RNS Number:4128F
TDK Corporation
20 December 2002
Commission File No. 1-08346
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of December 2002
TDK CORPORATION
(Translation of registrant's name into English)
13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272, Japan
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.)
Form 20-F x Form 40-F _____
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2 (b) under the Securities Exchange Act of
1934.)
Yes No x
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2 (b). 82-____________ )
1
(Exhibit 1)
Interim Consolidated Financial Statements for the six-month-period ended
September 30, 2002
On December 17, 2002, this report was filed with the Director of the Kanto Local
Finance Bureau of the Ministry of Finance pursuant to the Securities and
Exchange Law of Japan.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TDK Corporation
(Registrant)
December 17, 2002 By: /s/ Seiji Enami
Seiji Enami
General Manager
Finance and Accounting Department
2
EXHIBIT 1
(FINANCIAL STATEMENTS)
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Consolidated balance sheets (Unaudited)
Yen (Millions)
September 30, September 30, March 31,
ASSETS 2001 2002 2002
Current assets:
Cash and cash equivalents Y126,709 Y147,822 Y125,761
Trade receivables:
Notes 8,148 8,178 8,219
Accounts 123,577 132,918 138,378
Allowance for doubtful (2,721) (3,300) (3,770)
receivables
Net trade receivables 129,004 137,796 142,827
Inventories 117,409 83,714 91,149
Income tax receivables 1,453 1,889 8,289
Prepaid expenses and other current 30,201 35,079 31,180
assets
Total current assets 404,776 406,300 399,206
Investments and advances (Notes 2 and 5) 22,173 19,309 24,265
Property, plant and equipment, at cost:
Land 22,569 23,611 23,739
Buildings 180,519 180,385 183,450
Machinery and equipment 497,858 496,859 507,589
Construction in progress 31,898 8,989 13,301
732,844 709,844 728,079
Less accumulated depreciation 455,367 465,804 462,489
Net property, plant and 277,477 244,040 265,590
equipment
Goodwill 10,830 10,712 11,500
Intangible assets 7,772 6,796 7,265
Deferred income taxes 20,483 36,021 37,021
Other assets 5,424 4,496 5,063
Y748,935 Y727,674 Y749,910
See accompanying notes to consolidated financial statements.
-2-
Yen (Millions)
September 30, September 30, March 31,
2001 2002 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt Y2,912 Y1,463 Y1,655
Current installments of long-term debt 742 371 657
Trade payables:
Notes 732 663 849
Accounts 48,851 55,233 51,760
Accrued salaries and wages 11,838 12,452 11,247
Other accrued expenses 18,794 13,779 12,510
Income taxes 2,730 2,484 2,546
Other current liabilities 20,267 13,238 29,117
Total current liabilities 106,866 99,683 110,341
Long-term debt, excluding current installments 612 255 459
Retirement and severance benefits 33,294 58,318 49,992
Deferred income taxes 9 398 598
Total liabilities 140,781 158,654 161,390
Minority interests 4,220 4,425 4,593
Stockholders' equity:
Common stock
Authorized 480,000,000 shares;
Issued 133,189,659 shares at September 30, 2001
and 2002, and March 31, 2002 32,641 32,641 32,641
Additional paid-in capital 63,051 63,051 63,051
Legal reserve (Note 3) 15,710 15,955 15,683
Retained earnings (Note 3) 551,705 521,859 520,143
Accumulated other comprehensive income (loss) (Note 4) (55,591) (64,100) (43,999)
Treasury stock at cost;
328,455 shares at September 30,
2001,
555,567 shares at September 30,
2002 and
330,083 shares at March 31, 2002 (3,582) (4,811) (3,592)
Total stockholders' equity 603,934 564,595 583,927
Commitments and contingent liabilities (Note 6)
Y748,935 Y727,674 Y749,910
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Consolidated statements of income (Unaudited)
Yen (Millions)
Six months Six months
ended September ended September Year ended
30, 2001 30, 2002 March 31, 2002
Net sales Y270,786 Y296,380 Y570,511
Cost of sales 213,309 223,738 464,620
Gross profit 57,477 72,642 105,891
Selling, general and administrative expenses 60,288 59,196 123,741
Restructuring cost - 3,427 25,872
Operating income (loss) (2,811) 10,019 (43,722)
Other income (deductions) :
Interest and dividend income 1,288 708 2,033
Interest expense (672) (198) (1,264)
Foreign exchange gain (loss) (514) (1,699) 618
Other - net (373) (1,194) (1,362)
(271) (2,383) 25
Income (loss) before income taxes (3,082) 7,636 (43,697)
Income taxes:
Current 1,786 223 (3,197)
Deferred (5,363) 2,533 (13,797)
(3,577) 2,756 (16,994)
Income (loss) before minority interests 495 4,880 (26,703)
Minority interests 1,337 (235) 932
Net income (loss) Y1,832 Y4,645 Y(25,771)
Amounts per share:
Yen (except number of common shares outstanding)
Basic and diluted net income (loss) per share Y13.78 Y34.98 Y(193.91)
Weighted average and diluted common shares outstanding in 132,940 132,802 132,900
thousands
Cash dividends paid (Note 3) Y30.00 Y20.00 Y60.00
See accompanying notes to consolidated financial statements.
Note: TDK adopted the Emerging Issues Task Force Issue 01-9 ("EITF 01-9"), "
Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)" from the fiscal year beginning April 1, 2002
and the prior year's consolidated financial statements have been restated for
the change, accordingly.
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Consolidated statements of stockholders' equity (Unaudited)
Yen (Millions)
Six months Six months
ended September ended September Year ended
30, 2001 30, 2002 March 31, 2002
Common stock:
Balance at beginning of period Y32,641 Y32,641 Y32,641
Balance at end of period 32,641 32,641 32,641
Additional paid-in capital:
Balance at beginning of period 63,051 63,051 63,051
Balance at end of period 63,051 63,051 63,051
Legal reserve (Note 3):
Balance at beginning of period 13,409 15,683 13,409
Transferred from retained earnings 2,301 272 2,274
Balance at end of period 15,710 15,955 15,683
Retained earnings (Note 3):
Balance at beginning of period 556,165 520,143 556,165
Net income (loss) 1,832 4,645 (25,771)
Cash dividends (3,991) (2,657) (7,977)
Transferred to legal reserve (2,301) (272) (2,274)
Balance at end of period 551,705 521,859 520,143
Accumulated other comprehensive income (loss) (Note 4):
Balance at beginning of period (24,851) (43,999) (24,851)
Other comprehensive income (loss) for the period, net of tax (30,740) (20,101) (19,148)
Balance at end of period (55,591) (64,100) (43,999)
Treasury stock:
Balance at beginning of period (2,666) (3,592) (2,666)
Acquisition of treasury stock (916) (1,219) (926)
Balance at end of period (3,582) (4,811) (3,592)
Total stockholders' equity Y603,934 Y564,595 Y583,927
Disclosure of comprehensive income (loss):
Net income (loss) for the period Y1,832 Y4,645 Y(25,771)
Other comprehensive income (loss) for the period, net of tax (30,740) (20,101) (19,148)
(Note 4)
Total comprehensive income (loss) for the period Y(28,908) Y(15,456) Y(44,919)
See accompanying notes to consolidated financial statements.
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Consolidated statements of cash flows (Unaudited)
Yen (Millions)
Six months Six months
ended September ended September Year ended
30, 2001 30, 2002 March 31, 2002
Cash flows from operating activities:
Net income (loss) Y1,832 Y4,645 Y(25,771)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 29,062 28,503 61,920
Loss on disposal of property and equipment 226 2,441 6,436
Deferred income taxes (5,363) 2,533 (13,797)
Loss (gain) on securities (117) 949 207
Changes in assets and liabilities:
Decrease in trade receivables 24,980 306 18,517
Decrease (increase) in inventories (3,218) 4,616 28,776
Increase (decrease) in trade payables (13,874) 5,451 (14,806)
Increase (decrease) in income taxes (16,838) 62 (17,181)
Other - net 5,752 (5,436) (2,797)
Net cash provided by operating activities 22,442 44,070 41,504
Cash flows from investing activities:
Capital expenditures (38,094) (14,472) (58,777)
Proceeds from sale of investments 326 11 323
Payment for purchase of investments (1,859) (30) (3,116)
Other - net 2,568 1,146 3,667
Net cash used in investing activities (37,059) (13,345) (57,903)
Cash flows from financing activities:
Proceeds from long-term debt 46 35 46
Repayment of long-term debt (459) (439) (777)
Decrease in short-term debt (1,973) (60) (3,568)
Payment to acquire treasury stock (916) (1,219) (926)
Dividends paid (3,991) (2,657) (7,977)
Net cash usedin financing activities (7,293) (4,340) (13,202)
Effect of exchange rate changes on cash and cash equivalents (2,298) (4,324) 4,445
Net increase (decrease) in cash and cash equivalents (24,208) 22,061 (25,156)
Cash and cash equivalents at beginning of period 150,917 125,761 150,917
Cash and cash equivalents at end of period Y126,709 Y147,822 Y125,761
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Summary of Significant Accounting Policies
(a) Financial Statements
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The consolidated financial statements include the accounts of the
Company and all its subsidiaries.
The segment information is presented in accordance with the accounting
principles generally accepted in Japan. The segment information required to be
disclosed in financial statements under accounting principles generally accepted
in the United States of America is not presented in the accompanying
consolidated financial statements.
In the opinion of management, all adjustments necessary for a fair presentation
have been included. The results of operations for interim periods are not
necessarily indicative of the operating results which may be expected for any
other interim period or for the year. For further information, refer to the
March 31, 2002 consolidated financial statements and notes thereto included in
TDK Corporation and Subsidiaries Annual Report 2002. Consolidated financial
statements ended March 31, 2002 are audited while consolidated financial
statements ended September 30, 2001 and 2002 are unaudited.
(b) Consolidation Policy
The consolidated financial statements include the accounts of TDK and its
subsidiaries. The investments in affiliates in which TDK's ownership is twenty
percent (20%) to fifty percent (50%) are accounted for by the equity method.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
(c) Cash Equivalents
Cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
(d) Marketable Securities
TDK classifies its debt and equity securities into one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are bought
and held principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities in which TDK has the ability
and intent to hold the security until maturity. All securities not included in
trading or held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Held-to-
maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities are included in earnings. Unrealized holding gains
and losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component of other
comprehensive income until realized.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally by the average method.
(f) Depreciation
Depreciation of property, plant and equipment is principally computed by the
declining-balance method for assets located in Japan and for certain foreign
subsidiaries and by the straight-line method for assets of other foreign
subsidiaries based on the following estimated useful lives:
Buildings 3 to 60 years
Machinery and equipment 2 to 22 years
(g) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards.
(h) Retirement and Severance Benefits
TDK accounts for and provides disclosures about its defined benefit pension and
retirement plans in accordance with Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions" and with Statement of Financial
Accounting
-7-
Standards No. 132, "Employers' Disclosures about pensions and Other
Postretirement Benefits".
(i) Advertising Costs
Advertising costs are expensed as incurred.
(j) Foreign Currency Translation
The assets and liabilities of TDK's subsidiaries located outside Japan are
translated into Japanese yen at the rates of exchange prevailing at the balance
sheet date. Revenue and expense items are translated at the average exchange
rate during the year.
(k) Use of Estimates
Management of TDK has made a number of estimates and assumptions relating to the
reporting of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles in the United States of
America. Actual results could differ from those estimates.
(l) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
TDK's long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows (undiscounted and without interest charges) expected to
be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
(m) Goodwill and Other Intangible Assets
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations",
and Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill
and Other Intangible Assets". SFAS 141 requires the use of the purchase method
of accounting for business combinations. SFAS 141 also specifies the types of
acquired intangible assets that are required to be recognized and reported
separately from goodwill and those acquired intangible assets that are required
to be included in goodwill. Under SFAS 142 goodwill is no longer amortized, but
instead is tested for impairment at least annually. Intangible assets are
amortized over their respective estimated useful lives and reviewed for
impairment in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". Any recognized intangible asset determined to have an
indefinite useful life will not be amortized, but instead is tested for
impairment until its life is determined to no longer be indefinite.
TDK adopted early the provisions of SFAS 142 on April 1, 2001.
(n) Derivative Financial Instruments
TDK and certain of its subsidiaries use derivative financial instruments, such
as currency swaps, currency option contracts and forward foreign exchange
contracts, to limit their exposure to fluctuations in foreign exchange rates and
interest rates.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". In June 2000, the Financial Accounting
Standards Board also issued Statement of Financial Accounting Standards No. 138
("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133". Both standards establish
accounting and reporting standards for derivative instruments and for hedging
activities, and require that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. SFAS 133, as amended, and 138 are effective for fiscal years beginning
after June 15, 2000. TDK adopted SFAS 133 and 138 as of April 1, 2001. The
cumulative effect adjustment upon the adoption of SFAS 133 and 138, net of the
related income tax effect, resulted in a decrease to other comprehensive income
of approximately Y90 million. This amount was reclassified from other
comprehensive income to earnings during the year ended March 31, 2002. TDK has
not elected to apply hedge accounting subsequent to the adoption of SFAS 133 and
138, and changes in the fair value of derivatives are recognized in earnings in
the period of the changes.
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(o) Net Income per Share
Basic net income per share has been computed by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
during each year. Diluted net income per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or any other arrangement resulted in
the issuance of common stock that participates in distribution of income of TDK.
(p) Revenue Recognition
TDK recognizes revenue when persuasive evidence of an arrangement including
title transfer exists, delivery has occurred, the sales price is fixed or
determinable, and collectibility is probable.
(q) Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)
In May 2000, the Emerging Issues Task Force reached a final consensus on
Issue 00-14 ("EITF 00-14"), "Accounting for Certain Sales Incentives". EITF
00-14 addresses accounting and reporting standards for sales incentives such as
coupons or rebates that are provided by vendors or manufacturers and are
exercisable by customers at the point of sale.
In April 2001, the Emerging Issues Task Force also reached a final consensus on
a portion of Issue 00-25 ("EITF 00-25"), "Vendor Income Statement
Characterization of Consideration to a Purchaser of the Vendor's Products or
Services". EITF 00-25 addresses the income statement characterization of
consideration, other than that directly addressed in EITF 00-14, from a vendor
(typically a manufacturer or distributor) to a customer (typically a retailer or
wholesaler) in connection with the sale to the customer of the vendor's products
or promotion of sales of the vendor's products by the customer.
In November 2001, EITF 00-14 and EITF 00-25 were subsequently codified in
and superseded by Issue 01-9 ("EITF 01-9"), "Accounting for Consideration Given
by a Vendor to a Customer (Including a Reseller of the Vendor's Products)" on
which the Emerging Issue Task Force reached a final consensus. TDK adopted EITF
01-9 on April 1, 2002. The adoption of EITF 01-9 did not have a material effect
on TDK's consolidated financial position or results of operations.
(r) Accounting for the Impairment of Disposal of Long-Lived Assets
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supersedes both Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
the accounting and reporting provisions of APB Opinion No. 30 ("Opinion 30"), "
Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", for the disposal of a segment of a business (as
previously defined in that Opinion). SFAS 144 retains the fundamental provisions
in SFAS 121 for recognizing and measuring impairment losses on long-lived assets
held for use and long-lived assets to be disposed of by sale, while also
resolving significant implementation issues associated with SFAS 121. TDK
adopted the provision of SFAS 144 on April 1, 2002. Adoption of SFAS 144 did not
have a material effect on TDK's consolidated financial position or results of
operations.
(s) New Accounting Standards Not Yet Adopted
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 ("SFAS 143"), "Accounting for Asset
Retirement Obligations". SFAS 143 applies to legal obligations associated with
the retirement of long-lived assets that result from the acquisition,
construction, development and (or) the normal operation of a long-lived assets,
except for certain obligations of lessees. SFAS 143 requires that the fair value
of liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset and subsequently allocated to expense over the asset's
useful life. TDK is required to adopt the provisions of SFAS 143 on April 1,
2003. Currently, the effect on TDK's consolidated financial statements of
adopting SFAS 143 has not been determined.
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In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 ("SFAS 146"), "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". The provisions of SFAS
146 are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. Currently, the effect on
TDK's consolidated financial statements of adopting SFAS 146 has not been
determined.
2. Marketable Securities and Investments and Advances
Marketable securities and investments and advances consist of available-for-sale
securities. Information with respect to such securities at September 30, 2001
and 2002, and at March 31, 2002, are as follows:
September 30, 2001
Gross Gross
Unrealized Unrealized
Holding Holding
Yen (Millions): Cost Gains Losses Fair Value
Investments and advances:
Equity securities Y3,695 99 435 3,359
Debt securities 2,864 32 - 2,896
Y6,559 131 435 6,255
September 30, 2002
Gross Gross
Unrealized Unrealized
Holding Holding
Yen (Millions): Cost Gains Losses Fair Value
Investments and advances:
Equity securities Y5,766 150 2,622 3,294
Debt securities 3,287 12 - 3,299
Y9,053 162 2,622 6,593
March 31, 2002
Gross Gross
Unrealized Unrealized
Holding Holding
Yen (Millions): Cost Gains Losses Fair Value
Investments and advances:
Equity securities Y4,389 596 - 4,985
Debt securities 3,274 24 - 3,298
Y7,663 620 - 8,283
3. Legal Reserve and Dividends
Cash dividends and appropriations to the legal reserve charged to retained
earnings during the periods represent dividends paid out during the periods and
related appropriations to the legal reserve. The accompanying consolidated
financial statements do not include any provision for the dividend proposed by
the Board of Directors of Y25 per share aggregating Y3,316 million in respect of
the six months ended September 30, 2002, or for the related appropriation to the
legal reserve.
Cash dividends per common share are computed based on dividends paid for each
period presented.
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4. Other Comprehensive Income (Loss)
Change in accumulated other comprehensive income (loss) for the six months
ended September 30, 2001 and 2002, and the year ended March 31, 2002, are as
follows:
Yen (Millions)
September 30, September 30, March 31,
2001 2002 2002
Foreign currency translation adjustments:
Balance at beginning of period Y(23,798) Y(7,773) Y(23,798)
Adjustments for period (7,457) (15,542) 16,025
Balance at end of period (31,255) (23,315) (7,773)
Net unrealized gains (losses) on securities:
Balance at beginning of period (329) 379 (329)
Adjustments for period 128 (1,959) 708
Balance at end of period (201) (1,580) 379
Minimum pension liability adjustments:
Balance at beginning of period (724) (36,605) (724)
Adjustments for period (23,411) (2,600) (35,881)
Balance at end of period (24,135) (39,205) (36,605)
Total accumulated other comprehensive income (loss):
Balance at beginning of period (24,851) (43,999) (24,851)
Adjustments for period (30,740) (20,101) (19,148)
Balance at end of period Y(55,591) Y(64,100) Y(43,999)
5. Leases
TDK and its subsidiaries occupy offices and other facilities under various
cancellable lease agreements expiring in fiscal 2003 through 2004. Lease
deposits made under such agreements, aggregating Y1,952 million and Y1,856
million at September 30, 2001 and 2002, respectively, and Y1,896 million at
March 31, 2002, are included in investments and advances on the accompanying
consolidated balance sheets.
The followings are schedules of future minimum rental payments required under
operating leases that have initial or remaining noncancellable lease terms in
excess of one year as of September 30, 2001 and 2002, and March 31, 2002:
Yen (Millions)
September 30, September 30, March 31,
2001 2002 2002
Less 1 year Y3,535 Y4,402 Y4,968
Over 1 year 8,477 8,697 9,990
Total Y12,012 Y13,099 Y14,958
6. Contingent Liabilities
Contingent liabilities for guarantees of loans of TDK's employees and
affiliates at September 30, 2001 and 2002, and March 31, 2002, are as follows:
Yen (Millions)
September 30, September 30, March 31,
2001 2002 2002
Contingent liabilities for guarantees of
loans of TDK's employees and affiliates Y8,426 Y7,485 Y8,224
Several claims and legal actions against TDK and certain subsidiaries are
pending. Provisions have been made for the estimated liabilities for certain
items. In the opinion of management based upon discussion with counsel, any
additional liability will not materially affect the consolidated financial
position and results of operations of TDK.
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7. Risk Management Activities and Derivative Financial Instruments
TDK and its subsidiaries operate internationally which exposes them to the risk
of changes in foreign exchange rates and interest rates, and therefore it
utilizes derivative financial instruments to reduce these risks. TDK and its
subsidiaries do not hold or issue financial instruments for trading purposes.
TDK is exposed to credit related losses in the event of nonperformance by the
counterparties to those financial instruments, but does not expect any
counterparties to fail in meeting their obligations given their high credit
ratings. The credit exposure of currency swaps, interest rate and currency
swaps, interest rate swaps, forward foreign exchange contracts and currency
option contracts are represented by the fair values of contracts with a positive
fair value at the reporting date.
TDK and one of its subsidiaries have currency swaps and interest rate and
currency swaps with certain financial institutions to limit their exposure to
fluctuations in foreign exchange rates and interest rates involved mainly in
loans made by TDK to its subsidiaries. Gains or losses on currency swaps are
included in interest expenses, other income or other deductions in the
consolidated statements of income. The swap contracts are measured at fair value
and are included in prepaid expenses and other current assets or other current
liabilities, as the case may be, in the consolidated balance sheets.
Forward exchange contracts and currency option contracts have been entered
into to hedge adverse effects of foreign currency exchange rate fluctuations
mainly on foreign-currency-denominated trade receivables and
foreign-currency-denominated forecasted transactions.
TDK and certain subsidiaries had forward exchange contracts to sell and buy
foreign currencies at September 30, 2001 and 2002, and at March 31, 2002.
Written foreign currency option contracts are entered into in combination with
purchased option contracts to offset premium amounts to be paid for purchased
option contracts. Notional amounts, exercise dates and exercise prices of both
written and purchased contracts are the same. All foreign currency option
contracts and forward exchange contracts are measured at their fair values by
recognizing a foreign exchange gain or loss on the consolidated statements of
income, and such gains or losses are included in prepaid expenses and other
current assets or other current liabilities, as the case may be, in the
consolidated balance sheet.
The contract amounts, carrying amounts and estimated fair values of TDK's
financial instruments at September 30, 2001 and 2002, and at March 31, 2002, are
summarized as follows:
Yen (Millions)
September 30, 2001 Contract Carrying Estimated
amount amount fair value
Forward foreign exchange contracts Y34,336 Y358 Y358
Currency option contracts
Purchased 123 (1) (1)
Written 1,661 (1) (1)
Currency swap agreements and interest rate and currency swap agreements for
loans to its subsidiaries 18,406 (68) (68)
Yen (Millions)
September 30, 2001 Contract Carrying Estimated
amount amount fair value
Forward foreign exchange contracts Y17,549 Y(84) Y(84)
Currency swap agreements and interest rate and currency swap agreements for
loans to its subsidiaries 13,613 (48) (48)
-12-
Yen (Millions)
March 31, 2002 Contract Carrying Estimated
amount amount fair value
Forward foreign exchange contracts Y7,577 Y(59) Y(59)
Currency swap agreements and interest rate and currency swap agreements for
loans to its subsidiaries 13,269 (315) (315)
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.
8. Goodwill and Other Intangible Assets
Under Statement of Financial Accounting Standards No. 142 ("SFAS 142"),
"Goodwill and Other Intangible Assets", goodwill is no longer amortized but is
reviewed for impairment annually, or more frequently if certain indicators
arise. In addition, the statement requires reassessment of the useful lives of
previously recognized intangible assets. With the adoption of SFAS 142, TDK
ceased amortization of goodwill as of April 1, 2001. As of March 31, 2002, TDK
completed a goodwill impairment test. No impairment was indicated at that time.
The components of acquired intangible assets excluding goodwill at September 30,
2001, September 30, 2002 and March 31, 2002, are as follows:
Yen (Millions)
September 30, 2001 September 30, 2002 March 31, 2002
Gross Gross Gross
Carrying Accumulated Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization Amount Amortization
Amortized intangible assets:
Software Y5,907 2,249 Y6,535 2,892 Y6,401 2,672
Other 3,403 975 3,326 1,122 4,032 1,376
Total 9,310 3,224 9,861 4,014 10,433 4,048
Unamortized
intangible assets Y1,686 Y949 Y880
Aggregate amortization expense for the six months ended September 30, 2001 and
2002 are Y754 million and Y738 million, respectively and for the year ended
March 31, 2002 is Y1,394 million. Estimated amortization expense for the next
five years is: Y720 million in the 2nd half of 2003, Y1,266 million in 2004, Y
882 million in 2005, Y693 million in 2006, and Y320 million in 2007.
-13-
The changes in the carrying amount of goodwill by segment for the six months
ended September 30, 2001 and 2002, and the year ended March 31, 2002 are as
follows:
Yen (Millions)
Electronic Recording
materials media
and and
components systems Total
Balance as of April 1, 2001 Y11,002 Y497 Y11,499
Goodwill acquired during period 66 - 66
Impairment losses - - -
Goodwill written off related to sale of business unit - - -
Translation adjustment (735) - (735)
Balance as of September 30, 2001 Y10,333 Y497 Y10,830
Yen (Millions)
Electronic Recording
materials media
and and
components systems Total
Balance as of March 31, 2002 Y11,003 Y497 Y11,500
Goodwill acquired during period - - -
Impairment losses - - -
Goodwill written off related to sale of business unit - - -
Translation adjustment (788) - (788)
Balance as of September 30, 2002 Y10,215 Y497 Y10,712
Yen (Millions)
Electronic Recording
materials media
and and
components systems Total
Balance as of April 1, 2001 Y 11,002 Y497 Y11,499
Goodwill acquired during year 106 - 106
Impairment losses - - -
Goodwill written off related to sale of business unit - - -
Translation adjustment (105) - (105)
Balance as of March 31, 2002 Y11,003 Y497 Y10,500
9. Supplementary Information
Yen (Millions)
Six months Six months
ended ended Year ended
September 30, September 30, March 31,
2001 2002 2002
(a) Statement of Income
Research and development Y19,065 Y15,649 Y38,630
Rent 5,435 4,830 11,538
Maintenance and repairs 5,836 5,514 11,437
Advertising costs 4,618 2,684 10,489
(b) Statement of Cash Flows
Cash paid during six months for:
Interest Y673 Y193 Y1,162
Income taxes Y19,830 Y(6,239) Y22,026
Noncash activities
There were no material noncash investing and financing activities.
-14-
10. Segment Information
(a) Industry segment information
Six months ended September 30, 2001
Yen (Millions)
Electronic Recording
materials media Eliminations
& & and
component systems Sub total corporate Total
Net sales
Unaffiliated customers Y209,607 Y61,179 Y270,786 - Y270,786
Intersegment - - - - -
Total 209,607 61,179 270,786 - 270,786
Operating expenses 210,329 63,268 273,597 - 273,597
Operating income (loss) Y(722) Y(2,089) Y(2,811) - Y(2,811)
Six months ended September 30, 2002
Yen (Millions)
Electronic Recording
materials media Eliminations
& & and
components systems Sub total corporate Total
Net sales
Unaffiliated customers Y234,272 Y62,108 Y296,380 - Y296,380
Intersegment - - - - -
Total 234,272 62,108 296,380 - 296,380
Operating expenses 223,557 62,804 286,361 - 286,361
Operating income (loss) Y10,715 Y(696) Y10,019 - Y10,019
Year ended March 31, 2002
Yen (Millions)
Electronic Recording
materials media Eliminations
& & and
components systems Sub total corporate Total
Net sales
Unaffiliated customers Y432,886 Y137,625 Y570,511 - Y570,511
Intersegment - - - - -
Total 432,886 137,625 570,511 - 570,511
Operating expenses 469,232 145,001 614,233 - 614,233
Operating income (loss) Y(36,346) Y(7,376) Y(43,722) - Y(43,722)
(Notes) 1. Segment classification
Segments are classified by the similarity of the product, the
product's character, the manufacturing method and the selling market.
2. Principal products in each segment
Electronic materials & components:
Ferrite cores, Ceramic capacitors, High-frequency components,
Inductors, GMR heads and Semiconductors
Recording media & systems:
Audio tapes, Video tapes, CD-Rs, MDs, DVDs and PC cards
-15-
3. TDK adopted the Emerging Issues Task Force Issue 01-9 ("EITF 01-9"),
"Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)" from the fiscal year beginning April 1,
2002 and the prior year's consolidated financial statements have been
restated for the change, accordingly.
(b) Geographic segment information
Six months ended September 30, 2001
Yen (Millions)
Asia Eliminations
and and
Japan Americas Europe others Sub total corporate Total
Net sales
Unaffiliated customers Y92,204 Y41,558 Y36,243 Y100,781 Y 270,786 - Y270,786
Intersegment 74,923 6,102 1,258 22,539 104,822 (104,822) -
Total 167,127 47,660 37,501 123,320 375,608 (104,822) 270,786
Operating expenses 166,389 52,588 38,373 123,315 380,665 (107,068) 273,597
Operating income (loss) Y738 Y(4,928) Y(872) Y5 Y(5,057) Y2,246 Y(2,811)
Six months ended September 30, 2002
Yen (Millions)
Asia Eliminations
and and
Japan Americas Europe others Sub total corporate Total
Net sales
Unaffiliated customers Y90,338 Y43,019 Y33,507 Y129,516 Y296,380 - Y296,380
Intersegment 83,557 7,919 655 19,471 111,602 (111,602) -
Total 173,895 50,938 34,162 148,987 407,982 (111,602) 296,380
Operating expenses 171,231 51,247 36,457 139,117 398,052 (111,691) 286,361
Operating income (loss) Y2,664 Y(309) Y(2,295) Y9,870 Y9,930 Y89 Y10,019
-16-
Year ended March 31, 2002
Yen (Millions)
Asia Eliminations
and and
Japan Americas Europe others Sub total corporate Total
Net sales
Unaffiliated customers Y178,771 Y86,808 Y76,604 Y228,328 Y570,511 - Y570,511
Intersegment 149,443 15,102 2,337 40,036 206,918 (206,918) -
Total 328,214 101,910 78,941 268,364 777,429 (206,918) 570,511
Operating expenses 361,466 114,622 82,125 266,664 824,877 (210,644) 614,233
Operating income (loss) Y(33,252) Y(12,712) Y(3,184) Y1,700 Y(47,448) Y3,726 Y(43,722)
(Notes) 1. Geographic segments are based on the location of the seller.
2. Principal nations in each geographic segment excluding Japan:
Americas: United States of America
Europe: Luxembourg
Asia and others: Hong Kong, Taiwan, and Singapore
3. TDK adopted the Emerging Issues Task Force Issue 01-9
("EITF 01-9"), "Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor's Products)" from the
fiscal year beginning April 1, 2002 and the prior year's
consolidated financial statements have been restated for the
change, accordingly.
(c) Overseas sales
Six months ended September 30, 2001
Yen (Millions)
Asia and
Americas Europe others Total
Sales by region Y50,463 Y37,817 Y97,336 Y185,616
Net sales 270,786
Ratio to overseas sales of net sales (%) 18.6 14.0 35.9 68.5
Six months ended September 30, 2002
Yen (Millions)
Asia and
Americas Europe others Total
Sales by region Y56,294 Y34,368 Y121,429 Y212,091
Net sales 296,380
Ratio to overseas sales of net sales (%) 19.0 11.6 41.0 71.6
-17-
Year ended March 31, 2002
Yen (Millions)
Asia and
Americas Europe others Total
Sales by region Y109,452 Y79,639 Y216,616 Y405,707
Net sales 570,511
Ratio to overseas sales of net sales (%) 19.2 13.9 38.0 71.1
(Notes) 1. Overseas sales are classified by the geographic areas of the buyer.
2. Principal nations in each region excluding Japan:
Americas: United States of America
Europe: Germany, United Kingdom, and France
Asia and others: Singapore, Hong Kong, and Malaysia
3. TDK adopted the Emerging Issues Task Force Issue 01-9
("EITF 01-9"), "Accounting for Consideration Given by a Vendor to
a Customer (Including a Reseller of the Vendor's Products)" from
the fiscal year beginning April 1, 2002 and the prior year's
consolidated financial statements have been restated for the
change, accordingly.
-18-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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