oki AR_E_0727.indd

Transcription

oki AR_E_0727.indd

Annual Report
2007
(For the year ended March 31, 2007)
OKI, Achieving Global Prominence by
Realizing an e-Society
The OKI Group celebrated its 125th anniversary in November 2006. To commemorate this milestone
event and to bring about wider brand recognition, the Group standardized its brand name to “OKI.”
Also, with its new brand statement, “Open up your dreams,” OKI strives to achieve the e-society
wherein all of our stakeholders will realize their hopes and dreams.
Stepping boldly onto the world stage, the OKI Group is targeting a 50% overseas sales ratio in
the fiscal year ending March 2011, representing a significant leap from the 36% achieved the fiscal
year ended March 2007. In the focus region of China, OKI is targeting a net sales ratio of 10%.
OKI's Semiconductor and Printer businesses are already positioned fully in the global market
spotlight. In addition, OKI aims to take bold strides forward in Info-Telecom System business
for overseas development—with the key phrase “info-telecom converged technologies” and
“mechatronics” to characterize its strengths and provide technologies and products that meet
regional needs worldwide. By focusing on the improvement of regional structures rather than on
Japan-centered operations, OKI continues to make advances in its overseas business: advances
that will lead to the prompt formulation of a line of regional business processes including
marketing, development, production and sales.
To Our Shareholders
Performance in the Fiscal Year
Ended March 31, 2007
The domestic and world economies both progressed steadily
toward recovery in the fiscal year ended March 31, 2007.
Within the OKI Group, sales in the financial system business
increased owing to healthier capital investment within the
financial market, while sales of color LED* non-impact printers also improved in line with market growth. On the whole,
however, OKI’s businesses faced a challenging operating
environment. Major factors impacting OKI’s businesses were
sluggish investment in fixed-line network systems by telecommunication carriers, weakened sales of driver LSIs due
to prolonged inventory adjustment of LCD* panels, and OKI’s
insufficient cost reduction against declining sale prices due
to intensified competition in all fields.
As a result, while net sales in this period grew 5.6% year
on year to 718.8 billion yen, OKI recorded an operating loss
of 5.4 billion yen, representing a 16.0 billion yen decline from
10.6 billion yen in operating income in the previous fiscal
year. Net loss totaled 36.4 billion yen, accounting for a 41.5
billion fall from 5.1 billion yen in net income in the previous
fiscal year, including the effect of the reversal of deferred tax
assets.
OKI places a high priority on the stable return of profits to
shareholders. Regrettably, owing to a slowed performance in
the fiscal year under review, we ask for your understanding in
our decision to suspend dividend payments for the fiscal year
ended March 2007.
* LED: Light Emitting Diode
* LCD: Liquid Crystal Display
3
Annual Report 2007
Revamp of Business Structure
and V-Shape Recovery in the Fiscal Year
Ending March 31, 2008
OKI incurred these results as we are currently facing a
significant turning point in our businesses deployment. OKI’s
capabilities in business promotion and product competitiveness fall short of what is needed to succeed when looking at
the pace of change in the business environment, typified by
accelerated globalization, saturated domestic markets and
customers’ ongoing pursuit of investment efficiency.
In response to this situation, we implemented a full reexamination of our group activities at the end of the previous
fiscal year. As a result, we are dedicated to generating rocksolid competitiveness by pursuing the following principal
strategies.
1. Accelerate Business Selection
and Concentration
This strategy involves reexamining all Group businesses
along with efforts to drive low profitability businesses toward
higher profits. Businesses deemed unable to make this shift
will be reviewed for possible consolidation, spun off or sold.
Already approximately 10% of all our business units have
been earmarked for consolidation or partial consolidation.
In the fiscal year ending March 2008, we plan to implement
further reductions in the order of 10%.
Meanwhile, we will make efforts to concentrate management resources on businesses with high-growth potential.
We have already newly established five companies, including
both in-house and in-house venture companies, aiming for
the expansion of businesses with mobility. In addition, OKI
has resolved to implement a human resource shift affecting
1,700 employees.
2. Initiate Transformation toward a More Efficient
Management Style
With the aim of conducting business in a timely manner,
we have built an organizational structure to clarify the
distinction of policy planning, implementation and execution management duties. Looking to improve the speed and
flexibility of business execution, we have reduced the number
of indirect planning departments, shifted a number of employees to direct departments and have begun flattening the
organizational structure. These changes will help to simplify
the dissemination of information and decision-making processes.
Also, as we aimed to accelerate market-oriented business
development, we reorganized our Info-Telecom System segment according to the business characteristics and fields of
our three business groups: finance, telecom and information
systems.
3. Develop Strong Businesses
Based on Strong Products
By integrating, uniting and harmonizing our essential
resources—people, goods, businesses, technologies and
products—together in an appropriate manner, we will work
toward rebuilding our competitiveness with a differentiated uniqueness that only OKI is capable of. We will also
enthusiastically push for the creation of global alliances and
partnerships.
The provision of Ubiquitous Services is at the core of
the Info-Telecom Systems Group’s operations, while nextgeneration networks (NGNs) are considered its main area of
Ubiquitous Services. Its strengths in info-telecom converged
technology and mechatronic technology contribute to the
generation of differentiated technologies and products and
consequently further business development. Furthermore,
by accelerating its selection and concentration activities,
strengthening its competitiveness of hardware products,
expanding its software and service businesses through the
creation of a global software development structure and
augmenting overseas businesses with a newly established
dedicated division, OKI is diligently working to boost sales
and profitability.
In the Semiconductor Business Group, OKI is working to
reinvent itself and depart from the current business framework founded solely on the semiconductor business. We will
innovatively combine semiconductor technologies with other
OKI Group technologies to create and expand the business
of high-value-added electronic functional modules (e-functional modules). In addition, OKI is looking to boost profitability in the large LCD driver business and further focus on
system LSIs with differentiated technologies, including its
ultra low-power consumption technologies.
Our Printer Business Group is fortifying sales channels in
the SMB* market in anticipation of gaining key status in the
global market, in the future. At present, OKI is endeavoring
to raise earning power by creating a well-balanced product
lineup of the printers the SMB market most demands:
multifunctional mid- to high-end color LED non-impact
printers. At the same time, OKI will seek to make inroads into
emerging markets, extending its reach beyond Europe, the
Americas and Japan, while also pursing sustained earnings
in its dot impact printer category.
In addition to these three strategies, OKI will implement
urgent measures, including the constriction of fixed costs
in the fiscal year ending March 2008. OKI aims to attain two
numerical targets: 750.0 billion yen in net sales and at least
8.0 billion yen in operating income.
* SMB: Small & Medium Business
World Recognition as Global Enterprise
The diffusion of Internet and broadband networks are significantly changing the times in which we live. People are now
able to easily and securely access a vast range of Ubiquitous
Services, which OKI advocates, in the styles they most desire—either as information, products, or services—whenever
and wherever with whatever they want. Transcending time
and space constraints, breaking boundaries among countries, regions, and cultures, providing individuals with the
freedom to safely and securely partake in a variety of activities is the product of a rapidly advancing network society, a
society that OKI has long championed—the e-Society.
We aspire to be a globally recognized key player in this
e-Society and to achieve sustained growth. To this end, we
are working to actualize an e-Society able to fulfill the hopes
and aspirations of people around the world as stipulated by
our brand statement, “Open up your dreams.” Furthermore,
OKI is targeting global business expansion quantified by a
50% overseas sales ratio, up from 36%, by 2010.
As a trusted partner to all our stakeholders around the world,
OKI will continue to build on the comprehensive wisdom of
its Group employees. In conclusion, I would like to thank our
shareholders for their steadfast support and understanding.
July 2007
Katsumasa Shinozuka
President and Chief Executive Officer
Oki Electric Industry Co., Ltd.
4
Interview with the President
Q1.
Operating conditions in the fiscal year ended March
2007 were particularly difficult. What are your views
on the factors that contributed to this?
Shinozuka: Changes in the operating environment that
occurred during the year were more profound than we had
predicted. As a result, unfortunately, we weren’t fully prepared to face the difficulties they presented.
There were three main transitions that took place during
the year: accelerated globalization, domestic market saturation and stronger demand among customers for increased
investment efficiency. The IT industry, within which OKI
develops business, is undergoing rapid expansion as a
globally competitive environment in line with the evolution
of ubiquitous services and broadband networks. Within this
competitive global environment, the actions customers took
in pursuit of management efficiency were noteworthy. The
pace of these changes far exceeded our expectations. OKI’s
response, I must admit, failed to match to our potential.
While our customers, our customers’ customers and
competitors all continue to advance toward globalization, the
principle cause of OKI’s performance slump stems from a
gap between these environmental changes and OKI’s business operation capabilities to access and offer products to
the market.
On the other hand, we will concentrate management
resources on businesses that are highly profitable now as
well as those that we have earmarked for future growth.
Simply consolidating businesses doesn’t guarantee future
growth; it is essential that we develop distinct businesses.
We have already established a total of five in-house and
in-house venture companies, and designated them as our
growth businesses for the fiscal year ending March 2008. Also,
in response to market fluctuations, we are working to rapidly
expand these businesses.
Q3.
There is a possibility that the short-term measures
of the current fiscal year, such as the reduction
of fixed costs and curbing capital investment and
R&D expenses, may lead to a decline in competitive
strength. How do you plan to balance measures
to bolster competitiveness over the medium to
long term?
Shinozuka: We don’t intend to reduce fixed costs and curb
investment haphazardly. Within our accelerated selection and
concentration scheme, we will make a clear distinction between strong and weak business investments. Furthermore,
our approach to cutting costs includes limiting inefficient
and needless investments. Instead we’re taking proactive
measures to focus management resources on strong products
and businesses as well as businesses in which we anticipate
growth. If we narrow down our targets further, we’ll then be
able to realize a stronger OKI over the medium to long term.
Q4.
Q2.
In reference to OKI’s efforts toward “promoting
strong business development based on strong
products,” how do you think OKI compares to other
companies?
Shinozuka: We have made our decisions. Businesses with
operating income ratios of 3% or below will be carefully monitored for future growth potential, while businesses lacking
profit potential will be considered for consolidation, spun off
or sold, with customers’ understanding.
Shinozuka: I am particularly proud of our Info-Telecom
Systems segment, which was among the first in the industry
to converge information and telecommunications technologies. It is also where we have long cultivated the mechatronics technology we use in our ATM systems. Our info-telecom
converged technologies are embedded within industry-leading VoIP* and IP telephony systems as well as in our CTstage®
CTI* system, which boasts the leading market share in the
contact center market in Japan. These technologies prove that
we already possess significant strengths in the technological
You have designated an “accelerated selection and
concentration” scheme as one of OKI’s policies to
revamp the business structure for the fiscal year
ending March 2008. Are businesses for selection
already being determined?
By revamping business structures to build stronger
businesses, we are aiming for a V-shape recovery.
5
Annual Report 2007
fields essential for expanding NGNs and Ubiquitous Services.
As regards mechatronics, with about 40% of all operating
ATMs in Japan being supplied by OKI, our share of the
market is second to none. Mechatronic devices are essential
in utilizing Ubiquitous Services.
In the Semiconductor segment, we have been focusing on
the development of a uniquely OKI semiconductor business,
targeting personal and mobile fields. For example, we are
focusing on technologies such as the Silicon-on-Sapphire
manufacturing process, the most attractive feature of which
is its ultra low-power consumption, as well as power-saving,
high-voltage process and high-density packaging technologies that are essential to personal and mobile device
structures. OKI will innovatively combine its semiconductor
technologies with other technologies within the Group, for
instance by synthesizing wireless communications and
printed circuit board technologies. To this end, we have built a
policy around efforts to create and expand a new e-functional
module business. Our ability to bring such a variety of technologies together is one of OKI’s unique strengths.
In the Printer segment, our LED print-head and mechatronics technologies, which contribute to superior compactness,
high-speed and high-resolution, are among the greatest of
OKI’s strengths. OKI is ranked among the top companies in
the world in terms of color printer sales. At the same time, we
are one of the two major dot printer companies and boast a
large share of the market.
Not only does OKI boast a host of unique world-class
technologies, it also maintains a high level of competitiveness
in terms of both product and business capabilities.
* VoIP: Voice over Internet Protocol
* CTI: Computer Telephony Integration
Q5.
You have defined one of OKI’s targets for 2010 as
an overseas sales ratio of 50%. Please explain what
this means and what kinds of specific developments this entails.
Shinozuka: Amid accelerating globalization, OKI must increase its successes in the global market, which is why we are
targeting an increase in our overseas sales ratio, from 36%
to 50%. Expanding sales and strengthening profitability will
allow us to gain worldwide recognition as a global corporation. On a business segment basis, approximately half of total
semiconductor sales are generated overseas; over 80% of
total printer sales are from overseas; while info-telecom systems overseas sales still only account for just a few percent.
OKI’s road to recovery and the next leap forward depends on
the global ground it gains in info-telecom systems.
I consider there to be two key aspects in advancing toward
global development. The first is to localize and customize
strong products with global growth potential to meet the
needs of particular regions. For example, full-scale expansion
of our ATM business in China has continued apace thanks to
our collaborative efforts with partners in the region and the
creation of customized models to meet regional needs. We are
now working to expand our leading IP-based key telephone
systems for SMB offices throughout China, Europe and the
Pacific region.
The second is to forge and maintain partnerships. Undertaking business expansion in isolation has its limitations.
Local companies have the best understanding of a region’s
particular characteristics and establishing partnerships with
prominent corporations in each of our target regions will allow
us to tailor our business activities—from marketing, technology and product development to sales and maintenance—in
each of these regions. As we work to fully incorporate
regional characteristics into our products and operations, we
will be doing our utmost to maintain the partnerships we have
established and moving inexorably closer to becoming a truly
global enterprise.
Q6.
In conclusion, please tell us what efforts OKI is
making to maximize shareholder value.
Shinozuka: Dividend payments to shareholders are of
paramount importance. Regrettably, we suspended dividend
payments for the fiscal year ended March 2007 due to waning
performance. Resuming payments are a management priority
and we continue to exert every effort to raise OKI’s corporate
value.
What’s important for OKI is to aggressively expand its
businesses globally and produce results. In order to anticipate changes in the business environment, which will be accelerating in their frequency, OKI is implementing measures
to bring about results in a new era.
These measures will be driven by OKI’s technological
development. OKI aims to realize a new age in Ubiquitous
Services, readily providing them in the styles people most desire—either as information, products, or services—whenever,
wherever, with whatever they want. Leveraging OKI’s DNA as
a manufacturer, we will develop products and technologies far
in advance of other companies on a worldwide scale to bring
about a recovery in performance results.
6
Financial Business
Offering solutions meeting the needs of financial institutions
through competent mechatronics technologies
and financial system know-how
Using its years of accumulated know-how and experience,
OKI has erected two business pillars to support the financial
market: one includes ATMs, bank branch systems and
backyard solutions that form the basis of OKI’s financial
business; the other consists of new financial businesses,
such as e-finance systems that utilize Internet technologies.
OKI has responded to the wide-ranging demands of financial
institutions by providing enhanced security functions,
industry-leading systems that support new services, and
increased operational efficiency, for which it has earned the
steadfast trust of the industry.
In the Japanese ATM market, in which OKI holds the
largest share on an operating basis, the Group is working to
further deploy its latest ATM-BankIT™, an industry-leader
that features IC-card and biometric identification functions.
OKI has also introduced small-sized, highly secure ATMs
that boast low operating costs, making them suitable for
convenience stores and other similar locations.
f i le 1:
Koji Shibaike
System Engineer
Marketing & Sales Division, Systems Hardware Company
Japan
Develop user-centered ATMs
The ATMs installed at supermarkets and convenience
stores are no longer used merely as cash dispensers.
They now provide a range of new services and functions
made possible by mobile terminal links. The rapid growth
in the Chinese market is providing further proof of the
enormous potential that ATMs possess. I was personally involved in the development of a product to display
user-centered messages and campaign ads on the ATM
screen while the user waits for cash to be dispensed.
Apart from later being able to apply this know-how to
other projects, I can’t help but feel proud every time I
walk by one of these impressive ATMs. Still, I realize that
there’s a lot of work to be done. I’m eager to
participate in the development of ATMs that
offer true convenience to a variety of users, such as people with disabilities.
7
Annual Report 2007
OKI has added compact, space-saving ATMs to its
lineup specifically made for the Chinese market, where sales
efforts are well under way and OKI aims to be able to provide
ATMs to both large- and small-scale stores. Similarly, OKI
has successfully begun to expand in South Korea. Making
the most of business alliances, OKI is working toward global
market expansion based on the joint development of ATMs,
cash processing machines and other financial systems.
In its new financial businesses, OKI is actively
promoting service-oriented business such as networkbased settlement, ATM operation outsourcing and bank
branch video surveillance to augment its previous efforts in
establishing contact centers and providing network-based
settlement systems. Financial Business Group operations
contribute to providing ubiquitous financial services,
accessible to users anytime and anywhere.
Group
2.
New factory in China
begins ATM production
1.
Space-saving
ATM21SX for
Chinese market
Launched in China to target
financial institutions and convenience stores, the ATM21SX
is 30% more compact than
OKI’s previous ATM models.
As the smallest ATM model
on the market, it responds to
the needs of large-scale stores
but is also ideal for installation
in small- and medium-scale
stores, which often suffer
from space limitations. In
line with increased demand
brought about by market
infrastructure improvements
in China, OKI is aiming to sell
10,000 units by 2010.
ATM21SX
Oki Electric Industry (Shenzhen) Co., Ltd., which manufactures ATMs, printers and
other equipment, transferred
its operations to a new facility,
starting production in January
2007. The new facility, which
has twice the floor space and
triple the production capacity
of its predecessor, is expected
to reach a production capacity
of 30,000 units, including ATMs
and main elements, per year
to meet expanding demand in
China for ATM systems.
New facility opening ceremony
3.
OKI and Nautilus
Hyosung, Inc. sign
agreement
OKI and Nautilus Hyosung, Inc.,
which holds the largest share of
the South Korean ATM market,
entered into an agreement to
jointly supply financial systems
throughout the world. Utilizing
their combined strengths in
the financial field, they will
together develop, manufacture
and market ATMs and cash
processing machines in the
South Korean, Chinese and
other overseas markets.
5.
4.
Spacious design from
OKI’s Bank Branch
Solutions Consultation
Service
Responding to diversified
customer needs while simultaneously offering customers
a sense of security is one
strategic issue financial institutions must address. OKI’s Bank
Branch Solutions Consultation
Service does just this. Based
on a wealth of experience and
know-how , OKI is offering
financial institutions high
value-added bank branch solutions that feature spaciously
designed interiors equipped
with advanced information
processing systems. With a
focus on providing attractive
customer-centered service
environments and interior
layouts, OKI’s consultation
services ranges from complete
branch concept planning, to
system structure planning and
total interior design.
Responding to i-appli
Banking with bank
correspondence service
OKI has launched a service
that facilitates correspondence
between NTT DoCoMo, Inc.’s
i-appli Banking*1and mobile
banking*2 services operated by
financial institutions. Thanks
to this development, providing
quickly installed low-cost
mobile banking systems
that support i-appli Banking
services has become possible.
Mizuho Bank, Ltd. stands out as
the first to adopt this service.
*1 i-appli Banking: One of several
i-appli services offered by NTT
DoCoMo, Inc., i-Appli Banking
allows customers easy access
to their bank account information at a maximum of two
financial institutions.
*2 Mobile banking: A mobile phone
service that offers users access
to their bank account balances
and other account information.
i-appli Banking (computergenerated image)
Bank Branch Solutions
Consultation Service
Contract signing press conference
with Nautilus Hyosung, Inc.
8
Telecom Business
Generating more attractive products
through advanced NGN system development
Every telecom carrier is now able to offer a variety of new
integrated services. Typical of these are the “quadrupleplay services”—an amalgamation of voice, video, data
and wireless applications—made possible by NGN, which
combine fixed and mobile networks over broadband IP
networks.
As a necessary part of the services it offers, OKI has
positioned the field of application platforms as a focus
area, where it is concentrating on developing broadband
application servers, communication servers, as well as fixed
communication and mobile phone-integrated FMC* systems.
In line with these efforts, OKI merged its businesses for
telecom carriers and business for enterprise networks
to create the Telecom Business Group. By so doing, OKI
created a business structure able to provide service
infrastructures that leverage the technologies of both
businesses.
Also, with the aim of entering the mobile business
market, OKI is making concerted efforts to strengthen
alliances with its global business partners, including Aruba
f i le 2:
Ma Weidong
President
OKI Software Technology Co., Ltd.
China
Spread OKI brand benefits
It’s been seven years now since OKI Software Technology Co., Ltd. was established and I was appointed
president. We have devoted our time and effort as a team
to maintaining a high-level of cost competitiveness and
initiating high-quality developments as OKI’s telecom
software development base in China. Our hardworking
efforts have served to improve the software development process along with mutual understanding with our
Japanese counterparts and resulted in OKI Software
Technology being awarded as one of the well-respected
companies in Jiangsu Province. As a business support
base, we will exert every effort to spread the benefits of
the OKI brand and promptly and accurately meet customer needs to expand sales in China and other Asian
markets.
9
Annual Report 2007
Networks Inc., a proven innovator in the U.S. network
security field, and Huawei Technologies Co., Ltd. in China,
OKI’s collaborative partner in a mobile WiMAX* wireless
technology business targeting the Japanese market.
In response to ongoing expansion in demand for
broadband access networks, which link carriers and
subscribers, and broadband home networks, the OKI Group
is dedicating resources to the active development of homeuse broadband routers and optical access equipment.
Furthermore, in its quest for greater corporate sales
in overseas markets, OKI is developing full-scale key
telephone systems that support IP telephony and mobile
functions, while undertaking aggressive business phone
sales activities across the world, including in China and
India.
* FMC: Fixed Mobile Convergence
* Mobile WiMax: Mobile Worldwide Interoperability for Microwave Access;
standard specification for mobile telecommunications technology that
provides wireless broadband access
Group
2.
5.
CTstage® 5i: The latest
word in contact center
systems
1.
Enhanced CenterStage®
series for NGNs
NGNs built by telecom carriers
offer a variety of simultaneous
services using voice, video and
data. Targeting enhanced NGN
functioning, OKI has worked
to enhance its communication
server series for telecom
carriers. OKI’s newly available
state-of-the-art CenterStage
NX5000 series allows both fixed
and mobile phone services
to be built into the same IP
network, while the CenterStage
NX3200 is the industry’s first
session border controller
capable of linking telecom
carriers.
Responding to needs for more
sophisticated contact center
systems, OKI has introduced
the CTstage 5i, an enhanced
version of the earlier CTstage
that holds the No. 1 share of the
Japanese market. Integrating
technologies accumulated over
many years, OKI offers this
highly reliable system—which
boasts seamless expandability
and route diversion security during any momentary failures—to
flexibly respond to changes in
customers’ future business
environments.
4.
Marketing of new
IPstage® MX/SX
goes global
CTstage 5i
3.
Bolstering global
alliances
CenterStage NX3200
Smarter surveillance
systems with
VisualCast ®
VBOX-S/500 digital
video recorder
Targeting increasing full-scale
NGN development, OKI is
working on further strengthening its alliances with leading
companies in the industry.
Specifically, OKI and Aruba
Networks Inc. in the United
States have agreed to collaborate and share development
aims in the network security
field. Together they will work
on new advances in network
security solutions, systems
integration methods, as well as
on global marketing strategies.
OKI and Nortel Networks in
Japan have initiated the joint
development of next-generation
optical transmission devices
for NGNs in Japan. Furthermore, OKI has teamed up with
Huawei Technologies Co., Ltd.
in China, which develops wireless products such as mobile
WiMAX and third-generation
mobile phones for the global
market, in the development
of a mobile WiMAX wireless
technology business targeting
the Japanese market.
In response to expanding IP
networks and designed for
offices with 100 people or less,
OKI has launched IPstage MX
and IPstage SX key telephone
systems that support full-scale
IP telephony and mobile
functioning. The IPstage series
accommodate dual wireless
LAN terminals, which can be
used as extensions within wireless LAN areas and as external
lines when away from the LAN.
Also, it accommodates SIP*1
soft phone functions, the first
telephone system of its kind in
Japan. Sales are already under
way in China, with OKI planning
gradual expansion targeting
Asian and Pacific regions.
OKI has released the VisualCast VBOX-S/500 digital
video recorder for network
applications, which can connect
up to 16 surveillance cameras
including network-compatible
cameras. In addition to digital
recording functions and network functions for concentrated
surveillance at monitoring
centers, the VisualCast VBOXS/500 responds to increasing
needs for security with functions for automatic, motion-triggered detection of suspicious
behavior, helping call attention
to possible threats. Featuring
the incorporation of an array
of automated functions, this
product has brought to fruition
highly intelligent remote video
surveillance management.
VisualCast VBOX-S/500
*1 SIP: Session Initiation Protocol; a major protocol used in
VoIP technology
VoIP wireless
LAN access point
MWINS BR2102
IPstage MX
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Information System
Providing advanced solutions by info-telecom converged
technologies in accord with market needs
The Information System Business Group operates in and
develops products destined for two distinct markets. In
the public sector market, the emphasis is on large-scale
projects serving national and local government agencies;
in the private sector market, OKI offers differentiated
technological solutions developed through the integration of
mechatronics and info-telecom converged technologies.
OKI’s public sector-focused operations encompass three
areas of business: government solutions based on optimized
planning solutions; public disaster-prevention networks
that rely on advanced technologies; and the ITS* business
that includes sophisticated traffic and transportation
technologies such as ETC* and VICS* systems. In providing
government solutions, OKI leverages its proven track record
in network administration to provide shared administrative
systems. OKI also supports government administrative
processes through the introduction of optimal IT
systems based on the Japanese government’s Enterprise
Architecture framework. In the public disaster prevention
network field, OKI promotes the development of advanced
solutions based on digital wireless systems. The ITS
business is one of OKI’s focus businesses for which OKI
established an internal venture company by making full use
of a solid track record in DSRC* technologies.
In the private sector, OKI makes full use of its
mechatronics capabilities to offer market-leading
systems—covering ticket reservation and issuing systems
as well as automated check-in machines—to the travel and
transportation industry. OKI also provides systems that
converges information and telecom technologies, such as
added-value solutions for existing ticketing systems and
IP network-based video surveillance systems. For other
industries also, OKI maintains efforts to furnish customers
with wide-ranging solutions, including application servers
that link companies’ existing mission-critical systems with
IP telephony and video distribution systems.
* ITS: Intelligence Transport System
* ETC: Electronic Toll Collection
* VICS: Vehicle Information Communications System
* DSRC: Dedicated Short Range Communication
f i le 3:
Yaeko Makimoto
Marketing & Sales
Enterprise Solutions Division, System Solutions Company
Japan
Propose optimal solutions with honesty,
tenacity and smiles
As a member of the info-telecom solutions marketing team, I am in charge of ATMs, contact centers and
network devices for the railway market. In order to offer
proposals to suit the needs of each customer, I must
carefully control everything from research and liaising with related departments to managing risk control.
Although it’s quite a tough job, when our proposal is
adopted and the system is finally put into operation, I am
filled with satisfaction. In an environment where railway
stations are undergoing increasing change due to the
introduction of web-based ticket reservation and on-line
payment systems, I hope to continue to promote OKI’s
truly cutting-edge products and technologies—with
honesty, tenacity and smiles.
11 Annual Report 2007
Business Group
2.
Real-time earthquake
disaster prevention
system
1.
Easy-to-operate
wireless disasterprevention system with
multiple functions
OKI’s disaster-prevention
system for municipalities
offers two-way communication
between parent and mobile
stations, meteorological data
collection and provision of
written information. The system
also features high-speed data
transmission, compatibility
with other systems of its type, a
diverse range of functions and
ease of operation.
Utilizing urgent earthquake
reports from the Japan Meteorological Agency and early P-wave
tremor detection capabilities,
OKI’s real-time earthquake
disaster prevention system
provides advance warning
before a major S-wave quake
arrives. The system cuts off the
supply of dangerous gas and
chemical substances, automatically deactivates security systems, and helps to minimize the
outbreak of secondary disasters.
OKI is now promoting sales of
these systems to semiconductor
factories and other manufacturing facilities that handle hazardous materials.
Real-time earthquake disaster
prevention system
4.
USCOS™:
Recycling-type cash
deposit and withdrawal
equipment
OKI’s USCOS is a machine for
the retail industry to operate on
a recycling principle, whereby
bills and coins that have been
deposited are recycled for
withdrawals, with high-security
comparable with ATMs. OKI
expanded its lineup, launching
a series that enables the linking
of multiple machines within a
single retail location.
Applicable for use in any setting, from small- to large-size
retail stores, stations, travel
agencies and other locations
where large amounts of cash
are exchanged, the USCOS
contributes to greater efficiency
in cash management operations.
5.
Face Sensing Engine™
(FSE): Face image
processing middleware
FSE is a face recognition
software that was developed to
enable smooth image processing in mobile phones, digital
cameras, mobile game consoles
and other mobile devices,
which compared to computers
have significantly lower builtin processing capabilities.
Domestic and foreign mobile
phone and digital camera
makers have already begun to
adopt the technology. In addition, fiscal year ending March
2008 marked the beginning of a
variety of service developments
for face recognition-equipped
mobile phones as well as of
development planning aimed at
robots, digital home appliances
and surveillance systems.
3.
ITS solutions contribute
to enhanced, secure
traffic systems
Municipality disaster prevention
system
OKI’s advanced ITS solutions
provide a wide array of solutions
to improve and optimize systems. These include automated
ETC systems (see photo) based
on DSRC technologies, VICS
systems that provides realtime traffic information on car
navigation, as well as highway
information terminals that
advise drivers of nearby service
stations and provide other essential information.
FSE-embedded digital camera
(computer-generated image)
USCOS
ETC
12
Semiconductor Bu
Shifting from sole focus on semiconductors to expand
e-functional module business
Leading the industry in late 1990s, OKI shifted the direction
of its semiconductor business from the general-purpose
DRAM* to system LSIs* and logic LSIs, hedging high
investment risks associated with DRAMs, which were
inevitably exposed to fluctuating market conditions.
Since taking this decisive step, OKI has concentrated its
management resources on the growing personal and mobile
markets. The LSIs used for mobile phones, information
appliances and other personal and mobile devices require
certain characteristics, such as compact designs, and
longer battery lives. OKI is rolling out such LSIs based on
its differentiated technologies of power-saving, high voltage
processes and high-density mounting, indispensable to
personal and mobile devices.
In line with these development efforts, OKI has
separated its design and development functions from
production functions to form two internal companies, as
well as strengthened strategic alliances with world-leading
fabricators. This is OKI’s unique “fab-free” business model
that allows the choice to be made between in-house or
partner fabricators according to the characteristics of each
project. This model has contributed to progress in our quest
toward a stable profit structure.
In order to enhance its earnings power, OKI will pursue
cost reductions in the large TFT* driver business while
shifting its business focus to the large LCD TV market. Also,
OKI will adjust its emphasis to application-specific LSIs,
micro devices and foundry businesses, where OKI boasts
differentiated technologies, while achieving cost reductions
in its entire semiconductor business. Through these
initiatives, OKI is striving to further solidify its business
foundation.
Accelerating toward future growth, OKI is working to
depart from the current business framework founded solely
upon the semiconductor business. The Semiconductor
Business Group’s long-established expertise in the personal
and mobile market will be coupled with other business
groups’ unique technologies, such as communication
systems, information security and power control domains.
Buoyed by this renewed business framework, OKI will create
and expand the business of high-value-added e-functional
modules.
* DRAM: Dynamic Random Access Memory
* LSI: Large-Scale Integration
* TFT: Thin-Film Transistor
f i le 4:
Pattanan Hangam
Corporate Officer
Oki (Thailand) Co., Ltd.
Thailand
Nurture employees into future OKI leaders
I am working at the office in Ayutthaya, Thailand, and am involved
in the administration of various divisions including purchasing,
material planning, inventory, production control as well as semiconductor import and export. We manufacture high-quality semiconductors at low cost, thereby creating more customer satisfaction. For us to become a company with outstanding management
capable of providing such semiconductors, each employee needs
to remain highly motivated and develop a keen work awareness.
OKI’s semiconductors have an excellent reputation for technological superiority and excellent quality in
the global market. In a spirit of teamwork,
we are making efforts to proactively nurture employees into future OKI leaders in
the Asian region.
siness Group
2.
World-first UV sensor
IC using thin-film SOI
1.
Real-time clock IC with
world’s lowest current
consumption
OKI has succeeded in developing the ML9073/ML9074
real-time clock IC, achieving
the world’s lowest current
consumption at just 0.15 µA.
The ICs are based on OKI’s
specialty SOI*1-CMOS*2 technology: conventional silicon
wafers are substituted with SOI
wafers that have embedded
insulators; and CMOS are
formed on the SOI wafers. This
technology possesses excellent
electronic properties, and
significantly contributes to the
improvement of energy-savings
in the power-off functions of
mobile devices and audio-video
equipment. Also, the ICs help
improve the life of batteries
on these devices by 150%
compared with conventional
ICs. Their compact size enables
further miniaturization of battery equipment and condensers.
*1 SOI: Silicon-on-Insulator
*2 CMOS: Complimentary Metal
Oxide Semiconductor
ML9074
OKI has commercialized the
ML8511 ultra-violet (UV) sensor
IC using thin-film SOI. While
conventional UV sensors use
compound semiconductors,
OKI is the first company in the
world to have succeeded in using thin-film SOI in UV sensors.
Enabling an analog voltage output function proportional to UV
light intensity on a single chip,
the new IC does not require an
optical cut filter, which allows
manufacturers to develop
compact and highly mobile UV
devices at low cost. In addition
to conventional applications
such as accessory-type devices
to measure the amount of UV in
daylight, OKI plans to expand
sales of the ICs to home appliance applications.
4.
Industry-first ITScompatible in-vehicle
single-chip transmitter/
receiver LSI
The ML9636 is a new single-chip
IC product that handles data
transmission and reception
and integrates RF*4 and
MODEM*5 circuits, both of
which are essential for wireless
communications in DSRC, a
communications technology
utilized in ITS systems. The use
of the single-chip eliminates the
need to design RF circuits on
baseband LSIs and the mounting
of digital to analog converters,
thereby contributing to shorter
development cycles for DSRC
systems.
*4 RF: Radio Frequency
*5 MODEM: Modulator-Demodulator
ML9636
ML8511
3.
World’s smallest audio
DAC LSI equipped with
stereo speaker amplifier
In July 2007, OKI commenced
sample shipments of its ML2611
audio LSI with stereo playbackcapable DAC*3, 3-D surround
functionality and speaker
amplifier all incorporated in a
single chip. Achieving all these
functions in the world’s smallest
package size of 3.0 mm x 3.2 mm
among 16-bit audio DACs, the
new audio LSI is packed with
sophisticated technologies that
allow for authentic reproduction
of low frequency sound on audio
equipment.
*3 DAC: Digital to Analog Converter
5.
High performance
driver LSI for full highdefinition LCD TVs
As larger full high-definition
LCD TVs grow in popularity,
users are seeking better color
reproduction on their LCD TVs.
To respond to this demand, OKI
developed three new large TFT
driver LSIs—being released
successively—best suited for
full high-definition LCD TV
applications. Characterized by
two-fold high-speed drives and
reduced heat generation by 35%
compared to other driver LSIs,
the new driver LSIs are highly
advanced and capable of displaying one billion colors based on a
10-bit multi gray-scale. Looking
ahead, OKI will enhance the
lineup of its high-value-added
products and expand its market
share for driver LSIs.
6.
10 Gbps optical
transmission receiver
module
The widespread distribution
of image and video data via
the Internet is leading to
increased adoption of optical
receiver-transmitters compatible with 10 Gbps large-capacity
transmission over long or middle
distances in urban settings.
OKI has developed two 10 Gbps
ROSA*6 receiver modules.
Eyeing the future prevalence of
the 10 Gbps optical transmission
standard, OKI has commenced
the sale of sample modules on a
global scale. For the fiscal year
ending March 2008, OKI expects
the number of the two modules
sold to reach 60,000.
*6 ROSA: Receiver Optical Sub
Assembly; an optical receiver
device optimized for mounting on
compact transceivers.
10 Gbps ROSA module
ML2611
10-bit TFT driver
14
Printer Business
Expanding mid- and high-range color LED printers into the
SMB market by maximizing OKI technologies
Operating under the business brand of OKI Printing
Solutions, the Printer Business Group provides
monochrome and color LED* non-impact printers for
business use, MFPs*, and dot-impact printers to over 120
nations and regions worldwide.
OKI’s LED printers demonstrate size advantage,
superior speed and resolution performance compared to
laser-method printers thanks to its proprietary Single Pass
Color ® technology that utilizes a LED light source. Also,
compatible with various paper sizes and media, OKI’s
printers score highly in performance evaluation in the
marketplace.
The growth of OKI’s printer business is dependent
on expansion in sales and earnings. This means that OKI
must enhance the competitive advantages of its color nonimpact LED non-impact printer products. Accordingly,
OKI is accelerating efforts to instigate a shift to mid- and
high- range models that offer high added value and a
multitude of functions. These efforts will be reflected in
its sales activities, whereby OKI will work to fortify sales
channels within the SMB market, which shows a need for
mid- and high-range models. OKI will also make inroads
into emerging markets such as South America, Southeast
Asia and China, in addition to the United States, Europe and
Japan, as it seeks further growth.
In terms of product development, OKI released a new
LED print-head that is half the size of conventional types
and contributes to more compact, lower cost printers.
In order to maintain price competitiveness, OKI has
incorporated one-spin development processes, which
use simulation technologies to help reduce the number of
reworks and therefore the costs involved in the design stage,
and to enable products to be brought rapidly to market.
In addition to bringing about cost reductions in the dotimpact printer business, OKI is responding to emergingmarket demand for low-cost printer models as it aims to
heighten earnings stability.
* LED: Light-Emitting Diode
* MFP: Multi-Function Printer
f i le 5:
Rainer Sauer
CEO and Chairman
OKI Printing Solutions EMEA
UK
Ensuring OKI Printing Solutions remains
industry-leading brand
As the CEO and Chairman of OKI Printing Solutions
EMEA, I am responsible for sales, customer service and
marketing of printers in Europe, the Middle East and
Africa. Amid extremely severe competition, I believe that
our strengths lie in implementing attractive and useful
programs for sales channel companies and providing efficient printing solutions to enhance end users’ business
efficiencies. This is equally important to our principal
strategy: to offer high-quality products and cutting-edge
technologies. Through these endeavors, A3 color printer
sales rose in the fourth quarter of the fiscal year ended
March 2007, securing the top market share* in 10 countries in the EMEA region. We will continue our efforts to
make sure that OKI Printing Solutions remains an industry-leading brand.
* Based on research from IDC
Group
3.
Production begins at
new printer plant
in China
1.
C8000 Series:
compact A3-size
color LED printer
The compact A3-size C8000 Series is the latest addition to the
top of OKI’s C Series color LED
printer models for business use
that were developed around the
design concept of “Smart and
Tough.” The C8800dn responds
to business-users’ increasing
security needs and meets international evaluation standards
with its embedded data security
kit, which encrypts printing data
stored on the printer’s hard
disk. The C8800-P meets the
specialized needs of the retail
industry and small-retail outlets
that use POP*1 advertisement
creation applications for instore displays.
*1 POP: Point of Purchase
2.
Oki Electric Industry
(Shenzhen) Co. Ltd., which
manufactures printers and
ATMs, began production at its
newly constructed manufacturing site in January 2007. With
production now under way, the
company is expected to reach
an annual production capacity of 600,000 units, tripling its
previous production volume
of color LED and dot-impact
printers. Supplying printers
to over 120 countries, OKI has
positioned this company as an
important hub in support of its
global development strategy.
Solutions Center
established in Brazil
OKI Printing Solutions Center
was established in Sao Paulo,
Brazil, the first within the South
American region; operations
commenced in February 2007.
Aiming to accelerate the
development of user-based
solutions, the center provides
the full gamut of printing solutions through specialists able
to pinpoint specific user needs.
OKI plans to penetrate other
growth-region markets around
the world, as represented by the
BRIC*2 markets.
*2 BRIC: Brazil, Russia, India,
China
C8800
Solutions Center
opening ceremony
Printer production line
at new plant
4.
5.
Newly developed halfsize LED print-head
OKI’s Epi Film Bonding technology (see page 17 for details),
which bonds thin dissimilar
materials, has resulted in the
development of a new LED
print-head for non-impact
printers. Thinned LED array
chips, serving as exposure
light sources, are bonded with
driver IC chips, resulting in
an LED head half the size of
conventional LED print-heads.
This feature contributes to
significant reductions in the
number of chips used, requires
less wire bonding and increases
cost efficiency thanks to reductions in production processes
and materials.
Delivering MICROLINE
1190 to BRIC markets
The MICROLINE 1190 is an
entry-level yet fast, compact
dot-impact printer that meets
low-end printer market needs
in Asia, particularly in China,
Central and South America,
Eastern Europe and the Middle
East. Thanks to collaborative
sales activities conducted with
one of China’s leading IT companies, Digital China Holdings
Ltd., OKI plans to raise sales of
dot-impact printers to 300,000
units in the fiscal year ending
March 2008.
New LED print-head
MICROLINE 1190
16
Research and Devel
Giving More to Society through Advanced Technologies
Ubiquitous Services—able to satisfy user demands to obtain
information, products, and services wherever, whenever and
with whatever—continue to expand as the e-Society evolves.
OKI supports the development of this e-Society by pushing
the boundaries of R&D in six specific areas to provide leading
Ubiquitous Services.
Six Areas of Technological Development in
Provision of Ubiquitous Services
1. Ubiquitous Networks: Technology that provides individuals with freedom of activity, anytime and anywhere. OKI engages in the development of technologies for NGNs, industry-leading IP networks, and advanced wireless and sensor networks.
2. Network Dependability: Technology that provides individuals the secure use of safe, authentic services, such as
biometric identification systems and security technology for
network-based settlement.
3. Rich Media: Technology that allows individuals to precisely
obtain the desired services and data, in the right format, including technology that smoothly delivers video images and
integrates telecommunications and broadcasting.
4. Customer Concierge: Technology that offers individuals
services to meet their precise needs, including administrative
applications and electronic ticketing systems as well as ITS
developments for the private sector.
5. Smart Mechatronics: Advanced infrastructures for using
ubiquitous services based on OKI’s well-developed mechatronics know-how, such as ATM systems and printers.
6. Ubiquitous Devices: Technology that makes ubiquitous
infrastructures possible. OKI utilizes semiconductor and component technology capabilities gained by concentrating on the
development of personal and mobile devices.
OKI maximizes efficiency in its R&D efforts by delegating
basic research functions to its Corporate Research and Development Center and entrusting product development to the
development departments of each in-house company. To create advanced technologies, commercialize products flexibly
and rapidly, and link basic research with product development,
OKI has established the Business Incubation Division within
the Systems Network Group under the Info-telecom Systems
segment. By promoting Group-wide project cooperation, OKI is
accelerating the creation of new technologies and businesses.
Research at the level of elemental technology development is
promoted through business-academia collaborations.
World’s First Mass Producer of Thin-Film Bonding Technology for Dissimilar Materials
OKI has become the first in the world to successfully develop and commercialize Epi Film
Bonding (EFB) technology, which is able to bond thinned materials on top of dissimilar materials
without the use of adhesives by taking advantage of the phenomenon known as intermolecular
bonding force. EFB can be safely peeled from surfaces without causing blemishes, bonded to
different raw materials, and integrated into semiconductor processes. This technology dispenses with the need for wire bonding that was previously necessary for dissimilar materials and has
reduced the number of chips used in electronic devices. EFB technology endows increasingly
dense, multi-layered semiconductors with faster speeds and lower power consumption, which
opens up many possibilities in developing a variety of IC devices.
OKI has applied its proprietary EFB technology to create a new type of LED print-head for
printers. Thinned LED array chips and driver IC chips that have been integrated using intermolecular bonding force are, as a single unit, half the size of conventional LED print-heads. EFB
technology also contributes to lowering fabrication and material costs, thereby improving cost
efficiency. These heads debuted in the C3400n, a compact, high-speed color LED printer, and will
be featured in subsequent OKI color and monochrome LED printers. By developing this technology, OKI plans to develop ultra small print-heads and heads with 1200dpi or more to enable
higher resolution printing.
OKI will use this technology to further its research into smaller, lower cost ICs that consume
less power as well as to realize developments such as ultra-compact LED displays. Recognizing
this technology’s potential, OKI has launched a Group-wide research unit to investigate adapting this technology in other fields.
Thinned LED and driver
IC integrated with EFB
technology
Conventional LED print-head
New LED print-head
opment
1.
3.
Japan’s First Iris-Pattern Recognition System for CameraEquipped Mobile Phones Introduced
The variety of new mobile phone-supported services, such as
payment services, is growing in step with increasing mobile
phone functionality. These trends have brought about an increasing need for higher levels of mobile phone security to ensure
both the security of the services offered and guard against abuse
of personal information in the event of mobile phone loss or theft.
In response to these rapidly changing needs, OKI has become
the first company in Japan to develop iris-pattern recognition
technology for camera-equipped mobile phones. The great complexity and randomness inherent in human iris patterns permits
highly precise identity authentication. Thanks to its use of newly
developed algorithms and compact programs, OKI was able to
integrate iris pattern recognition technology into standard mobile phone cameras
and eliminate the need for the infrared
cameras that were previously used. Based
on this development, OKI is endeavoring to apply this technology to cameraequipped PDAs*1 and other products to
provide greater levels of security
World’s First Isolator-Free Optical Transmitter Module
Developed for Practical Use
Utilizing gain-coupled DFB*2 laser technologies, which reduce
noise deterioration, OKI was able to develop the industry’s first
practical-use isolator-free optical transmitter module. This
new development dispenses with the need for the optical isolators previously used in optical transmitter modules for longdistance transmissions. The newly developed gain-coupled
DFB laser boasts several favorable characteristics such as
production cost that is relatively the same as that for previous
DFB lasers, little degradation of reception sensitivity and superior light-reflecting properties. These have in turn eliminated
the need for high-cost isolators within the module component
and helped to bring low-cost, compact transmission module
development to fruition.
Taking this technology further, OKI
will continue to advance the development of products fitted with compact,
low-cost, optical transmission components with its proprietary silicone lens
technology.
*1 PDA: Personal Digital Assistant
*2 DFB: Distributed Feedback laser
Gain-coupled DFB laser
Iris-pattern recognition
on mobile phone
2.
Advanced eSound™ and eVideo Technologies
OKI’s eSound is an advanced VoIP technology that offers much
improved voice and sound quality. With a frequency range from
300 Hz to 3.4 kHz that far surpasses conventional phone voice
data transmission, eSound gives users a feeling akin to voice
quality of speaking face to face.
To offer this same high-quality sound to users of conventional phone services, OKI recently added My eSound™. This
technology improved sound quality by using low sound voice
data to create and modify high sound voice data that is filtered
out by conventional phones.
OKI’s eVideo technology enables compressed transmission
of video images—ranging from narrow-transmission-band
mobile terminal videos to high-definition, high-quality images—over IP networks. While compliant with international standards with regard to video encoding methods, OKI is working
to integrate proprietary high-speed, high-quality technologies
with IP network technologies to bring about high-quality image
and video transmission.
In addition to building these two
technologies into its own IP communication devices, OKI also provides them as
software engines to telecom carriers and
device vendors.
4.
MAILPIA® New Mobile Phone Service
MAILPIA is a notification system that alerts users of content
updates to their favorite Web sites via an e-mail sent either
to their mobile phone or personal computer. Signing up for
MAILPIA updates couldn’t be simpler; users just register any
Web site, blog URL or related keyword of their choice via the
MAILPIA Web site. Making registration even easier for those
who use mobile phones to access Web sites—usually intended
for personal computer Web browsing—OKI has launched a mobile-browser-supported service site that cuts down on access
and download time, making mobile access to
MAILPIA seamless and simple.
OKI will continue to promote the use of its
MAILPIA mobile service site as one approach
to developing its Web content service business.
MAILPIA
18
OKI’s Social Respo
Corporate Governance
The OKI Group recognizes that its greatest management
priority is to respond to the trust placed in it by all its stakeholders—including customers, shareholders and investors,
business partners, local communities, and employees—by
continuously working to improve corporate value. With this in
mind, the Group makes concerted efforts to reinforce its corporate governance based on three fundamental concepts: the
enhancement of management fairness and transparency; the
clarification of decision-making processes; and the achievement of thorough compliance.
Governance Structure
OKI maintains a corporate auditor system and allocates the
supervision and auditing of business execution functions to its
Board of Directors and Board of Auditors. To enhance management efficiency, OKI has introduced an executive officer system to make more distinct the separation of management and
business execution functions.
OKI’s Board of Directors comprises 10 directors, including
one external director. The Board of Directors normally meets
once a month to make decisions on fundamental management
policies and other important issues, as well as to supervise
business execution functions. The appointment of an external
director is judged to be essential in strengthening the supervisory function over the business execution functions of the Board
General Meeting of Shareholders
Board of Auditors
Internal Auditors
External Auditors
Board of Directors
Internal Directors
External Directors
Management
Advisory
Committee
Compensation
Committee
Accounting
Auditors
Management
Committee
CSR Committee
Compliance
Committee
Internal
Auditing
Division
Corporate
(Head Office
Function)
Information
Security
Committee
Companies
(Business Division)
Disclosure
Committee
of Directors and in accurately pinpointing business environment
and management issues. OKI’s Management Committee, which
consists of executive officers at the senior vice president level
or higher as well as corporate auditors, normally meets once
a week to make decisions on important issues relating to the
execution of the Group’s operations and to receive vital reports
concerning each of its divisional operations.
The Board of Auditors comprises three standing auditors,
one of whom serves concurrently as one of two external auditors. Their duties include attending Board of Directors’ meetings and other important meetings, verifying the contents of
reports received by directors and other executives, as well
as auditing the business execution functions of directors by
examining the status of company operations and finances.
Auditors liaise closely with the Internal Auditing Division to
accurately ascertain the overall status of company operations
as well as to carry out audits of the executive function. External
corporate auditors are appointed with the view that they are
able to accurately audit directors’ execution of their business
functions.
Committee Organization
OKI has established several dedicated committees to
strengthen its corporate governance functions. Details regarding their activities follow.
The Management Advisory Committee provides advice to
senior management to enhance management transparency and
soundness. Its members include external persons deemed to
possess the expert knowledge necessary to facilitate these objectives. The Compensation Committee ensures transparency
in the criteria and mechanisms used to set the remuneration of
directors, executive officers and management officials.
The Compliance Committee, headed by the Chief Compliance Officer, has been established with the company-wide
authority to propose fundamental compliance policies. The
Disclosure Committee ensures that disclosure to stakeholders
is accurate and timely.
In the fiscal year ending March 31, 2008, OKI added two new
committees to its governance structure. A newly established
CSR Committee will engage in the deliberation of basic policies related to the Group’s CSR activities, while an Information Security Committee will ensure thorough implementation
of information security measures.
Subsidiaries and Affiliates
Accounting
Auditors
(Board of)
Auditors
OKI’s Corporate Governance Structure
Establishment of Internal Control System
Selection/dismissal
Collaboration
Audit
Supervision
(As of June 11, 2007)
Japan’s new Corporation Law came into effect in May 2006. In
line with this new law, OKI announced in that same month a
decision reached by its Board of Directors for the formulation
of a Basic Policy for the Establishment of an Internal Control
System. OKI will move forward with efforts to strengthen its
corporate governance in conformity with this Basic Policy.
nsibility
Corporate Social Responsibility (CSR)
The OKI Group engages in a comprehensive range of CSR activities and goes to great lengths to ensure the robust development of its corporate activities. It does so not only in compliance
with relevant laws, regulations and accepted standards, but also
based on its corporate philosophy: “The people of OKI, true to
the company’s enterprising spirit, are committed to creating superior network solutions and providing excellent information and
communications services globally to meet the diversified needs
of communities worldwide in the information age.”
* For further information regarding OKI’S CSR activities, please visit our
website at http://www.oki.com/en/csr/.
Enhancing CSR Promotion Structure
In April 2007, OKI integrated its CSR Promotion and Compliance and Business Ethics Divisions to establish an enhanced
CSR Promotion Division. OKI recognizes thorough compliance
as the fundamental aim of CSR and directs the basis of its efforts toward continuous improvement of the Group’s CSR and
compliance promotion structure.
®
Privacy Mark Certification Granted
Having fulfilled the JISQ15001:2006 “Personal information
protection management systems—Requirement,” OKI was
granted Privacy Mark certification by the Japan Information
Processing Development Corporation on April 3, 2007. In line
with certification requirements, OKI reinforced Group-wide
personal information protection and handling systems, bolstered its internal audit structure, undertook relevant staff
training, thoroughly implemented personal information storage
rules, and introduced entry and exit systems at all of its offices. With the ultimate goal of providing its
customers with a sense of security, OKI will
continue its efforts to appropriately manage
personal and confidential information and
maintain a high-level of information security.
Contributing to Society
OKI Supports Elementary School Project in China
In the fiscal year ending March 2007, the OKI Group participated in a special project in China that was organized by Foster
Parents Plan Japan. The second project of its kind, a ceremony
was held on June 8, 2006 to commemorate the completion of
renovations to existing structures and the building of a new
two-story schoolhouse in the village of Fu Jia Pan, Shanxi
Province. In November 2001, OKI contributed to its first special
Foster Parents Plan Japansponsored project, which on that
occasion was in the village of
Chun Hua County, also in Shanxi
Province, as part of events marking OKI’s 120th anniversary.
Emperor Showa Memorial Award for Promotion of Blood
Donation Presented
At a national convention held on July 13, 2006 under the sponsorship of Japan’s Ministry of Health, Labour and Welfare, the
Japan Red Cross Society and Gunma Prefecture, OKI was
presented with the Emperor Showa Memorial Award for the
Promotion of Blood Donation. OKI began Group-wide blood
donations in 1964, becoming the first company in Japan to take
part in such activities, and today over 2,000 of its employees
now give blood each year. OKI’s efforts have also involved the
donation of a special cooler-equipped vehicle for safe blood
transport as well as providing for enhancements to the Japan
Red Cross Society website—a
gift funded by “OKI Volunteer
Fund,” a Group-wide fund-raiser
with matching gift donations
provided by the Company. Selected for the dedication it has
demonstrated by these activities, OKI is the proud recipient
Presentation of the Emperor
of this award.
Showa Memorial Award for
the Promotion of Blood Donation
Environmental Conservation
Ministry of Environment Approves Group’s Waste
Treatment Scheme
The OKI Group’s environmental philosophy calls for the realization of a better global environment for the next generation
and is put into action by providing products that contribute
to an e-Society. This philosophy involves OKI contributing to
environmental conservation through its products; by conducting conservation activities as an integral part of its business
affairs; and by supporting the activities of society at large.
Exemplifying these efforts, OKI was granted “Certified
Cross-jurisdictional Waste Treatment Manufacturer Scheme”
approval by the Ministry of the Environment in June 2006.
Large-area industrial waste certification systems endeavor
to enhance recycling activities in the
overall disposal of used products.
OKI sought out and commissioned the
services of eight new companies for
intermediate industrial waste treatment,
aiming to enhance its used-product
recovery system and realize eco-friendly
recycling methods.
Large-Area Industrial
Waste Certifi cate of
Approval
Fu Jia Pan Village Elementary
School
20
Management
Kazuo Tanaka, Katsumasa Shinozuka and Naoki Sato (from left)
Board of Directors and Executive Officers
Auditors
President and Chief Executive Officer
Senior Vice Presidents
Standing Auditors
Katsumasa Shinozuka *1
Masataka Sase
Takahisa Inagawa
General Manager, Global Environment Division
Senior Managing Directors and Executive
Vice Presidents
Masao Miyashita
President, System Solutions Company
Kazuo Tanaka *1
Chief Financial Officer
Chief Compliance Officer
Naoki Sato *1
Managing Directors and Senior Vice
Presidents
Harushige Sugimoto
Chief Technology Officer
Hideichi Kawasaki
General Manager, Marketing Promotion Division
Hironori Kitabayashi
Chairman, Semiconductor Business Group
Keiichi Fukumura
General Manager, CSR Promotion Division
Masayoshi Matsushita
Chief Information Officer
Directors
Executive Officers
Yutaka Asai
Yoshikatsu Shiraishi
Hiroyuki Katagiri *4
Auditor
Ieji Yoshioka *4
General Manager, Global Business Development Division
Shigeru Yamamoto
President, Financial Solutions Company
Hiroshi Enomoto
General Manager, Business Management and Promotion
Division
Kichiro Akino
President, Network Systems Company
Kazuhiro Iritani
General Manager, Kansai Regional Office
Masasuke Kishi
EVP *3, Network Systems Company
Hideto Morizono
President, Manufacturing Service Company
Sei Yano
General Manager, Corporate Strategy Planning Office
Mikihiko Maeno
President and CEO, Oki Data Corporation
Minoru Morio *2
*1
*2
*3
*4
Representative Directors
External Director
Executive Vice President
External Auditors
(As of June 29, 2007)
Financial Section
Contents
Six-Year Summary..............................................................23
Financial Review.................................................................24
Consolidated Balance Sheets..........................................29
Consolidated Statements of Operations........................31
Consolidated Statements of Cash Flows .......................32
Consolidated Statements of Changes in Net Assets...33
Notes to Consolidated Financial Statements................35
Report of Independent Auditors.......................................48
22
Six-Year Summary
Oki Electric Industry Co., Ltd. and consolidated subsidiaries
Years ended March 31
Thousands of U.S.
dollars (Note 1)
Millions of yen
2007
2006
2005
2004
2003
2002
2007
$6,091,245
For the year:
Net sales
¥718,767
¥680,526
¥688,542
¥654,214
¥585,473
¥604,572
Cost of sales
560,817
514,483
504,340
484,455
445,709
490,257
4,752,686
Gross profit
157,949
166,043
184,202
169,759
139,763
114,314
1,338,550
Operating (loss) income
(5,410)
10,593
27,220
21,606
1,368
(27,247)
(45,847)
(10,720)
(133)
(8,920)
(19,410)
(4,602)
(29,643)
(90,847)
(Loss) income before income taxes,
minority interests and equity
in (losses) earnings of affiliates
(16,130)
10,460
18,299
2,195
(3,233)
(56,890)
(136,694)
Net (loss) income
(36,446)
5,058
11,174
1,328
(6,560)
(34,077)
(308,864)
¥379,135
¥374,278
¥379,374
¥382,369
¥368,582
Other (expenses) income, net
At the year end: (Note 2)
Total current assets
Total investments and
long-term receivables
Property, plant and equipment, net
¥405,161
$3,433,567
58,025
71,052
61,492
58,615
42,796
49,254
491,737
129,696
125,223
126,470
119,662
136,355
163,844
1,099,118
Other assets
35,515
43,244
44,996
51,333
60,659
69,039
300,974
Total assets
628,398
618,655
607,237
608,986
622,180
650,721
5,325,406
Total current liabilities
318,996
295,865
313,828
311,557
307,489
305,877
2,703,355
Total long-term liabilities
193,428
182,770
163,369
181,645
208,272
231,322
1,639,220
Total net assets
115,973
140,019
130,040
115,782
106,418
113,520
982,822
Common stock
76,940
67,882
67,877
67,862
67,862
67,862
652,033
U.S. dollars
(Note 1)
Yen
Per share amounts:
Net (loss) income per share
Cash dividends per share
Number of shareholders
Number of employees
¥ (56.27)
2.17
¥ (10.72)
¥ (55.66)
—
¥
8.27
3.00
¥
18.27
3.00
¥
—
—
—
121,000
111,379
99,735
100,778
115,215
107,165
21,380
21,175
20,410
20,960
22,520
23,597
$
(0.47)
—
Ratios (%): (Note 2)
Return on equity
(30.0)%
3.9%
9.5%
1.3%
(6.3)%
Return on assets
(5.8)
0.8
1.8
0.2
(1.0)
(26.6)%
(4.9)
Shareholders’ equity
17.4
21.6
20.4
18.1
16.2
16.6
Note 1: The U.S. dollar amounts in this annual report are translated from yen, for convenience only, at ¥118=US$1.00, the approximate exchange rate prevailing on March 31, 2007.
Note 2: Effective the year ended March 31, 2007, the Company has adopted a new accounting standard for the presentation of net assets in the balance sheet and the related
implementation guidance. In this connection the six-year summary has been restated to conform to the presentation and disclosure of the consolidated financial
statements for the year ended March 31, 2007.
Financial Review
Annual Report for Oki Electric Industry Co., Ltd. and its Consolidated Subsidiaries
SCOPE OF CONSOLIDATION
SEGMENT INFORMATION
In the fiscal year ended March 31, 2007, 17 companies, including 11
equity-method subsidiaries, were newly included in the Group’s scope
of consolidation, while two other equity-method affiliates remained
unchanged from the previous fiscal year. In addition, one company
was excluded due to a merger executed by OKI Electric Co., Ltd.
(“OKI” or “the Company”) for a total of 100 Group companies.
Info-Telecom Systems
In this segment, business for telecommunication carriers experienced
especially tough conditions. Sales in fixed-line network systems
decreased, affected by the decline of investment in IP networks and
conventional fixed-line communication systems by telecommunication
carriers coupled with delayed development of new products. In addition, the full-scale introduction of next-generation networks (NGNs),
which were not expected to launch until either the fiscal 2008 or
thereafter, contributed to the OKI Group’s performance.
In financial sector market, both ATMs for the South Korean and
Chinese markets, and ATMs with enhanced security features were
robust. Sales of branch terminals in post offices also increased. In the
public sector market, sales of wireless disaster prevention systems
for integration into communities were favorable. In the private sector
market, sales decreased, mainly in systems for logistics and distribution industries. As such, the OKI Group increased investment in the
establishment of sales channels to expand the sales of IP telephony to
private companies.
As a result, consolidated segment sales, excluding inter-segment sales, increased 4.3% compared with the previous fiscal year
to ¥352.7 billion. Reflecting such factors as price cuts due to harsh
competition and insufficient cost reduction efforts, an operating loss
of ¥1.5 billion was posted, compared with operating income of ¥10.9
billion in the previous fiscal year.
OVERVIEW OF THE FISCAL YEAR ENDED MARCH 31, 2007
Net Sales and Operating Income
In the fiscal year under review, the Japanese economy remained
on a generally steady course, supported by an improvement in corporate earnings and an increase in capital investment. The global
economy also enjoyed steady ongoing growth. The Company’s businesses, however, were challenged by harsh operating conditions.
On one hand, sales of financial system business increased owing to
a recovery of investment by financial institutions, and sales of color
non-impact printers (NIPs) also grew, driven by market expansion.
However, a slowdown in investment in fixed-line network systems
by telecommunication carriers and weakened sales of driver LSIs due
to prolonged inventory reduction of LCD panels put pressure on sales
and income. Additionally, cost reduction efforts were not sufficient
to offset sales declines due to intensifying competition in a variety of
product fields.
As a result, the OKI Group reported consolidated net sales of
¥718.8 billion, up 5.6% compared with the previous fiscal year. Consolidated operating loss was ¥5.4 billion against operating income of
¥10.6 billion in the previous fiscal year.
Net Sales
Operating Income
Billions of yen
Billions of yen
373.1
338.0
352.7
15.8
Net Sales
10.9
Billions of yen
800
688.5
680.5
718.8
‒1.5
（Info-Telecom Systems ）
600
400
200
0
2005
2006
2007
Operating Income
Billions of yen
30
27.2
Semiconductors
In the semiconductor segment, sales of driver LSIs decreased in
accordance with prolonged inventory reductions by LED panel manufacturers. Sales of system LSIs for specified customers also declined.
On the other hand, P2ROMs for the amusement market and foundry
businesses—employing such unique technology as a high-voltage
process—were favorable in the fiscal year under review. As a result,
consolidated sales in this segment, not including inter-segment sales,
decreased 3.5% year on year to ¥145.5 billion. Operating income
declined by ¥2.3 billion to ¥0.7 billion.
15
10.6
0
Net Sales
Operating Income
Billions of yen
Billions of yen
12.0
‒5.4
150.7
-15
2005
2006
150.7
145.5
3.0
2007
0.7
（Semiconductors）
24
Printers
In the printer segment, sales of business-use color NIPs increased
and was significantly impacted by depreciation of the Japanese yen.
In this market, however, intense price competition continued among
manufacturers aiming to increase their market share.
Based on the aforementioned, consolidated sales, excluding intersegment sales, climbed 16.6% year on year to ¥187.1 billion. Operating income, on the other hand, declined ¥2.4 billion from ¥4.1 billion
in the previous fiscal year to ¥1.7 billion. This was attributed mainly
to delays in a shift to mid- and high-range printer models with higher
profit rates.
Net Sales
Operating Income
Billions of yen
Billions of yen
137.7
187.1
160.5
Asia
Sales in Asia, excluding inter-segment sales, increased 25.8% to
¥44.6 billion due to favorable expansion of sales in ATMs and printers,
especially in the Chinese market. Operating income fell ¥0.8 billion to
¥0.7 billion from ¥1.5 billion in the previous fiscal year.
NET INCOME
On account of an ¥16.0 billion, year on year, increase in operating
loss and the realization of ¥17.8 billion in deferred tax assets, net loss
totaled ¥36.4 billion, a drop of ¥41.5 billion from ¥5.1 billion in net
income recorded in the previous fiscal year.
In line with this increase in net loss, net loss per share was ¥56.27
compared to ¥8.27 as net income per share in the previous fiscal year.
FINANCIAL POSITION
7.8
4.1
1.7
（Printers ）
GEOGRAPHIC SEGMENT INFORMATION
Japan
In the domestic market, despite the downturn of investment in fixedline systems by telecommunication carriers, sales of financial institution system equipment increased owing to an investment recovery
in the financial industry and expansion in the printer market. As a
result, sales, excluding inter-segment sales, grew 1.9% year on year
to ¥503.9 billion. Delays in business cost reductions by enterprises,
and the sales decrease in the telecommunication carrier and semiconductor businesses exerted a negative influence on operating income,
which fell ¥17.0 billion from ¥20.6 billion to ¥3.6 billion.
North America
The printer business was robust, although sales in semiconductors
declined. Sales decreased 0.5% to ¥65.3 billion. The OKI Group
posted an operating loss of ¥0.2 billion, a decrease of ¥1.3 billion, year
on year.
Europe
Sales in Europe, not including inter-segment sales, climbed 23.7%
to ¥104.9 billion, owing to significant sales increases in the printer
and semiconductor businesses. The OKI Group recorded operating
income of ¥2.0 billion, an improvement of ¥3.9 billion from an operating loss of ¥1.9 billion in the previous fiscal year.
Assets, Liabilities and Shareholders’ Equity
Compared with the previous fiscal year-end, total assets increased
¥9.7 billion. Main factors were increases of ¥11.4 billion in cash and
cash equivalents, ¥14.0 billion in note and accounts receivable and
¥4.5 billion in property, plant and equipment. On the other hand,
investments in securities and deferred tax assets decreased ¥12.0 billion and ¥17.8 billion, respectively.
In total liabilities and net assets, retained earnings decreased ¥39.0
billion. Common stock and additional paid-in capital increased ¥18.0
billion, owing to partial exercise of convertible bonds and a ¥16.5 billion increase in interest-bearing debt.
CASH FLOWS
In the fiscal year under review, net cash provided by operating activities increased ¥1.1 billion to ¥16.1 billion from ¥15.0 billion in the previous fiscal year, mainly due to an improvement in working capital.
Net cash used in investing activities narrowed ¥6.3 billion to ¥34.9
billion from ¥28.6 billion in the previous fiscal year. This was attributed
to a drop in gain on sale of investments in securities.
Free cash flows, which are the total of cash flows from operating
and investing activities, were negative, totaling ¥18.8 billion, a ¥5.2
billion downturn from the previous fiscal year.
Net cash provided by financing activities amounted to ¥28.1 billion. This was due to issuance of convertible bonds and long-term
debt against the redemption of bonds and the repayment of long-term
debt.
Net Income / Return on Equity [ROE]
Cash Flows
Billions of yen
Billions of yen
20
100
11.2
9.5%
5.1
59.3
3.9%
0
50
28.1
16.1
15.0
‒20
0.8
0
‒30.0%
‒26.9
‒36.4
‒40
2005
Net Income
2006
2007
‒50
‒41.5
2005
‒28.6
2006
‒34.9
2007
ROE (%)
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
As a result of these cash flow movements, cash and cash equivalents as of March 31, 2007 were ¥49.8 billion. This represents a yearon-year increase of ¥11.4 billion compared with the previous fiscal
year-end total of ¥38.4 billion.
CAPITAL EXPENDITURES, DEPRECIATION AND
RESEARCH AND DEVELOPMENT EXPENSES
As a result of expanded investment toward strengthening semiconductor production, capital expenditures as a whole increased by ¥4.2
billion to ¥37.7 billion. Depreciation of property, plant and equipment
increased by ¥0.6 billion to ¥ 27.3 billion. Research and development
expenses also grew by ¥1.7 billion to ¥21.3 billion.
OUTLOOK FOR THE YEAR ENDING MARCH 31, 2008
The Japanese economy is exhibiting clearer signs of a recovery,
supported by improvements in the corporate sector. Despite this
favorable outlook, however, the OKI Group remains cautious about a
rapidly changing operating environment typified by increasingly hurried globalization, domestic market saturation, and the fervent pursuit
of investment efficiency by customers.
Within this environment, the OKI Group is exerting efforts to
raise the earning capacity of its Info-Telecom Systems segment. To
this end, it plans to consolidate low-profit businesses, strengthen
Company competitiveness, expand its software service business by
creating a global software development structure, and grow overseas
businesses by newly establishing a dedicated overseas structure. In
businesses targeting the information market, the Group is looking to
bolster its earnings power through the thorough promotion of cost
reduction measures relating to mainstay products such as home-use
subscriber devices and IP-PBX for companies. In the finance business
market, OKI aims to further strengthen overseas ATM business development with a keen focus on markets in China and South Korea. It
will base these efforts on its strengths in mechatronics technologies.
Furthermore, in regard to public-sector information systems, OKI will
liquidate underperforming businesses as well as reevaluate its cost
structure in order to strengthen its earnings capabilities.
40
As a result of these efforts, OKI is forecasting a ¥12.3 billion
increase in sales in the Info-Telecom Systems segment, to ¥365.0
billion, year on year. Likewise, we anticipate operating income to
improve by ¥5.0 billion to ¥3.5 billion.
With a focus on boosting profitability in the Semiconductor segment, OKI will work to reduce fixed and fluctuating costs, as well as
to implement an optimal shift of human resources. Specifically, OKI
will pursue cost reductions in the large TFT driver business while
using differentiated technologies to take the lead in this competitive
market. Furthermore, with an emphasis on system LSIs and ASICs,
OKI will shift its business focus to the development of high-addedvalue businesses supported by an amalgamation of Group strengths,
while at the same time working to consolidate underperforming businesses. Through these efforts, we foresee a ¥4.5 billion increase in
Semiconductor segment sales, year on year, to ¥150.0 billion. Operating income is expected to amount to ¥5.0 billion, an increase of ¥4.3
billion.
In the Printer segment, which is dominated by color NIPs, OKI
is accelerating efforts to instigate a shift away from low-end printer
models to mid- and high-range models targeting business development in the SMB market. In addition to bringing about cost reductions
in the dot-impact printer business, OKI will seek to bolster its sales
capabilities by introducing new printers to China, where market expansion is anticipated. As a result, Printer segment sales are anticipated
to rise by ¥7.9 billion to ¥195.0 billion, with a ¥3.3 billion increase in
operating income to ¥5.0 billion.
In other segments, the OKI Group is anticipating sales of ¥40.0 billion and operating income of ¥3.5 billion.
As a result, consolidated net sales for the fiscal year ending March
31, 2008 are expected to reach ¥750.0 billion. Operating income is
forecast at ¥8.0 billion, with net income of ¥1.0 billion.
Forecasts for the fiscal year ending March 31, 2008 are based on
exchange rates of ¥115 to U.S.$1.00 and ¥150 to one euro.
Capital Expenditures / Depreciation
R&D Expenses / R&D Expenses to Net Sales
Billions of yen
Billions of yen
30
37.7
37.8
3.2%
33.5
22.0
30
26.6
25.5
27.3
21.3
19.6
20
3.0%
20
10
2.9%
10
0
2005
2006
Capital Expenditures
2007
Depreciation
0
2005
R&D Expenses
2006
2007
R&D Expenses to Net Sales (%)
26
Performance Forecasts for the Fiscal Year Ending March 31, 2008
(Billions of yen unless otherwise stated)
Net Sales
Operating Income
Net Income
Net Income per
Share (Yen)
¥750.0
¥8.0
¥1.0
¥1.46
BUSINESS AND OTHER RISKS
The following items are business and other risks recognized by the
OKI Group and its consolidated subsidiaries as those that may significantly influence investors’ judgment. OKI is aware of the potential
impact these risks may have if any were to occur and is implementing
measures to avoid such occurrence, as well as to minimize the weight
of their impact should they occur.
(1) Political and Economic Trends
Demand for the OKI Group’s products is subject to political and economic trends in the individual countries and regions in which they are
sold. Accordingly, economic recession and the resulting contraction
in demand in the OKI Group’s principal operating markets of Japan,
North America, Europe and Asia may impact its business performance
and financial position.
(2) Sudden Technological Innovation
The OKI Group’s principal business segments comprising Info-Telecom Systems, Semiconductors and Printers are subject to rapid
technological innovation. Accordingly, the OKI Group strives to preserve its competitive advantage through new technology and product
research and development. In the event, however, the OKI Group is
unable to keep pace with new innovations in technology and products,
is burdened with obsolete products, and is unable to deliver products
and services that appeal to customers, its performance and financial
position may be affected.
(3) Market Trends
1 The product and geographical markets in which the OKI Group
operates are subject to frequent entry by new participants and persistent competition. In an effort to secure competitive advantage,
the OKI Group strives to enhance product development and reduce
costs. In the event the OKI Group is unable to implement effective
product development and cost rationalization measures and fails to
maintain and secure sufficient market share, business performance
and financial position may be affected.
2 The performance of the Info-Telecom Systems segment is subject
to a variety of factors including: (1) changes in investment trends
by financial institutions due to revisions of financial regulation, poor
performance and other factors; (2) changes in investment trends
by telecommunication carriers owing to amendments to telecommunication regulations, shifts in business strategy and other factors, and; (3) a significant decline in public-sector investment due
to national and local government policies.
3 The semiconductor market in which the OKI Group operates is
characterized by turbulent fluctuations. While the OKI Group
makes every effort to establish and develop a business structure
that is resilient to movements in the market, in the event of a
substantial unforeseen drop in demand or price deterioration, the
Semiconductor segment’s performance may be affected.
4 The printer market, a core component of the OKI Group’s field of
operations, is experiencing intense price competition, particularly
in color printers. In an effort to secure a strong market position and
profitability, the OKI Group is endeavoring to develop new products
and reduce costs. Despite these efforts, continued downward revisions to product prices may impact the Printer segment’s performance.
(4) Raw Material and Component Procurement
The OKI Group procures a variety of raw materials and components
in support of its manufacturing activities. The ability to ensure timely
product shipment, avoid delays in product delivery and minimize
opportunity loss is dependent upon the stable supply of raw materials,
components, specialized parts and alternative components. The OKI
Group’s performance and financial position may therefore be affected
in the event stable supply cannot be maintained.
The OKI Group is reliant upon the direct and indirect supply of
crude oil and materials, such as metals, as a part of its manufacturing
activities. A sharp rise in the price of these and other key materials
may impact the OKI Group’s performance and financial position.
(5) Product Defects and Delays in Delivery
Despite every effort to maintain quality assurance, the OKI Group is
unable to eliminate all possibility of product and service defects. In
the event of a product or service defect, the OKI Group may be liable
for damages. In addition, any incidence of defect may impact the OKI
Group’s reputation and standing and contribute to a drop in demand.
In either case, the OKI Group’s performance and financial position
may be affected.
While the OKI Group adopts complete and thorough measures to
ensure the timely delivery of its products and services, unforeseen
incidents in design, material procurement and production control may
lead to a delay in shipment. In this case, the OKI Group may become
liable for the payment of damages.
(6) Success or Failure of Strategic Alliances
The OKI Group is aggressively engaged with other companies in
strategic alliances in research and development, manufacturing, sales
and other activities. While the OKI Group only enters into and maintains such alliances with the utmost caution, there may in theory be
instances where the OKI Group is not able to obtain the desired cooperation from the strategic partner in business strategy, production and
technical development, funds procurement or other activity, or where
the alliance does not yield satisfactory results. The OKI Group’s performance and financial condition may be adversely affected by such
an event.
(7) Overseas Business Activities
The OKI Group is engaged in business activities across a variety of
countries and regions. Accordingly, it is subject to a number of risks
specific to overseas business activities, including country risk and foreign currency fluctuation risk. In the implementation of its business,
the OKI Group takes all necessary care to avoid and minimize risks.
In particular the OKI Group enters into forward currency and currency
swap contracts to minimize the risk of short-term movements in foreign currencies. Notwithstanding the aforementioned, a sharp appreciation of the yen against the United States dollar and the euro may
affect the OKI Group’s performance and financial position.
The OKI Group operates production sites in Thailand and China.
The OKI Group’s performance and financial position may therefore be
affected in the event of economic recession, movements in local currency exchange rates and unforeseen circumstances in either of these
countries.
(8) Patents and Intellectual Property
The OKI Group strives to protect its patents and to secure new
patents with the aim of differentiating the OKI Group from its competitors. Failure to do so may impact the performance of relevant businesses. The OKI Group is also active in developing new products and
securing the right to use other companies’ patents. In the event the
OKI Group is unable to secure patents or rights, or secures patents or
rights under unfavorable terms and conditions, its performance and
financial position may be affected.
The OKI Group endeavors to comply with patents held by third parties. It is not, however, in a position to completely guarantee the OKI
Group will not violate intellectual property rights held by another party.
In the event the OKI Group is involved in a claim relating to the violation of intellectual property rights, it is likely to incur legal and other
expenses. In the event the OKI Group is found to have breached intellectual property rights held by another party, then it is likely to incur
damages. In either event, the performance and financial position of
the OKI Group may be affected.
(9) Statutory and Regulatory Compliance
The OKI Group is subject to statutory and regulatory requirements,
business and investment application and approval, export restrictions relating to national security and other factors, import regulations
including customs and taxation and a variety of government ordinances in each of the countries and regions in which it operates. The
OKI Group is also subject to statutory and regulatory requirements
relating to commerce, antitrust, patents and intellectual property
rights, taxation, foreign currency, the environment and recycling. In
the event the OKI Group is unable to comply with any of the aforementioned, the possibility exists its activities would be restricted or
suspended. Accordingly, the aforementioned and other statutory and
regulatory requirements may impact the OKI Group’s performance
and financial position.
(10) Natural and Other Disaster
The OKI Group conducts periodic inspections and implements a variety of accident, disaster and fire prevention measures to minimize
stoppages of its production line. There is, however, no complete guarantee that accidents, disasters and fire that would impact the production line can be prevented.
In particular, stoppages to the OKI Group’s semiconductor production lines located in Hachioji (Tokyo), Miyazaki Prefecture, Miyagi
Prefecture and Thailand due to earthquake, wide and flood damage or
power blackout may affect the OKI Group’s performance and financial
position.
(11) Information Management
Although the OKI Group implements defense measures to protect its
internal systems against computer viruses and the leakage of information, the Group cannot guarantee complete protection from system
failure and information leakage attributable to human error, new virus
strains and other like causes. The Group, therefore, faces the risk of
cumulative losses should there be a breech in the information management structure.
(12) Procurement and Training of Human Resources
The ability to secure and foster high-quality human resources is a
key factor in ensuring further growth as a stable earnings company.
Accordingly, the OKI Group strives to recruit capable employees at
every level, including new graduates and mid-career employees. In an
effort to foster quality human resources, the OKI Group also conducts
on-the-job training, education and a variety of training activities. In the
event the OKI Group is unable to secure and foster high-quality human
resources or a number of key employees leave the OKI Group, future
growth may be affected.
(13) Interest-Rate Fluctuations
Although the OKI Group has been reducing its interest-bearing debt, it
is still susceptible to changes in interest rates. The OKI Group utilizes
interest-rate swaps and other instruments to manage the risks of
interest-rate fluctuations. However, there is a possibility that interest
charges may suffer an increase associated with a rise in interest rates
and that the increased cost of raising capital would adversely affect
the Company’s ability to raise working capital.
(14) Changes to Accounting Standards
The Company makes consolidated and non-consolidated financial
statements in accordance with accounting standards generally recognized as fair and accurate. Should changes to accounting standards
occur, there is a possibility that the OKI Group’s performance and
financial position may be adversely affected.
(15) Debt Recovery
While the Company constantly appraises the financial situation of
its customers and makes provision for bad debts after the Balance
Sheet date, a sudden deterioration in the financial condition of a major
customer could exert a negative influence on the OKI Group’s performance.
(16) Impairment Loss on Fixed Assets
In the event that it becomes necessary for the OKI Group to record an
impairment loss on fixed assets such as tangible and intangible fixed
assets, investment and other assets, and assets under finance leases,
the Group’s performance and financial position may be adversely
affected.
(17) Deferred Tax Assets
The OKI Group amortizes deferred assets against retained losses carried forward and temporary differences as appropriate. In the event
the OKI Group is unable to liquidate deferred tax assets due to the
decline in taxable income brought on by fluctuations in its business
results, the OKI Group’s performance may be affected.
(18) Retirement Benefit Obligations
The OKI Group provides for retirement benefit obligations based on
a discount rate established using actuarial calculations. Accordingly,
a significant change in the discount rate and other preconditions and
assumptions that lead to an increase in the retirement benefit obligation may impact the OKI Group’s performance and financial position.
28
Consolidated Balance Sheets
As of March 31, 2007 and 2006
Thousands of U.S.
dollars (Note 2)
Millions of yen
ASSETS
2007
2006
¥ 49,800
¥ 38,419
101
500
2007
Current assets:
Cash and cash equivalents
Marketable securities (Note 3)
$
422,033
855
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates
Other
Less: Allowance for doubtful receivables
Inventories (Note 4)
Other current assets (Note 8)
6,807
11,787
57,686
173,815
153,699
1,473,008
(1,904)
167,513
(1,842)
166,899
(16,135)
1,419,601
9,028
9,671
76,508
405,161
379,135
3,433,567
Investments in and advances to unconsolidated subsidiaries and affiliates (Note 5)
11,717
15,643
99,296
Other investments in securities (Note 3)
47,360
57,900
401,355
Total current assets
Investments and long-term receivables:
Other long-term receivables
Less: Allowance for doubtful receivables
Total investments and long-term receivables
1,660
3,089
14,067
(2,712)
(5,581)
(22,983)
58,025
71,052
491,737
Property, plant and equipment (Notes 6 and 10):
15,760
15,940
133,559
Buildings
Land
128,139
124,515
1,085,923
Machinery and equipment
495,944
482,365
4,202,915
837
431
7,093
640,681
623,253
5,429,500
(510,985)
(498,030)
(4,330,381)
129,696
125,223
1,099,118
35,515
43,244
300,974
¥ 628,398
¥ 618,655
$ 5,325,406
Construction in progress
Less: Accumulated depreciation
Property, plant and equipment, net
Other assets (Note 8)
Total assets
Thousands of U.S.
dollars (Note 2)
Millions of yen
LIABILITIES
2007
2006
2007
¥ 98,643
¥ 79,412
$ 835,957
43,666
56,665
370,050
Current liabilities:
Short-term borrowings (Note 6)
Current portion of long-term debt (Note 6)
Notes and accounts payable:
Other
Accrued income taxes
Other accrued expenses
5,506
6,370
46,661
107,832
98,130
913,830
1,749
1,182
14,822
47,339
44,350
401,177
Other current liabilities (Note 8)
14,259
9,752
120,838
Total current liabilities
318,996
295,865
2,703,355
142,530
132,229
1,207,881
45,658
42,897
386,932
5,239
7,644
44,398
Total long-term liabilities
193,428
182,770
1,639,220
Total liabilities
512,425
478,636
4,342,584
76,940
67,882
652,033
46,744
37,801
396,135
(22,375)
16,580
(189,618)
Long-term liabilities:
Long-term debt (Note 6)
Retirement benefits (Note 7)
Other long-term liabilities (Note 8)
NET ASSETS
Shareholders’ equity (Notes 9 and 18):
Common stock:
Authorized—2,400,000,000 shares
Issued—684,256,778 shares in 2007 and 612,371,797 shares in 2006
Additional paid-in capital
(Accumulated deficit) retained earnings
Less: Treasury stock, at cost:
1,069,266 shares in 2007 and 915,526 shares in 2006
Total shareholders’ equity
(320)
(280)
(2,711)
100,989
121,984
855,838
14,377
19,113
121,838
Valuation, translation adjustments and other:
Net unrealized holding gain on other securities
Loss on deferred hedges
Translation adjustments
Total valuation, translation adjustments and other
Warrants
Minority interests in consolidated subsidiaries
Total net assets
(368)
(204)
(3,118)
(5,595)
(7,210)
(47,415)
8,412
11,698
71,288
32
—
271
6,538
6,335
55,406
115,973
140,019
982,822
¥628,398
¥618,655
$5,325,406
Contingent liabilities (Note 17)
Total liabilities and net assets
The accompanying notes are an integral part of these statements.
30
Consolidated Statements of Operations
Years ended March 31, 2007, 2006 and 2005
Thousands of U.S.
dollars (Note 2)
Millions of yen
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
2007
2006
2005
2007
¥718,767
¥680,526
¥688,542
$6,091,245
560,817
514,483
504,340
4,752,686
157,949
166,043
184,202
1,338,550
163,359
1,384,398
155,449
156,982
(5,410)
10,593
27,220
(45,847)
(6,820)
(6,171)
(6,724)
(57,796)
1,500
1,837
1,323
12,711
—
1,403
561
—
3,362
8,043
3,037
28,491
(2,130)
—
(1,193)
(18,050)
(785)
1,045
(1,300)
(6,652)
Other (expenses) income:
Interest expense
Interest and dividend income
Foreign exchange gain, net
Gain on sale of investments in securities
Write-downs of investments in unconsolidated subsidiaries and
other investments in securities
(Loss) gain on sale and disposition of property, plant and equipment
Loss on impairment of fixed assets (Note 12)
—
(2,973)
—
Loss on natural disaster (Note 13)
—
(856)
—
(1,442)
(2,363)
(7,491)
Special retirement payments
(884)
—
—
Loss on business restructuring (Note 14)
(2,335)
—
—
(19,788)
Other, net
(2,626)
(1,019)
(2,261)
(22,254)
(10,720)
(133)
(8,920)
(90,847)
(16,130)
10,460
18,299
(136,694)
(Loss) income before income taxes, minority interests and equity
Income taxes (Note 8):
Current
Deferred
2,152
1,579
2,695
18,237
17,813
3,773
4,377
150,957
19,966
5,352
7,072
169,203
(36,096)
5,107
11,226
(305,898)
(274)
(211)
(297)
(2,322)
(75)
161
245
(635)
5,058
¥ 11,174
$ (308,864)
(Loss) income before minority interests and equity
Minority interests in earnings of consolidated subsidiaries
Equity in (losses) earnings of affiliates
Net (loss) income (Note 18)
¥ (36,446)
¥
Consolidated Statements of Cash Flows
Thousands of U.S.
dollars (Note 2)
Millions of yen
2007
2006
2005
2007
¥ 5,058
¥ 11,174
34,957
34,691
34,245
—
2,973
—
—
2,821
2,651
4,490
23,906
Cash flows from operating activities:
Net (loss) income
¥(36,446)
$(308,864)
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization
Loss on impairment of fixed assets
Provision for retirement benefits, net of payments
Write-downs of investments in unconsolidated subsidiaries
and other investments in securities
Gain on sale of investments in securities
Loss (gain) on sale and disposition of property, plant and equipment
2,130
(3,362)
296,245
—
1,193
18,050
(8,043)
(3,037)
(28,491)
785
(1,045)
1,300
6,652
Deferred income taxes
17,813
3,773
4,377
150,957
Other, net
(1,779)
(802)
1,025
(15,076)
(7,379)
(1,371)
13,620
(62,533)
2,686
(15,536)
(9,014)
22,762
Changes in operating assets and liabilities:
Notes and accounts receivable
Inventories
Notes and accounts payable
(95)
(5,276)
7,056
Accrued income taxes
798
(1,138)
923
6,762
19,830
Other accrued expenses
Other assets and liabilities
Net cash provided by operating activities
(805)
2,340
(633)
1,135
833
(334)
(9,167)
7,059
16,105
14,965
59,323
136,483
Cash flows from investing activities:
Decrease in time deposits and marketable securities
Increase in investments and other long-term receivables
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
30
89
(8,862)
500
(1,911)
(7,280)
(75,101)
(26,729)
(29,153)
(33,926)
(226,516)
2,808
1,895
5,474
646
4,237
Payment for purchases of businesses
(455)
(328)
(2,292)
(3,855)
Net cash used in investing activities
(34,900)
(28,555)
(41,514)
(295,762)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings
15,765
(999)
(6,843)
133,601
Issuance of long-term debt
39,648
70,692
19,182
336,000
(56,826)
(67,540)
(59,071)
(481,576)
—
19,942
254,135
(1,817)
(1)
1,371
438
(98)
11,618
28,130
774
(26,890)
238,389
Repayment of long-term debt
Issuance of bonds
29,988
Cash dividends paid
(1,817)
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
(15,398)
947
714
417
8,025
Net increase (decrease) in cash and cash equivalents
10,283
(12,102)
(8,664)
87,144
Cash and cash equivalents at beginning of the year
38,419
49,411
58,075
325,584
1,090
1,110
—
9,237
Cash and cash equivalents of initially consolidated subsidiaries at beginning
of the year
Increase in cash and cash equivalents upon merger
of an unconsolidated subsidiary with a consolidated subsidiary
Cash and cash equivalents at end of the year
7
—
—
59
¥ 49,800
¥ 38,419
¥ 49,411
$ 422,033
¥ 6,993
¥ 5,928
¥ 7,123
$ 59,262
1,353
2,717
1,771
11,466
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest
Income taxes
32
Consolidated Statements of Changes in Net Assets
Balance at March 31, 2004
Issuance of new shares of common stock
Net income
Purchases of treasury stock
Transfer from additional paid-in capital to (accumulated deficit)
retained earnings
Decrease due to exclusion of subsidiaries from consolidation
Other, net
Net changes during the year
Distributions of retained earnings
Net income
Increase at beginning of the year due to initial consolidation
of subsidiaries
Decrease in unfunded retirement benefit obligation with
respect to foreign subsidiaries
Other, net
Net loss
Decrease at beginning of the year due to initial consolidation
of subsidiaries
of subsidiaries accounted for by the equity method
Increase in unfunded retirement benefit obligation with
Other, net
Numbers of
shares
issued
(Thousands)
Common
stock
Additional
paid-in
capital
612,221
114
¥ 67,862
15
¥ 71,150
15
(Accumulated
deficit)
retained
earnings
Treasury
stock,
at cost
Total
shareholders’
equity
¥ (29,685)
¥ (141)
¥ 109,185
30
11,174
(75)
11,174
(75)
114
612,335
36
15
67,877
4
(33,369)
33,369
(4)
(33,353)
37,797
4
44,539
14,854
—
(4)
(75)
(217)
(1,834)
5,058
(62)
36
612,371
71,884
4
67,882
9,057
4
37,801
8,942
308
308
(1,805)
(1,805)
1,726
16,580
(62)
(280)
(1,834)
(36,446)
(40)
(23)
166
166
(1,140)
322
9,057
¥ 76,940
8,942
¥ 46,744
1,672
121,984
18,000
(1,834)
(36,446)
(40)
(23)
(1,140)
71,884
684,256
11,125
120,311
9
(1,834)
5,058
(62)
(38,955)
¥ (22,375)
322
(40)
¥ (320)
(20,995)
¥ 100,989
Net loss
of subsidiaries
Increase in unfunded retirement benefit obligation with
Other, net
Numbers of
shares
issued
(Thousands)
Common
stock
Additional
paid-in
capital
612,371
71,884
$575,271
76,754
$320,347
75,779
(Accumulated
deficit)
retained
earnings
Treasury
stock,
at cost
Total
shareholders’
equity
$ 140,508
$(2,372)
$1,033,762
152,542
(15,542)
(308,864)
(338)
(15,542)
(308,864)
(338)
(194)
71,884
684,256
76,754
$652,033
75,779
$396,135
(194)
1,406
1,406
(9,661)
(9,661)
2,728
2,728
(330,127)
$(189,618)
(338)
$(2,711)
(177,923)
$ 855,838
Valuation, translation adjustments and other
Net
Total
unrealized
valuation,
holding gain
Loss on
translation
on other
deferred
Translation
adjustments
securities
hedges
adjustments
and other
¥ 10,932
1,508
1,508
12,441
¥ (455)
(321)
(321)
(776)
¥ (9,619)
1,694
1,694
(7,925)
¥
857
2,881
2,881
3,739
Warrants
Minority
interests in
consolidated
subsidiaries
¥ —
¥ 5,739
—
—
—
249
249
5,989
Total net
assets
Millions of yen
¥ 115,782
30
11,174
(75)
—
(4)
3,131
14,257
130,040
9
(1,834)
5,058
(62)
308
6,671
6,671
19,113
572
572
(204)
714
714
(7,210)
7,959
7,959
11,698
—
—
—
346
346
6,335
(1,805)
8,306
9,979
140,019
18,000
(1,834)
(36,446)
(40)
(23)
166
(1,140)
(4,735)
(4,735)
¥ 14,377
(164)
(164)
¥ (368)
1,614
1,614
¥ (5,595)
(3,285)
(3,285)
¥ 8,412
Valuation, translation adjustments and other
Net
Total
unrealized
valuation,
holding gain
Loss on
translation
on other
deferred
Translation
adjustments
securities
hedges
adjustments
and other
$161,974
$(1,728)
$(61,101)
$ 99,135
32
32
¥ 32
Warrants
$ —
202
202
¥ 6,538
322
(3,050)
(24,046)
¥ 115,973
Minority
interests in
consolidated
Total net
subsidiaries
assets
Thousands of U.S. dollars (Note 2)
$53,686
$1,186,601
152,542
(15,542)
(308,864)
(338)
(194)
1,406
(9,661)
(40,127)
(40,127)
$121,838
(1,389)
(1,389)
$(3,118)
13,677
13,677
$(47,415)
(27,838)
(27,838)
$ 71,288
271
271
$271
1,711
1,711
$55,406
2,728
(25,847)
(203,779)
$ 982,822
34
Notes to Consolidated Financial Statements
March 31, 2007
1.
SIGNI FI C A NT ACCOUNT ING P OLIC I ES
(a) Basis of presentation
Oki Electric Industry Co., Ltd. (the “Company”) and its domestic
consolidated subsidiaries (collectively and including its overseas subsidiaries, the “Group”) maintain their books of account in accordance
with accounting standards generally accepted in Japan, and its overseas subsidiaries maintain their books of account in conformity with
those of their respective countries of domicile. The accompanying
consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and have been
compiled from the consolidated financial statements prepared by the
Company as required by the Securities and Exchange Law of Japan.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.
Certain amounts from prior years have been reclassified to conform
to the current year’s presentation. The accompanying consolidated
statements of cash flows, which have not been prepared under the
same requirements as those specified in the Japanese accounting
standard for cash flows, are presented in a format similar to that
required under accounting standards generally accepted in the United
States, and the concept and format are almost identical to those
required under the Japanese standard.
(b) Principles of consolidation and accounting for investments in
unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the
accounts of the Company and all significant subsidiaries over which
substantial control is exerted either through majority ownership of
voting stock and/or by other means. All significant intercompany balances and transactions have been eliminated in consolidation.
Investments in certain unconsolidated subsidiaries and significant
affiliates are accounted for by the equity method. Other investments
in unconsolidated subsidiaries and affiliates are stated at cost or
less. Where there has been a permanent decline in the value of such
investments, the Company has written them down to reflect the
impairment.
(c) Foreign currency transactions
(1) The Company translates the revenue and expense accounts of
the overseas consolidated subsidiaries at the average rates of
exchange in effect during the year. The balance sheet accounts,
except for the components of shareholders’ equity, are translated
into yen at the rates of exchange in effect at the balance sheet
date. The components of shareholders’ equity are translated at
their historical exchange rates. Differences arising from translation
where two exchange rates have been used are presented under
translation adjustments as a component of net assets.
(2) Current and noncurrent monetary assets and liabilities denominated in foreign currencies of the Company and its domestic
consolidated subsidiaries are translated into yen at the exchange
rates in effect at the balance sheet date, except for those hedged
by forward foreign exchange contracts which are translated at the
contracted rates.
All revenues and expenses are translated at the average rate for
the month prior to the transaction.
Gains and losses arising from foreign exchange differences are
credited or charged to income in the year in which they are made
or incurred, except for those arising from forward foreign exchange
contracts pertaining to long-term debt which are deferred and
amortized over the periods of the respective contracts.
(d) Cash equivalents
All highly liquid investments, generally with a maturity of three months
or less when purchased, which are readily convertible into known
amounts of cash and are so near maturity that they represent only an
insignificant risk of any change in value attributable to changes in interest rates, are considered cash equivalents.
(e) Securities
Held-to-maturity securities are either amortized or accumulated to
face value. Other securities with quoted market prices are carried at
market value. The difference between the acquisition cost and the carrying value of other securities, including unrealized gain and loss, net
of the applicable income taxes, is recognized as a component of net
assets and is reflected as “Net unrealized holding gain on other securities.” The cost of other securities sold is computed by the moving
average method. Other securities without quoted market prices are
stated at cost based on the moving average method.
(f) Inventories
Inventories are principally stated at cost determined by the following
methods:
Finished goods - Moving average method
Work in process - Specific identification method
Raw materials and supplies - Last purchase price method
(g) Property, plant and equipment, and depreciation
Property, plant and equipment is recorded at cost. Depreciation of
property, plant and equipment is principally computed by the declining balance method over the estimated useful lives of the respective assets. However, buildings (excluding leasehold improvements)
acquired after April 1, 1998 by the Company and its domestic consolidated subsidiaries are depreciated by the straight-line method over
their respective estimated useful lives. Significant renewals and betterments are capitalized at cost. Maintenance and repairs are charged
to income.
(h) Intangible assets and amortization
Intangible assets, including capitalized computer software costs, are
amortized by the straight-line method over their respective estimated
useful lives.
(i) Leases
Noncancelable leases are primarily accounted for as operating leases
(regardless of whether such leases are classified as operating or
finance leases), except that leases which stipulate the transfer of
ownership of the leased property to the lessee are accounted for as
finance leases.
(j) Retirement benefits
The Group has retirement benefit plans covering substantially all its
employees.
An allowance for retirement benefits has been provided for employees’ retirement benefits based on an estimate of the projected retirement benefit obligation and the pension fund assets.
The transition difference arising from the initial adoption of the
accounting standard for retirement benefits is being amortized over a
period of 15 years except for certain domestic consolidated subsidiaries which charged it to income when it was recognized or certain overseas consolidated subsidiaries which charged it directly to retained
earnings.
Actuarial gains and losses and prior service cost are amortized by
the straight-line method over periods of 13 to 14 years and 14 years,
respectively, which are within the estimated average remaining years
of service of the participants in the plans. The amortization of such
gains and losses is recognized in the year subsequent to the year
in which they arise except for certain overseas subsidiaries which
charged or credited it directly to retained earnings.
Certain consolidated subsidiaries also provide an allowance for
retirement benefits for directors at the amount which would be
required to be paid if all directors retired at the balance sheet date
based on the Group’s internal regulations.
(k) Income taxes
Deferred income taxes are recognized by the asset and liability
method under which deferred tax assets and liabilities are determined
based on the difference between financial reporting and the tax bases
of the assets and liabilities, and are measured using the enacted
tax rates and laws which will be in effect when the differences are
expected to reverse.
(l) Hedge accounting
Forward foreign exchange contracts are accounted for by deferral
hedge accounting which requires that unrealized gains or losses be
deferred as assets or liabilities. Forward foreign exchange contracts
which meet certain criteria are accounted for by the allocation method
which is utilized to hedge against risks arising from fluctuation in
foreign currency exchange rates. Interest-rate swaps which meet the
required criteria are accounted for by a special method (as stipulated
in the accounting standard) as if the interest rates applied to the interest-rate swaps had originally applied to the underlying borrowings.
Swap contracts are utilized to hedge market risks which may arise in
the future with respect to short-term and long-term loans with variable interest rates.
The Group has developed hedging policies to control various
aspects of derivatives transactions, including levels of authorization
and transaction volume. Based on these policies, the Group hedges
risks arising from fluctuation in foreign currency exchange rates and
interest rates. During the period from the inception of a hedge position to the assessment of its effectiveness, the Group reviews the
effectiveness of all its hedging policies in order to monitor and control the cumulative cash flows and to respond to any changes in the
market.
(m) Changes in Methods of Accounting
(1) Effective the year ended March 31, 2007, the Company has
adopted a new accounting standard for the presentation of net
assets in the balance sheet and the related implementation guid-
(2)
(3)
(4)
(5)
ance. In addition, effective the year ended March 31, 2007, the
Company is required to prepare consolidated statements of
changes in net assets instead of consolidated statements of shareholders’ equity. In this connection the previously reported consolidated balance sheet as of March 31, 2006 and the consolidated
statements of shareholders’ equity for the years ended March 31,
2006 and 2005 have been restated to conform to the presentation
and disclosure of the consolidated financial statements for the year
ended March 31, 2007.
Total shareholders’ equity under the previous method of presentation amounted to ¥109,771 million ($930,264 thousand) for the
year ended March 31, 2007.
Effective the year ended March 31, 2007, the Company has
adopted a new accounting standard for business combinations and
the related implementation guidance.
Effective the year ended March 31, 2007, the Company has
adopted a new accounting standard for share-based payments and
the related implementation guidance. The effect of the adoption
of this new standard was to increase operating loss, loss before
income taxes, minority interests and equity in losses of affiliates
by ¥32 million ($ 275 thousand) for the year ended March 31, 2007
over the amounts which would have been recorded under the previous method.
In August 2002, the Business Accounting Council of Japan issued
“Opinion Concerning Establishment of Accounting Standards for
Impairment of Fixed Assets,” and in October 2003 the Accounting Standards Board of Japan (ASBJ) issued Financial Accounting
Standards Implementation Guidance No. 6, “Implementation Guidance for Accounting Standards for Impairment of Fixed Assets.”
These new pronouncements went into effect for fiscal years
beginning on or after April 1, 2005.
This standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Companies are required to recognize an impairment loss in their statement of income if certain indicators of asset impairment exist and
if the book value of the fixed asset exceeds the undiscounted sum
of its future cash flows.
The effect of the adoption of this standard was to decrease
income before income taxes, minority interests and equity in earnings of affiliates by ¥2,973 million for the year ended March 31,
2006.
Certain overseas consolidated subsidiaries have adopted the new
accounting standards for retirement benefits in their respective
countries effective the year ended March 31, 2006. The adoptions
of the new accounting standards had no significant impact on net
income.
However, because under these new accounting standards, the
transition differences arising from the initial adoption of these new
accounting standards and the actuarial differences were deducted
directly from retained earnings, retained earnings decreased by
¥1,805 million.
2.
U. S. D OLL A R A MOUNT S
The translation of yen amounts into U.S. dollar amounts is included solely for convenience and has been made, as a matter of arithmetic computation only, at ¥118 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2007. This translation should not be construed as a representation that yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.
36
3.
S ECURI T I ES
Securities with quoted market prices at March 31, 2007 and 2006 are summarized as follows:
Held-to-maturity securities with quoted market prices
Millions of yen
Thousands of U.S. dollars
2007
Amount
recorded in
balance sheet
2006
Quoted
market
price
Difference
¥—
¥—
2007
Amount
recorded in
balance sheet
Quoted
market
price
Difference
¥ 500
¥ 500
¥0
Amount
recorded in
balance sheet
Quoted
market
price
Difference
$—
$—
Held-to-maturity securities whose
market value exceeds amounts
recorded in balance sheet:
Debt securities
Held-to-maturity securities whose
market value does not exceed
amounts recorded in balance sheet:
Total
¥—
$—
—
—
—
—
—
—
—
—
—
¥—
¥—
¥—
¥ 500
¥ 500
¥0
$—
$—
$—
Other securities with quoted market prices
Millions of yen
2007
2006
2007
Acquisition
costs
Amount
recorded in
balance sheet Difference
¥12,434
¥36,333
¥23,898
¥12,868
¥45,157
¥32,288
397
507
110
499
553
53
3,364
4,296
932
12,832
36,841
24,008
13,367
45,710
32,342
108,745
312,211
203,457
1,189
1,034
(154)
302
238
(64)
10,076
8,762
102
101
(0)
—
—
—
864
855
(0)
1,291
1,136
(155)
302
238
(64)
10,940
9,627
(1,313)
¥14,123
¥37,977
¥13,670
¥45,948
¥32,278
Acquisition
costs
Amount
recorded in
Amount
recorded in
Acquisition
costs
Other securities whose market value
recorded in balance sheet exceeds
their acquisition costs:
Equity securities
Other
Subtotal
$105,372 $307,906
$202,525
Other securities whose market value
recorded in balance sheet does not
exceed their acquisition costs:
Equity securities
Other
Subtotal
Total
¥23,853
$119,686 $321,838
(1,305)
$202,144
Other securities without quoted market prices at March 31, 2007 and 2006 are summarized as follows:
Thousands of
U.S. dollars
Millions of yen
Amount recorded in the balance sheet
2007
2006
2007
Held-to-maturity bonds:
Local bond
¥
0
¥
—
$
0
¥ 100
¥
100
$
847
Other investments in securities:
Medium-term government bond fund
Free financial fund
Money management fund
Local bond
Unlisted equity securities
Investment in a limited liability joint business partnership
2,803
—
23,754
900
3,701
7,627
0
—
0
8,686
11,046
73,610
460
600
3,898
4.
INV ENTORI ES
Inventories at March 31, 2007 and 2006 were as follows:
Thousands of
U.S. dollars
Millions of yen
2007
Finished goods
2006
¥ 52,419
¥ 53,277
2007
$ 444,228
Work in process
67,257
69,231
569,974
Raw materials and supplies
47,835
44,392
405,381
¥167,513
¥166,899
$1,419,601
5.
INV ES T M ENT S IN A ND A DVA NC ES TO UNCONSOLIDAT ED SUBSID I A RI ES A ND A FFILI AT ES
Investments in and advances to unconsolidated subsidiaries and affiliates at March 31, 2007 and 2006 were as follows:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2007
¥ 5,226
¥ 4,788
$44,288
2,234
4,146
18,932
4,242
6,708
35,949
¥11,703
¥15,643
$99,177
Investments stated:
By equity method
At cost or less
Advances
6.
SHOR T-T ERM BORROW INGS A ND LONG -T ERM D EBT
Short-term borrowings at March 31, 2007 and 2006 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2007
Loans, principally from banks, at weighted-average interest rates of 1.8% and 1.3%
at March 31, 2007 and 2006, respectively:
Secured
Unsecured
Commercial paper at weighted-average interest rate of 1.7% at March 31, 2007
¥
—
91,643
¥
—
79,412
$
—
776,635
7,000
—
59,322
¥98,643
¥79,412
$835,957
38
Long-term debt at March 31, 2007 and 2006 is summarized as follows:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2007
Loans from banks, insurance companies and government agencies, due through 2018:
Secured
Unsecured
¥
1,230
¥
1,102
$
10,423
143,466
138,292
1,215,813
144,696
139,394
1,226,237
Zero coupon convertible bonds with stock acquisition rights due 2008 (*1)
20,000
20,000
169,491
Zero coupon convertible bonds with stock acquisition rights due 2011 (*2)
12,000
—
101,694
3.15% bonds due 2006
—
20,000
—
2.65% bonds due 2007
9,500
9,500
80,508
186,196
188,894
1,577,932
(43,666)
(56,665)
Unsecured convertible bonds:
Unsecured bonds in yen:
Less: Current portion
¥142,530
¥132,229
(370,050)
$1,207,881
*1 The zero coupon convertible bonds with stock acquisition rights due 2008 (the “Bonds” ) are exercisable during the period from December 10,
2004 to November 12, 2008 (unless the Bonds are previously redeemed or purchased and cancelled) and entitle the bearer to acquire fully-paid
and non-assessable shares of common stock of the Company at a conversion price of ¥ 504 ($ 4.3) per share.
*2 The zero coupon convertible bonds with stock acquisition rights due 2011 (the “Bonds” ) are exercisable during the period from June 8, 2006
to June 6, 2011 (unless the Bonds are previously redeemed or purchased and cancelled) and entitle the bearer to acquire fully-paid and nonassessable shares of common stock of the Company at a conversion price of ¥ 291 ($ 2.4) per share.
The Bonds are subject to certain provisions that permit the conversion price to be adjusted depending on the stock price (¥291 being the
lower limit).The conversion price of ¥291 was amended from the initial conversion price of ¥376 and valid after December 25, 2006.
At March 31, 2007, current portion of long-term debt and long-term debt of ¥1,230 million ($10,423 thousand) in the aggregate were collateralized
by property, plant and equipment amounting to ¥2,154 million ($18,254 thousand).
As is customary in Japan, both short-term and long-term bank loans are made under general agreements which provide that collateral and guarantees (or additional collateral or guarantees, as appropriate) with respect to present and future indebtedness be given at the request of the lending bank, and that the bank shall have the right, as the obligations become due or in the event of default, to offset the obligations with any cash
deposited with the bank.
The aggregate annual maturities of long-term debt subsequent to March 31, 2007 are summarized as follows:
Millions of yen
Thousands of
U.S. dollars
2008
¥ 43,666
$ 370,050
2009
48,475
410,805
2010
21,257
180,144
2011
48,446
410,559
Year ending March 31,
2012 and thereafter
24,350
206,355
¥186,196
$1,577,932
The Group has access to substantial sources of funds at numerous banks worldwide. Total unused credit available to the Group at March 31, 2007
was ¥123,557 million ($1,047,093 thousand).
7.
R E T I R EM EN T B EN EFI T S
The Group has a noncontributory defined benefit pension plan, tax-qualified pension plans, and lump-sum retirement payment plans which cover
substantially all employees who terminate their employment with the Group. Certain foreign consolidated subsidiaries have defined benefit and
defined contribution pension plans. In addition, eligible employees, upon termination of their employment with the Group, may receive certain
additional payments under the plan.
The Company and 37 domestic consolidated subsidiaries joined the OKI Pension Fund which was established on January 1, 2005.
The following is a summary of the plans.
Retirement benefit obligation at March 31, 2007 and 2006:
Thousands of
U.S. dollars
Millions of yen
2007
Projected benefit obligation
¥(166,341)
Fair value of plan assets
2006
2007
¥(168,038)
$(1,409,669)
86,335
82,999
731,652
(80,006)
(85,039)
(678,016)
34,666
38,999
293,779
13,022
17,514
110,355
Unrecognized prior service cost
(12,892)
(13,989)
(109,254)
Obligation recognized in the consolidated balance sheets
(45,209)
(42,515)
(383,127)
Funded status
Transition differences arising from initial adoption of new accounting standard
for retirement benefits
Unrecognized actuarial loss
Prepaid pension cost
9
Allowance for retirement benefits
¥ (45,218)
10
76
¥ (42,525)
$ (383,203)
Certain domestic consolidated subsidiaries have adopted a simplified method, as permitted, to calculate their projected benefit obligation.
Components of net periodic pension cost for the years ended March 31, 2007, 2006 and 2005:
Thousands of
U.S. dollars
Millions of yen
Service cost during the year
2007
2006
2005
2007
¥ 5,089
¥ 5,208
¥ 5,585
$ 43,127
Interest cost on projected benefit obligation
3,427
3,850
4,887
29,042
Expected return on plan assets
(1,907)
(2,959)
(2,657)
(16,161)
Amortization of obligation at transition
4,333
4,333
4,511
36,720
Amortization of actuarial difference
2,331
3,638
2,753
19,754
Amortization of prior service cost
(1,093)
(1,097)
(274)
¥12,974
¥14,807
Net periodic pension cost
¥12,180
(9,262)
$103,220
(1) Special retirement payments of ¥884 million ($7,491 thousand), ¥1,442 million and ¥1,947 million in the aggregate were paid in addition to the
net periodic pension cost presented in the above table for the years ended March 31, 2007, 2006 and 2005, respectively.
(2) The allowance for retirement benefits was determined by the simplified method by certain consolidated subsidiaries and their net periodic
pension cost has been included in service cost of benefits earned during the year.
Assumptions used in the actuarial calculation:
Years ended March 31
Discount rate:
Expected rates of return:
Amortization period for prior service cost:
Amortization period for actuarial difference:
2007
2006
2.10%
2.10%
2.30%
4.00%
14 years (amortized by the straight-line method over a period which falls within the
average remaining years of service of the participants in the plans, commencing the
year subsequent to the period in which the cost was incurred)
13–14 years (amortized by the straight-line method over a period which falls within
the average remaining years of service of the participants in the plans, in the year
subsequent to the period in which such difference was incurred) except for certain
overseas subsidiaries which charge it directly to retained earnings.
Amortization period for transition obligation arising
15 years, except for certain consolidated subsidiaries which charge or credit it to
from the initial adoption of a new method of accounting:
income when incurred, and certain overseas subsidiaries which charge it directly to
retained earnings.
40
8.
INCOM E TA X ES
Deferred tax assets and liabilities at March 31, 2007 and 2006 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2007
Deferred tax assets:
Loss carryforwards
Nondeductible accrued bonuses
Nondeductible retirement benefits
Nondeductible write-downs of inventories
Other
¥ 26,511
¥ 15,457
5,176
5,715
$ 224,669
43,864
15,189
16,600
128,720
1,811
1,622
15,347
—
1,218
—
8,286
8,402
70,220
Gross deferred tax assets
56,975
49,017
482,838
Less: Valuation allowance
(43,498)
(17,825)
(368,627)
Total deferred tax assets
13,476
31,191
114,203
(9,552)
(13,292)
(80,949)
(119)
(105)
(1,008)
(9,672)
(13,397)
(81,966)
Deferred tax liabilities:
Net unrealized holding gain on other securities
Other
Total deferred tax liabilities
Net deferred tax assets
¥ 3,804
¥ 17,793
$ 32,237
Net deferred tax assets are included in the consolidated balance sheets as follows:
Thousands of
U.S. dollars
Millions of yen
2007
Other current assets
2006
2007
¥ 5,977
¥ 6,508
$ 50,652
Other assets
153
11,294
1,296
Other current liabilities
(21)
(4)
(177)
(2,304)
(5)
(19,525)
Other long-term liabilities
Net deferred tax assets
¥ 3,804
¥17,793
$ 32,237
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprised corporation tax, inhabitants’ taxes and enterprise
tax, which, in the aggregate, resulted in a statutory tax rate of approximately 41% for the years ended March 31, 2007, 2006 and 2005. Income
taxes of the overseas consolidated subsidiaries are based generally on the tax rates applicable in their respective countries of incorporation. A
reconciliation between the statutory tax rate and the effective tax rates as a percentage of income before income taxes for the years ended
March 31, 2006 and 2005 is summarized as follows, and the corresponding reconciliation for the year ended March 31, 2007 has been omitted
since loss before income taxes, minority interests and equity in earnings of affiliates was recorded.
2007
2006
2005
—
41.0%
41.0%
Increase in valuation allowance for deferred tax assets
—
10.1
Permanent nondeductible differences such as entertainment expenses
—
6.9
2.9
Permanent differences not recognized for tax purposes such as dividends received
—
(3.5)
(1.0)
(2.5)
Statutory tax rates
Additions to (deductions from) income taxes resulting from:
4.0
Differences between the Company's statutory tax rates and
—
(2.3)
Other, net
the overseas consolidated subsidiaries’ effective tax rates
—
(1.8)
(6.3)
Effective tax rates
—
50.4%
38.1%
9.
SH A R EHOLD ERS’ EQUI T Y
The Commercial Code of Japan (the “Code”) provides that an amount
equal to at least 10% of the amounts to be disbursed as distributions
of earnings be appropriated to the legal reserve until the sum of the
reserve and additional paid-in capital equals 25% of the common
stock account.
The Code also stipulates that, to the extent that the sum of the
additional paid-in capital account and the legal reserve exceeds 25%
of the common stock account, the amount of any such excess is
available for appropriation by resolution of the shareholders. Both the
legal reserve and additional paid-in capital may be used to eliminate or
reduce a deficit by resolution of shareholders or may be capitalized by
resolution of the Board of Directors. In accordance with the Code, the
Company has provided a legal reserve which is included in retained
earnings.
The new Corporation Law of Japan (the “Law”), which superseded
most of the provisions of the Commercial Code of Japan, went into
effect on May 1, 2006. The Law provides that amounts from additional paid-in capital and retained earnings may be distributed to the
shareholders at any time by resolution of the shareholders or by the
Board of Directors if certain provisions are met subject to the extent
of the applicable sources of such distributions. The Law further provides that amounts equal to 10% of such distributions be transferred
to the capital reserve included in additional paid-in capital or the legal
reserve included in retained earnings based on the applicable sources
of such distributions until the sum of the capital reserve and the legal
reserve equals 25% of the capital stock account.
Pursuant to a resolution of the Board of Directors at a meeting held
on May 23, 2006, the Company issued unsecured convertible bonds
with stock acquisition rights (the total amount of the bond issuance
was ¥18,000 million). Unsecured convertible bonds with stock acquisition rights which were converted fully to shares of common stock as
a result of the exercise of rights held by shareholders during the year
ended March 31, 2007. As a result, the common stock and additional
paid-in capital increased during the year ended March 31, 2007.
10.
D EPR EC I AT ION
Depreciation of property, plant and equipment for the years ended March 31, 2007, 2006 and 2005 was as follows:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2005
2007
¥27,263
¥26,590
¥25,549
$231,042
11.
R ES E A RC H A ND D E V ELOPM ENT E X P ENS ES
Research and development expenses for the years ended March 31, 2007, 2006 and 2005 were as follows:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2005
2007
¥21,305
¥19,614
¥21,987
$180,550
12.
LOSS ON IMPA IRM ENT O F FI X ED ASS E T S
The Company recognized a loss on impairment of fixed assets for the year ended March 31, 2006.
In accordance with the accounting standard for impairment of fixed assets, the Company recognized a loss on impairment of certain fixed
assets due to a projected change in their usage, from shared usage within the Company, to the rental of such assets to external third parties. This
loss recognition was determined based on the net sale prices of the respective assets.
13.
LOSS ON N ATUR A L D ISAS T ERS
Due to an earthquake that took place at the coast of Miyagi Prefecture on August 16, 2005, certain production lines of Miyagi Oki Electric Industry Co., Ltd. were suspended and the subsidiary recognized the related loss for the year ended March 31, 2006.
42
14.
LOSS ON BUSINESS R EST RUC TURING
The Company disposed of a portion of its inventories of maintenance components as a result of the restructuring of the Info-Telecom Systems
business.
15.
D ERI VAT I V ES A ND H EDGING AC T I V I T I ES
The Company and its subsidiaries primarily utilize comprehensive
forward foreign exchange and currency swap contracts to hedge their
exposure to foreign exchange fluctuation relating to their receivables
and payables. The Company and its subsidiaries also utilize interestrate swaps to manage the risks of interest-rate fluctuation and to
equalize their financial costs for each fiscal year with regard to shortterm and long-term debt at variable interest rates.
As a matter of policy, the Company and its subsidiaries do not
speculate in derivatives which are subject to significant market value
fluctuation. The Company and its subsidiaries do not anticipate any
credit risk resulting from nonperformance by any of the counterparties because all are financial institutions with high credit ratings. The
Company and its subsidiaries have established internal rules for entering into and monitoring derivative transactions which prescribe the
managers’ duties and the management of these positions as well as
a reporting system. Derivatives are controlled on a daily basis by the
Financial Section, which has established an internal control system
to supervise the procedures and transaction limits, and are confirmed
with the respective financial institutions by the Accounting Section.
16.
L E AS ES
Lease payments relating to finance leases accounted for as operating leases in the accompanying consolidated financial statements amounted to
¥5,137 million ($43,533 thousand), ¥3,633 million and ¥2,415 million for the years ended March 31, 2007, 2006 and 2005, respectively.
Leased assets held under finance leases accounted for as operating leases were as follows:
Thousands of
U.S. dollars
Millions of yen
2007
2006
2007
¥22,308
¥16,802
$189,050
Other
3,426
1,142
29,033
Less: Accumulated depreciation
9,304
6,749
78,847
¥16,430
¥11,195
$139,237
Machinery and equipment
Depreciation is computed by applying the straight-line method over the estimated useful lives of the related assets assuming that the Company
guarantees a nil residual value at the end of the term of each lease.
The following is a schedule of future minimum lease payments under finance leases accounted for as operating leases:
2008
2009 and thereafter
Millions of yen
¥ 5,213
Thousands of
U.S. dollars
$ 44,177
11,589
98,211
¥16,803
$142,398
Minimum rental payments subsequent to March 31, 2007 required under operating leases with noncancelable lease terms in excess of one year
are summarized as follows:
2008
2009 and thereafter
Millions of yen
¥ 957
Thousands of
U.S. dollars
$ 8,110
382
3,237
¥1,340
$11,355
17.
CONT ING ENT LI A BILI T I ES
At March 31, 2007, the Company and its consolidated subsidiaries had the following contingent liabilities:
Millions of yen
As endorsers of trade notes discounted and endorsed
¥
Thousands of
U.S. dollars
2
$
16
As guarantors of indebtedness of:
976
8,271
2,270
19,237
¥3,248
$27,525
Other
18.
A MOUNT S P ER SH A R E
In accordance with the accounting standard for earnings per share, basic net (loss) income per share is computed based on the net (loss) income
available for distribution to shareholders of common stock and the weighted-average number of shares of common stock outstanding during each
year. Diluted net income per share is computed based on the net income available for distribution to the shareholders and the weighted-average
number of shares of common stock outstanding during each year assuming full conversion of the convertible bonds. Diluted net income per share
for the year ended March 31, 2007 has not been presented because a net loss was recorded. Net assets per share are based on the number of
shares of common stock outstanding at the year end.
Yen
2007
U.S. dollars
2006
2005
2007
¥(56.27)
¥8.27
¥18.27
$(0.47)
—
7.77
17.87
Net (loss) income:
Basic
Diluted
Yen
Net assets
—
U.S. dollars
2007
2006
2007
¥160.13
¥218.96
$1.35
19.
STOCK OP TION PL ANS
At March 31, 2007, the following stock option plans of the Company had been approved by the shareholders:
Date of approval by shareholders
Grantees
June 27, 2002
9 directors and
14 executive officers
June 27, 2003
June 29, 2004
8 directors,
9 directors,
15 executive officers 12 executive officers,
and 12 management 9 management officials
officials
and 4 directors of
subsidiaries
June 29, 2005
June 29, 2006
9 directors,
12 executive officers,
8 management officials and
3 directors of subsidiaries
10 directors,
11 executive officers,
7 management officials and
1 director of a subsidiary
Type of shares with
warrants granted
Common stock
Common stock
Common stock
Common stock
Common stock
Number of shares
with warrants granted
153,000 shares
815,000 shares
452,000 shares
442,000 shares
342,000 shares
Option price per warrant
Exercise period
¥271
¥384
¥458
¥406
¥277
July 1, 2004−
June 30, 2007
July 1, 2005−
June 26, 2013
July 1, 2006−
June 28, 2014
July 1, 2007−
June 28, 2015
July 1, 2008−
June 28, 2016
On June 26, 2007, shareholders of the Company approved a stock option plan under which warrants to purchase shares of the Company’s
common stock were to be granted to the Company’s directors, executive officers and to certain management officials as well as to directors of
certain subsidiaries in accordance with the Corporation Law of Japan and Item 12 of the Company’s Articles of Incorporation. Under the plan,
shares of common stock of up to a maximum of 532,000 were granted.
44
The stock option price is determined by multiplying the highest of the average final price of the Company’s shares of common stock traded on
the Tokyo Stock Exchange in the month prior to the date of the granting of the options or the corresponding final share price on the day prior to
the granting of the options, or the corresponding final share price on the day prior to the date of the annual general meeting of shareholders by a
factor of 1.05.
As outlined in the Company’s stock option plan, this exercise price will be adjusted in accordance with a specified formula for stock splits,
reverse stock splits or new issuances of shares of common stock issued at less than market price.
The stock options will become exercisable during the period from July 1, 2009 to June 25, 2017.
20.
SEGM ENT INFORM AT ION
Business segments
The Group classifies its businesses into Info-Telecom Systems, Semiconductors, Printers and Other.
The business segment information for the years ended March 31, 2007, 2006 and 2005 is summarized as follows:
Millions of yen
Year ended March 31,
Sales to third parties
2007
Info-Telecom
Semi-
Systems
conductors
Printers
Other
Total
¥352,728
¥145,512
¥187,083
¥33,442
¥718,767
2,739
3,736
4,824
29,566
40,866
(40,866)
—
355,468
149,248
191,907
63,009
759,633
(40,866)
718,767
Intersegment sales and transfers
Total sales
Operating expenses
357,008
Corporate and
148,504
¥
744
190,157
59,980
1,749
¥ 3,028
¥
¥
eliminations
¥
—
Consolidated
¥718,767
755,650
(31,473)
724,177
3,982
¥ (9,393)
¥ (5,410)
¥ (1,539)
Total assets
¥240,450
¥148,885
¥135,245
¥37,176
¥561,757
¥66,640
¥628,398
Depreciation
¥
7,532
¥ 16,553
¥
7,291
¥ 1,384
¥ 32,761
¥ 2,196
¥ 34,957
Capital expenditures
¥ 10,603
¥ 20,115
¥
8,604
¥ 2,525
¥ 41,848
¥ 1,881
¥ 43,730
Millions of yen
2006
Info-Telecom
Semi-
Systems
conductors
Printers
Other
Total
¥338,048
¥150,723
¥160,483
¥31,271
¥680,526
1,950
5,004
4,844
25,279
37,078
(37,078)
—
339,998
155,728
165,327
56,551
717,605
(37,078)
680,526
Total sales
Operating expenses
329,075
Corporate and
152,750
2,977
¥
¥
—
Consolidated
¥680,526
161,181
53,736
696,744
(26,811)
669,933
4,146
¥ 2,814
¥ 20,860
¥(10,267)
¥ 10,593
Operating income
¥ 10,922
Total assets
¥248,973
¥145,506
¥116,895
¥34,940
¥546,316
¥ 72,339
¥618,655
Depreciation
¥
¥ 16,700
¥
¥ 1,236
¥ 32,192
¥ 2,499
¥ 34,691
¥
—
¥
—
¥
—
¥
¥
—
¥ 2,973
¥
¥
9,662
¥ 16,353
¥
9,415
¥ 37,060
¥ 3,401
¥ 40,461
7,622
¥
eliminations
6,632
—
¥ 1,629
2,973
Millions of yen
2005
Info-Telecom
Semi-
Systems
conductors
Printers
Other
Total
¥373,132
¥150,721
¥137,710
¥26,977
¥688,542
6,714
5,595
1,842
26,047
40,200
(40,200)
—
379,847
156,316
139,553
53,024
728,742
(40,200)
688,542
Total sales
Operating expenses
364,032
144,301
Operating income
¥ 15,814
¥ 12,014
Total assets
¥241,039
Depreciation
¥
8,218
¥
9,282
Corporate and
eliminations
¥
—
Consolidated
¥688,542
131,791
50,494
690,621
(29,298)
661,322
7,761
¥ 2,530
¥ 38,121
¥(10,901)
¥ 27,220
¥150,662
¥113,396
¥27,684
¥532,781
¥ 74,456
¥607,237
¥ 16,758
¥
6,210
¥ 1,130
¥ 32,317
¥ 1,927
¥ 34,245
¥ 23,027
¥
6,977
¥ 1,376
¥ 40,663
¥ 3,886
¥ 44,550
¥
2007
Info-Telecom
Semi-
Systems
conductors
$2,989,220
Total sales
Operating expenses
$1,233,152
Corporate and
Printers
Other
$1,585,449
$283,406
Total
$6,091,245
eliminations
$
—
Consolidated
$6,091,245
23,211
31,661
40,881
250,559
346,322
(346,322)
—
3,012,440
1,264,813
1,626,330
533,974
6,437,567
(346,322)
6,091,245
3,025,491
1,611,500
508,305
14,822
$ 25,661
$
$1,261,737
$1,146,144
$315,050
63,830
$ 140,279
$
61,788
89,855
$ 170,466
$
72,915
$
(13,042)
Total assets
$2,037,711
Depreciation
$
$
1,258,508
$
6,305
$
6,403,813
(266,720)
33,745
$ (79,601)
$
6,137,093
$4,760,652
$ 564,745
$5,325,406
$ 11,728
$ 277,635
$ 18,610
$ 296,245
$ 21,398
$ 354,644
$ 15,940
$ 370,593
(45,847)
(1) Business segments are divided into categories based on the nature of the products or services rendered and similarities in sales methodology.
(2) Eliminations or unallocated amounts of operating expenses consist principally of expenses in the Company’s General and Administrative Department and research and development costs within the Group amounting to ¥ 9,927 million ($84,127 thousand), ¥10,362 million and ¥10,921 million
for the years ended March 31, 2007, 2006 and 2005, respectively.
(3) Eliminations or unallocated amounts of total assets consist principally of the Company’s surplus funds, funds for long-term investments and
assets belonging to the General and Administrative Department amounting to ¥135,221 million ($1,145,940 thousand), ¥142,288 million and
¥162,189 million for the years ended March 31, 2007, 2006,and 2005, respectively.
(4) Included in depreciation and capital expenditures are amortization and additions to long-term prepaid expenses, respectively.
(5) Effective the year ended March 31, 2007, the Company has adopted a new accounting standard for the presentation of net assets in the balance
sheet and the related implementation guidance. In this connection the segment information has been restated to conform to the presentation and
disclosure of the consolidated financial statements for the year ended March 31, 2007.
(6) Change in segmentation:
Effective the year ended March 31, 2006, the Company changed its management organization in accordance with the Group’s mid-term business
plan. As presented above, business segment information for the year ended March 31, 2005 has been restated to reflect the revised segmentation.
Geographical segments
The geographical segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2007, 2006 and 2005 is
outlined as follows:
Millions of yen
2007
Corporate and
Japan
North America
Europe
Asia
Total
¥503,882
¥65,330
¥104,940
¥ 44,612
¥718,767
Interarea sales
131,867
419
2,170
102,035
236,492
(236,492)
—
Total sales
635,750
65,750
107,110
146,648
955,259
(236,492)
718,767
Operating expenses
632,137
¥
3,612
Total assets
¥542,988
65,958
¥
(208)
¥30,747
105,091
¥
2,019
¥ 60,951
145,920
¥
727
¥ 53,266
eliminations
¥
—
Consolidated
¥718,767
949,108
(224,931)
724,177
6,151
¥ (11,561)
¥ (5,410)
¥687,953
¥ (59,554)
¥628,398
¥
Millions of yen
2006
Corporate and
Japan
North America
Europe
Asia
Total
¥494,513
¥65,669
¥84,867
¥ 35,475
¥680,526
Interarea sales
128,245
393
2,397
95,326
226,363
(226,363)
—
Total sales
622,759
66,063
87,265
130,801
906,889
(226,363)
680,526
Operating expenses
129,309
eliminations
¥
—
Consolidated
¥680,526
602,204
64,934
89,175
885,624
(215,691)
669,933
Operating income (loss)
¥ 20,554
¥ 1,128
¥ (1,909)
¥
1,492
¥ 21,265
¥ (10,671)
¥ 10,593
Total assets
¥533,137
¥35,167
¥50,374
¥ 42,695
¥661,375
¥ (42,719)
¥618,655
46
Millions of yen
2005
Corporate and
Japan
North America
Europe
Asia
Total
¥513,981
¥58,445
¥79,517
¥ 36,597
¥688,542
Interarea sales
128,151
431
2,228
80,236
211,048
(211,048)
—
Total sales
642,133
58,876
81,746
116,833
899,590
(211,048)
688,542
Operating expenses
606,116
57,951
Operating income
¥ 36,016
¥
924
Total assets
¥508,187
¥24,579
80,870
¥
875
Consolidated
—
¥688,542
114,410
859,349
(198,027)
661,322
2,423
¥ 40,240
¥ (13,020)
¥ 27,220
¥ 33,803
¥617,457
¥ (10,219)
¥607,237
¥
¥50,886
eliminations
¥
2007
Corporate and
Japan
$4,270,186
North America
Europe
$553,644
$889,322
Asia
Total
$ 378,067
$6,091,245
$
eliminations
Consolidated
—
$6,091,245
Interarea sales
1,117,516
3,550
18,389
864,703
2,004,169
(2,004,169)
—
Total sales
5,387,711
557,203
907,711
1,242,779
8,095,415
(2,004,169)
6,091,245
Operating expenses
5,357,093
$
30,610
Total assets
$4,601,593
558,966
890,601
$ (1,762)
$ 17,110
$
1,236,610
$260,567
$516,533
$ 451,406
6,161
8,043,288
$
52,127
$5,830,110
(1,906,194)
$
(97,974)
$ (504,694)
6,137,093
$
(45,847)
$5,325,406
Overseas sales, which include export sales of the Company and its domestic consolidated subsidiaries and sales of the overseas consolidated
subsidiaries (other than exports to Japan), totaled ¥259,952 million ($2,202,983 thousand), ¥237,502 million and ¥203,023 million or 36.2%,
34.9% and 29.5% of consolidated net sales for the years ended March 31, 2007, 2006 and 2005, respectively.
As presented above, geographical segment information for the year ended March 31, 2005 has been restated to reflect the revised segmentation.
Report of Independent Auditors
48
Company Profile
Profile (As of March 31, 2007)
Company Name:
Founded:
Company Established:
Common Stock:
1881
November 1, 1949
76.9 billion
Employees:
21,380 (Consolidated)
5,579 (Non-consolidated)
Head Office: 7-12, Toranomon 1-chome, Minato-ku, Tokyo 105-8460, Japan
Tel: +81-3-3454-2111 URL: http://www.oki.com/
Organization (As of June 1, 2007)
Board of Directors
President and Chief Executive
Officer
Corporate
Semiconductor Business
Group
Systems Network Group
Financial Business Group
Financial Solutions Company
Systems Hardware Company
NetBusiness Solutions
Company
Silicon Solutions Company
Information System
Business Group
System Solutions Company
Intelligent Transport Systems
Solutions Company
Silicon Microdevice Company
Optical Components Company
Postal Solutions Company
Telecom Business Group
Network Systems Company
Media-network Appliance
Company
IP Systems Company
Multimedia Messaging
Company
Manufacturing Service
Company
Printer Business Group
Ubiquitous Service Platform
Company
Oki Data Corporation
Business Incubation Division
OKI Group
Business Support Division
Broadband Media Company
Security and Mobility
Company
Visual Nexus Company
Major Subsidiaries and Affiliates
Japan
•
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•
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•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Oki Software Co., Ltd.
Oki Telecommunication Systems Co., Ltd.
Oki Information Systems Co., Ltd.
OKICOMTEC Ltd.
Oki SystemMate Co., Ltd.
Oki Consulting Solutions Co., Ltd.
Oki Network Integration Co., Ltd.
OKI ACCESS Technologies, Co., Ltd.
Japan Business Operations Co., Ltd.
Shizuoka Oki Electric Co., Ltd.
OKI SEATEC CO., LTD.
Nagano Oki Electric Co., Ltd.
Oki Network LSI Co., Ltd.
Oki Micro Design Co., Ltd.
Oki Technocollage Inc.
Oki Microelectronics Co., Ltd.
Miyazaki Oki Electric Co., Ltd.
Miyagi Oki Electric Co., Ltd.
Tama Oki Electric Co., Ltd.
Oki Environment Technologies Inc.
Oki Data Corporation
Oki Digital Imaging Corporation
Oki Data Systems Co., Ltd.
M L Supply Co., Ltd.
Oki Customer Adtech Co., Ltd.
Oki Micro Engineering Co., Ltd.
Oki Power Tech Co., Ltd.
Oki Erfolg Co., Ltd.
Oki Printed Circuits Co., Ltd.
Oki Sensor Device Corporation
Oki Communication Systems Co., Ltd.
•
•
•
•
•
•
•
•
Oki Engineering Co., Ltd.
Oki Logistics Co., Ltd.
Oki Human Network Co., Ltd.
OKI ALPHA CREATE, INC.
Oki Infotech Co., Ltd.
Mobile Techno Corporation
Oki Wintech Co., Ltd.
Oki Electric Cable Co., Ltd.
Americas
• Oki America, Inc.
• Oki Semiconductor Company
• Oki Network Technologies
• Oki Data Americas, Inc
• Oki Data do Brasil Informatica Ltda.
• Oki Data de Mexico, S.A. de C.V.
Europe
•
•
•
•
•
•
•
•
•
•
•
•
•
Oki Europe Ltd.
Oki (UK) Ltd.
Oki Systems Holding Co., Ltd.
Oki Systems (UK) Ltd.
Oki Systems (Danmark) a•s
Oki Systems (Holland) b.v.
Oki Systems (Ireland) Ltd.
Oki Systems (Italia) S.p.A.
Oki Systems (Norway) A/S
Oki Systems (Sweden) AB
OKI Systems (Finland) Oy
Oki Systemes (France) S.A.
Oki Systems (Iberica) S.A.U.
•
•
•
•
•
•
•
•
Oki Systems (Deutschland) GmbH
Oki Systems (Polska) Sp.z.o.o.
Oki Systems (Magyarorszag) Kft.
Oki Systems (Czech & Slovak) s.r.o.
Oki Systems ve Yazici Cozumleri LS
Oki Electric Europe GmbH
Oki (France) sarl
Oki Semiconductor (UK) Ltd.
Asia
•
•
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•
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•
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•
•
•
•
•
•
Oki Hong Kong Ltd.
Oki Electric Industry (Shenzhen) Co., Ltd.
Oki Electric Technology (Kunshan) Co., Ltd.
Changzhou OKI-GEG Telecoms Ltd.
OKI Software Technology Co., Ltd
Oki Trading (Beijing) Co., Ltd.
Oki Data Dalian Co., Ltd.
Oki Semiconductor Shanghai Co., Ltd.
Oki Semiconductor Technology Shanghai Co., Ltd.
Oki Electronics (Hong Kong) Ltd.
Oki Systems (Hong Kong) Pte. Ltd.
Oki Semiconductor Taiwan Inc.
Oki Systems Taiwan Co., Ltd.
Oki Semiconductor Korea Co., Ltd.
Oki Systems Korea Co., Ltd.
Oki Semiconductor Singapore Pte. Ltd.
Oki Techno Centre (Singapore) Pte. Ltd.
Oki Data (Singapore) Pte. Ltd.
Oki Systems (Thailand) Ltd.
Oki (Thailand) Co., Ltd.
Oki Data Manufacturing (Thailand) Co., Ltd.
Oki Precision (Thailand) Co., Ltd.
Investor Information
Number of Shares of Common Stock (As of March 31, 2007)
Authorized: 2,400,000 thousand
Issued:
684,256 thousand (including 1,021 thousand treasury stock)
Number of shareholders (As of March 31, 2007)
121,000
Stock Exchange Listing
First section of the Tokyo Stock Exchange
First section of the Osaka Stock Exchange
Administrative Agent for the Company’s
Shareholder Register
Mizuho Trust & Banking Co., Ltd.
Transfer Agent for the Company’s Shares
Stock Transfer Agency Department
Mizuho Trust & Banking Co., Ltd.
17-7, Saga 1-chome, Koto-ku, Tokyo 135-8722, Japan
Contact for Further Information
Investors Relations
Business Management and Promotion Division
7-12 Toranomon 1-chome, Minato-ku, Tokyo 105-8460, Japan
Tel: +81-3-3501-3111 E-mail: [email protected]
Common Stock Price Range
on the Tokyo Stock Exchange (Years ended March 31)
(yen)
600
400
200
0
I II III IV
I II III IV
I II III IV
I II III IV
I II III IV
2003
2004
2005
2006
2007
Breakdown of Shares Held by
Shareholder Type (As of March 31, 2007)
Japanese corporations and others
7.6%
Foreign corporation and others
9.6%
Annual Report
Japanese individual investors
56.2%
Japanese financial institutes
26.6%
Economy
* This annual report contains forward-looking statements concerning the OKI
Group's future plans, financial targets, technologies, products, services and
performance. These forward-looking statements represent assumptions and
beliefs based on data and calculation methods currently available to OKI as of
the date of publication, and therefore OKI does not guarantee the accuracy of
such statements. Furthermore, the target figures and other expressions in these
statements are subject to changes attributable to business risks and uncertainties,
which may affect OKI's performance and consequently cause actual results to
differ from our forecasts.
Society
Social
Responsibility
Report
Environment
Environmental
Report
* As part of its efforts to enhance communications with all stakeholders, OKI also
publishes corporate social responsibility and environmental reports.
* All company and product names included in this annual report are trademarks or
registered trademarks of each of companies they represent.
50
This entire brochure was printed in Japan using 100% plant-based soy ink and a waterless printing process on 70% recycled paper.

oki AR_E_0727.indd

Transcription

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