Certain prior year amounts have been reclassified to conform to the current year presentation.
3. Securities
A. The following tables summarize acquisition costs and book values (fair values) of securities with available fair values as of December 31 and March 31, 2007:
December 31, 2007
Millions of yen Thousands of U.S. dollars
Acquisition cost
Book
value Difference
Acquisition cost
Book
value Difference
Securities with book values exceeding acquisition costs
Equity securities ¥13,983 ¥27,788 ¥13,805 $122,486 $243,413 $120,927
Bonds 297 314 17 2,602 2,751 149
Others 1,223 1,297 74 10,713 11,361 648
Total 15,503 29,399 13,896 135,801 257,525 121,724
Securities with book values not exceeding acquisition costs
Equity securities 3,286 2,194 (1,092) 28,784 19,218 (9,566)
Bonds 10,822 10,448 (374) 94,797 91,521 (3,276)
Others 3,340 3,084 (256) 29,257 27,015 (2,242)
Total 17,448 15,726 (1,722) 152,838 137,754 (15,084)
Total ¥32,951 ¥45,125 ¥12,174 $288,639 $395,279 $106,640
March 31, 2007 Millions of yen Acquisition
cost
Book
value Difference
Securities with book values exceeding acquisition costs
Equity securities ¥14,929 ¥32,712 ¥17,783
Bonds 1,250 1,254 4
Others 1,531 1,571 40
Total 17,710 35,537 17,827
Securities with book values not exceeding acquisition costs
Equity securities 1,689 983 (706)
Bonds 8,619 8,382 (237)
Others 2,271 2,202 (69)
Total 12,579 11,567 (1,012)
Total ¥30,289 ¥47,104 ¥16,815
37 37
B. The following table summarizes book values of securities with no available fair values as of December 31 and March 31, 2007:
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
Held-to-maturity debt securities:
Non-listed foreign securities ¥ 6,602 ¥ 5,813 $ 57,831
Available-for-sale securities:
Non-listed equity securities 1,037 1,116 9,084
Free financial fund 3,000 2,000 26,279
Money management fund 301 – 2,637
Other 1,874 1,657 16,415
Total 6,212 4,773 54,415
Total ¥12,814 ¥10,586 $112,246
C. Available-for-sale securities with maturities and held-to-maturity debt securities mature as follows:
December 31, 2007 Millions of yen Within
one year
Over one year but within five years
Over five years but within ten
years
Over ten years Held-to-maturity debt securities:
Bonds ¥– ¥324 ¥ 722 ¥ 5,556
Total – 324 722 5,556
Available-for-sale securities:
Bonds – 67 4,928 5,766
Other – 247 1,617 2,517
Total – 314 6,545 8,283
Total ¥– ¥638 ¥7,267 ¥13,839
Thousands of U.S. dollars Held-to-maturity debt securities:
Bonds $– $2,838 $ 6,324 $ 48,669
Total – 2,838 6,324 48,669
Available-for-sale securities:
Bonds – 587 43,167 50,508
Other – 2,164 14,165 22,048
Total – 2,751 57,332 72,556
Total $– $5,589 $63,656 $121,225
March 31, 2007 Millions of yen Within
one year
Over one year but within five years
Over five years but within
ten years
Over ten years Held-to-maturity debt securities:
Bonds ¥– ¥212 ¥ 647 ¥ 4,934
Total – 212 647 4,934
Available-for-sale securities:
Bonds – 87 4,859 4,710
Other – – 1,495 1,268
Total – 87 6,354 5,978
Total ¥– ¥299 ¥7,001 ¥10,912
D. Total sales of available-for-sale securities in the fiscal years ended December 31 and March 31, 2007 are as follows:
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
Total sales of available-for-sale securities ¥309 ¥1,210 $2,707
Related gains and losses:
Gains – 115 –
Losses 5 27 44
4. Derivative transactions
The Company and its subsidiaries use forward foreign currency con-tracts and interest rate swaps as derivative financial instruments for the purpose of mitigating future risks of foreign exchange rate changes and interest rate changes and obtaining higher yields from investments. The derivative transactions are executed in accordance with established policies and within the specified limits on the amounts of derivative transactions allowed.
The following summarizes hedging derivative financial instruments used by the Company and its subsidiaries and the corresponding items hedged:
Hedging instruments:
Forward foreign exchange contracts Interest rate swaps
Hedged items:
Foreign currency trade payables
Interest on bonds and short-term loans and long-term debt The Company and its subsidiaries evaluate hedge effectiveness semiannually by comparing the cumulative changes in cash flows from or the changes in fair value of hedged items and the corresponding changes in the hedging derivative instruments.
The following tables summarize market value information as of December 31 and March 31, 2007 of derivative transactions for which hedge accounting had not been applied:
(1) At December 31, 2007 the Company and its consolidated subsidiaries had the following outstanding contracts:
Millions of yen
Thousands of U.S. dollars Contract
amount
Portion maturing
over one year Market value
Recognized gain
Recognized gain Interest related:
Interest rate swaps
Receive fixed rate and pay floating rate ¥ 7,000 ¥ 4,000 ¥ 9 ¥ 9 $ 79
Receive floating rate and pay fixed rate 5,000 5,000 115 115 1,007
Currency related:
Currency swaps
Receive U.S. dollars and pay yen 3,182 2,269 160 160 1,402
Others:
Credit default option 1,000 1,000 12 12 105
Total ¥16,182 ¥12,269 ¥296 ¥296 $2,593
39 39
(2) At March 31, 2007 the Company and its consolidated subsidiaries had the following outstanding contracts:
Millions of yen Contract
amount
Portion maturing
over one year Market value
Recognized gain (loss) Interest related:
Interest rate swaps
Receive fixed rate and pay floating rate ¥ 7,000 ¥ 6,000 ¥ (16) ¥ (16)
Receive floating rate and pay fixed rate 5,000 5,000 186 186
Currency related:
Currency swaps
Receive U.S. dollars and pay yen 3,868 2,954 232 232
Others:
Credit default option 1,000 1,000 29 29
Total ¥16,868 ¥14,954 ¥431 ¥431
5. Inventories
Inventories at December 31 and March 31, 2007 consisted of the following:
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
Merchandise and finished goods ¥27,996 ¥28,607 $245,235
Work in progress 988 1,259 8,654
Raw materials and supplies 2,243 1,961 19,648
Total ¥31,227 ¥31,827 $273,537
6. Short-term loans and long-term debt
Short-term loans are represented by bank loans with average interest rates of 1.5% and 1.4% at December 31 and March 31, 2007, respectively.
Short-term loans, including the current portion of long-term debt, at December 31 and March 31, 2007 consisted of the following:
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
Bank loans ¥ 7,465 ¥8,378 $ 65,391
Long-term debt due within one year 10,454 782 91,573
Total ¥17,919 ¥9,160 $156,964
Long-term debt at December 31 and March 31, 2007 consisted of the following:
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
1.69% to 4.81% loans from banks, due through 2008
Secured ¥ – ¥ – $ –
Unsecured 6,666 6,957 58,392
4.32% to 6.00% loans from the Pension Welfare Service Public Corporation due through 2009 6 7 52
2.625% bonds, due 2008 10,000 10,000 87,596
1.44% bonds, due 2012 10,000 – 87,596
Zero coupon convertible bonds, due 2024 12,000 12,000 105,116
0.71% bonds, due 2009 150 180 1,314
38,822 29,144 340,066
Less–current maturities included in current liabilities (10,454) (782) (91,573)
Total ¥ 28,368 ¥28,362 $248,493
The conversion price of the unsecured convertible bonds was ¥1,557.00 ($13.64) as of December 31, 2007, subject to adjustment to reflect stock splits and certain other events. Convertible bonds outstanding at December 31, 2007 were convertible into 7,707,129 shares of common stock of the Company at the above conversion price.
The aggregate annual maturities of long-term debt at December 31, 2007 were as follows:
Year ended December 31, Millions of yen
Thousands of U.S. dollars
2008 ¥10,454 $ 91,573
2009 645 5,650
2010 131 1,148
2011 191 1,673
2012 and thereafter 27,401 240,023
Total ¥38,822 $340,067
7. Retirement benefits
The Company and its domestic consolidated subsidiaries have been providing three kinds of post-employment benefit plans, unfunded lump-sum pay-ment plans, a governpay-mental welfare contributory pension plan (which would otherwise be provided by the Japanese governpay-ment), and a funded non-contributory pension plan, under which all eligible employees are entitled to benefits based on the level of wages and salaries at the time of retirement or termination, length of service and certain other factors.
The liabilities for severance and retirement benefits included in the liabilities section of the consolidated balance sheets as of December 31 and March 31, 2007 consisted of the following:
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
Retirement benefit obligation at end of year ¥ 19,201 ¥ 20,841 $ 168,193
Fair value of plan assets at end of year (7,171) (6,829) (62,815)
Retirement benefit trust (12,310) (12,477) (107,831)
Benefit obligation in excess of plan assets (280) 1,535 (2,453)
Unrecognized actuarial differences (6,178) (7,395) (54,117)
Unrecognized prior service costs 2,787 2,932 24,413
Prepaid retirement and severance benefit expenses 6,366 5,186 55,764
Severance and retirement benefits in the consolidated balance sheet ¥ 2,695 ¥ 2,258 $ 23,607 Note: Some consolidated subsidiaries have adopted the allowed alternative treatment of the accounting standard for retirement benefits for small business entities.
41 41
Severance and pension costs of the Company and its consolidated subsidiaries included the following components for the fiscal years ended December 31 and March 31, 2007.
Millions of yen
Thousands of U.S. dollars
2007/12 2007/3 2007/12
Service cost ¥ 795 ¥ 959 $ 6,964
Interest cost 219 294 1,918
Expected return on plan assets (417) (506) (3,653)
Amortization of actuarial differences 530 685 4,643
Amortization of prior service costs (credits) (195) (260) (1,708)
Other (including early retirement benefits) 113 346 990
Net benefit cost ¥1,045 ¥1,518 $ 9,154
Note: Contributions of employees to the governmental welfare contributory pension plan are not included in service cost.
Assumptions used in accounting for the defined benefit plans for the fiscal years ended December 31 and March 31, 2007 were as follows:
2007/12 2007/3
Method of attributing benefit to periods of service Straight-line method Straight-line method
Discount rate 1.5% 1.5%
Long-term rate of return on fund assets 2.4%–3.2% 2.4%–3.2%
Amortization period for actuarial losses Primarily 10–15 years
(within the average of the estimated remaining service years)
Primarily 10–15 years
(within the average of the estimated remaining service years)
Amortization of prior service costs 15 years
(within the average of the estimated remaining service years)
15 years
(within the average of the estimated remaining service years)