ricoh Optical Industries Co., Ltd. Ricoh Puerto Rico, Inc. Gestetner (Israel) Limited Korea Sindo Ricoh Co., Ltd. Ricoh Unitechno Co., Ltd. United States Italy Ricoh Elemex Corporation Ricoh Corporation* Ricoh Italia S.p.A. Sales and Other Ricoh Keiki Co., Ltd. Ricoh Finance Corporation NRG Italia S.p.A. Ricoh Microelectronics Co., Ltd. Ricoh Innovations, Inc. Netherlands Australia Ricoh Printing Systems Ltd. Ricoh Latin America, Inc. Ricoh Europe B.V.** Ricoh Australia Pty. Ltd. Lanier (Australia) Pty. Ltd. Lanier Worldwide, Inc.* **After April 1, 2007, Ricoh Europe PLC Sales and Other *After April 1, 2007, Ricoh Americas Corporation Ricoh Nederland B.V. China Ricoh Tohoku Co., Ltd. Uruguay Ricoh Finance Nederland B.V. Ricoh China Co., Ltd. Ricoh Chubu Co., Ltd. Gestetner Limitada NRG Rex-Rotary B.V. Ricoh Electronic Technology Ltd. Ricoh Kansai Co., Ltd. Ricoh South America Distribution NRG Benelux B.V. (China) Ricoh Chugoku Co., Ltd. Center S.A. Ricoh Software Technology Ricoh Kyushu Co., Ltd. Norway Ricoh Norge A.S. (Shanghai) Co., Ltd. Ricoh Sales Co., Ltd. Ricoh Electroniuc Devices Shanghai Hokkaido Ricoh Co., Ltd. Europe, Africa, and Poland Co., Ltd. Ricoh Technosystems Co., Ltd. Ricoh Polska Sp.zo.o. Ricoh Software Research Center in Ricoh Leasing Company, Ltd. the Middle East Russia Beijing Ricoh Logistics System Co., Ltd. Mitsui-Ricoh CIS Ltd. Ricoh Thermal Media (Wuxi) Co., Production South Africa Ltd. The Americas France NRG Gestetner South Africa (Pty) Ricoh Microelectronics (Shenzhen) Ricoh Industrie France S.A.S. Ltd. Co., Ltd. United Kingdom Spain Hong Kong Production Ricoh UK Products Ltd. Ricoh España S.L. Ricoh Hong Kong Ltd. Mexico Ricoh Wellingborough Products NRG Group Spain S.A. Ricoh Asia Industry Ltd. Ricoh Industrial de Mexico, S.A. Ricoh Component (H.K.) Ltd. Ltd. Sweden de C.V. GR Advanced Materials Ltd. NRG Scandinavia AB India United States Ricoh India Limited Switzerland Ricoh Electronics, Inc. Sales and Other Lanier (Schweiz) AG Malaysia Austria Ricoh (Malaysia) Sdn. Bhd. United Kingdom Sales and Other Ricoh Austria GmbH New Zealand NRG Gestetner Austria GmbH Ricoh UK Ltd. Argentina NRG Group PLC Ricoh New Zealand Limited Ricoh Argentina S.A. Belgium NRG Group UK Limited Philippines Brazil Ricoh Belgium NV Infotec Europe B.V. Ricoh (Philippines), Inc. Gestetner do Brazil S.A. NRG Belgium S.A. Singapore Canada Denmark Ricoh Asia Pacific Pte Ltd. Ricoh Canada Inc. NRG Scandinavia A/S Asia and Oceania Ricoh (Singapore) Pte Ltd. Chile Finland Thailand Lanier de Chile, S.A. Ricoh Finland Oy Production Ricoh (Thailand) Ltd. Colombia France China Taiwan Ricoh Colombia S.A. Ricoh France S.A.S. Ricoh Asia Industry (Shenzhen) Ltd. Ricoh Hong Kong Ltd. Costa Rica NRG France S.A. Ricoh Dianzhuang (Shenzhen) Taiwan Branch Ricoh Costa Rica, S.A. Rex-Rotary S.A. Electronics Co., Ltd. Germany Ricoh International (Shanghai) Co., Dominican Republic Ltd. Lanier Dominicana, S.A. Ricoh Deutschland GmbH NRG Deutschland GmbH Shanghai Ricoh Facsimile Co., Ltd. El Salvador Shanghai Ricoh Digital Equipment Ricoh El Salvador, S.A. de C.V. Guernsey Co., Ltd. NRG International Limited Guatemala Ricoh Electronic Technology Ltd. Ricoh Guatemala, S.A. Hungary (Beijing) Ricoh Hungary Kft.
69 ANNUAL REPORT 2007 Senior Management As of June 26,2007
Board of Directors Executive Officers Group Executive Officers
Representative Directors Chairman Makoto Hashimoto Masamitsu Sakurai Masamitsu Sakurai Yuji Inoue (Chairman of the board) President and CEO Shiroh Sasaki Shiro Kondo Shiro Kondo Peter E.Hart Directors Bernard Decugis Koichi Endo Corporate Executive Vice Presidents Hiroshi Tsuruga Masayuki Matsumoto Koichi Endo Norihisa Goto Katsumi Yoshida Masayuki Matsumoto Shunsuke Nakanishi Takashi Nakamura Katsumi Yoshida Mitsuhiko Ikuno Kazunori Azuma Takashi Nakamura Yoshihiro Niimura Zenji Miura Kazunori Azuma Michel De Bosschere Kiyoshi Sakai Zenji Miura Toshiaki Katayama Takaaki Wakasugi Kiyoshi Sakai Kunihiko Satoh Takuya Goto Thomas Salierno Corporate Senior Vice Presidents Kazuo Togashi Corporate Auditors Terumoto Nonaka Advisor Kohji Tomizawa Etsuo Kobayashi Shigekazu Iijima Haruo Nakamura Principal Advisor Kenji Matsuishi Kenji Hatanaka Hiroshi Hamada Takehiko Wada Hideko Kunii Hiroshi Kobayashi Susumu Ichioka Yoshimasa Matsuura Norio Tanaka
Corporate Vice Presidents Kiyoto Nagasawa Yutaka Ebi Hiroo Matsuda Hiroshi Adachi Kohji Sawa Sadahiro Arikawa Kenichi Kanemaru Daisuke Segawa Hisashi Takata Kenichi Matsubayashi Soichi Nagamatsu
ANNUAL REPORT 2007 70 Corporate Data
Ricoh Company, Ltd.
Corporate Headquarters 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 Shares Authorized 1,500,000,000 shares
Number of Shares Issued (as of March 31, 2007) 744,912,078 shares
Stock Listings Tokyo, Osaka, Nagoya, Fukuoka, Sapporo, Euronext Amsterdam, Frankfurt, Euronext Paris
Independent Public Accountants KPMG AZSA & Co.
Transfer Agent for Common Stock The Chuo Mitsui Trust and Banking Co., Ltd. 33-1, Shiba 2-chome, Minato-ku, Tokyo 105-8574, Japan
Depositary and Agent for American Depositary Receipts The Bank of New York 101 Barclay Street, 22 West New York, NY 10286, U.S.A. Tel: 212-815-3700 US toll free: 1-888-269-2377 (1-888-bny-adrs) Website: http://www.bnyadr.com
71 ANNUAL REPORT 2007 Ricoh Americas Corporation 5 Dedrick Place, West Caldwell, New Jersey 07006, U.S.A. Phone: +1-973-882-2000 Facsimile: +1-973-882-2506 http://www.ricoh-usa.com/
Ricoh Europe PLC 66 Chiltern Street, London W1U 4AG, United Kingdom Phone: +44-20-7465-1000 Facsimile: +44-20-7224-5740 http://www.ricoh-europe.com/
Ricoh Asia Pacific Pte Ltd. 260 Orchard Road #15-01/02 The Heeren, Singapore 238855 Phone :+65-830-5888 Facsimile: +65-830-5830 http://www.ricoh.com.sg/
Ricoh China Co., Ltd. 17F., Huamin Empire Plaza, No.728 Yan An West Road, Shanghai, China Phone: +86-21-5238-0222 Facsimile: +86-21-5238-2070 http://www.ricoh.com.cn/
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 as a color universal design due to its easy-to-see features based on careful color selection.