UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
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o
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
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OR
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended
March 31, 2008
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
EXCHANGE ACT OF 1934
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OR
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o
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
EXCHANGE ACT OF 1934
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Commission file number
001-08346
TDK KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)
TDK CORPORATION
(Translation of Registrants name into English)
Japan
(Jurisdiction of incorporation or organization)
13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272 Japan
(Address of Registrants principal executive offices)
Takakazu Momozuka, +81-3-5201-7116, tmomo@mb1.tdk.co.jp, +81-3-5201-7118,
13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272 Japan
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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American Depositary Shares
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New York Stock Exchange
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Common Stock
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New York Stock Exchange
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Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of the issuers classes of capital or common stock
as of the close of the period covered by the annual report:
Common Stock
128,955,736 shares (excluding treasury stock)
Indicate by check mark whether if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.
Yes
þ
No
o
If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Yes
o
No
þ
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Indicate by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
U.S. GAAP
þ
International Financial Reporting Standards as issued by the International
Accounting Standards Board
o
Other
o
If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the registrant has elected to follow.
Item 17
o
Item 18
o
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
þ
All of the information contained in this annual report is as of March 31, 2008 unless
otherwise specified. Fiscal 2008, fiscal 2007, fiscal 2006, fiscal 2005 and fiscal 2004 of this
annual report indicate TDK Corporations fiscal period of the fiscal years ended March 31, 2008,
2007, 2006, 2005 and 2004, respectively.
The figures in this annual report are expressed in yen and, solely for the convenience of the
reader, are translated into United States dollars at the rate of ¥100 = U.S.$1, the approximate
exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 31, 2008. (See Note 2 of
the Notes to Consolidated Financial Statements.) On June 30, 2008 the noon buying rate for yen
cable transfers in New York City as reported by the Federal Reserve
Bank of New York was ¥106.17 =
$1. This translation should not be construed as a representation that the amounts shown could be
converted into U.S. dollars at such rate.
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Forward-Looking Statements
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This document contains forward-looking statements, including projections, plans, policies,
management strategies, targets, schedules, understandings and evaluations, about TDK Corporation
(TDK) and its group companies (TDK and its group companies are referred to also as TDK where
the context so requires). These forward-looking statements are based on the current forecasts,
estimates, assumptions, plans, beliefs and evaluations of TDK in light of information currently
available to it, and contain known and unknown risks, uncertainties and other factors. TDK
therefore wishes to caution readers that, being subject to risks, uncertainties and other factors,
TDKs actual results, performance, achievements or financial position could be materially different
from any future results, performance, achievements or financial position expressed or implied by
these forward-looking statements, and TDK undertakes no obligation to publicly update or revise any
forward-looking statements after the issue of this document except as required by law.
The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks,
uncertainties and other factors that can have significant effects on TDK include, but are not
limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange
rates, and changes in economic environments, conditions of competition, laws and regulations.
- 1 -
PART I
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Item 1
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Identity of Directors, Senior Management and Advisers
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Item 2
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Offer Statistics and Expected Timetable
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- 2 -
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A.
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Selected financial data
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The following selected consolidated financial data has been derived from the consolidated
financial statements of TDK as of each of the dates and for each of the periods indicated below.
This information should be read in conjunction with TDKs
audited consolidated balance sheets of March 31, 2008 and 2007,
the related consolidated statements of income, stockholders
equity and cash flows for each of the years in the three-year period
ended March 31, 2008 and the notes thereto that appear
elsewhere in this annual report.
You should read the selected consolidated financial data set forth below in conjunction with
Item 5 Operating and Financial Review and Prospects appearing elsewhere in this annual report.
Income Statement Data
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Thousands of
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U.S. dollars,
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except per
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Millions of yen, except per share amounts
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share
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For the year ended March 31
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amounts
(1)
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2008
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2007
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2006
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2005
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2004
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2008
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Net sales
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¥
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866,285
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¥
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862,025
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¥
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795,180
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¥
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657,853
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¥
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655,792
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$
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8,662,850
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Cost of sales
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635,529
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622,819
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585,780
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484,323
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476,407
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6,355,290
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Gross profit
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230,756
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239,206
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209,400
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173,530
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179,385
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2,307,560
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Selling, general and
administrative expenses
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158,921
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159,106
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142,052
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119,886
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122,875
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1,589,210
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Transfer to the government of
the substitutional portion of
Employees Pension Fund:
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Subsidy from the government
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(33,533
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Loss on settlement
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27,347
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Gain on sale of business to Imation
Corp.
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(15,340
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(153,400
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Restructuring cost
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510
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6,825
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Operating income
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87,175
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79,590
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60,523
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59,830
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56,510
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871,750
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Income from continuing
operations before income
taxes
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91,505
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88,665
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66,103
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60,728
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55,847
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915,050
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Income from continuing
operations
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71,461
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70,125
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44,411
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36,965
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43,355
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714,610
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Loss from discontinued
operations
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310
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3,665
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1,254
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Net income
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71,461
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70,125
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44,101
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33,300
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42,101
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714,610
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Per Common Share:
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Income from continuing
operations per share:
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Basic
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¥
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551.72
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¥
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529.88
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¥
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335.84
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¥
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279.41
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¥
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327.27
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$
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5.52
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Diluted
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551.19
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529.29
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335.54
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279.25
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327.15
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5.51
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Loss from discontinued
operations per share:
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Basic
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¥
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¥
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¥
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(2.34
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¥
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(27.70
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¥
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(9.47
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$
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Diluted
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(2.34
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(27.69
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(9.46
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- 3 -
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Thousands of
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U.S. dollars,
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except per
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Millions of yen, except per share amounts
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share
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For the year ended March 31
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amounts
(1)
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2008
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2007
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2006
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2005
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2004
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2008
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Net income per share:
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Basic
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¥
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551.72
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¥
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529.88
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¥
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333.50
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¥
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251.71
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¥
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317.80
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$
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5.52
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Diluted
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551.19
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529.29
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333.20
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251.56
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317.69
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5.51
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Cash dividends
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¥
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120.00
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¥
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100.00
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¥
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80.00
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¥
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60.00
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¥
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50.00
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U.S. Dollar equivalents (1)
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$
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1.20
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$
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0.85
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$
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0.68
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$
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0.56
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$
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0.47
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Balance Sheet Data
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Millions of yen, except per share amounts
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Thousands of
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and exchange rate for yen
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U.S.
dollars
(2)
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2008
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2007
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2006
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2005
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2004
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2008
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Net working capital (3)
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¥
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300,859
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¥
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449,830
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¥
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397,131
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¥
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379,746
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¥
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360,555
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$
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3,008,590
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Total assets
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935,533
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989,304
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923,503
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808,001
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770,319
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9,355,330
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Short-term indebtedness
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9,192
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3,527
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6,427
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103
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416
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91,920
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Long-term indebtedness
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152
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|
532
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405
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81
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27
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1,520
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Retirement and
severance benefits
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33,990
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32,290
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26,790
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28,839
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73,521
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339,900
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Capital Stock
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32,641
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32,641
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32,641
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32,641
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32,641
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|
326,410
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Stockholders equity
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716,577
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762,712
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702,419
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639,067
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576,219
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7,165,770
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Number of shares
outstanding (in
thousands)
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128,956
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132,434
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132,267
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132,245
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132,409
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Exchange Rate Information
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Yen exchange rates per U.S. dollar
(4)
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Average
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Term end
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High
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Low
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Year ended March 31:
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2004
|
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112.75
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104.18
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120.55
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104.18
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2005
|
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107.28
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107.22
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114.30
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102.26
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2006
|
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113.67
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|
|
|
117.48
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|
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|
120.93
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|
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104.64
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2007
|
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|
116.55
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|
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|
117.56
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121.81
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110.07
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2008
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113.61
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|
|
|
99.85
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124.09
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96.88
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2009 (through June 30, 2008)
|
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105.39
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106.17
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108.29
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100.87
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|
|
|
|
|
|
|
|
Month of 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2008
|
|
|
|
|
|
|
|
|
|
|
109.70
|
|
|
|
105.42
|
|
February 2008
|
|
|
|
|
|
|
|
|
|
|
108.15
|
|
|
|
104.19
|
|
March 2008
|
|
|
|
|
|
|
|
|
|
|
103.99
|
|
|
|
96.88
|
|
April 2008
|
|
|
|
|
|
|
|
|
|
|
104.56
|
|
|
|
100.87
|
|
May 2008
|
|
|
|
|
|
|
|
|
|
|
105.52
|
|
|
|
103.01
|
|
June 2008
|
|
|
|
|
|
|
|
|
|
|
108.29
|
|
|
|
104.41
|
|
|
|
|
Notes:
|
|
(1)
|
|
Translated based on the rates specified in Note (4) below on the respective
dates of semi-annual payments for each year.
|
|
(2)
|
|
Translated, except for cash dividend amounts, for convenience of the reader
into U.S. dollars at the rate of ¥100 = $1, the approximate rate on the
Tokyo Foreign Exchange Market on March 31, 2008.
|
- 4 -
|
|
|
(3)
|
|
Net working capital is defined as current assets less current liabilities.
|
|
(4)
|
|
Based on the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York. The average rates are computed based on the exchange
rates on the last day of each month during the year.
|
|
B.
|
|
Capitalization and indebtedness
|
Not applicable.
|
C.
|
|
Reasons for the offer and use of proceeds
|
Not applicable.
|
|
Our business is exposed to fluctuations in economic conditions that may adversely affect our
business results and financial condition.
|
The electronics industry, our field of operations, is highly susceptible to economic trends in
the U.S., Europe, China and Japan, which are the main markets for end products. Markets in these
countries are constantly exposed to various risks such as international issues and economic
fluctuations. In addition, the digital consumer products field is significantly affected by the
extremely fast pace of technological innovation and competition in the development of new products
as well as changes in economic conditions. Changes in the economic environments from our
expectations could significantly affect our business results and financial condition.
|
|
Fluctuations in currency exchange rates could adversely affect our business results and
financial condition.
|
We import and export products between different regions of the world as we conduct our
business activities in countries around the globe. Sudden changes in foreign currency exchange
rates affect company transactions between regions and costs and prices of our products and services
at overseas bases, which consequently have effects on our business results such as sales and
income. Such fluctuations also give rise to conversion differences with respect to our investments
in overseas assets and liabilities, which are converted into Japanese yen in our consolidated
financial statements. Therefore, significant fluctuations in foreign currency exchange rates could
have a significant adverse effect on our business results and financial condition.
|
|
We are susceptible to risks involved with selling our products in markets outside of
Japan.
|
Overseas sales account for approximately 80% of total sales on a consolidated basis.
Therefore, we may be exposed to international political risks, such as war, terrorism and other
events; economic risks, such as fluctuations in foreign currency exchange rates and trade
imbalance; and social risks, including disease and labor problems stemming from differences in
cultures and customs. Such risks may give rise to changes of a far greater magnitude than we
anticipate. We may also face unexpected barriers in building relationships with trading partners
due to differences in commercial and business customs. These risks could lower productivity in
manufacturing processes, undermine the competitiveness of products and hinder sales activities.
These outcomes could in turn have a significant adverse effect on our business results and
financial condition.
- 5 -
|
|
A slow-down of the Chinese economy, adverse changes in political and economic policies of the
Chinese government, or other factors in China may reduce our growth and profitability.
|
We have many production bases in China for mainstay products, such as HDD heads. We have also established a system for supplying
both local companies and customers that have been setting up operations in China.
However, in the event that political factors
(such as changes in laws and regulations), economic factors (such as the continuity of high growth,
problems with electric power supply and
other infrastructure) and social factors cause unexpected events in China, there could be a
material adverse effect on our growth and profitability.
|
|
We may not be able to compete effectively with respect to prices, which would have a material
adverse effect on our profitability.
|
We supply products in a broad range of fields in an electronics industry defined by intense
competition. These fields include information technology and communications devices such as
digital home appliances, personal computers and mobiles phones. Price is one of the main
competitive factors differentiating us from other companies in an industry in which leading
Japanese companies and Asian companies in South Korea and Taiwan have fueled intense price-based
competition.
However, pressure continues to mount from customers for price discounts. In the
event that a fall in prices far exceeds our expectations or becomes protracted, there could be a
material adverse effect on our profitability.
|
|
Rapid changes in technology could adversely affect our business and hurt our competitive
position.
|
We believe that our ability to increase sales by developing appealing and innovative products
has an important role in our growth. However, it is extremely difficult to predict future demand
in the rapidly changing electronics industry and develop new technologies to meet that demand. We
may fail to develop and supply in a timely manner attractive, new products with innovative
technologies for this industry and our markets. In the event that our technology innovations lag
behind others and existing technology becomes obsolete due to the technological change at an
unexpectedly rapid pace, actual earnings could differ significantly from our forecasts. Such
events also may negatively affect our ability to compete in existing markets, resulting in a
significant adverse effect on our business results and growth prospects.
|
|
Claims of product liability and other issues associated with the quality of our products
could adversely affect our business results and brand name.
|
We manufacture various products at overseas manufacturing bases that we are developing
globally in accordance with ISO (International Organization for Standardization) quality management
standards (ISO 9001) and the strict standards required by customers in the electronics industry.
We cannot be fully certain, however, that all of our products are defect-free and immune from
recalls at some later date. A product recall or a product liability claim against us or against
consumer products of our brand name caused by product defects could result in recall costs or
damage claims, lower sales and have a negative impact on our reputation and brand, and may have a
material adverse effect on TDKs business performance. A situation resulting from poor product
quality due to a major product defect could have a materially adverse effect on our business
results.
- 6 -
|
|
Our proprietary technology is difficult to protect and unauthorized use of our proprietary
technology by third parties may reduce the value of our products and brand and impair our ability
to compete effectively.
|
Our growth depends to a great extent on our ability to obtain patents, licenses and other
intellectual property rights covering our products, product designs and manufacturing processes.
However, there are cases where our intellectual property rights cannot be fully protected in a
particular region for reasons unique to that region. Furthermore, we may suffer damages resulting
from the manufacture by a third party of similar products to our own with the unauthorized use of
our intellectual property rights. Limitations of our ability to enforce our intellectual property
rights in such regions could reduce the value of our products and brand and impair our ability to
compete effectively.
|
|
Our business may suffer if we are sued for infringing upon the intellectual property rights
of third parties.
|
There may be cases where it is alleged that our products infringe on the intellectual property
rights of third parties that may sue for damages as a result of such alleged infringement. If our
defenses against such claims are not accepted in such disputes, we may have to pay damages and
royalties and suffer losses such as the loss of markets. Whether or not our defenses against such
claims are accepted, we may incur expenses related to participating in legal processes or
settlement negotiations in defense of such claims.
The failure to defend against such third party infringement claims could have a materially
adverse effect on our business development and business results and financial condition.
|
|
Our success depends on attracting and retaining highly-skilled employees, and we would suffer
material adverse effects if we are unable to do so.
|
To prevail against fierce competition in the electronics industry, we believe that it is
necessary to recruit and retain staff possessing advanced technical skills, and superior management
ability, such as with respect to the ability to formulate strategy and organizational management.
However, intense competition to recruit such skilled employees is not limited to the
industries where we are active. Moreover, in Japan, the change of employment environment
progresses rapidly because of the falling birthrate and the aging population, and the decline of
the workforce population. These and other factors mean there is no guarantee that we will continue
to be able to recruit and retain skilled employees. The inability to recruit and train personnel
as planned could have a materially adverse effect on our operations, business results and growth
prospects.
|
|
We are dependent on certain raw materials and other products, and our business will suffer if
we are unable to procure such materials.
|
Our manufacturing system is premised on deliveries of raw materials, components, equipment and
other supplies in adequate quality and quantity in a timely manner from many external suppliers.
In new product development, we may rely on certain irreplaceable suppliers for materials.
Because of this, there may be cases where supplies of raw materials and other products to us
are interrupted by an accident or some other event at a supplier, supply is suspended due to
quality or other issues, or there is a shortage of or instability in supply due to a rapid increase
in demand for finished products that use certain materials and products. If any of these
situations becomes protracted, we may have difficulty finding substitutes in a timely manner from
other suppliers, which could have a significant, adverse effect on our production and prevent us
from fulfilling our responsibilities to supply products to our customers. Furthermore, such
changes in the supply-demand equation may increase the price we pay for the raw materials. In the
event of these or other similar occurrences, there could be a material adverse effect on our
business results and financial condition.
- 7 -
|
|
Increased government regulation of our industry or changes in those regulations, whether in
Japan or overseas, may limit our ability to compete effectively.
|
We are subject to various regulations in Japan and other countries where we conduct business.
These include approval for conducting business and making investments, laws and regulations
governing the safety of electric and electronic products, laws and regulations relating to national
security between nations, and export/import laws and regulations. We are also subject to
commercial, antitrust, patent, product liability, environmental, consumer and business taxation
laws and regulations.
In the event that these laws and regulations become more stringent in the future, our business
development could be affected adversely and we may incur additional operating costs. Furthermore,
in the event that we are unable to respond appropriately to these laws and regulations, we may be
forced to partially withdraw from certain businesses or take other actions.
Government laws and regulations in their various forms may limit our ability to compete
effectively.
|
|
Fluctuations in interest rates may have an adverse effect on our profitability.
|
We have financial assets and liabilities which are subject to interest rates changes. Interest
rate changes could have a material effect on interest income, interest expense or the value of
financial assets, and could have a material adverse effect on our results and financial position.
|
|
We are developing business to business transactions on a global scale, whereby we supply electronic components to a variety of customers, and are thus susceptible to adverse changes with respect to the business of such customers.
|
We are developing on a global scale business to business transactions, whereby we supply electronic components to a variety of electronics manufacturers, personal computer makers and other customers.
However, supplies to these customers are significantly affected by various factors that are
beyond our control such as changes in each customers business results and management strategies.
A drop-off in purchasing demand due to poor business results at major customers, changes in
customers purchasing plans and policies, the unexpected termination of contracts and other
occurrences could result in our profit margins being reduced due to discounting pressure from
customers or our being left holding large amounts of inventory.
In recent years, mergers and acquisitions have been actively conducted in Japan and overseas.
In the event that our customers go through reorganization or acquisition effected by enterprises of
different business types with huge funds or by competitive enterprises, this situation could have a
material adverse effect on our sales.
Customers business results, changes in management strategy or other factors could thus have a
material adverse effect on our business results and financial condition.
|
|
Our operations depend on facilities throughout the world and are subject to forces of nature
that could disrupt our ability to serve our customers.
|
We have many production sites and research and development facilities in Japan and overseas.
These facilities and plants have taken measures to prevent damage caused by natural disasters.
However, these facilities and plants could still suffer significant damage due to a force majeure
event such as a large earthquake, typhoon, flood, or unknown epidemics including a new type of influenza virus that far exceeds any level expected. In the
event of interruption to manufacturing, disruption of transportation routes, damage to or
disconnection of information and communications infrastructure, our ability to supply our customers
could be affected for a long period of time. This situation could have a material adverse effect
on our business results and financial condition.
- 8 -
|
|
If we are unable to comply with the various environmental laws and regulations to which we
are subject, we may have to withdraw from certain business activities, which would have an
adverse effect on our brand and business operations.
|
We are subject to various environmental laws and regulations with respect to industrial waste
and emissions into the atmosphere and water from our production processes in Japan and overseas and
with respect to specified hazardous chemical substances used in the products. In the event that
environmental protection regulations become more stringent in the future, we expect our cost of compliance
with such regulations to increase as well.
While we both comply with such environmental regulations and actively promote environmental protection activities, there may be situations in which we will have difficulty responding appropriately to such demands and laws and
regulations. In which case, we may be forced to withdraw from certain business activities, which could have a material adverse effect on our business results and financial condition.
|
|
Mergers and acquisitions may have an adverse effect on our profitability.
|
The electronics industry is defined by intense competition and in order to remain competitive
we have conducted mergers and acquisitions with the goal of pursuing competitiveness and
profitability. However, we may not achieve the synergistic effects we expect or we may not achieve
the profitability expected as a result of a merger or acquisition due to reasons such as
insufficient penetration of management policies and strategies. Our inability to achieve the
desired results after a merger or acquisition may significantly adversely effect on our business
results, growth prospects and business development.
|
|
Japans Unit Share System could affect access to Japanese markets by holders of American
Depositary Shares (ADSs), which could adversely affect the price of our shares.
|
Pursuant to our Articles of Incorporation, 100 of our shares constitute one unit. A holder
who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit of shares of
Common Stock. Although, under the unit share system holders of less than a unit have the right to
require us to purchase their shares, holders of ADRs evidencing ADSs that represent other than
integral multiples of whole units are unable to exchange their ADRs for the underlying shares of
Common Stock representing less than a unit and, therefore, are unable to exercise the rights to
require us to purchase such underlying shares at this time. As a result, access to the Japanese
markets by holders of ADRs through this mechanism will not be available for dispositions of shares
of Common Stock in lots less than a unit. The unit share system does not affect the
transferability of ADSs, which may be transferred in lots of any size.
|
|
Holders of American Depositary Shares have limited rights, which could adversely affect the
price of our shares.
|
The rights of shareholders under Japanese law to take actions, including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining our accounting books
and records and exercising appraisal rights are available only to shareholders of record.
Citibank, N.A., through its custodian agent, is the record holder of the shares underlying the
ADSs, and therefore only it can exercise the rights of shareholders in connection with the
deposited shares. The depositary has agreed to endeavor to vote the shares underlying ADSs in
accordance with the instructions of ADS holders and to pay the dividends and distributions
collected from us. However, ADS holders will not be able to bring a derivative action, examine our
accounting books and records or exercise appraisal rights through the depositary.
We are incorporated in Japan and a substantial portion of our assets are located outside of
the United States (U.S.). As a result, it may be more difficult for investors to enforce against
us judgments obtained in U.S. courts predicated upon the civil liability provisions of the Federal
securities laws of the United States, including the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, or judgments obtained in other courts outside of
Japan. In addition, there is doubt as to the enforceability in Japanese courts, in original
actions or in actions for enforcements of judgments of U.S. courts, of civil liabilities based
solely upon violation of these Federal securities laws of the United States.
- 9 -
|
|
|
Item 4
.
|
|
Information on the Company
|
|
A.
|
|
History and development of the Company
|
TDK Corporation (TDK Kabushiki Kaisha) is a corporation formed under the Companies Act
(formerly the Commercial Code) of Japan (the Companies Act). TDKs principal place of business is at 13-1, Nihonbashi
1-chome, Chuo-ku, Tokyo 103-8272 Japan and its telephone number is +81-3-5201-7102. The agent in
the U.S. for purposes of this Item 4 is TDK U.S.A. Corporation, 901 Franklin Avenue, P.O. Box 9302,
Garden City, New York, NY 11530.
TDK is a world leading manufacturer of recording media, ferrite products and recording device
products, and a major producer of inductor, ceramic capacitor, magnet, HDD head and other
components. TDK is a Tokyo-head quartered company founded on December 7, 1935 to commercialize
ferrite.
Historically, TDKs growth has been centered on ferrite, a material invented in 1933 by Doctor
Yogoro Kato and Doctor Takeshi Takei. Ferrite is indispensable as a magnetic substance in the
manufacture of electronic equipment. It is a magnetic material with a ceramic structure composed
of iron oxide and other metallic oxides. Its advantages over other magnetic materials include
higher resistivity and thus lower eddy current loss while maintaining superior permeability and
flux density. Based on its strong materials knowledge and production technology, TDK expanded into
ceramic capacitors and magnetic recording tapes in the early 1950s, and ferrite magnets and coil
components in the early 1960s. In the early 1980s, TDK began production of a magnetic head,
continuing development to its modern day product, the HDD head. Since the 1990s, TDK has
promoted the establishment of world-wide research and development organizations and environmental
management efforts. TDK has continued to broaden its product development programs by building up
expertise in materials technology and new recording-related products.
In
the years ended March 31, 2008, 2007 and 2006, TDKs
capital expenditures were ¥84.3
billion ($843 million), ¥70.4 billion ($704 million) and ¥73.9 billion ($739 million),
respectively. For further information of TDKs capital expenditures, see Capital Expenditures
included in Item 5.B. Liquidity and capital resources.
TDK is planning capital expenditures of ¥70.0 billion ($700 million) in fiscal 2009, primarily
for the expansion of production facilities and upgrading of facilities. Regarding TDKs capital
expenditure plans, TDKs policy is to invest actively in targeted strategic fields to drive growth.
TDK anticipates that the funds needed for the capital expenditures will be generated internally
from its operations.
- 10 -
|
|
Sales by product category
|
TDKs businesses are broadly classified into two business segments: the electronic materials
and components segment and the recording media segment.
The following is a breakdown of consolidated net sales of TDK and its subsidiaries by business
segment for fiscal 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
(millions of yen)
|
|
|
(millions of
|
|
|
|
(%)
|
|
|
U.S. dollars)
|
|
Electronic Materials and Components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic materials
|
|
¥
|
200,101
|
|
|
¥
|
199,243
|
|
|
¥
|
180,766
|
|
|
$
|
2,001.0
|
|
|
|
|
(23.1
|
)
|
|
|
(23.1
|
)
|
|
|
(22.7
|
)
|
|
|
|
|
Electronic devices
|
|
|
209,089
|
|
|
|
198,199
|
|
|
|
154,680
|
|
|
|
2,090.9
|
|
|
|
|
(24.1
|
)
|
|
|
(23.0
|
)
|
|
|
(19.5
|
)
|
|
|
|
|
Recording devices
|
|
|
334,734
|
|
|
|
304,822
|
|
|
|
315,928
|
|
|
|
3,347.4
|
|
|
|
|
(38.6
|
)
|
|
|
(35.4
|
)
|
|
|
(39.7
|
)
|
|
|
|
|
Other electronic components
|
|
|
74,191
|
|
|
|
56,557
|
|
|
|
36,376
|
|
|
|
741.9
|
|
|
|
|
(8.6
|
)
|
|
|
(6.5
|
)
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub total
|
|
|
818,115
|
|
|
|
758,821
|
|
|
|
687,750
|
|
|
|
|
|
|
|
|
(94.4
|
)
|
|
|
(88.0
|
)
|
|
|
(86.5
|
)
|
|
|
8,181.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recording Media:
|
|
|
48,170
|
|
|
|
103,204
|
|
|
|
107,430
|
|
|
|
481.7
|
|
|
|
|
(5.6
|
)
|
|
|
(12.0
|
)
|
|
|
(13.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
866,285
|
|
|
¥
|
862,025
|
|
|
¥
|
795,180
|
|
|
$
|
8,662.9
|
|
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
|
|
The business segment information, in addition to being an Item 4 requirement,
is required by the Japanese Securities Exchange Law. Segment information has not been derived from the audited consolidated financial statements in Item 17.
|
Electronic Materials and Components segment.
TDKs electronic materials and components segment is
made up of four product sectors: (i) electronic materials, (ii) electronic devices, (iii)
recording devices, and (iv) other electronic components. Overall business results of each sector
in fiscal 2008 compared to fiscal 2007 are as follows.
(i) Electronic materials.
This sector is broken down into two product categories: capacitors, and
ferrite cores and magnets.
Capacitors: Sales of capacitors increased slightly year over year, reflecting higher sales of
multilayer ceramic chip capacitors, the main product in the capacitors category, to the auto market
and other sectors, which outweighed lower sales for use in personal computers and mobile phones.
Ferrite cores and magnets: Sales of ferrite cores and magnets rose year over year, as higher
magnet sales countered lower ferrite core sales.
- 11 -
(ii) Electronic devices.
This sector has three product categories: inductive devices,
high-frequency components, and other products.
Inductive devices: Sales of inductive devices increased year over year, mainly as a result of
higher sales of power line coils and signal line coils used in flat-screen TVs and of common-mode
filters for the auto market.
High-frequency components: Sales of high-frequency components increased year over year, the
result mainly of higher sales for PC applications.
Other products: Sales of other products were down year over year, with sensor and actuator
sales falling mainly due to price declines and power supplies recording a slight drop due in part
to the termination of some products.
(iii) Recording devices.
This sector has two product categories: HDD heads and other.
HDD heads: Sales of HDD heads increased year over year as HDD head sales volume increased on
the back of higher unit production of HDDs, which was driven by growth in demand for HDDs for use
in personal computers. Another factors was the increasing storage capacity of HDDs.
Other: Sales of other increased year over year, with lower other heads sales offset by the
inclusion from this fiscal term of the sales of a Thai-based manufacturer of suspension assemblies
for HDDs, which was consolidated in November 2007.
(iv) Other electronic components.
This sector includes all other products of the electronic
materials and components segment other than those in the three sectors above. These products
include anechoic chambers, mechatronics (production equipment) and energy devices (rechargeable
batteries).
Sales of this sector increased year over year as a result of higher sales of anechoic chambers
and energy devices, and strong sales of new products.
Recording Media.
This segment has three product categories: audiotapes and videotapes, optical
media, and other products. On August 1, 2007, TDK transferred substantially all of the assets
relating to TDK branded world wide recording media business and use of the TDK brand name for
current and future recording media products to U.S. company Imation Corp (Imation). TDK retained its research and development, manufacturing and OEM business related to above three product categories.
Sales of audiotapes and videotapes declined year over year, reflecting the effect of the sales
business transfer and falling demand amid an ongoing switch to digital data storage.
Sales of optical media declined year over year, due to lower sales of CD-Rs and DVDs following
as a result of the sale of the TDK brand recording media sales business to Imation. On the other
hand, sales of Blu-ray Discs increased.
Sales of other products decreased year over year despite higher sales of LTO-standard* (Linear
Tape-Open) tape-based data storage media for computers due to rising demand. The main reason for
the overall fall in sales was lower sales of accessories and other products following the sale of the TDK brand recording media sales
business.
|
|
|
*Linear Tape-Open, LTO, the LTO logo, Ultrium and the Ultrium logo are trademarks of HP, IBM
and Quantum in the U.S. and other countries.
|
- 12 -
Marketing and Distribution
|
|
Marketing channels in Japan
|
TDK markets electronic materials and components in Japan through its sales division, which had
approximately 337 sales representatives at March 31, 2008.
TDK had 73 direct and indirect foreign subsidiaries as of March 31, 2008:
|
|
|
35 manufacturing various product lines and distributing their products in their
country of operation and other countries;
|
|
|
|
|
16 sales subsidiaries which exclusively handle products manufactured by TDK;
|
|
|
|
|
1 holding company for the administration of TDKs U.S. operations;
|
|
|
|
|
1 holding company for the administration of TDKs European operations;
|
|
|
|
|
1 company for research and development in Ireland;
|
|
|
|
|
2 companies for research and development in the U.S.;
|
|
|
|
|
1 company for engineering service for magnetic heads in Singapore;
|
|
|
|
|
1 local management company for the administration of TDKs Chinese operations;
|
|
|
|
|
1 company for engineering service for magnetic heads in China;
|
|
|
|
|
1 company for engineering service for magnetic heads in South Korea;
|
|
|
|
|
1 holding company for the administration of Lambdas U.S. operations;
|
|
|
|
|
1 company for administration in Canada;
|
|
|
|
|
1 holding company for the administration of Lambdas European operations;
|
|
|
|
|
1 company for research and development in Taiwan;
|
|
|
|
|
1 holding company for the administration of Magnecomps U.S. operations;
|
|
|
|
|
1 holding company for the administration of Magnecomps Asian operations;
|
|
|
|
|
1 company for property investment in Thailand;
|
|
|
|
|
3 dormant companies; and
|
|
|
|
|
3 companies in the course of liquidation.
|
Principal manufacturing or assembly operations were conducted by subsidiaries in the following
countries as of March 31, 2008:
|
China(including
Hong Kong)
|
|
HDD heads, inductors, ferrite cores, capacitors, transformer, power supplies, and ferrite magnets
|
|
|
United States
|
|
HDD heads, capacitors, ferrite magnets, and power supplies
|
|
|
Taiwan
|
|
Capacitors, ferrite cores, and power supplies
|
|
|
Philippines
|
|
HDD heads
|
|
|
Thailand
|
|
Audiotapes, rare-earth metal magnets, power supplies, and suspension assemblies for HDD heads
|
|
|
Malaysia
|
|
Power supplies, Capacitors and high-frequency components
|
|
|
South Korea
|
|
Capacitors and inductors
|
|
|
Hungary
|
|
Capacitors and ferrite cores
|
A manufacturing subsidiary in Luxembourg ceased operation in April 2006.
Outside of Japan, TDK relies on a combination of its sales force, distribution agents,
retailers and directed sales efforts to market its products. TDK has sales subsidiaries in
Germany, the United Kingdom, the United States, Singapore, Brazil, China, China (Hong Kong),
Philippines, France, Italy and Sweden.
- 13 -
TDKs production sites are spread in many different regions in the world, which enables TDK to
more easily adapt to fluctuating exchange rates and potential trade barriers. Production outside
Japan as a percentage of sales outside Japan was 85.1% in fiscal 2008, 77.7% in fiscal 2007 and 79
% in fiscal 2006.
Consolidated net sales of TDK and subsidiaries by geographical area for fiscal 2008, 2007 and
2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions of
|
|
|
|
|
|
|
|
|
|
|
|
(millions of yen) (%)
|
|
|
|
|
|
|
|
|
|
|
U.S. dollars)
|
|
Japan
|
|
¥
|
172,292
|
|
|
|
(19.9
|
)
|
|
¥
|
187,056
|
|
|
|
(21.7
|
)
|
|
¥
|
168,554
|
|
|
|
(21.2
|
)
|
|
$
|
1,722.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
63,126
|
|
|
|
(7.3
|
)
|
|
|
75,862
|
|
|
|
(8.8
|
)
|
|
|
65,931
|
|
|
|
(8.3
|
)
|
|
|
631.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
52,801
|
|
|
|
(6.1
|
)
|
|
|
82,721
|
|
|
|
(9.6
|
)
|
|
|
74,846
|
|
|
|
(9.4
|
)
|
|
|
528.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia and others
|
|
|
578,066
|
|
|
|
(66.7
|
)
|
|
|
516,386
|
|
|
|
(59.9
|
)
|
|
|
485,849
|
|
|
|
(61.1
|
)
|
|
|
5,780.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
866,285
|
|
|
|
(100.0
|
)
|
|
¥
|
862,025
|
|
|
|
(100.0
|
)
|
|
¥
|
795,180
|
|
|
|
(100.0
|
)
|
|
$
|
8,662.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Net sales in each geographic area are based on the location of TDK entities
where the external sales are generated.
|
TDK has a variety of patents in Japan and other countries, and also has licenses from other
companies. It believes that expiration of any one of its patents or licenses or related group of
patents or licenses would not materially adversely affect its business activities. TDK does not
believe that acquisition of new proprietary patents or other companies patents would have a
material effect on operating results in the future.
In electronic materials and components, rapid technological innovation makes technological
improvement a particularly significant competitive factor in the industry. It has become difficult
to make difference in product performance characteristics, due to the shift of technologies from analog to digital in electronics market
in recent yeas. Also, customers expand their development, manufacture and sales into all over the
world. Because of this, competitive factors are not only product performance characteristics which
customers seek, but also higher quality reliability, reasonable price, appropriate delivery timing.
In addition, it has become important to comply with the environmental regulations and laws (ex.
The EUs Restriction of Hazardous Substances (RoHS) Directive) and promote the creation of more
products with an even higher level of environmental performance.
Also, TDK does not compete only with Japanese companies, but also with foreign companies
(especially Asian Companies). So, the foreign exchange will make an impact on the competition
factor of products price.
- 14 -
|
|
Raw Materials and Sources of Supply
|
TDK purchases a wide variety of raw materials, machines, tools and parts for use in the
manufacture of its products. The principal raw materials purchased include magnetic powder of iron
oxide, used for various electronic parts and recording media, neodymium-iron-alloy, composed
rare-earth magnet products. For products manufactured in Japan, TDK purchases such raw materials
from approximately 1,800 different sources, primarily in Japan. However, TDK purchases base tape
from mainly three suppliers in Japan, although alternative sources of supply exist. Recently TDK
increased its purchases from overseas and also increased local procurement of raw materials. No
single source accounted for more than 10 percent of total purchases for fiscal 2008.
TDK monitors the availability of raw materials on a regular basis to ensure that it will not
encounter any shortages. TDK has not experienced any significant difficulty in obtaining raw
materials and believes that it will be able to continue to obtain comparable raw materials in
sufficient quantities to meet its manufacturing needs in the future. TDK also believes that the
effect of price volatility with respect to raw materials that it uses in manufacturing its products
can be managed.
|
C.
|
|
Organizational structure
|
As of March 31, 2008, TDK had 73 overseas subsidiaries and 18 Japanese subsidiaries. See
Exhibit 8.1 List of Significant Subsidiaries for further information.
- 15 -
|
D.
|
|
Property, plants and equipment
|
TDKs manufacturing operations are conducted primarily at 36 plants in Japan and 28 plants
overseas.
The following table sets forth information, as of March 31, 2008, with respect to TDKs
manufacturing facilities, the sites of which approximately 73% (in terms of floor space) are owned
by TDK.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Floor space
|
|
|
|
|
principal
|
|
(thousands of
|
|
|
Location
|
|
factories
|
|
square feet)
|
|
Principal products manufactured
|
Japan
|
|
|
|
|
|
|
|
|
Akita
|
|
16
|
|
|
2,047
|
|
|
Capacitors, ferrite cores, inductors and high-frequency components
|
Nagano
|
|
4
|
|
|
1,150
|
|
|
HDD heads and optical disks
|
Chiba
|
|
1
|
|
|
724
|
|
|
Rare-earth metal magnets, ferrite cores and power supplies
|
Yamanashi
|
|
3
|
|
|
603
|
|
|
HDD heads and data storage tapes
|
Oita
|
|
1
|
|
|
470
|
|
|
Videotapes
|
Shizuoka
|
|
2
|
|
|
465
|
|
|
Ferrite magnets
|
Yamagata
|
|
3
|
|
|
345
|
|
|
Inductors
|
Iwate
|
|
1
|
|
|
298
|
|
|
Capacitors
|
Ibaraki
|
|
3
|
|
|
209
|
|
|
Display and power supplies
|
Niigata
|
|
1
|
|
|
54
|
|
|
Power supplies
|
Kanagawa
|
|
1
|
|
|
25
|
|
|
Ferrite magnets
|
|
|
|
|
|
|
|
|
|
Overseas
|
|
|
|
|
|
|
|
|
China
|
|
7
|
|
|
4,684
|
|
|
HDD heads, inductors, ferrite cores, capacitors, transformer, power supplies and ferrite magnets
|
United
States of America
|
|
7
|
|
|
746
|
|
|
HDD heads, capacitors, ferrite magnets and power supplies
|
Thailand
|
|
3
|
|
|
626
|
|
|
Audiotapes, rare-earth metal magnets, power supplies and suspension assemblies for HDD heads
|
Philippines
|
|
1
|
|
|
441
|
|
|
HDD heads
|
Taiwan
|
|
1
|
|
|
380
|
|
|
Capacitors, ferrite cores and power supplies
|
Malaysia
|
|
2
|
|
|
364
|
|
|
Power supplies, Capacitors and high-frequency components
|
China (Hong Kong)
|
|
3
|
|
|
271
|
|
|
Ferrite cores
|
South Korea
|
|
1
|
|
|
164
|
|
|
Capacitors and inductors
|
Hungary
|
|
1
|
|
|
160
|
|
|
Capacitors and ferrite cores
|
United Kingdom
|
|
1
|
|
|
42
|
|
|
Power supplies
|
Israel
|
|
1
|
|
|
28
|
|
|
Power supplies
|
|
Total
|
|
64
|
|
|
14,296
|
|
|
|
- 16 -
TDK considers all of its principal manufacturing facilities and other significant properties
to be in good condition and adequate to meet the needs of its operations. TDK owns each of its
significant properties.
In addition, TDK utilizes additional floor space at the above plants and elsewhere for
laboratories, office buildings, and employee housing and welfare facilities, with an aggregate
floor space of 7,725 thousand square feet, of which approximately 48% is owned by TDK and the
balance is leased to TDK.
|
|
|
Item 4A
.
|
|
Unresolved Staff Comments
|
None.
- 17 -
|
|
|
Item 5
.
|
|
Operating and Financial Review and Prospects
|
Overview
TDK was established in 1935 as the worlds first company to commercialize a magnetic material
called ferrite. In the ensuing years, TDK developed and commercialized a host of other materials
and products. The drive to develop new products is based on TDKs founding spirit of Contribute
to culture and industry through creativity.
TDKs operations are affected by economic conditions in various regions of the world including
Japan, the U.S., Europe and Asia. Looking at economic conditions worldwide during the past fiscal
year, the U.S. economy saw consumer spending and capital expenditures slow in the second half as a
result of soaring energy and material prices and other factors. This happened at the same time as
housing investment continued to plummet, due to a credit crunch triggered by the subprime loan
problem. European economies, meanwhile, remained firm, underpinned by strong capital expenditures
and increasing consumer spending. In Asia, economic conditions were strong due to continued
expansion, particularly in Chinese exports. The Japanese economy, while seeing housing investment
drop in the wake of amendments to the Building Standard Code of Japan, was resilient during the
past fiscal year, thanks to increasing capital expenditures and exports.
In the electronics market, which has a major bearing on the TDK Groups performance, fiscal
2008 saw higher production of flat-screen TVs, home game consoles, notebook PCs, HDDs, digital
still cameras and mobile phones, thanks in part to increasing demand in emerging growth markets.
This growth, together with an increase in the number of electronic components required for use in
finished products driven by their increasing sophistication and features, led to higher demand for
electronic components, a key market for TDK. The increasing use of electronics in automobiles also
lifted demand for electronic components.
In this operating environment, TDK responded to this increasing demand for electronic
components by boosting output of multilayer ceramic chip capacitors and other products. In
November 2007, it also acquired the minority interest of DENSEI-LAMBDA K.K. making it a wholly
owned subsidiary with the goal of expanding the power supplies business. In a move designed to
make TDKs HDD head operations more competitive, in September 2007, TDK acquired assets of an HDD
head-related business from Alps Electric Co., Ltd., including manufacturing and other equipment and
intellectual property rights such as patents and unpatented technologies. TDK also acquired
Magnecomp Precision Technology Public Company Limited (MPT), a Thai-based manufacturer of
suspension assemblies for HDDs, which became a consolidated subsidiary of TDK in November 2007.
Moreover, on August 1, 2007, TDK transferred substantially all of the assets relating to TDK
branded world wide recording media business and use of the TDK brand name for current and future
recording media products to U.S. company Imation Corp. (Imation) for $250 million. In
consideration, TDK received Imation common stock constituting approximately 16.6 percent of that
companys total outstanding shares and cash of approximately $29 million. Subsequently, on
December 5, 2007, TDK purchased additional shares in Imation. As a result of this share purchase,
TDKs ownership in Imation increased to 20.1 percent, accordingly, TDK accounts for this company as
an equity-method affiliate.
TDK
had consolidated net sales of ¥866,285 million ($8,662,850 thousand) in fiscal 2008, an
increase of 0.5 percent from ¥862,025 million in fiscal 2007.
Operating income increased 9.5 percent from ¥79,590 million in fiscal 2007 to ¥87,175 million
($871,750 thousand) in fiscal 2008.
Income from continuing operations before income taxes increased 3.2 percent from ¥88,665
million in fiscal 2007 to ¥91,505 million ($915,050 thousand) in fiscal 2008.
Net income rose 1.9 percent from ¥70,125 million in fiscal 2007 to ¥71,461 million ($714,610
thousand) in fiscal 2008.
-18-
Basic net income per common share was ¥551.72 in fiscal 2008, an increase from ¥529.88 in
fiscal 2007.
TDKs businesses are broadly classified into two business segments: the electronic materials
and components segment and the recording media segment.
The Electronic Materials and Components Segment is made up of four product sectors: (1)
electronic materials, (2) electronic devices, (3) recording devices, and (4) other electronic
components. This segments net sales climbed 7.8 percent to ¥818,115 million ($8,181,150 thousand)
in fiscal 2008, from ¥758,821 million in fiscal 2007, while segment operating income declined 7.1
percent to ¥75,972 million ($759,720 thousand) in fiscal 2008, from ¥81,775 million in fiscal 2007.
The Recording Media Segment has three product categories: audiotapes and videotapes, optical
media and other products. This segments net sales declined 53.3 percent from ¥103,204 million in
fiscal 2007 to ¥48,170 million ($481,700 thousand) in fiscal 2008. Operating income of the
recording media segment in fiscal 2008 was ¥11,203 million ($112,030 thousand), up ¥13,388 million
from fiscal 2007.
- 19 -
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
(millions of yen)
|
|
|
(thousands
|
|
|
|
(%)
|
|
|
of dollars)
|
|
Net sales
|
|
¥
|
866,285
|
|
|
¥
|
862,025
|
|
|
¥
|
795,180
|
|
|
$
|
8,662,850
|
|
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
Cost of sales
|
|
|
635,529
|
|
|
|
622,819
|
|
|
|
585,780
|
|
|
|
6,355,290
|
|
|
|
|
(73.4
|
)
|
|
|
(72.3
|
)
|
|
|
(73.7
|
)
|
|
|
|
|
Gross profit
|
|
|
230,756
|
|
|
|
239,206
|
|
|
|
209,400
|
|
|
|
2,307,560
|
|
|
|
|
(26.6
|
)
|
|
|
(27.7
|
)
|
|
|
(26.3
|
)
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
158,921
|
|
|
|
159,106
|
|
|
|
142,052
|
|
|
|
1,589,210
|
|
|
|
|
(18.3
|
)
|
|
|
(18.4
|
)
|
|
|
(17.9
|
)
|
|
|
|
|
Gain on sale of business to Imation Corp.
|
|
|
(15,340
|
)
|
|
|
|
|
|
|
|
|
|
|
(153,400
|
)
|
|
|
|
(-1.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring cost
|
|
|
|
|
|
|
510
|
|
|
|
6,825
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(0.8
|
)
|
|
|
|
|
Operating income
|
|
|
87,175
|
|
|
|
79,590
|
|
|
|
60,523
|
|
|
|
871,750
|
|
|
|
|
(10.1
|
)
|
|
|
(9.2
|
)
|
|
|
(7.6
|
)
|
|
|
|
|
Other income (other deductions)
|
|
|
4,330
|
|
|
|
9,075
|
|
|
|
5,580
|
|
|
|
43,300
|
|
|
|
|
(0.5
|
)
|
|
|
(1.1
|
)
|
|
|
(0.7
|
)
|
|
|
|
|
Income taxes and minority interests, net of tax
|
|
|
20,044
|
|
|
|
18,540
|
|
|
|
21,692
|
|
|
|
200,440
|
|
|
|
|
(2.4
|
)
|
|
|
(2.2
|
)
|
|
|
(2.7
|
)
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
¥
|
71,461
|
|
|
¥
|
70,125
|
|
|
¥
|
44,101
|
|
|
$
|
714,610
|
|
|
|
|
(8.2
|
)
|
|
|
(8.1
|
)
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
(millions of yen)
|
|
|
(thousands
|
|
|
|
(%)
|
|
|
of dollars)
|
|
Japan
|
|
¥
|
152,113
|
|
|
¥
|
171,352
|
|
|
¥
|
173,658
|
|
|
$
|
1,521,130
|
|
|
|
|
(17.6
|
)
|
|
|
(19.9
|
)
|
|
|
(21.8
|
)
|
|
|
|
|
North and South America
|
|
|
96,287
|
|
|
|
103,124
|
|
|
|
90,192
|
|
|
|
962,870
|
|
|
|
|
(11.1
|
)
|
|
|
(11.9
|
)
|
|
|
(11.4
|
)
|
|
|
|
|
Europe
|
|
|
59,128
|
|
|
|
83,545
|
|
|
|
75,895
|
|
|
|
591,280
|
|
|
|
|
(6.8
|
)
|
|
|
(9.7
|
)
|
|
|
(9.5
|
)
|
|
|
|
|
Asia (excluding Japan) and Oceania
|
|
|
553,911
|
|
|
|
499,505
|
|
|
|
451,710
|
|
|
|
5,539,110
|
|
|
|
|
(63.9
|
)
|
|
|
(58.0
|
)
|
|
|
(56.8
|
)
|
|
|
|
|
Middle East and Africa
|
|
|
4,846
|
|
|
|
4,499
|
|
|
|
3,725
|
|
|
|
48,460
|
|
|
|
|
(0.6
|
)
|
|
|
(0.5
|
)
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
¥
|
866,285
|
|
|
¥
|
862,025
|
|
|
¥
|
795,180
|
|
|
$
|
8,662,850
|
|
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This summary of sales by region is based on the location of the customer.
- 20 -
Segment Information
The following industry and geographic segment information is presented to conform to requirements of the Financial
Instruments and Exchange Law of Japan. Segment information has not been derived from the audited consolidated financial statements in Item 17.
Industry Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
(millions of yen)
|
|
|
(thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of dollars)
|
|
ELECTRONIC MATERIALS AND COMPONENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
¥
|
818,115
|
|
|
¥
|
758,821
|
|
|
¥
|
687,750
|
|
|
$
|
8,181,150
|
|
Intersegment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
818,115
|
|
|
|
758,821
|
|
|
|
687,750
|
|
|
|
8,181,150
|
|
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
Operating expenses
|
|
|
742,143
|
|
|
|
677,046
|
|
|
|
613,417
|
|
|
|
7,421,430
|
|
|
|
|
(90.7
|
%)
|
|
|
(89.2
|
%)
|
|
|
(89.2
|
%)
|
|
|
(90.7
|
%)
|
|
Operating income
|
|
¥
|
75,972
|
|
|
¥
|
81,775
|
|
|
¥
|
74,333
|
|
|
$
|
759,720
|
|
|
|
|
(9.3
|
%)
|
|
|
(10.8
|
%)
|
|
|
(10.8
|
%)
|
|
|
(9.3
|
%)
|
|
Identifiable assets
|
|
|
790,005
|
|
|
|
735,204
|
|
|
|
672,596
|
|
|
|
7,900,050
|
|
Depreciation and amortization
|
|
|
68,910
|
|
|
|
62,605
|
|
|
|
53,599
|
|
|
|
689,100
|
|
Capital expenditures
|
|
|
81,957
|
|
|
|
68,394
|
|
|
|
71,070
|
|
|
|
819,570
|
|
|
RECORDING MEDIA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
¥
|
48,170
|
|
|
¥
|
103,204
|
|
|
¥
|
107,430
|
|
|
$
|
481,700
|
|
Intersegment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
48,170
|
|
|
|
103,204
|
|
|
|
107,430
|
|
|
|
481,700
|
|
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
Operating expenses
|
|
|
36,967
|
|
|
|
105,389
|
|
|
|
121,240
|
|
|
|
369,670
|
|
|
|
|
(76.7
|
%)
|
|
|
(102.1
|
%)
|
|
|
(112.9
|
%)
|
|
|
(76.7
|
%)
|
|
Operating income (loss)
|
|
¥
|
11,203
|
|
|
¥
|
(2,185
|
)
|
|
¥
|
(13,810
|
)
|
|
$
|
112,030
|
|
|
|
|
(23.3
|
%)
|
|
|
(-2.1
|
%)
|
|
|
(-12.9
|
%)
|
|
|
(23.3
|
%)
|
|
Identifiable assets
|
|
|
65,264
|
|
|
|
75,442
|
|
|
|
79,109
|
|
|
|
652,640
|
|
Depreciation and amortization
|
|
|
2,387
|
|
|
|
2,732
|
|
|
|
4,941
|
|
|
|
23,870
|
|
Capital expenditures
|
|
|
2,355
|
|
|
|
2,046
|
|
|
|
2,841
|
|
|
|
23,550
|
|
|
ELIMINATIONS AND CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate assets
|
|
¥
|
80,264
|
|
|
¥
|
178,658
|
|
|
¥
|
171,798
|
|
|
$
|
802,640
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
¥
|
866,285
|
|
|
¥
|
862,025
|
|
|
¥
|
795,180
|
|
|
$
|
8,662,850
|
|
Intersegment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
866,285
|
|
|
|
862,025
|
|
|
|
795,180
|
|
|
|
8,662,850
|
|
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
|
|
(100.0
|
%)
|
Operating expenses
|
|
|
779,110
|
|
|
|
782,435
|
|
|
|
734,657
|
|
|
|
7,791,100
|
|
|
|
|
(89.9
|
%)
|
|
|
(90.8
|
%)
|
|
|
(92.4
|
%)
|
|
|
(89.9
|
%)
|
|
Operating income
|
|
¥
|
87,175
|
|
|
¥
|
79,590
|
|
|
¥
|
60,523
|
|
|
$
|
871,750
|
|
|
|
|
(10.1
|
%)
|
|
|
(9.2
|
%)
|
|
|
(7.6
|
%)
|
|
|
(10.1
|
%)
|
|
Identifiable and corporate assets
|
|
|
935,533
|
|
|
|
989,304
|
|
|
|
923,503
|
|
|
|
9,355,330
|
|
Depreciation and amortization
|
|
|
71,297
|
|
|
|
65,337
|
|
|
|
58,540
|
|
|
|
712,970
|
|
Capital expenditures
|
|
|
84,312
|
|
|
|
70,440
|
|
|
|
73,911
|
|
|
|
843,120
|
|
|
- 21 -
Geographic Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
|
|
|
|
(millions of yen)
|
|
|
|
|
(thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of dollars)
|
JAPAN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (1)
|
|
¥
|
390,364
|
|
|
¥
|
397,147
|
|
|
¥
|
360,210
|
|
|
$
|
3,903,640
|
|
Operating income
|
|
|
35,257
|
|
|
|
31,277
|
|
|
|
49,437
|
|
|
|
352,570
|
|
Identifiable assets
|
|
|
414,009
|
|
|
|
363,203
|
|
|
|
347,942
|
|
|
|
4,140,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTH AND SOUTH AMERICA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (1)
|
|
|
103,248
|
|
|
|
111,689
|
|
|
|
105,979
|
|
|
|
1,032,480
|
|
Operating income
|
|
|
7,905
|
|
|
|
7,869
|
|
|
|
9,995
|
|
|
|
79,050
|
|
Identifiable assets
|
|
|
82,128
|
|
|
|
99,585
|
|
|
|
100,611
|
|
|
|
821,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUROPE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (1)
|
|
|
54,418
|
|
|
|
84,329
|
|
|
|
76,240
|
|
|
|
544,180
|
|
Operating income (loss)
|
|
|
(4,056
|
)
|
|
|
(3
|
)
|
|
|
(9,996
|
)
|
|
|
(40,560
|
)
|
Identifiable assets
|
|
|
37,917
|
|
|
|
50,941
|
|
|
|
45,729
|
|
|
|
379,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASIA AND
OTHERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (1)
|
|
|
636,242
|
|
|
|
572,979
|
|
|
|
531,824
|
|
|
|
6,362,420
|
|
Operating income
|
|
|
44,397
|
|
|
|
41,515
|
|
|
|
12,607
|
|
|
|
443,970
|
|
Identifiable assets
|
|
|
396,348
|
|
|
|
387,002
|
|
|
|
348,008
|
|
|
|
3,963,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ELIMINATIONS
AND CORPORATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (1)
|
|
|
317,987
|
|
|
|
304,119
|
|
|
|
279,073
|
|
|
|
3,179,870
|
|
Operating income (loss)
|
|
|
3,672
|
|
|
|
(1,068
|
)
|
|
|
(1,520
|
)
|
|
|
36,720
|
|
Identifiable assets
|
|
|
5,131
|
|
|
|
88,573
|
|
|
|
81,213
|
|
|
|
51,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
¥
|
866,285
|
|
|
¥
|
862,025
|
|
|
¥
|
795,180
|
|
|
$
|
8,662,850
|
|
Operating income
|
|
|
87,175
|
|
|
|
79,590
|
|
|
|
60,523
|
|
|
|
871,750
|
|
|
Identifiable and corporate assets
|
|
|
935,533
|
|
|
|
989,304
|
|
|
|
923,503
|
|
|
|
9,355,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OVERSEAS
SALES (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
¥
|
96,287
|
|
|
¥
|
103,124
|
|
|
¥
|
90,192
|
|
|
$
|
962,870
|
|
Europe
|
|
|
59,128
|
|
|
|
83,545
|
|
|
|
75,895
|
|
|
|
591,280
|
|
Asia and others
|
|
|
558,757
|
|
|
|
504,004
|
|
|
|
455,435
|
|
|
|
5,587,570
|
|
Overseas sales total
|
|
¥
|
714,172
|
|
|
¥
|
690,673
|
|
|
¥
|
621,522
|
|
|
$
|
7,141,720
|
|
Percentage of consolidated sales
|
|
|
82.4
|
%
|
|
|
80.1
|
%
|
|
|
78.2
|
%
|
|
|
82.4
|
%
|
|
|
|
Notes:
|
|
|
|
(1)
|
|
Net sales in each geographic area are based on the location of TDK
entities where the sales are generated.
|
|
(2)
|
|
Overseas sales are based on the location of the customers.
|
- 22 -
Fiscal 2008 Compared to Fiscal 2007
Consolidated net sales increased 0.5 percent from ¥862.0 billion to ¥866.3 billion ($8,662.9
million) for the fiscal year ended March 31, 2008.
Electronic Materials and Components Segment is made up of four product sectors: (1) electronic
materials, (2) electronic devices, (3) recording devices, and (4) other electronic components.
Electronic Materials: Sales in the electronic materials sector rose 0.4 percent from ¥199.2
billion to ¥200.1 billion ($2,001.0 million). Sales of capacitors increased slightly year over
year, reflecting higher sales of multilayer ceramic chip capacitors, the main product in the
capacitors category to the auto market and other sectors, which outweighed lower sales for use in
PCs and mobile phones. Sales of ferrite cores and magnets rose year over year, as higher magnet
sales countered lower ferrite core sales.
Electronic Devices: Sales in the electronic devices sector climbed 5.5 percent from ¥198.2
billion to ¥209.1 billion ($2,090.9 million). Sales of inductive devices increased year over year,
mainly as a result of higher sales of power line coils and signal line coils used in flat-screen
TVs and of common-mode filters for the auto market. Sales of high-frequency components increased
year over year, the result mainly of higher sales for PC applications. Sales of other products
were down year over year, with sensor and actuator sales falling mainly due to price declines and
power supplies recording a slight drop due in part to the termination of some products.
Recording Devices: In the recording devices sector, sales rose 9.8 percent from ¥304.8 billion
to ¥334.7 billion ($3,347.3 million). Sales of HDD heads increased year over year, as HDD head
sales volume increased on the back of higher unit production of HDDs, which was driven by growth in
demand for HDDs for use in PCs. Another factor was the increasing storage capacity of HDDs. Sales
of other increased year over year, with lower other heads sales offset by the inclusion from this
fiscal term of the sales of a Thai-based manufacturer of suspension assemblies for HDDs, which was
consolidated in November 2007.
Other Electronic Components: Sales in the other electronic components sector increased 31.2
percent from ¥56.6 billion to ¥74.2 billion ($741.9 million) compared to the prior fiscal year.
This was the result of higher anechoic chamber and energy device sales, and strong sales of new
products.
Operating income of the electronic materials and components segment in fiscal 2008 was ¥76.0
billion ($759.7 million), a decrease of ¥5.8 billion as compared to fiscal 2007. The decrease is
mainly due to the decline in gross profit ratio as a result of reduction of sale price in certain
products.
In the recording media segment, sales decreased 53.3 percent from ¥103.2 billion to ¥48.2
billion ($481.7 million). Sales dropped sharply year over year due to the sale of the TDK brand
recording media sales business in August 2007. Sales of audiotapes and videotapes declined year
over year, reflecting the effect of the sale of the TDK brand recording media sales business and
falling demand due to an ongoing switch to digital data storage. Sales of optical media declined
year over year, the result of lower sales of CD-Rs and DVDs as a result of the sale of the TDK
brand recording media sales business. On the other hand, sales of Blu-ray Discs increased. Sales
of other products decreased year over year despite higher sales of LTO-standard* (Linear Tape-Open)
tape-based data storage media for computers on the back of rising demand. The main reason for the
overall fall in sales was lower sales of accessories and other products following the sale of the TDK brand recording media sales
business.
Operating income of the recording media segment in fiscal 2008 was ¥11.2 billion ($112.0
million), ¥13.4 billion increase from the ¥2.2 billion operating loss in fiscal 2007. The
aforementioned business sale resulted in TDK recognizing a gain on sale of ¥15.3 billion, which is
included in operating income.
- 23 -
*Linear Tape-Open, LTO, the LTO Logo, Ultrium and the Ultrium Logo are trademarks of HP, IBM
and Quantum in the U.S. and other countries.
By region, sales in Japan declined 11.2 percent from ¥171.4 billion to ¥152.1 billion
($1,521.1 million). Overseas sales increased 3.4 percent from ¥690.7 billion to ¥714.2 billion
($7,141.7 million). Overseas sales accounted for 82.4 percent of consolidated net sales.
|
|
Net Sales Geographic Segments
|
Japan: In Japan, sales in the other electronic components sector increased, while sales in the
electronic materials, electronic devices and recording devices sectors and recording media segment
declined. While operating income of the electronic materials and components segment decreased by
¥8.5 billion due to the decline in the electronic materials sector, operating income of the
recording media segment increased significantly, resulting in the increase in operating income in
this region by ¥9.5 billion to ¥39.2 billion.
Asia (excluding Japan) and Oceania: In Asia (excluding Japan) and Oceania, sales increased in
the electronic materials, electronic devices, recording devices and other electronic components
sectors, but sales declined in the recording media segment. Operating income of the electronic
materials and components segment increased by ¥3.1 billion due to the increase in the other
electronic components sector. Operating income in this region increased by ¥3.0 billion to ¥44.4
billion.
North and South America: In the Americas, sales decreased in the electronic materials sector
and recording media segment. The appreciation of the yen versus the U.S. dollar also led to
decreased sales because TDK products became more expensive to U.S. consumers as a result of these
exchange rate movements. Operating income of the electronic materials and components segment was
relatively unchanged while there was a decline in operating income of the recording media segment.
Operating income in this region decreased slightly by ¥0.9 billion to ¥7.6 billion.
Europe: In Europe, sales decreased in the electronic materials sector and recording media
segment. Operating income of the electronic materials and components segment down turned by ¥0.4
billion to operating loss of ¥0.3 billion, and operating loss of the recording media segment
increased by ¥3.6 billion to ¥3.7 billion. Operating loss in this region increased by ¥4.0 billion
to ¥4.0 billion.
|
|
Effect of foreign exchange movements
|
In fiscal 2008, overseas sales accounted for 82.4 percent of consolidated net sales, an
increase of 2.3 percent compared to the prior fiscal year. As a result, fluctuations in foreign
exchange rates had a significant effect on TDKs consolidated sales and income. During fiscal
2008, the yens value rose 2.2 percent against the U.S. dollar and declined 7.7 percent against the
Euro, based on average exchange rates in markets. Overall, exchange rate movements had the
effect of decreasing net sales by approximately ¥8.1 billion and operating income by approximately
¥5.9 billion in fiscal 2008.
By
geographic area based on the location of TDK entities, foreign exchange fluctuations decreased sales in Japan by approximately ¥3.7
billion, in Asia and Others by approximately ¥10.8 billion, in North and South
America by approximately ¥2.5 billion and increased sales
in Europe by approximately ¥3.9 billion. The effect of
foreign exchange fluctuations on consolidated net sales after the
elimination of intersegment transactions between and among TDK and
consolidated subsidiaries was approximately ¥8.1 billion.
- 24 -
TDK conducts a large share of business activities outside Japan. Such activities include
manufacturing and sales, as well as research, design and procurement. In-region production ratio
for the sales amount in fiscal 2008 represented 99.1 percent compared with 100.6 percent in the
2007 fiscal year of sales in Asia (excluding Japan) and Oceania, 25.2 percent compared with 23.8
percent in the 2007 fiscal year in the Americas, and 28.4 percent compared with 17.2 percent in the
2007 fiscal year in Europe. Overseas production accounted for 70.1 percent of total sales in
fiscal 2008, compared with 62.2 percent one year earlier, and for 85.1 percent of overseas sales,
compared with 77.7 percent one year earlier. The rise in the percentage of overseas production in
fiscal 2008 is mainly due to higher production in Asia in the electronic materials and components
segment.
TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and currency option contracts for
some foreign currency-denominated obligations. Foreign exchange risk arising from operating
activities is hedged by using forward foreign exchange contracts and currency option contracts. In
principle, TDKs policy is to hedge up to 50 percent of expected foreign currency-denominated
accounts receivable for each month for the next six months to follow. Due to the global nature of
operations, management realizes that currency movements continue to have the potential to exert a
material influence on consolidated performance.
The cost of sales increased 2.0 percent to ¥635.5 billion in fiscal 2008 from ¥622.8 billion
in fiscal 2007 due primarily to higher sales. Cost of sales increased from 72.3 percent to 73.4
percent of net sales, respectively. In spite of strong pressures by customers to reduce sales
prices of TDK products in each segment, TDKs cost of sales ratio improved because of increased
productivity in the manufacture of electronic materials and components, structural reforms
undertaken by TDK that reduced its cost and reductions in the prices of materials used by TDK. As
a result, gross profit was 26.6 percent in fiscal 2008, compared to gross profit of 27.7 percent in
fiscal 2007.
Selling, general and administrative expenses decreased by ¥0.2 billion from ¥159.1 billion in
fiscal 2007 to ¥158.9 billion in fiscal 2008. This represented a decrease from 18.4 percent to
18.3 percent of net sales, respectively. The change was mainly a result of transfer of TDK brand
product sales business for recording media of ¥9.3 billion, increase in research and development
expenses of ¥7.3 billion, increase in maintenance and repairs expenses of ¥1.3 billion, and
resulting from acquisition of MPT of ¥1.6 billion. Exchange rate effects from a stronger yen of
¥0.5 billion also attributed to the increase of ¥0.2 billion. Research and development expenses
included in selling, general and administrative expenses increased by ¥7.3 billion from ¥50.1
billion in fiscal 2007 to ¥57.4 billion in fiscal 2008, and increased from 5.8 percent to 6.6
percent of net sales, respectively. The increase was mainly due to investment for increasing
storage capacity of HDD heads.
Also the income of ¥15.3 billion relating to sale of substantially all of the assets relating
to TDK branded world wide recording media business and use of the TDK brand name for current and
future recording media products to Imation for $250 million is included.
|
|
Other income and deductions
|
Other income (deductions) decreased ¥4.7 billion from the previous fiscal year. Although
reflecting a ¥1.3 billion increase in interest primarily from bank deposits due to an increase in
interest rates outside of Japan, foreign exchange loss of ¥3.7 billion was recognized in fiscal
2008 as compared to foreign exchange gain of ¥1.0 billion in fiscal 2007.
- 25 -
|
|
Income taxes and minority interests
|
The ratio of income taxes to income from continuing operations before income taxes (the
effective tax rate) increased from 19.2 percent in fiscal 2007 to 21.8 percent in fiscal 2008
mainly due to increase in additional valuation allowance provided relating to net operating losses
during the year and the decrease in research and development tax credit.
TDK earned net income of ¥71.5 billion, resulting in basic net income per common share of
¥551.72, compared with ¥529.88 in the previous fiscal year. Return on Equity, which is net income
divided by average total stockholders equity, increased from 9.6 percent to 9.7 percent. This was
mainly due to a ¥1.3 billion increase in net income.
Cash dividends per share paid during fiscal year 2008 were ¥120. This dividend was the sum of
the June 2007 year-end dividend of ¥60 and the December 2007 interim dividend of ¥60.
(Shareholders of record on March 31, 2008 received a cash dividend of ¥70 per share at the end of
June 2008.)
- 26 -
Fiscal 2007 Compared to Fiscal 2006
Sales
Consolidated net sales increased 8.4 percent from ¥795.2 billion to ¥862.0 billion for the
fiscal year ended March 31, 2007.
Looking at economic conditions worldwide during the past fiscal year, the U.S. economy
recorded healthy growth underpinned by consumer spending and capital expenditures, despite a
drop-off in housing investment. Meanwhile, European economies grew on balanced domestic and
external demand. In Asia, China maintained a high growth rate and the economies of India and South
Korea experienced moderate growth. The Japanese economy also experienced moderate growth, mainly
due to capital expenditures fueled by strong corporate earnings.
In the electronics market, which has a large bearing on the TDKs performance, fiscal 2007 was
notable for buoyant demand for mobile phones, notebook PCs and flat-screen TVs. This demand,
together with an increase in the number of electronic components in finished products as a result
of the increasing sophistication and number of features of these products, led to even higher
demand for electronic components.
Amid this operating environment, TDK took steps in fiscal 2007 to respond to the increasing
demand for its components. In addition to increasing production capacity of its multilayer ceramic
chip capacitors and other components, TDK entered into an equity-based business alliance with
Tabuchi Electric Co., Ltd. (by way of strategic investment of TDK purchasing 14 percent of
Tabuchis outstanding shares) to strengthen the power supplies business.
As a result, the electronic materials and components segment posted net sales of ¥758.8
billion, up 10.3 percent from ¥687.8 billion in the previous fiscal year.
Electronic Materials and Components Segment is made up of four product sectors: (1) electronic
materials, (2) electronic devices, (3) recording devices, and (4) other electronic components.
Electronic Materials: Sales in the electronic materials sector rose 10.2 percent from ¥180.8
billion to ¥199.2 billion. Sales of capacitors increased year over year, the result mainly of
higher sales of multilayer ceramic chip capacitors, the main product in the capacitors category.
Sales for use in PCs and flat-screen TVs were particularly strong. Sales of ferrite cores and
magnets rose compared to the prior fiscal year. Sales of ferrite cores declined marginally as TDK
terminated some products. On the other hand, sales of magnets rose. Ferrite magnet sales rose
mainly on a weaker yen, while rare-earth magnets saw sales rise as production of HDDs increased.
Electronic Devices: Sales in the electronic devices sector climbed 28.1 percent from ¥154.7
billion to ¥198.2 billion. This large year over year increase reflected the inclusion of the
Lambda Power Business in this sector from the second half of the previous fiscal year. In other
words, this was the first full year the Lambda Power Business results have been reflected in the
sectors results, after only half a years sales were booked in the previous fiscal year. Even
excluding these sales, existing businesses in the sector posted year over year sales growth. Sales
of inductive devices increased compared to the prior fiscal year, mainly as a result of increased
sales of power line coils used in mobile phones and HDDs. Sales of high-frequency components
declined compared to the prior fiscal year, the result mainly of lower sales volumes and decreased
sales prices. Sales of other products increased compared to the prior fiscal year mainly due to
increased sales of power supplies, which offset a slight decline in sales of sensors and actuators
as sales prices fell.
- 27 -
Recording Devices: In the recording devices sector, sales declined 3.5 percent from ¥315.9
billion to ¥304.8 billion. Sales of HDD heads decreased year over year. TDKs HDD head sales
volume increased due to higher unit production of HDDs for use in PCs as well as new applications
in other consumer electronics. In terms of HDD head volume, therefore, TDK absorbed a negative
effect caused by the fact that, in fiscal 2007, TDK lost one of its largest customers for HDD
heads, Maxtor Peripherals (S) Pte. Ltd., which had been acquired by a HDD manufacturer. However,
discounting pressure on HDD heads stemming from competition for market share among HDD
manufacturers led to the overall decrease in sales. Sales of other heads declined year over year.
Other Electronic Components: Sales in the other electronic components sector increased 55.5
percent from ¥36.4 billion to ¥56.6 billion compared to the prior fiscal year. This was the result
of increased sales of organic EL displays, mechatronics and other new products.
Operating income of the electronic materials and components segment in fiscal 2007 was ¥81.8
billion, an increase of ¥7.5 billion as compared to fiscal 2006. In spite of strong pressure by
customers to reduce sales prices of TDK products in each segment, TDKs sales cost ratio improved
because of increased productivity in the manufacture of electronic materials and components, cost
improvement, structural reforms undertaken by TDK that reduced its costs and reductions in the
prices of materials used by TDK.
In the recording media segment, sales decreased 3.9 percent from ¥107.4 billion to ¥103.2
billion. Sales of audiotapes and videotapes declined compared to the prior fiscal year and while
TDK maintained a high market share, demand decreased for these products as a whole. Sales of
optical media increased compared to the prior fiscal year and sales volumes of these products
outweighed a continued fall in unit prices of CD-Rs and DVDs. Sales of other products, recording
media products other than audiotapes, videotapes and optical media products increased year over
year. Sales of LTO-standard* (Linear Tape-Open) tape-based data storage media for computers
increased due to strong demand.
Operating loss of the recording media segment in fiscal 2007 was ¥2.2 billion, a loss that was
¥11.6 billion less than the ¥13.8 billion operating loss in fiscal 2006. Operating loss improved
significantly due to the effect of restructuring including restructuring costs which decreased by
¥6.3 billion.
*Linear Tape-Open, LTO, the LTO Logo, Ultrium and the Ultrium Logo are trademarks of HP, IBM
and Quantum in the U.S. and other countries.
By region, sales in Japan declined 1.3 percent from ¥173.7 billion to ¥171.4 billion.
Overseas sales increased 11.1 percent from ¥621.5 billion to ¥690.7 billion. Overseas sales
accounted for 80.1 percent of consolidated net sales.
Net Sales Geographic Segments
Japan: In Japan, sales in the electronic materials, electronic devices and other electronic
components sectors increased, while sales in the recording devices sector and recording media
segment declined. Operating income of the electronic materials and components segment decreased by
¥20.5 billion due to the absence in fiscal 2007 of the recognition of operating income as was
recognized in fiscal 2006 from the payment made by its subsidiary in Asia to TDK in the amount of
¥24.0 billion (relating to the assessment of additional tax in fiscal 2005 on prices charged and
paid by TDK in connection with sales and purchases of products involving the subsidiary). This
effect was mitigated by improved operation capacity. Although operating loss of the recording
media segment improved slightly, operating income in this region decreased by ¥19.0 billion to
¥29.8 billion.
- 28 -
Asia (excluding Japan) and Oceania: In Asia (excluding Japan) and Oceania, sales increased in
the electronic materials, electronic devices, other electronic components sectors and recording
media segment, but sales declined in the recording devices sector. Operating income of the
electronic materials and components segment increased by ¥28.9 billion. This was because
significant operating loss of the other electronic components sector reversed to operating income
due to profit increase without the recognition of operating loss in the previous year from the
payment made by its subsidiary in Asia to TDK in the amount of ¥24.0 billion relating to the
assessment of additional tax in fiscal 2005 on prices charged and paid by TDK in connection with
sales and purchases of products involving the subsidiary, in addition to increase in operating
income by increasing sales of each sector above, and operating income of the recording media
segment also increased slightly. Operating income in this region increased by ¥28.9 billion to
¥41.4 billion.
North and South America: In the Americas, sales increased in the electronic materials,
electronic devices and other electronic components sectors. The lower yen versus the U.S. dollar
also led to increased sales. Operating income of the electronic materials and components segment
decreased by ¥0.7 billion due to a decrease in operating income mainly in the recording devices
sector, and slight decline in operating income of the recording media segment. Operating income in
this region decreased by ¥0.9 billion to ¥8.4 billion.
Europe: In Europe, sales increased in the electronic materials and electronic devices sectors.
Although operating income of the electronic materials and components segment decreased slightly,
operating loss of the recording media segment improved significantly due to reduction to operating
loss of ¥0.1 billion, ¥10.2 billion up from fiscal 2006, by the effect of restructuring including
restructuring costs which decreased by ¥6.3 billion. Operating loss in this region upturned by
¥10.0 billion to ¥0.0 billion (¥12 million).
Effect of foreign exchange movements
In fiscal 2007, overseas sales accounted for 80.1 percent of consolidated net sales, an
increase of 1.9 percent compared to the prior fiscal year. As a result, fluctuations in foreign
exchange rates had a significant effect on TDKs consolidated sales and income. During fiscal
2007, the yens value declined 3.2 percent against the U.S. dollar and 8.8 percent against the
Euro, based on TDKs average internal exchange rates. Overall, exchange rate movements had the
effect of increasing net sales by approximately ¥24.7 billion and operating income by approximately
¥6.1 billion in fiscal 2007.
By
geographic area based on the location of TDK entities, foreign
exchange fluctuations increased sales in Japan by approximately ¥6.5 billion, in
Asia and Others by approximately ¥19.7 billion, in the
North and South America by approximately ¥4.0 billion and in Europe by approximately ¥7.6 billion. The effect of foreign exchange fluctuations on
consolidated net sales after the elimination of intersegment transactions between and among TDK and
consolidated subsidiaries was approximately ¥24.7 billion.
TDK conducts a large share of business activities outside Japan. Such activities include
manufacturing and sales, as well as research, design and procurement. In-region production ratio
for the sales amount in fiscal 2007 represented 100.6 percent compared with 102.2 percent in the
2006 fiscal year of sales in Asia (excluding Japan) and Oceania, 23.8 percent compared with 22.0
percent in the 2006 fiscal year in the Americas, and 17.2 percent compared with 19.1 percent in the
2006 fiscal year in Europe. Overseas production accounted for 62.2 percent of total sales in
fiscal 2007, compared with 61.7 percent one year earlier, and for 77.7 percent of overseas sales,
compared with 79.0 percent one year earlier. The rise in the percentage of overseas production in
fiscal 2007 is mainly due to higher production in Asia in the electronic materials and components
segment.
- 29 -
TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and swaps for some foreign
currency-denominated obligations. Foreign exchange risk arising from operating activities is
hedged by using forward foreign exchange contracts. In principle, TDKs policy is to hedge up to
50 percent of expected foreign currency-denominated accounts receivable for each month for the next
six months to follow. Due to the global nature of operations, management realizes that currency
movements continue to have the potential to exert a material influence on consolidated performance.
Cost and expenses
The cost of sales increased 6.3 percent to ¥622.8 billion in fiscal 2007 from ¥585.8 billion
in fiscal 2006 due primarily to higher sales. Cost of sales decreased from 73.7 percent to 72.3
percent of net sales, respectively. In spite of strong pressures by customers to reduce sales
prices of TDK products in each segment, TDKs sales cost ratio improved because of increased
productivity in the manufacture of electronic materials and components, structural reforms
undertaken by TDK that reduced its cost and reductions in the prices of materials used by TDK. As
a result, gross profit was 27.7 percent in fiscal 2007, compared to gross profit of 26.3 percent in
fiscal 2006.
Selling, general and administrative expenses increased by ¥17.1 billion from ¥142.1 billion in
fiscal 2006 to ¥159.1 billion in fiscal 2007. This represented an increase from 17.9 percent to
18.4 percent of net sales, respectively. The increase was mainly a result of the inclusion of
operating results of Lambda Power Business for the whole fiscal year in fiscal 2007, while in
fiscal 2006 this business was included only for the second half period, resulting in an increase of
¥7.4 billion in such expenses. Exchange rate effects from a weaker yen of ¥4.5 billion also
attributed the increase of ¥17.1 billion. Research and development expenses included in selling,
general and administrative expenses increased by ¥4.6 billion from ¥45.5 billion in fiscal 2006 to
¥50.1 billion in fiscal 2007, and increased from 5.7 percent to 5.8 percent of net sales,
respectively. The increase was mainly due to the increase in the production of HDD heads. Also
the inclusion of Lambda Power Business resulted in an increase of ¥0.8 billion in research and
development expenses.
In addition, TDK decided to restructure certain of its recording media business in March 2006,
including the withdrawal from the manufacturing of recordable CD and DVDs, and recorded a
restructuring cost of ¥0.5 billion and ¥6.8 billion for the years ended March 31, 2007 and 2006,
respectively.
Other income and deductions
Other income (deductions) improved ¥3.5 billion from the previous fiscal year, reflecting a
¥3.4 billion increase in interest primarily from bank deposits and dividend income from equity
investments from companies that are not consolidated in TDKs financial statements due to an
increase in interest rates outside of Japan.
Income taxes and minority interests
The ratio of income taxes to income from continuing operations before income taxes (the
effective tax rate) decreased from 31.9 percent in fiscal 2006 to 19.2 percent in fiscal 2007. The
decrease reflects the higher amounts of income earned in overseas subsidiaries in regions with
lower tax rates than TDKs effective tax rate for all other jurisdictions in which it pays income
taxes, decrease in additional valuation allowance provided relating to net operating losses during
the year, and one-time reversals of income tax payables as a result of the agreement with the Tax
Bureau related to prices in connection with sales and purchases of products involving its overseas
subsidiaries.
- 30 -
Net income
TDK earned net income of ¥70.1 billion, resulting in net income per diluted share of ¥529.29,
compared with ¥333.20 in the previous fiscal year. Return on Equity, which is net income divided
by average total stockholders equity, increased from 6.6 percent to 9.6 percent. This was mainly
due to a ¥26.0 billion increase in net income.
Cash dividends per share paid during fiscal year 2007 were ¥100. This dividend was the sum of
the June 2006 year-end dividend of ¥50 and the December 2006 interim dividend of ¥50.
(Shareholders of record on March 31, 2007 received a cash dividend of ¥60 per share at the end of
June 2007.)
In fiscal 2006, consolidated net income included loss from discontinued operations of ¥310
million related to TDK Semiconductor Corporation (TSC). See discussion at Discontinued
Operations.
- 31 -
Discontinued Operations
On March 31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly
owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital (Buyer). The sale of TSC is
part of TDKs continuing shift away from non-core products and technologies. The sale agreement
also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. The
payments are contingent upon certain milestones being met related to future revenue targets
extending through April 2007. No earn-out payments were earned through the measurement period
ended April 30, 2007. The transaction was completed on April 8, 2005. TDK has accounted for the
sale of TSC as a discontinued operation pursuant to FASB Statement No. 144, Accounting for the
impairment or Disposal of Long-Lived Assets, as TSC meets the definition of a component of an
entity. The results of operations for this subsidiary have been reported as discontinued
operations for all periods presented. Accordingly, certain financial statement information and
related footnote disclosures related to prior periods have been reclassified.
Selected financial information for the year ended March 31, 2006 for the discontinued
operations, is summarized as follows:
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
|
2006
|
|
|
Net sales
|
|
¥
|
45
|
|
|
|
|
|
Loss from operations before income taxes (including loss on
disposal of ¥224 million in 2006)
|
|
|
310
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
¥
|
310
|
|
|
|
|
|
|
|
|
|
|
|
See Note 22 to the Consolidated Financial Statements for further discussion.
- 32 -
|
B.
|
|
Liquidity and capital resources
|
Financing requirements
TDKs financing requirements mainly comprise working capital to fund day-to-day business
activities, funds for capital expenditures necessary for future growth, funding of R&D programs,
and funds for mergers, acquisitions and other strategic investments aimed at accelerating growth in
corporate value.
Working capital is required to finance, among other things, the procurement of raw materials
and parts used in product manufacture and the cost of labor utilized in manufacturing processes.
These expenses are booked as manufacturing expenses. The other major use of working capital is to
finance selling, general and administrative expenses, which include managerial and non-production
payroll costs, advertising and promotional costs related to sales activities, and
distribution-related expenses.
TDKs capital expenditures primarily target growth-oriented, high-priority sectors such as IT
home electronic appliances, high-speed and large-capacity networks, and car electronics.
TDKs R&D budget principally funds programs to improve and expand the product range, notably
within the above high-priority sectors. Particular areas of R&D focus include next-generation
recording-related products, microelectronics modules used in mobile communications, and
eco-friendly, energy-efficient devices based on advanced materials and design technologies.
TDKs financing requirements for M&A activities and strategic investments aimed at
accelerating growth in corporate value have also tended to increase in recent years. TDK regularly
reviews acquisition opportunities and, as a result, could require additional debt or equity
financing to fund these transactions.
In view of its stated intention to maintain a growth trajectory within the electronics
industry, TDK believes that its financing requirements to achieve this aim are likely to increase
going forward.
TDK views returning earnings to shareholders as one of its highest management priorities. TDK
gives consideration to a consistent increase in dividends based on factors such as the return on
equity (ROE), dividends as a percentage of equity (DOE) and TDKs results of operations on a
consolidated basis.
TDK also places importance on the acquisition and retirement of treasury stock as a method for
enhancing shareholder value. In the year ended March 31, 2008, TDK invested ¥39.2 billion to
purchase 3,599,000 shares of treasury stock. TDK retired such 3,599,000 shares of the treasury
stock pursuant to Article 178 of the Companies Act of Japan on August 10, 2007.
Capital Expenditures
In fiscal 2008, capital expenditures on a cash basis increased compared to fiscal year 2007 by
¥13.9 billion from ¥70.4 billion in 2007 to ¥84.3 billion ($843 million) in 2008. TDK made
significant investment in a number of its product offerings, including IT home electronics
appliances, high-speed, large-capacity networks, and car electronics, which are fields TDK regards
as strategically important for growth.
In the electronic materials and components segment, TDK invested in improving facilities for
development and production of HDD heads, high recording density next generation heads, increased
production and rationalization in multilayer ceramic chip capacitors, inductive devices, ferrite
cores and magnets mainly in China, North America and Thailand. Capital expenditures in the
electronic materials and components segment of ¥82.0 billion also include investment in a
processing and assembly of Polymer Lithium Battery in China.
In the recording media segment, capital expenditures totaled ¥2.3 billion including investment
in development and mass production facilities for next generation optical products such as Blu-ray
disc and strengthening production capacity and rationalization of data storage media for computers.
- 33 -
In principle, the funds for these capital expenditures are provided from cash generated by
operations.
In fiscal 2007, capital expenditures on a cash basis declined compared to fiscal year 2006 by
¥3.5 billion from ¥73.9 billion in 2006 to ¥70.4 billion in 2007. TDK made significant investment,
at a slightly lower level than in 2006, in IT home electronics appliances; high-speed,
large-capacity networks; and car electronics, which are fields TDK regards as strategically
important for growth.
In the electronic materials and components segment, TDK invested in improving facilities for
development and production of HDD heads, high recording density next generation heads, increased
production and rationalization in multilayer ceramic chip capacitors, inductive devices, ferrite
cores and magnets mainly in China, North America and Thailand. Also, capital expenditures in the
electronic materials and components segment during fiscal 2007 totaled ¥68.4 billion including
investment in a processing and assembly of Polymer Lithium Battery in China.
In the recording media segment, capital expenditures during fiscal 2007 totaled ¥2.0 billion
including investment in development and mass production facilities for next generation optical
products such as Blu-ray disc and strengthening production capacity and rationalization of data
storage media for computers.
In fiscal 2006, capital expenditures on a cash basis rose ¥12.9 billion from ¥61.0 billion to
¥73.9 billion. This was the result of aggressive investment in IT home electronics appliances;
high-speed, large-capacity networks; and car electronics, which are fields TDK regards as
strategically important for growth.
In the electronic materials and components segment, capital expenditures totaled ¥71.1
billion. The bulk of the capital expenditures were for facilities to develop and produce HDD heads
with higher areal density mainly in China, the U.S. and the Philippines, and for facilities to
increase production and rationalize operations for multilayer ceramic chip capacitors mainly in
Japan and China.
In the recording media segment, capital expenditures totaled ¥2.8 billion, mainly for
facilities to increase production of LTO-standard tapes.
In addition, TDK paid ¥32.9 billion to acquire Lambda Power Business and Amperex Technology
Limited. The funds for these acquisitions were also provided from cash generated by operations.
TDKs financing policy and capital procurement
The ultimate aim of TDKs financing activities is to raise the overall corporate value of the
TDK Group. TDKs basic finance policy is to secure the necessary funds and to ensure and maintain
appropriate levels of liquidity to enable the TDK Group to conduct all business activities smoothly
and swiftly with the aim of increasing overall corporate value.
Working capital and other funding requirements with a projected short-term return on
investment are financed primarily from operating cash flows. In addition, TDKs basic policy is to
use cash on hand and operating cash flows to finance capital expenditures and R&D spending, as well
as any other funding requirements where the projected return on investment is over the medium or
long term, such as strategic investments aimed at accelerating the pace of corporate value
appreciation.
Working capital, capital expenditures and strategic investments were financed almost entirely
from cash on hand and operating cash flows in the year ended March 31, 2008.
TDK offers proper advice to subsidiaries on financing issues based on the consolidated
financial position and, wherever possible, tries to finance the funding needs of subsidiaries
internally using TDK Group resources.
- 34 -
Liquidity and funding sources
Cash and cash equivalents amounted to ¥166.1 billion at the end of the year to March 2008,
which was equal to approximately 2.3 months of sales from that fiscal year. TDK considers this
level of liquidity adequate for current needs. Moreover, TDKs finance policy emphasizes stability
and liquidity in the management of cash on hand.
Within the TDK Group, the parent company assumes primary responsibility for the management of
overall cash levels.
TDK has introduced a cash management system (CMS) in certain regions as one method for
improving capital efficiency. Specifically, within the regions subject to CMS-based liquidity
managementnamely, Japan, the United States and EuropeTDK manages liquidity levels through the
Head Office in Tokyo, along with financial holding companies based in New York and Luxembourg. The
parent company oversees the principal cash balances held by overseas subsidiaries based in Asia
outside Japan, which are required to provide balance sheets, profit and loss accounts and other
financial statements on a monthly basis.
In its management of cash and cash equivalents, TDK tries wherever possible to avoid the
emergence of foreign exchange-related risks due to uneven currency distribution.
Cash flows for fiscal 2008, 2007 and 2006 are outlined below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
(millions of yen)
|
|
|
(millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of dollars)
|
|
Income from continuing operations
|
|
¥
|
71,461
|
|
|
¥
|
70,125
|
|
|
¥
|
44,411
|
|
|
$
|
714.6
|
|
Adjustments to reconcile to net cash
provided by operating activities
|
|
|
47,952
|
|
|
|
75,358
|
|
|
|
44,707
|
|
|
|
479.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
119,413
|
|
|
|
145,483
|
|
|
|
89,118
|
|
|
|
1,194.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(157,747
|
)
|
|
|
(81,488
|
)
|
|
|
(104,782
|
)
|
|
|
(1,577.5
|
)
|
Net cash used in financing activities
|
|
|
(60,086
|
)
|
|
|
(15,862
|
)
|
|
|
(7,125
|
)
|
|
|
(600.8
|
)
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(414
|
)
|
|
|
|
|
Effect of exchange rate changes on cash
and cash equivalents
|
|
|
(24,644
|
)
|
|
|
2,019
|
|
|
|
10,712
|
|
|
|
(246.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
¥
|
(123,064
|
)
|
|
¥
|
50,152
|
|
|
¥
|
(12,491
|
)
|
|
$
|
(1,230.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 cash and cash equivalents decreased ¥123.1 billion from ¥289.2 billion in fiscal
2007 to ¥166.1 billion ($1,661 million). Operating activities provided net cash of ¥119.4 billion
($1,194 million), a decrease of ¥26.1 billion compared to fiscal 2007. Net income rose ¥1.3
billion to ¥71.5 billion ($715 million) and depreciation and amortization increased ¥6.0 billion to
¥71.3 billion ($713 million). In terms of changes in assets and liabilities, trade receivables
increased ¥25.0 billion mainly in recording devices manufacturing subsidiaries in Asia, inventories
increased ¥15.8 billion mainly in recording devices manufacturing subsidiaries and other electronic
components subsidiaries in Asia, other current assets increased ¥15.3 billion, and trade payables
increased ¥22.0 billion mainly in recording devices manufacturing subsidiaries and other electronic
components manufacturing subsidiaries in Asia.
Regarding research and development expenses, TDKs policy is to focus investments in the
strategic fields of IT home electronic appliances, high-speed and large-capacity networks and car
electronics. Funds for research and development are appropriated from
internal funds. R&D expenditures amounted to ¥57.4 billion ($574 million) or 6.6 percent of net sales in fiscal 2008 and ¥50.1 billion or 5.8 percent of net sales in fiscal 2007. See Item 5.C. Research and development, patents and licenses, etc. for further detail.
- 35 -
Investing activities used net cash of ¥157.7 billion ($1,577 million), ¥76.3 billion more than
a year earlier. Capital expenditures increased ¥13.9 billion to ¥84.3 billion ($843 million) for
improving facilities to develop and produce next-generation HDD heads with higher areal density and
for facilities to increase production and rationalize operations for multilayer ceramic chip
capacitors, inductive devices and ferrite cores and magnets. There was also an increase in cash
used in investing activities of ¥37.2 billion for acquisitions of assets relating to recording
devices products, ¥14.2 billion for payment for purchase of investments in securities, ¥18.2
billion for acquisition of subsidiaries, net of cash acquired, ¥15.8 billion for acquisition of
minority interests, while payment for purchase of short-term investments decreased ¥22.5 billion.
Financing activities used net cash of ¥60.1 billion ($601 million), ¥44.2 billion more
compared to fiscal 2007. This mainly reflected a ¥7.1 billion increase in repayment of long-term
debt, and a ¥39.2 billion increase in cash paid to acquire the TDKs own shares, with the aim of
improving capital efficiency and further raising the level of stockholder returns.
Regarding financing costs, TDK has long-term corporate credit ratings of AA- and A1 from
Standard & Poors and Moodys, respectively. Furthermore, Standard & Poors gives TDK their
highest short-term credit rating, A-1+. These ratings allow TDK to procure funds if needed at
relatively low interest rates.
TDKs fundamental treasury management policy is to give consideration to a consistent increase
in dividends based on factors such as the return on equity (ROE), dividends as a percentage of
equity (DOE) and TDKs results of operations on a consolidated basis. Funds for paying dividends
are generated by operating cash flow.
In the dynamically changing electronics industry, it is necessary to make well-timed
investments. Given this need, and the possibility that unstable financial conditions will continue
in Japan, TDKs policy is to maintain an adequate level of liquidity, considering risk factors as
well as a capital requirement forecast.
TDK estimates that operating cash flows and other internal resources will provide adequate
liquidity in fiscal 2009. Regarding cash flows for the fiscal years ending March 31, 2009 and
onward, TDK expects to provide the necessary funds from operating cash flows by increasing
profitability and improving the return on assets.
Fiscal 2007 cash and cash equivalents increased ¥50.2 billion from ¥239.0 billion in fiscal
2006 to ¥289.2 billion. Operating activities provided net cash of ¥145.5 billion, an increase of
¥56.4 billion compared to fiscal 2006. Income from continuing operations rose ¥25.7 billion to
¥70.1 billion and depreciation and amortization increased ¥6.8 billion to ¥65.3 billion. In terms
of changes in assets and liabilities, trade receivables decreased ¥28.1 billion, other current
assets decreased ¥15.0 billion, and income taxes payables, net increased ¥14.7 billion, while trade
payables decreased ¥12.4 billion and accrued expenses decreased ¥19.4 billion.
Regarding research and development expenses, TDKs policy is to focus investments in the
strategic fields of IT home electronic appliances, high-speed and large-capacity networks and car
electronics. Funds for research and development are appropriated from internal funds.
Investing activities used net cash of ¥81.5 billion, ¥23.3 billion less than a year earlier.
Capital expenditures decreased ¥3.5 billion to ¥70.4 billion. In addition, there was a decline of
¥32.9 billion for acquisition of businesses, net of cash acquired, paid in the previous fiscal year
and a cash inflow of ¥20.0 billion from proceeds from the sale of short-term investments, while
there was an outflow of ¥31.1 billion for payment for purchase of short-term investments.
Financing activities used net cash of ¥15.9 billion, ¥8.7 billion more compared to fiscal
2006. This mainly reflected a ¥1.9 billion increase in repayment of long-term debt, a decrease in
short-term debt, net of ¥5.1 billion, and a ¥2.7 billion increase in dividends paid due to a ¥20
increase in dividend per common share.
- 36 -
Fiscal 2006 cash and cash equivalents decreased ¥12.5 billion from ¥251.5 billion to ¥239.0
billion. Operating activities provided net cash of ¥89.1 billion, ¥6.1 billion less than in fiscal
2005. Income from continuing operations rose ¥7.4 billion to ¥44.4 billion and depreciation and
amortization increased ¥5.7 billion to ¥58.5 billion mainly due to increase in the recording
devices segment. In terms of changes in assets and liabilities, the increase in trade receivables
climbed ¥9.5 billion, changes in inventories increased ¥3.7 billion, changes in trade payables
increased ¥6.9 billion, and changes in accrued expenses increased ¥14.8 billion, while changes in
income taxes payables, net declined ¥25.1 billion.
Regarding research and development expenses, TDKs policy is to focus investments in the
strategic fields of IT home electronic appliances, high-speed and large-capacity networks and car
electronics. Funds for research and development are appropriated from internal funds.
Investing activities used net cash of ¥104.8 billion, ¥42.4 billion more than the ¥62.4
billion used in the previous fiscal year. TDK used ¥73.9 billion for capital expenditures, ¥12.9
billion more than in fiscal 2005, as a result of making aggressive investments to drive growth.
Furthermore, acquisition of businesses, net of cash acquired increased ¥31.4 billion and proceeds
from sale and maturity of investments in securities increased ¥2.5 billion year over year,
respectively.
Financing activities used net cash of ¥7.1 billion, a decrease of ¥2.5 billion from the ¥9.6
billion used in fiscal 2005. Dividends paid increased ¥2.6 billion due to a ¥20 per common share
increase in the year-end dividend. On the other hand, there were an increase of ¥4.0 billion in
increase (decrease) in short-term debt, net mainly in newly consolidated subsidiaries, and a
decrease of ¥0.7 billion in cash paid to acquire treasury stock for stock options.
Capital resources as of March 31, 2008, 2007 and 2006 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
|
(millions of yen)
|
|
|
(millions
|
|
|
|
|
|
|
|
(%)
|
|
|
|
|
|
|
of dollars)
|
|
Short-term debt
|
|
¥
|
8,898
|
|
|
¥
|
3,013
|
|
|
¥
|
4,469
|
|
|
$
|
89.0
|
|
|
|
|
(1.2
|
)
|
|
|
(0.4
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
Current installments of long-term debt
|
|
|
294
|
|
|
|
514
|
|
|
|
1,958
|
|
|
|
2.9
|
|
|
|
|
(0.1
|
)
|
|
|
(0.0
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
Long-term
debt, excluding current installments
|
|
|
152
|
|
|
|
532
|
|
|
|
405
|
|
|
|
1.5
|
|
|
|
|
(0.0
|
)
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
Stockholders equity
|
|
|
716,577
|
|
|
|
762,712
|
|
|
|
702,419
|
|
|
|
7,165.8
|
|
|
|
|
(98.7
|
)
|
|
|
(99.5
|
)
|
|
|
(99.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
¥
|
725,921
|
|
|
¥
|
766,771
|
|
|
¥
|
709,251
|
|
|
$
|
7,259.2
|
|
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDK has long-term corporate credit ratings of AA- from Standard & Poors (S&P) and of A1 from
Moodys. In addition, S&P has assigned TDK a short-term credit rating of A-1+, which is the highest
available rating in that series. Going forward, TDK is prepared to consider raising funds from
external sources to finance strategic investments as part of its strategy to actively seek to
accelerate the rate of growth in corporate value. TDK believes that its credit quality is
sufficiently high to facilitate external financing in the future eventuality of investment-related
financing requirements exceeding liquidity on hand.
However, it should be noted that the aforementioned credit ratings represent the independent
evaluations of credit rating agencies and, as such, are subject to potential revision or withdrawal
by the corresponding agency at any time.
- 37 -
Total assets amounted to ¥935.5 billion ($9,355 million) as of March 31, 2008, down ¥53.8
billion from ¥989.3 billion at the previous fiscal year-end. As of March 31, 2008, cash and cash
equivalents were ¥123.1 billion lower than a year ago from ¥289.2 billion to ¥166.1 billion ($1,661
million) mainly due to expenditures relating to acquisition of subsidiaries, acquisition of assets,
additional acquisition of minority interests and acquisition of treasury stock for retirement
purposes, while investments in securities and intangible assets increased ¥36.1 billion and ¥32.3
billion, respectively. As a result of these and other changes, total assets decreased ¥53.8
billion compared with March 31, 2007.
Total liabilities increased ¥2.9 billion year over year. Accrued expenses increased ¥3.4
billion due to balances of newly acquired subsidiaries and accrued expenses for capital
expenditures.
Total stockholders equity decreased ¥46.1 billion from ¥762.7 billion to ¥716.6 billion
($7,166 million). Retained earnings increased ¥17.4 billion from ¥671.4 billion to ¥688.7 billion
($6,887 million) and accumulated other comprehensive loss increased ¥63.7 billion from ¥17.8
billion to ¥81.6 billion ($816 million).
Total assets amounted to ¥989.3 billion as of March 31, 2007, up ¥65.8 billion from ¥923.5
billion at the previous fiscal year-end. As of March 31, 2007, cash and cash equivalents were
¥50.2 billion higher than a year ago from ¥239.0 billion to ¥289.2 billion, while short-term
investments rose ¥11.1 billion, net property, plant and equipment increased ¥3.0 billion from
¥243.7 billion to ¥246.7 billion and other assets increased ¥8.3 billion from ¥28.1 billion to
¥36.4 billion. On the other hand, net trade receivables decreased ¥10.7 billion from ¥189.0
billion to ¥178.3 billion. As a result of these and other changes, total assets increased ¥65.8
billion compared with March 31, 2006.
Total liabilities increased ¥5.3 billion year over year, with income taxes payables and
retirement and severance benefits increasing ¥4.1 billion and ¥5.5 billion, respectively.
Meanwhile, trade payables and accrued expenses declined ¥2.9 billion and ¥7.0 billion,
respectively.
Total stockholders equity increased ¥60.3 billion from ¥702.4 billion to ¥762.7 billion.
Retained earnings increased ¥53.1 billion from ¥618.3 billion to ¥671.4 billion and accumulated
other comprehensive loss decreased ¥4.1 billion from ¥21.9 billion to ¥17.8 billion.
Total assets amounted to ¥923.5 billion as of March 31, 2006, up ¥115.5 billion from ¥808.0
billion at the previous fiscal year-end. As of March 31, 2006, trade receivables were ¥189.1
billion, ¥41.1 billion higher than ¥148.0 billion and inventories were ¥89.0 billion, ¥14.1 billion
more than ¥74.9 billion a year ago, respectively. Property, plant and equipment increased ¥26.7
billion from ¥217.0 billion to ¥243.7 billion, investments in securities increased ¥6.1 billion
from ¥22.7 billion to ¥28.8 billion. In addition, goodwill increased ¥10.3 billion from ¥9.2
billion to ¥19.5 billion and intangible assets increased ¥16.3 billion from ¥13.2 billion to ¥29.5
billion due to the acquisition of businesses.
Total liabilities increased ¥43.3 billion from ¥163.8 billion to ¥207.1 billion. Income taxes
payables decreased ¥10.1 billion from ¥19.3 billion to ¥9.2 billion, while trade payables rose
¥22.6 billion from ¥62.1 billion to ¥84.7 billion, accrued expenses increased ¥12.4 billion from
¥31.1 billion to ¥43.5 billion, and deferred income taxes increased ¥4.5 billion from ¥0.8 billion
to ¥5.3 billion.
Total stockholders equity increased ¥63.3 billion from ¥639.1 billion to ¥702.4 billion.
Retained earnings increased ¥32.7 billion from ¥585.6 billion to ¥618.3 billion and accumulated
other comprehensive loss decreased ¥29.7 billion from ¥51.7 billion to ¥21.9 billion.
TDK has various pension plans covering its employees. The unfunded amount as of March 31,
2008 was ¥10.9 billion ($109 million). As of March 31, 2008, ¥1.3 billion ($13 million) and ¥34.0
billion ($340 million) were accrued on the balance sheet as accrued expenses and retirement and
severance benefits, ¥0.1 billion and ¥1.7 billion more than a year ago, respectively.
TDKs policy is to utilize group funds for the development of its business.
- 38 -
On May 30, 2007, TDK repurchased its own shares of common stock on the Tokyo Stock Exchange in
the amount of 3,599 thousand shares at a cost of ¥39,229 million.
The repurchases were intended to increase capital efficiency and further increase the level of
returns to stockholders. TDK retired such 3,599 thousand shares of the treasury stock pursuant to
Article 178 of the Companies Act of Japan on August 10, 2007. After the retirement, total number
of TDK shares issued was 129,590,659 shares.
Regarding TDKs capital expenditure plans, TDKs policy is to invest actively in targeted
strategic fields to drive growth. Capital expenditures will be funded using internally generated
funds.
TDK is planning capital expenditures of ¥70.0 billion in fiscal 2009, primarily for the
expansion of production facilities and upgrading of facilities. Actual capital expenditures could
differ from this forecast as a result of factors such as shifts in technology, demand, prices,
competition, economic environments and foreign exchange rates.
Sale of business to Imation Corp.
On August 1, 2007, pursuant to a definitive agreement between TDK and Imation dated April 19,
2007, TDK transferred substantially all of the assets relating to TDK branded world wide recording
media business and use of the TDK brand name for current and future recording media products to
Imation. TDK entered into this transaction to strengthen and grow its recording media products
sales business by partnering with Imation. TDK retained its research and development,
manufacturing and OEM recording media operations to improve competitiveness of the recoding media
operations.
Under the terms of the agreement, TDK has transferred all the shares of its six subsidiaries and
certain assets and liabilities relating to the recording media business of its three subsidiaries
to Imation. The transaction was closed on August 1, 2007 for $250 million. The total
consideration included Imation common stock constituting 16.6 percent (6,826 thousands shares) of
Imations common stock and cash of $29 million. TDK recognized ¥15,340 million ($153,400 thousand)
on the consolidated statements of income as Gain on sale of business to Imation Corp. for the
year ended March 31, 2008, which includes the excess of the target working capital amount under the
contractual provision. TDK may receive additional cash of up to $70 million contingent on future
financial performance compared to targeted gross margin for three years until December 2010.
Restructuring Costs
During the year ended March 31, 2006, TDK was fundamentally restructuring the recording media
business. While reviewing the progress of the restructuring and future strategies of the recording
media business, TDK looked for ways to re-strengthen the manufacturing of recordable CD & DVD
foundations from various perspectives. However, a sharp drop in market prices of recordable CD &
DVDs as well as the increased cost of natural resources had a material impact on the recording
media business of TDK. Following further study, at a board meeting held on March 8, 2006, TDK
management decided to withdraw from the manufacturing of recordable CD & DVDs, which should lead to
an improvement and reform of its recording media business.
TDK accelerated its ODM business model for the current generation of recordable CD & DVD
products and the third-party supply of such products following TDKs withdrawal. TDK also
continued its R&D and manufacturing activities in Japan of the blue laser disc, a highly
value-added product expected to grow in the near future. TDK has also concentrated its resources
on strengthening data storage tape business, which is another core business.
- 39 -
With this decision, TDK shut down the production facilities at its European subsidiary, TDK
Recording Media Europe S.A. in Luxembourg in April 2006. TDK recorded a restructuring charge of
¥6,825 million which included a charge of ¥3,309 million relating to employee termination benefits.
As a result of the restructuring, a total of 350 regular employees were terminated through May 31,
2006. In addition, TDK recorded a restructuring charge of ¥2,594 million relating to an impairment
on property, plant and equipment in connection with the decision to shut down production facilities
at its European subsidiary.
In fiscal 2007, TDK recorded a restructuring cost of ¥510 million which included an additional
charge of ¥441 million relating to employee termination benefits and ¥190 million relating to an
impairment of building held for sale in connection with the TDK Recording Media Europe S.A.
restructuring.
For a discussion of financial instruments, see Note 15 Risk Management Activities and
Derivative Financial Instruments, Note 16 Fair Value of Financial Instruments and Note 7
Short-Term and Long-Term Debt in Item 17 Financial Statements.
- 40 -
|
C.
|
|
Research and development, patents and licenses, etc.
|
R&D expenditures amounted to ¥57.4 billion ($574 million), 6.6 percent of net sales in fiscal
2008; ¥50.1 billion, 5.8 percent of net sales in fiscal 2007; and ¥45.5 billion, 5.7 percent of net
sales in fiscal 2006.
In its R&D activities, TDK continues to work on strengthening and expanding development of new
products that respond to diversification in the electronics market. In particular, TDK is
concentrating on next-generation recording-related products, micro electronics modules for mobile
communications-related applications, and energy-efficient, environmentally friendly devices based
on materials and design technologies. Furthermore, TDK is using its reservoir of technologies to
conduct efficient R&D activities concentrating on three strategic areas: IT home electronic
appliances, high-speed and large-capacity networks, and car electronics.
In the electronic materials and components segment, capital expenditures totaled ¥82.0 billion
($820 million). Development themes include ultra-compact components such as thin-film common-mode
filters that leverage core technologies in the electronic materials and components field, and
commercialization of 220Gbpsi PMR heads for HDDs used in mobile applications in the recording
devices sector. Furthermore, TDK has commercialized EMC components such as multilayer chip
varistors and EMI filter arrays.
In the recording media segment, capital expenditures totaled ¥2.3 billion ($23 million). TDK
has made progress strengthening its lineup of next-generation DVD-related products, such as by
commercializing a large-capacity, dual-layer 50GB rewritable Blu-ray Disc.
R&D at TDK is conducted by the Materials & Process Development Center, Devices Development
Center, Production Engineering Development Center, Materials Analysis Center, Application Center,
SQ Research Center and the R&D functions of each operating group. Each facility is developing new
products and technologies in its respective area of responsibility.
|
|
|
The Materials R&D Center is responsible for research in magnetic and dielectric
materials that use powder metallurgy.
|
|
|
|
|
The Advanced Process Technology Center facilitates the use of cutting-edge process
technologies.
|
|
|
|
|
The Devices Development Center conducts research in new devices.
|
|
|
|
|
The Application Center devises the necessary applied technologies with the aim of
keeping TDK in step with market trends and customer needs.
|
In terms of overseas R&D activities, TDK is conducting R&D in collaboration with leading
universities in the U.S. and Europe, and overseas R&D subsidiaries are making use of local
technological resources. In China, where TDK is aiming to establish and develop an operating base
capable of supporting growth, R&D activities are being carried out in the area of electronic
materials and components. In addition, consolidated subsidiary Headway Technologies, Inc. is
developing next-generation HDD heads.
Although TDK has a variety of patents in Japan and other countries, and licenses from other
companies, it believes that expiration of any one of its patents or licenses or related group of
patents or licenses would not materially adversely affect its business activities. Total income
from patents and licenses was ¥0.1 billion in fiscal 2006. TDK paid ¥8.9 billion ($89 million) in
fiscal 2008, ¥7.2 billion in fiscal 2007 and ¥7.1 billion in fiscal 2006 for patents and licenses,
mainly royalties for licenses related to the recording devices business. TDK does not believe that
acquisition of new proprietary patents or other companies patents would have a material effect on
operating results in the future.
- 41 -
Economic environment
Under current economic circumstances, from a medium-term perspective, the electronics industry
is expected to see the growth of digital home appliances; the convergence of information and
communications, as typified by the increasingly diverse functions offered by mobile phones and
advances in portable devices; and the greater use of electronics in motor vehicles. These trends
are expected to result in a continued increase in demand for electronics components. TDK believes
that this increase will create a large number of opportunities for its electronic components
business and potential for growth.
The electronic components business is constantly subject to two sources of downward pressure
on prices. One is price discounting pressure from finished products manufacturers, the customers
of electronic component manufacturers. The other is competition among manufacturers of electronic
components.
Demands for price discounts are the result of competition among finished product manufacturers
that seek to pass through price reduction in their products to component manufacturers such as TDK.
In addition, as well as seeking to secure a greater competitive advantage through pricing, these
consumer electronics manufacturers (that are customers of TDK) may pursue strategies such as
differentiating products by adding new functions to existing products. Such strategies may tend to
force consumer electronics manufacturing companies to compete by launching new products, resulting
in shorter product lifecycles and a greater risk of price declines.
TDKs electronic materials and components products, that are used mainly in digital home
appliances, mobile phones and other consumer electronics as well as in automotive electronics, are
directly exposed to the effects of these forms of competition among manufacturers using its
components. The pricing strategy of a company such as TDK is a key element in determining the
share of electronic components it supplies to finished product manufacturers. As a consequence,
there is constant downward pressure on prices of TDKs products. No change is foreseen in
discounting pressure from customers in the coming years.
The electronic components business thus requires the constant execution of initiatives to
mitigate the effect of these pricing pressures. Components suppliers such as TDK may be required
to reduce their costs in order to decrease their product prices. An effective response to such
conditions may also require TDK to establish a position as a components manufacturer that can
supply key components when customers launch new products. New product development activities are
important to a company such as TDK in positioning itself to be able to supply key components.
Price declines are thus inevitable in the electronic components business, but it is possible
to reduce or absorb the effects of lower prices by implementing the above measures appropriately,
when required. We believe that these actions are an inherently vital element that will ultimately
determine the competitiveness of an electronic components business.
- 42 -
On August 1, 2007, pursuant to a definitive agreement between TDK and Imation Corp.
(Imation) dated April 19, 2007, TDK transferred substantially all of the assets relating to TDK
branded world wide recording media business and use of the TDK brand name for current and future
recording media products to Imation. TDK entered into this transaction to strengthen and grow its
recording media products sales business by partnering with Imation. TDK retained its research and
development, manufacturing and OEM recording media operations to improve competitiveness of the
recoding media operations.
Under the terms of the agreement, TDK has transferred all the shares of its six subsidiaries and
certain assets and liabilities relating to the recording media business of its three subsidiaries
to Imation. The transaction was closed on August 1, 2007. The total consideration included
Imation common stock constituting 16.6 percent (6,826 thousands shares) of Imations common stock
and cash. TDK recognized ¥15,340 million ($153,400 thousand) on the consolidated statements of
income as Gain on sale of business to Imation Corp. for the year ended March 31, 2008, which
includes the excess of the target working capital amount under the contractual provision. TDK may
receive additional cash of up to $70 million contingent on future financial performance compared to
targeted gross margin for three years until December 2010.
TDK recorded the investment at fair value as of the acquisition date.
As a result of the transaction, TDK became the largest shareholder in Imation and obtained the
right to nominate a representative to serve on Imations Board of Directors. TDKs ownership stake
in Imation shall not exceed 22 percent on a fully diluted basis pursuant to the Investor Rights
Agreement, and TDK agreed to a three-year lock-up on sales of the Imation shares acquired in this
transaction.
On December 5, 2007, TDK acquired an additional 2.4 percent (915 thousands shares) of
Imations outstanding common stock for ¥2,207 million ($22,070 thousand) in a series of open market
transactions. In addition, Imation repurchased its own stock between August 1, 2007 and December
5, 2007, which resulted in a further increase in TDKs interest in Imation by 1.1 percent.
As a result of the transactions described above, TDKs ownership in Imation increased from
16.6 percent to 20.1 percent. Accordingly, TDK changed its accounting for the investment in
Imation to the equity-method of accounting and has retroactively reflected the change in accounting
to the initial acquisition date.
The preliminary allocation of the purchase price included acquired intangible assets,
including trademarks, customer relationships and non-competition agreements. The trademarks,
customer relationships and non-competition agreements are being amortized over respective useful
lives. The excess of the purchase price over the fair value allocated to the net assets, including
intangible assets, is investor level goodwill in the amount of $32 million.
On September 26, 2007, TDK reached an agreement with Alps Electric Co., Ltd. (Alps)
regarding a transfer of Alps manufacturing and other equipment and intellectual property rights
such as patents and unpatended technologies with respect to its HDD head business for an aggregate
of ¥34,429 million ($344,290 thousand).
The purpose of this acquisition is to improve the efficiency of TDKs operation and offer
enhanced technologies in its HDD head business, thereby strengthening the international
competitiveness.
The acquisition of the equipment and intangible assets was recorded based on the relative fair
value of each asset. The total acquisition cost was allocated to the equipment and intangible
assets in the amount of ¥7,184 million ($71,840 thousand) and ¥27,143 million ($271,430 thousand),
respectively.
Amortization periods for the acquired intangible assets range from 7 to 14 years.
- 43 -
On November 7, 2007 (acquisition date), TDK acquired 1,549,551 thousand shares, or 74.3
percent of the outstanding shares (inclusive of the option noted below), of Thailand-based
Magnecomp Precision Technology Public Company Limited (MPT) from Magnecomp International Limited
presently known as InnoTek Limited (InnoTek), a Singapore-based company, for total purchase
price, including direct cost, of ¥14,962 million ($149,620 thousand). MPT became a subsidiary of
TDK as a result of the acquisition.
TDK holds an option to purchase from InnoTek and InnoTek holds an option to put to TDK 208,486
thousand shares in 18 months from the acquisition date. The option was considered to be a part of
the purchase consideration and was included in the total purchase price, all of which was paid in
cash, with the exception of $16,500 thousand which will be paid upon settlement of the option.
In December 2007, TDK acquired an additional 513,963 thousand shares in MPT by a tender offer.
TDK also purchased an additional 1,164 thousand shares in a series of open market transactions.
The total purchase price to acquire these additional shares was ¥5,902 million ($59,020 thousand).
As a result of these transactions, TDKs interest in MPT has increased to 99.0 percent by
March 31, 2008.
MPT has technological strengths and expertise in the design and manufacture of suspension
assemblies, a key component of HDD magnetic heads. TDK believes the acquisition of MPT will help
TDK to strengthen the competitiveness of its HDD magnetic heads business.
TDK has included the results of operations of MPT and its subsidiaries in its consolidated
financial statements since the acquisition date.
The purchase price has been allocated based on the fair value of the net assets acquired,
including identifiable intangible assets and liabilities assumed, at the date of acquisition. The
excess of the purchase price over the net of amounts assigned to the fair value of the tangible and
identifiable intangible assets acquired and the liabilities assumed is recorded as goodwill.
As a result of the preliminary purchase price allocation, TDK recognized goodwill of ¥10,143
million ($101,430 thousand) and intangible assets, primarily consisting of unpatented technologies
with a weighted average useful life of approximately 3.5 years, of ¥3,240 million ($32,400
thousand). Goodwill is not deductible for tax purposes.
On November 15, 2007, TDK acquired an additional 37.5 percent of the issued and outstanding
common shares of DENSEI-LAMBDA K.K. (DENSEI-LAMBDA) by a tender offer. TDK had initially
acquired 58.7 percent of the outstanding shares on October 1, 2005, and DENSEI-LAMBDA has been a
consolidated subsidiary of TDK since the initial acquisition. TDK purchased 8,111 thousands shares
for approximately ¥14,525 million in total by the tender offer increasing TDKs interest in
DENSEI-LAMBDA to 96.3 percent.
DENSEI-LAMBDA engages mainly in the power supply business including the manufacture and sale
of switching power supplies and uninterruptible power supplies. The recent market environment in
connection with the power supply business and the electronic materials and components businesses is
growing and expanding not only within the existing field of industrial equipment but also into new
fields, such as automobile and digital home appliances. In order to pursue the business growth
under such environment, TDK completed the tender offer to turn DENSEI-LAMBDA into a wholly owned
subsidiary.
On February 29, 2008, TDK purchased an additional 775 thousands of common shares subject to
class-wide call (3.7 percent of issued and outstanding common stock) for ¥1,330 million in total.
As a result of this transaction, DENSEI-LAMBDA became a wholly owned subsidiary of TDK.
As a result of the preliminary purchase price allocation, the purchase price has been
allocated based on the fair value of the net assets acquired, including identifiable intangible
assets and liabilities assumed, at the date of acquisition. The excess of the purchase price over
the net of amounts assigned to the fair value of the tangible and identifiable intangible assets
acquired and the liabilities assumed are recorded as goodwill. Goodwill is not deductible for tax
purposes.
- 44 -
The acquired intangible assets which are being amortized have a weighted average useful life
of approximately 12 years. The intangible assets include customer relationships of ¥1,485 million
(15-year weighted average useful life), technologies of ¥743 million (12-year weighted average
useful life), and other intangible assets of ¥361 million (2-year weighted average useful life).
The acquired intangible assets which are not being amortized include trademarks of ¥1,403 million.
Goodwill recorded with respect to the above step-acquisitions was ¥3,074 million.
- 45 -
Critical accounting policies
Critical accounting policies are those that require application of managements most
difficult, subjective or complex judgments, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain and may change in subsequent periods.
The following is not intended to be a comprehensive list of all of TDKs accounting policies.
TDKs significant accounting policies are more fully described in Note 1 to the Consolidated
Financial Statements. In many cases, the accounting treatment of a particular transaction is
specifically dictated by U.S. generally accepted accounting principles, with no need for
managements judgment in their application. There are also areas in which managements judgment in
selecting an available alternative would not produce a materially different result.
TDK has identified the following as critical accounting policies: impairment of long-lived
assets, valuation of inventories, purchase accounting, goodwill and other intangible assets,
pension benefit costs, and deferred tax assets.
Impairment of long-lived assets
As of March 31, 2008 and 2007, the aggregate of TDKs property, plant and equipment and
amortized intangible assets was ¥326.2 billion ($3,262 million) and ¥274.7 billion, which accounted
for 34.9 percent and 27.8 percent of the total assets, respectively. TDK believes that impairment
of long-lived assets are critical to TDKs financial statements because the recoverability of the
amounts or lack thereof, could significantly affect its results of operations.
TDKs long-lived assets and certain identifiable intangibles are reviewed for impairment when
events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. This review is performed using estimates of future cash flows. If the carrying
amount of the asset is considered to be impaired, an impairment charge is recorded for the amount
by which the carrying value of an asset exceeds its fair value. Management believes that the
estimates of future cash flows and fair values are reasonable; however, changes in estimates
resulting in lower future cash flows and fair value due to unforeseen changes in business
assumptions could negatively affect the valuation of those long-lived assets and significantly
affect TDKs financial position and results of operations. TDK makes investments with due
prudence, taking sufficiently into consideration the future profitability of products and the
recoverability of investments.
Valuation of inventories
Inventories are stated at the lower of cost or market, with cost determined on the average
cost method. The carrying value of inventory is reduced for estimated obsolescence by the
difference between its cost and the estimated market value based upon assumptions about future
demand. TDK evaluates the inventory carrying value for potential excess and obsolete inventory
exposures by analyzing historical and anticipated demand. In addition, known and anticipated
engineering change orders are evaluated against on-hand quantities for their potential obsolescence
affects. As fluctuations in estimates, which become a standard in recognizing adjustments in the
carrying values of inventory for expected obsolescence, are influential to business results of TDK,
we conclude it as a critical accounting policy. If actual demand were to be substantially lower
than estimated, additional inventory adjustments for excess or obsolete inventory may be required,
which could have a material adverse effect on TDKs business, financial condition and results of
operations.
Regarding the appropriateness of estimates in the past, TDK does not use a method based on
various scenarios, but a method to reconsider every quarter by comparing estimate and actual
results. For example, in the operation management of product sector with rapid development in
technological innovation such as the recording devices sector, TDK revises the estimates of
valuation of obsolete inventories arising from the timely response to customers demands for
high-efficiency products on a quarterly basis.
- 46 -
Purchase Accounting
We account for acquired businesses using the purchase method of accounting which requires that
the assets acquired and liabilities assumed be recorded at the date of acquisition at their
respective fair values. The judgments made in determining the estimated fair value assigned to
each class of assets acquired, as well as asset lives, can materially impact net income of the
periods subsequent to the acquisition through depreciation and amortization, and in certain
instances by impairment charges, if the asset becomes impaired in the future.
In determining the estimated fair value for intangible assets, we typically utilize the income
approach, which employs discounting of the projected future net cash flow using an appropriate
discount rate that reflects the risk factors associated with the cash flow streams.
Determining the useful life of an intangible asset also requires judgment as different types
of intangible assets will have different useful lives and certain assets may even be considered to
have indefinite useful lives. Intangible assets determined to have an indefinite useful life have
been reassessed periodically based on the factors prescribed in SFAS No. 142 including, but not
limited to, the expected use of the asset by us, legal or contractual provisions that may affect
the useful life or renewal or extension of the assets contractual life without substantial cost,
and the effects of demand, competition and other economic factors.
Goodwill and other intangible assets
Goodwill and other intangible assets that are determined to have an indefinite useful life are
not amortized and are tested for impairment on an annual basis and between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair value of these
assets below their carrying amount. Fair value for these assets is determined using a discounted
cash flow analysis, which is based on an authorized business plan. Management believes that the
estimates of future cash flows and fair value are reasonable; however, changes in estimates
resulting in lower future cash flows and fair value due to unforeseen changes in business
assumptions could negatively affect the valuations.
Pension benefit costs
Employee pension benefit costs and obligations are dependent on assumptions used by actuaries
in calculating such amounts. These assumptions include discount rates, retirement rates and
mortality rates which are based upon current statistical data, as well as salary growth, long-term
return on plan assets and other factors. Actual results that differ from the assumptions are
accumulated and amortized over future periods and, therefore, generally affect TDKs recognized
expense and recorded obligation in future periods. While TDK believes that its assumptions used
are appropriate, differences in actual experience or changes in assumptions may affect TDKs
benefit obligations and future expense.
In preparing its financial statements for fiscal 2008, TDK established a discount rate of 2.2
percent in domestic plans and 5.1 percent overseas plans, and an expected long-term rate of return
of 3.5 percent on domestic plan assets and 6.1 percent on overseas plan assets. In estimating the
discount rate, TDK uses available information about rates of return on long-term corporate bonds
currently available and expected to be available during the period to the maturity of the pension
benefits. TDK established the expected long-term rate of return on plan assets based on
managements expectations in respect of the long-term returns of the various plan asset categories
in which it invests. Management developed expectations with respect to each plan asset category
based on actual historical returns and its current expectations for future returns.
A decrease in the discount rate leads to an increase in actuarial pension benefit obligations
that could lead to an increase in net periodic pension cost through amortization of unrecognized
actuarial gain or losses. A 50 basis point decrease in the discount rate would increase the
projected benefit obligation by approximately 9 percent.
An increase in the expected return on plan assets may decrease net periodic pension cost in
the current year. For fiscal 2008, a 50 basis point decrease in the long-term rate of return on
plan assets would increase net benefit cost by approximately ¥0.9 billion.
- 47 -
However, the difference between the expected return and the actual return on those assets could negatively
affect net income in future years.
Deferred tax assets
TDK has significant deferred tax assets, which are subject to realizability assessment. In
assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the
planned reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax assets are
deductible, management believes that it is more likely than not that all of the deferred tax assets
less valuation allowance, will be realized. However, in the event future projections for income
are not realized or are realized in lesser amounts, or in cases where management revises the
assessment of the potential for realization of deferred tax assets based on other factors, deferred
tax assets may be determined not to be realizable, which then would require TDK to increase a
valuation allowance against the deferred tax assets resulting in additional income tax expenses.
- 48 -
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|
New accounting pronouncements
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|
|
|
New Accounting Standards
|
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (SFAS
157), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective
for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff
Positions No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification
or Measurement under Statement 13 and No. FAS 157-2, Effective Date of FASB Statement No. 157,
which partially delay the effective date of SFAS 157 for one year for certain nonfinancial assets
and liabilities and remove certain leasing transactions from its scope. TDK does not expect the
adoption of SFAS 157 to have a material effect on TDKs consolidated financial position and results
of operations.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158 (SFAS
158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an
amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS 158 requires TDK to measure the
fair value of plan assets and benefit obligations as of the date of its fiscal year-end. The
measurement date provision will be effective for TDKs fiscal year ending March 31, 2009. TDK
currently uses a December 31 measurement date, and is evaluating the effect of changing measurement
date on TDKs consolidated financial position and results of operations.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS
159), The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment
of Statement of Financial Accounting Standards No. 115. SFAS 159 provides companies with an
option to report selected financial assets and liabilities at fair value. Unrealized gains and
losses on items for which the fair value option has been elected will be recognized in earnings.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. TDK does not expect the
adoption of SFAS 159 to have a material effect on TDKs consolidated financial position and results
of operations.
In December 2007, the United States Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 110 (SAB 110). SAB 110 amends the SECs views discussed in Staff
Accounting Bulletin No. 107 (SAB 107) regarding the use of the simplified method in developing
estimates of the expected lives of share options in accordance with SFAS 123(R). TDK will continue
to use the simplified method until TDK has the historical data necessary to provide reasonable
estimates of expected lives in accordance with SAB 107, as amended by SAB 110.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised
2007) (SFAS 141(R)), Business Combinations. SFAS 141(R) establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS 141(R) also establishes disclosure requirements to enable the
evaluation of the nature and financial effects of the business combination. SFAS 141(R) is
effective for fiscal years beginning on or after December 15, 2008. TDK is currently evaluating
the effect that the adoption of SFAS 141(R) will have on TDKs consolidated financial position and
results of operations.
- 49 -
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (SFAS
160), Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51.
SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries
held by parties other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parents ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS
160 also establishes disclosure requirements that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for
fiscal years beginning on or after December 15, 2008. TDK is currently evaluating the effect that
the adoption of SFAS 160 will have on TDKs consolidated financial position and results of
operations.
|
E.
|
|
Off-Balance Sheet Arrangements
|
As part of its ongoing business, TDK does not conduct transactions with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which have been established for the purpose of facilitating off-balance
sheet arrangements or other limited purposes.
|
F.
|
|
Tabular Disclosure of Contractual Obligations
|
On March 31, 2008, commitments outstanding for the purchase of property, plant and equipment
approximated ¥32.9 billion ($329 million). TDK has entered into several purchase agreements with
certain suppliers whereby TDK is committed to purchase a minimum amount of raw materials to be used
in the manufacture of its products. Future minimum purchases remaining under the agreements
approximated ¥7.2 billion ($72 million) at March 31, 2008. Contingent liabilities for guarantees
of loans of TDKs employees and affiliates amounted to approximately ¥4.8 billion ($48 million) at
March 31, 2008.
Contractual obligations on March 31, 2008 are summarized as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period (Yen in millions)
|
|
|
|
|
|
|
Less than
|
|
1 to 3
|
|
3 to 5
|
|
After 5
|
|
|
Total
|
|
1 year
|
|
years
|
|
years
|
|
years
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
¥
|
446
|
|
|
|
294
|
|
|
|
130
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
19,001
|
|
|
|
4,965
|
|
|
|
6,156
|
|
|
|
3,179
|
|
|
|
4,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to
defined benefit plans
|
|
|
4,423
|
|
|
|
4,423
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase commitment
of raw materials
|
|
|
7,189
|
|
|
|
5,805
|
|
|
|
1,384
|
|
|
|
|
|
|
|
|
|
Purchase commitment
of property, plant
and equipment
|
|
|
32,855
|
|
|
|
32,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
63,914
|
|
|
|
48,342
|
|
|
|
7,670
|
|
|
|
3,201
|
|
|
|
4,701
|
|
|
|
|
|
Note:
|
|
|
|
The table does not include provisions for uncertain tax positions and related accrued interest
and penalties, as the specific timing of future payments related to these obligations cannot
be projected with reasonable certainty. See Note 8, Income Taxes in the Notes to Consolidated
Financial Statements for further details.
|
- 50 -
The foregoing discussion contains forward-looking statements, including projections, plans,
policies, management strategies, targets, schedules, understandings and evaluations, about TDK
Corporation (TDK) and its group companies (TDK and its group companies are referred to also as
TDK where the context so requires). These forward-looking statements are based on the current
forecasts, estimates, assumptions, plans, beliefs and evaluations of TDK in light of information
currently available to it, and contain known and unknown risks, uncertainties and other factors.
TDK therefore wishes to caution readers that, being subject to risks, uncertainties and other
factors, TDKs actual results, performance, achievements or financial position could be materially
different from any future results, performance, achievements or financial position expressed or
implied by these forward-looking statements, and TDK undertakes no obligations to publicly update
or revise any forward-looking statements after the issue of this material except as provided for in
laws and ordinances.
The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks,
uncertainties and other factors that can have significant effects on TDK include, but are not
limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange
rates, and changes in economic environments, conditions of competition, laws and regulations.
- 51 -
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Item 6
.
|
|
Directors, Senior Management and Employees
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|
A.
|
|
Directors and senior management
|
Directors, corporate officers and company auditors of TDK as of June 27, 2008 and their
respective business experience are listed below.
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Name (Date of birth)
|
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Position, responsibility and brief personal record
|
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|
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|
|
Hajime Sawabe
|
|
Representative Director, Chairperson and CEO since June 2006
|
(Jan. 9, 1942)
|
|
|
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Director of TDK since June 1996
|
|
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|
|
Appointed Representative Director, President, and CEO in June 1998
|
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Takehiro Kamigama
|
|
Representative Director, President and COO since June 2006
|
(Jan. 12, 1958)
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|
|
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|
Appointed General Manager of TDK Data Storage Components Business Group in October 2001
|
|
|
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|
Corporate Officer of TDK since June 2002
|
|
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|
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|
|
Appointed Senior Vice President of TDK in June 2003
|
|
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Appointed General Manager of TDK Data Storage and Thin Film Technology Components Business Group in June 2003
|
|
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Appointed Director, Executive Vice President of TDK in June 2004
|
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Seiji Enami
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Director, Executive Vice President and CFO since June 2008
|
(Sep. 14, 1947)
|
|
In charge of TDK General Manager of Administration Group and Environment
|
|
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Appointed General Manager of TDK Recording Media and Systems Business Group Industrial Sales Department in
April 2000
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Appointed General Manager of TDK Finance and Accounting Department in April 2001
|
|
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CFO of TDK since June 2004
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|
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|
Director of TDK since June 2005
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|
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Appointed Senior Vice President of TDK in June 2007
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|
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|
|
General Manager of TDK Administration Group and Environment since June 2008
|
|
|
|
|
|
|
|
Shinji Yoko
|
|
Director, Senior Vice President since June 2002
|
(Jan. 2, 1948)
|
|
In charge of TDK General Manager of Electronic Components Sales and Marketing Group
|
|
|
|
|
|
|
Director of TDK since June 1998
|
|
|
|
|
|
|
Appointed Deputy General Manager of TDK Electronic Components Business Group, General Manager of High
Frequency Devices Division in April 2000
|
|
|
|
|
|
|
General Manager of TDK Electronic Components Sales and Marketing Group since June 2002
|
- 52 -
|
|
|
|
|
|
|
Name (Date of birth)
|
|
Position, responsibility and brief personal record
|
|
|
|
|
|
|
|
Yasuhiro Hagihara
|
|
Director (outside) since June 2002
|
(Oct. 19, 1937)
|
|
|
|
|
|
Admitted to the bar in Washington D.C., U.S.A. in April 1971
|
|
|
|
|
|
|
Elected Partner of Graham & James L.L.P. in January 1979
|
|
|
|
|
|
|
Partner of Squire, Sanders & Dempsey L.L.P. since July 2000
|
|
|
|
|
|
|
Gaikokuhou Jimu Bengoshi at Squire Sanders Gaikokuhou Kyodo Jigyo Horitsu Jimusho since August 2001
|
|
|
|
|
|
|
Keio University, Department of Law adjunct professor since April 2002
|
|
|
|
|
|
|
|
Minoru Takahashi
|
|
Director, Senior Vice President since June 2007
|
(Feb. 12, 1948)
|
|
In charge of General Manager of TDK Technology Group, General Manager of Materials & Process Development
Center and Technology, Intellectual Properties
|
|
|
|
|
|
|
Appointed General Manager of TDK Sensors and Actuators Business Division, General Manager of Business
Promotions Department in April 2002
|
|
|
|
|
|
|
Appointed Corporate Officer of TDK in June 2003
|
|
|
|
|
|
|
Appointed General Manager of TDK Sensors and Actuators Business Group in October 2003
|
|
|
|
|
|
|
Appointed General Manager of TDK Technology Group, General Manager of Devices Development Center and
Technology, Intellectual Properties in April 2005
|
|
|
|
|
|
|
Senior Vice President of TDK since June 2006
|
|
|
|
|
|
|
General Manager of TDK Technology Group, General Manager of Materials & Process Development Center and
Technology, Intellectual Properties since April 2007
|
|
|
|
|
|
|
|
Kenichi Mori
|
|
Director (outside) since June 2008
|
(Sep. 28, 1938)
|
|
|
|
|
|
Entered into Toshiba Corporation, Research and Development Center in April 1962
|
|
|
|
|
|
|
Appointed Director of Toshiba Corporation, General Manager of Information Equipment Group in June 1994
|
|
|
|
|
|
|
Appointed Executive Director of the same company in June 1996
|
|
|
|
|
|
|
Appointed Executive Director of Toshiba Tec Corporation in June 1998
|
|
|
|
|
|
|
Appointed President of the same company in June 1999
|
|
|
|
|
|
|
Professor at Tokyo University of Science MOT Graduate School since April 2004
|
|
|
|
|
|
|
Program Director at the Japan Science and Technology Agency, a semi governmental organization since April 2004
|
- 53 -
|
|
|
|
|
|
|
Name (Date of birth)
|
|
Position, responsibility and brief personal record
|
|
|
|
|
|
|
|
Takeshi Nomura
|
|
Corporate Officer, Senior Vice President since June 2002
|
(Mar. 8, 1952)
|
|
In charge of General Manager of Ferrite and Magnet Products Business Group
|
|
|
|
|
|
|
Appointed Director of TDK in June 1998
|
|
|
|
|
|
|
Appointed General Manager of TDK Materials Research Center, General Manager of Intellectual Properties Center
in July 2002
|
|
|
|
|
|
|
Appointed General Manager of TDK Materials Research Center, General Manager of Intellectual Properties
Center, General Manager of Information Technology Research Center and Technology in July 2003
|
|
|
|
|
|
|
Appointed General Manager of TDK Technology Group, General Manager of Intellectual Properties Center and
Technology in January 2004
|
|
|
|
|
|
|
Appointed General Manager of TDK Technology Group, General Manager of TDK Intellectual Properties Center,
General Manager of TDK Devices Development Center and Technology in July 2004
|
|
|
|
|
|
|
General Manager of TDK Ferrite and Magnet Products Business Group since April 2005
|
|
|
|
|
|
|
|
Takaya Ishigaki
|
|
Corporate Officer, Senior Vice President since June 2005
|
(Apr. 10, 1953)
|
|
In charge of General Manager of Capacitors Business Group
|
|
|
|
|
|
|
Appointed Deputy General Manager of TDK Circuit Devices Business Group, Capacitor Group Senior Manager,
General Manager of Multilayer Ceramics Manufacturing Department in October 2001
|
|
|
|
|
|
|
Appointed Corporate Officer of TDK in June 2003
|
|
|
|
|
|
|
Appointed General Manager of TDK Circuit Devices Business Group, Capacitor Group Senior Manager in April 2005
|
|
|
|
|
|
|
General Manager of TDK Capacitors Business Group since April 2007
|
|
|
|
|
|
|
|
Raymond Leung
|
|
Corporate Officer, Senior Vice President since June 2007
|
(Apr. 18, 1956)
|
|
In charge of General Manager of China Operation Group, Chairman of SAE Magnetics (H.K.) Ltd.
|
|
|
|
|
|
|
Appointed President of SAE Magnetics (H.K.) Ltd. in October 2000
|
|
|
|
|
|
|
Appointed Deputy General Manager of TDK Data Storage and Thin Film Technology Components Business Group in
June 2004
|
|
|
|
|
|
|
Appointed TDK Corporate Officer in June 2004
|
|
|
|
|
|
|
Appointed Vice Chairman of SAE Magnetics (H.K.) Ltd. in April 2005
|
|
|
|
|
|
|
General Manager of TDK China Operation Group since April 2005
|
|
|
|
|
|
|
Chairman of SAE Magnetics (H.K.) Ltd. since July 2006
|
- 54 -
|
|
|
|
|
|
|
Name (Date of birth)
|
|
Position, responsibility and brief personal record
|
|
|
|
|
|
|
|
Shiro Nomi
|
|
Corporate Officer, Senior Vice President since June 2007
|
(May 8, 1949)
|
|
In charge of General Manager of Corporate Strategy Group and Corporate Planning Department
|
|
|
|
|
|
|
Appointed General Manager of TDK Corporate Planning Department in July 2000
|
|
|
|
|
|
|
Appointed General Manager of TDK Corporate Strategy Corporate Planning Department in October 2001
|
|
|
|
|
|
|
Appointed TDK Corporate Officer in June 2005
|
|
|
|
|
|
|
Appointed General Manager of TDK Corporate Strategy Management Review & Support Department in April 2006
|
|
|
|
|
|
|
General Manager of TDK Corporate Strategy Group and Corporate Planning Department since June 2008
|
|
|
|
|
|
|
|
Shinichi Araya
|
|
Corporate Officer, Senior Vice President since June 2007
|
(Mar. 7, 1952)
|
|
In charge of General Manager of Magnetics Business Group
|
|
|
|
|
|
|
Appointed General Manager of TDK Mechatronics Division in January 1999
|
|
|
|
|
|
|
Appointed General Manager of TDK Mechatronics Division, General Manager of Production Engineering Development
Department in April 2000
|
|
|
|
|
|
|
Appointed Deputy General Manager of TDK Production Engineering Development Center in April 2001
|
|
|
|
|
|
|
Appointed General Manager of TDK Production Engineering Development Department in October 2001
|
|
|
|
|
|
|
Appointed Deputy General Manager of TDK Circuit Devices Business Group, Inductor Group Senior Manager in
April 2002
|
|
|
|
|
|
|
Appointed TDK Corporate Officer in June 2005
|
|
|
|
|
|
|
General Manager of TDK Magnetics Business Group since April 2007
|
|
|
|
|
|
|
|
Takeo Suzuki
|
|
Corporate Officer, Senior Vice President since April 2008
|
(Mar. 12, 1944)
|
|
In charge of General Manager of Power Systems Business Group
|
|
|
|
|
|
|
Appointed Senior Vice President of Kenwood Corporation in June 1996
|
|
|
|
|
|
|
Representative Director, President of Densei-Lambda K.K. since February 2000
|
|
|
|
|
|
|
General Manager of Power Systems Business Group since April 2008
|
|
|
|
|
|
|
|
Kenichiro Fujihara
|
|
Corporate Officer since June 2007
|
(Jul. 23, 1949)
|
|
In charge of Deputy General Manager of Electronic Components Sales & Marketing Group
|
|
|
|
|
|
|
Appointed General Manager of TDK Electronic Components Sales & Marketing Group Sales Division 1 in April 2003
|
|
|
|
|
|
|
Deputy General Manager of TDK Electronic Components Sales & Marketing Group since April 2006
|
- 55 -
|
|
|
|
|
|
|
Name (Date of birth)
|
|
Position, responsibility and brief personal record
|
|
|
|
|
|
|
|
Shinya Yoshihara
|
|
Corporate Officer since June 2007
|
(May 31, 1955)
|
|
In charge of General Manager of Technology Group Production Engineering Development Center
|
|
|
|
|
|
|
Appointed General Manager of TDK Technology Group Production Engineering Development Department in April 2002
|
|
|
|
|
|
|
General Manager of TDK Technology Group Production Engineering Development Center since January 2004
|
|
|
|
|
|
|
|
Atsuo Kobayashi
|
|
Corporate Officer since June 2008
|
(Jan. 7, 1960)
|
|
In charge of General Manager of Data Storage & Thin Film Technology Components Business Group
|
|
|
|
|
|
|
Appointed Deputy General Manager of Data Storage & Thin Film Technology Components Business Group, HDD Heads
Business Division Japan Operation Leader in July 2006
|
|
|
|
|
|
|
General Manager of Data Storage & Thin Film Technology Components Business Group since April 2007
|
|
|
|
|
|
|
|
Junji Yoneyama
|
|
Corporate Officer since June 2008
|
(Mar. 16, 1955)
|
|
In charge of General Manager of TDK Human Resources Department
|
|
|
|
|
|
|
Appointed President of TDK Philippines Corporation in January 2002
|
|
|
|
|
|
|
Appointed General Manager of Ichikawa Technical Center General Affairs Department, Narita General Affairs
Department in June 2003
|
|
|
|
|
|
|
Appointed Vice President of TDK Taiwan Corporation in July 2004
|
|
|
|
|
|
|
Appointed President of TDK Taiwan Corporation in April 2005
|
|
|
|
|
|
|
General Manager of TDK Human Resources Department since October 2006
|
- 56 -
|
|
|
Name (Date of birth)
|
|
Position, responsibility and brief personal record
|
|
|
|
Noboru Hara
(Dec. 24, 1949)
|
|
Full-time Company Auditor since June 2007
Appointed General Manager of TDK Administration Group General Affairs Department in
October 2001
|
|
|
|
Masaaki Miyoshi
(Sep. 3, 1947)
|
|
Full-time Company Auditor since June 2003
Appointed
President of Korea TDK Co., Ltd. in July 2000
|
|
|
|
Kaoru Matsumoto
(Dec. 8, 1947)
|
|
Company Auditor (outside) since June 2003
Registration
as a Certified Public Accountant in March 1976
Establishment of Kaoru Matsumoto & Co. since November 1977
|
|
|
|
Ryoichi Ohno
(Nov. 3, 1958)
|
|
Company Auditor (outside) since June 2004
Appointed Senior Vice President and Chief Financial Officer
of The Gibraltar Life Insurance Co., Ltd. in September 2001
Appointed Finance Vice President of Prudential Financial
Inc. in September 2001
Appointed Executive Vice President and Chief Financial
Officer of The Gibraltar Life Insurance Co., Ltd. in July
2005
Director of Prudential Life Insurance Co., Ltd. since July
2006
Prudential Financial Inc., Japan Representative Office
Regional CFO-Japan (USGAAP Reporting) since February 2007
|
|
|
|
Yukio Yanase
(Jun. 15, 1944)
|
|
Company Auditor (outside) since June 2007
Appointed Deputy President of ORIX Corporation in February
2005
Appointed Director and Deputy President of ORIX Corporation
in June 2005
Director and Representative Executive Officer and President
of ORIX Corporation since January 2008
|
All Directors and Company Auditors are elected by the general meeting of shareholders. The
term of office of Directors is one year. The current term of all Directors expires in June 2009.
The term of office of Company Auditors is four years. The current terms for Mr. Hara, Mr.
Miyoshi, Mr. Matsumoto, Mr. Ohno and Mr. Yanase expire in June 2011.
There are no family relationships between any Director or Corporate Officer or Company
Auditor and any other Director or Corporate Officer or Company Auditor of TDK.
- 57 -
(1)
|
|
The aggregate direct remuneration, including bonuses but excluding retirement allowances,
paid by TDK during the years ended March 31, 2008 and 2007 to all Directors and Company
Auditors of TDK who served during each of those years was approximately ¥315 million ($3,150
thousand) and ¥285 million ($2,850 thousand), respectively. During fiscal 2008, TDKs
Directors and Corporate Officers as of June 27, 2008 received 71 and 70 stock acquisition
rights as stock options, respectively. Each right represents an option to purchase 100 shares
of common stock of TDK. Further details regarding the grants are listed below. For a
discussion of other material terms of the issuance of these stock acquisitions rights, please
see Item 6.E. Share ownership. TDK does not disclose individual remuneration for each
Director and Company Auditor and aggregate direct remuneration for Corporate Officers except
for compensation in the form of stock acquisition rights, because such disclosure is not
required under Japanese law. Company Auditors do not receive stock acquisition rights.
|
|
|
|
|
|
|
|
|
|
|
|
Number of stock
|
|
|
|
|
acquisition rights
|
|
|
|
|
granted individually
|
Name
|
|
Position
|
|
during fiscal 2008
|
Directors
|
|
|
|
|
|
|
Hajime Sawabe
|
|
Representative Director,
Chairperson and CEO
|
|
|
20
|
|
Takehiro Kamigama
|
|
Representative Director,
President and COO
|
|
|
20
|
|
Seiji Enami
|
|
Director, Executive Vice
President and CFO
|
|
|
10
|
|
Shinji Yoko
|
|
Director, Senior Vice President
|
|
|
10
|
|
Yasuhiro Hagihara
|
|
Director (outside)
|
|
|
1
|
|
Minoru Takahashi
|
|
Director, Senior Vice President
|
|
|
10
|
|
Kenichi Mori
|
|
Director (outside)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
|
|
|
|
|
|
|
|
|
Corporate Officers
|
|
|
|
|
|
|
Takeshi Nomura
|
|
Corporate Officer, Senior Vice President
|
|
|
9
|
|
Takaya Ishigaki
|
|
Corporate Officer, Senior Vice President
|
|
|
9
|
|
Raymond Leung
|
|
Corporate Officer, Senior Vice President
|
|
|
10
|
|
Shiro Nomi
|
|
Corporate Officer, Senior Vice President
|
|
|
9
|
|
Shinichi Araya
|
|
Corporate Officer, Senior Vice President
|
|
|
9
|
|
Takeo Suzuki
|
|
Corporate Officer, Senior Vice President
|
|
|
|
Kenichiro Fujihara
|
|
Corporate Officer
|
|
|
4
|
|
Shinya Yoshihara
|
|
Corporate Officer
|
|
|
4
|
|
Atsuo Kobayashi
|
|
Corporate Officer
|
|
|
8
|
|
Junji Yoneyama
|
|
Corporate Officer
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
|
|
- 58 -
(2)
|
|
TDK stopped providing for retirement allowances for directors from the day after TDKs Board of
Directors passed a resolution on June 27, 2002 abolishing the directors retirement allowance
system. Consequently, current directors remuneration other than outside directors comprises
monthly remuneration, a results-linked bonus and stock options for a stock-linked compensation
plan, and does not include retirement allowances. Outside Directors remuneration comprises
monthly remuneration. Directors retirement allowances reserved through June 27, 2002 will be
paid to applicable directors when they retire upon approval by TDKs General Meeting of
Shareholders. The retirement allowance system for TDKs company auditors was abolished by a
resolution of the Board of Company Auditors on March 22, 2007. Accordingly, TDK stopped
providing reserves for retirement allowances for company auditors from the day after the
111
th
Ordinary General Meeting of Shareholders held on June 28, 2007. Consequently,
current company auditors remuneration comprises only monthly remuneration stipulated by TDKs
internal regulations, and does not include retirement allowances. Company auditors retirement
allowances reserved through June 28, 2007, will be paid to applicable company auditors when they
retire upon approval by TDKs General Meeting of Shareholders. The total amount of company
auditors retirement allowances provided for as of March 31, 2008 and 2007 was approximately ¥2
million ($20,000) and approximately ¥14 million ($140,000), respectively.
|
TDK has a stock option plan for Directors, Corporate Officers and all other employees. See
Item 6.E. Share ownership.
TDKs Articles of Incorporation provide for a Board of Directors of not more than ten members.
Directors are elected at the general meeting of shareholders for a term of office of one year and
may serve any number of consecutive terms. The Board of Directors has the ultimate responsibility
for the administration of the affairs of TDK.
The Board of Directors may appoint from among the Directors referred to above one or more
Representative Directors. Each of the Representative Directors has the authority to represent TDK
generally in the conduct of its affairs.
TDK introduced a Corporate Officer system in June 2002 to improve management efficiency and
expedite decision making. Corporate Officers are elected at the meeting of the Board of Directors
held immediately after the ordinary general meeting of shareholders, for a term of one year, but
may serve any number of terms upon appointment of the Board of Directors each time following the
expiration of the term. The Board of Directors may elect from among Corporate Officers,
Chairperson, President, Senior Executive Vice President, Executive Vice President and Senior Vice
President. Each of the Corporate Officers has the authority individually to operate businesses of
which he/she is in charge, under the control of the Board of Directors.
The Company Auditors of TDK, who are elected at the general meeting of shareholders and whose
number must not exceed five, are not required to be certified public accountants. One or more
Standing Company Auditors is required to be elected from among the Company Auditors. Each Company
Auditor has the statutory duty to audit the financial statements and business reports to be
submitted by the Representative Director to the ordinary general meeting of shareholders and also
to audit the administration by the Directors. Each of the Company Auditors is required to attend
and, if necessary, express his or her opinion at meetings of the Board of Directors, but is not
entitled to vote. TDK established a Board of Company Auditors (at least half of which must be from
outside TDK) and the term of each Company Auditor is four years.
- 59 -
In addition to the Company Auditors, TDK is required to appoint an accounting auditor which is
required to be a certified public accountant or an auditing firm. The primary duty of an
accounting auditor is to audit the financial statements proposed to be submitted by the
Representative Director to the ordinary general meetings of shareholders for approval thereof, and
to report their opinion to the Board of Company Auditors if they have detected any misconduct or
material facts which are in violation of laws and regulations or the Articles of Incorporation in
connection with the execution of the duties of the directors.
See Item 6.A. Directors and senior management for more information on board practices.
- 60 -
Significant differences in corporate governance practices between TDK and U.S. listed
companies on the New York Stock Exchange
1.
|
|
Directors Independence
|
Under the Companies Act of Japan (the Companies Act), which became effective on May 1, 2006,
TDK is a Company with Board of Company Auditors, meaning a company which has the board of company
auditors (
kansayaku-kai
). The Companies Act allows a company to choose to be a Company with
Committees, meaning a company that has a nominating committee, audit committee, compensation
committee, and one or more executive officers, without having company auditors. However, TDK has
not chosen to be a Company with Committees.
Under the New York Stock Exchange Corporate Governance Rules (the Rules), listed companies
must have a majority of independent directors. By contrast, while the Companies Act requires
Companies with a Board of Directors, meaning a company which has established or is required to
establish a board of the directors, to have a minimum of three directors, it does not require that
a company with a Board of Company Auditors to have outside directors. An outside director is
defined as a director of any stock company who is neither an executive director nor an executive
officer, nor an employee, including a manager, of such stock company or any of its subsidiaries,
and who has neither ever served in the past as an executive director nor executive officer, nor as
an employee, including a manager, of such stock company or any of its subsidiaries.
TDK is in compliance with the Companies Act and has seven directors. In addition, although
TDK is not required to have outside directors by law, it has voluntarily elected two outside
directors (Yasuhiro Hagihara and Kenichi Mori).
2.
|
|
Definition of Independent Director
|
The meaning of outside director under the Companies Act is not exactly the same as the
meaning of independent director provided under the Rules.
Under the Rules, no director qualifies as independent unless the board of directors
affirmatively determines that the director has no material relationship with the listed company,
either directly or as a partner, shareholder, or officer of an organization that has a relationship
with the company. Companies must identify which directors are independent and disclose the basis
for that determination. In addition, a director is not independent if:
|
|
|
The director is, or has been within the last three years, an employee of the listed
company, or an immediate family member is, or has been within the last three years, an
executive officer, of the listed company.
|
|
|
|
|
The director has received, or has an immediate family member who has received, during
any twelve-month period within the last three years, more than $100,000 in direct
compensation from the listed company, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided such compensation is not
contingent in any way on continued service).
|
|
|
|
|
The director or an immediate family member is a current partner of a firm that is the
companys internal or external auditor; the director is a current employee of such a firm;
the director has an immediate family member who is a current employee of such a firm and
who participates in the firms audit, assurance or tax compliance (but not tax planning)
practice; or the director or an immediate family member was within the
|
- 61 -
|
|
|
last three years (but is no longer) a partner or employee of such a firm and personally
worked on the listed companys audit within that time.
|
|
|
|
The director or an immediate family member is, or has been within the last three years,
employed as an executive officer of another company where any of the listed companys
present executive officers at the same time serves or served on that companys compensation
committee.
|
|
|
|
|
The director is a current employee, or an immediate family member is a current executive
officer, of a company that has made payments to, or received payments from, the listed
company for property or services in an amount which, in any of the last three fiscal years,
exceeds the greater of $1 million, or 2 % of such other companys consolidated gross
revenues.
|
By contrast, the Companies Act provides that an outside director is a director of any stock
company who is neither an executive director nor an executive officer, nor an employee, including a
manager, of such stock company or any of its subsidiaries, and who has neither ever served in the
past as an executive director nor executive officer, nor as an employee, including a manager, of
such stock company or any of its subsidiaries.
Messrs. Yasuhiro Hagihara and Kenichi Mori are outside directors within the meaning of the
Companies Act.
TDK, a Company with Board of Company Auditors within the meaning of the Companies Act, is
required to have at least three company auditors. At least half of such company auditors must be
outside auditors.
The Companies Act provides that an outside company auditor is a auditor of any stock
company who has neither ever served in the past as a director, accounting advisor (
kaikei sanyo
) or
executive officer, nor as an employee, including a manager, of such stock company or any of its
subsidiaries. On the other hand, the Rules provide that all audit committee members satisfy the
requirements for director independence.
Of the five TDK Company Auditors, three Mr. Kaoru Matsumoto, Mr. Ryoichi Ohno, and Mr.
Yukio Yanase are outside company auditors within the meaning of the Companies Act.
4.
|
|
Regularly Scheduled Sessions without Management
|
Japanese law does not require that TDK hold regular meetings without management as required in
the Rules. Since TDK is a Company with Board of Company Auditors, each of its Company Auditors and
the Board of Directors audit/monitor the management, and such auditing/monitoring by the Company
Auditors and the Board of Directors functions as TDKs system of monitoring management.
5.
|
|
Nominating / Corporate Governance Committee
|
Whereas under the Rules, listed companies must have a nominating/corporate governance
committee composed entirely of independent directors, under Japanese law, TDK, as a Company with
Board of Company Auditors, is not required to establish a nominating committee. Thus, TDK
currently does not have a nominating committee.
- 62 -
The Directors and Company Auditors of TDK must be appointed at a shareholders meeting in
accordance with the Companies Act. The Companies Act requires directors of a Company with Board of
Company Auditors to obtain the consent of the board of company auditors if the directors desire to
submit to a shareholders meeting a proposal concerning the appointment of a company auditor.
Also, the board of company auditors may demand that the directors include the appointment of a
company auditor in the agenda of a shareholders meeting or that the directors submit a proposal
concerning the appointment of a company auditor who is recommended by the board of company
auditors. In order to dismiss a company auditor, any such dismissal must be by special resolution
of a general shareholders meeting.
6.
|
|
Compensation Committee
|
Under the Rules, listed companies must have a compensation committee composed entirely of
independent directors. On the other hand, Japanese law does not require TDK, a Company with Board
of Company Auditors, to set up a compensation committee. TDK has, however, voluntarily established
a compensation advisory committee (the CAC). The CAC is responsible for (i) investigating
compensation levels for directors and executive officers, (ii) reviewing compensation systems,
performance evaluation standards, and the method of calculating compensation, and (iii) making
proposals for compensation level for certain individuals. The CAC is authorized to make and submit
proposals to the Board of Directors.
The CAC has four members: two outside directors (Yasuhiro Hagihara and Kenichi Mori), one
non-outside director (Seiji Enami) and an outside expert on compensation.
In the case of TDK, a Company with Board of Company Auditors, the Companies Act and the
Articles of Incorporation require the following matters with respect to the amount of compensation
for the Directors to be determined by the resolution of a shareholders meeting:
|
(1)
|
|
With respect to any item of compensation in a definitive amount, such amount;
|
|
|
(2)
|
|
With respect to any item of compensation not in a definitive amount, a concrete
method for the calculation thereof; and
|
|
|
(3)
|
|
With respect to non-monetary items as compensation, the specific contents
thereof.
|
Japanese law does not require TDK, a Company with Board of Company Auditors, to set up an
audit committee, and TDK therefore has not established an audit committee. TDK, however, has
established the board of company auditors pursuant to the Companies Act (consisting of five Company
Auditors including three outside Company Auditors) and this exempts TDK from Rule 10A-3 of the
Securities Exchange Act of 1934, as amended, requiring companies to have an audit committee. This
exemption is specifically provided by Rule 10A-3(c)(3) of the Securities Exchange Act of 1934, as
amended, and applies to TDK because TDK meets all of the following elements that are enumerated:
|
(i)
|
|
TDK has a Board of Company Auditors (
kansayaku-kai
) established and selected
pursuant to the Companies Act;
|
|
|
(ii)
|
|
The Companies Act requires the board of company auditors to be separate from
the board of directors;
|
- 63 -
|
(iii)
|
|
Under the Companies Act, the company auditors are not elected by management,
but by the shareholders at a shareholders meeting. In addition, no executive officer
of TDK is a member of the Board of Company Auditors;
|
|
|
(iv)
|
|
The Companies Act prohibits a company auditor from serving as a director,
manager, or other employee of the company or any of its subsidiaries, or as an
accounting advisor (
kaikei sanyo
) or executive officer of any subsidiary of the
company. The Companies Act requires a Company with Board of Company Auditors to have
at least half of the company auditors thereof be outside auditors as such term is
defined in the Companies Act. As such, the Companies Act provides for the standards
for independence of the Board of Company Auditors from the management of TDK;
|
|
|
(v)
|
|
The Companies Act provides that an accounting auditor (
kaikei kansanin
) must be
appointed at a shareholders meeting. However, it also provides that in order to
submit a proposal concerning an appointment of an accounting auditor to a shareholders
meeting, the directors must obtain the consent of the board of company auditors and
that the board of company auditors may demand that the directors include the
appointment of an accounting auditor in the agenda of a shareholders meeting. In
addition, the Companies Act provides that the board of company auditors may dismiss an
accounting auditor for causes such as breach of his or her duties that are enumerated
in the Companies Act. Further, pursuant to the Companies Act and Company Accounting
Regulations thereunder, the board of company auditors audit the financial statements
separately from an audit by the accounting auditor, and if the board of company
auditors believes that the manner or result of an audit by the accounting auditors is
not reasonable, it must indicate its objections and the reasons therefor in the audit
report. To this end, a company auditor may, if necessary for the performance of
his/her duties, request the accounting auditor to provide a report thereon. As such,
in accordance with the Companies Act, the Board of Company Auditors of TDK is
responsible, to the extent permitted by law, for the appointment, retention, and
supervision of the work of a registered public accounting firm engaged for the purpose
of preparing or issuing an audit report or performing other audit, review or attest
services for TDK; and
|
|
|
(vi)
|
|
Under Japanese law, the establishment of the procedures for the receipt,
retention, and treatment of complaints and their confidential, anonymous submission by
employees is a responsibility of the board of directors, not the company auditors or
the board of company auditors, and thus, the Board of Directors of TDK has established
such procedures. Each Company Auditor of TDK may, however, investigate the status of
such procedures at any time and state his/her opinion at a meeting of the Board of
Directors if he/she considers it necessary. In addition, each Company Auditor of TDK
has the authority to engage independent counsel and other advisers if such engagement
is necessary to carry out his/her duties. Furthermore, each Company Auditor may
require TDK to pay any and all expenses necessary for carrying out his/her duties,
including compensation of any advisers employed by him/her and ordinary administrative
expenses.
|
- 64 -
8.
|
|
Corporate Governance Guidelines
|
Under the Rules, listed companies must adopt and disclose corporate governance guidelines. On
the other hand, Japanese law does not require TDK to either adopt or disclose corporate governance
guidelines, and thus TDK has not established such guidelines. However, TDK has disclosed The
Status Concerning Corporate Governance in its Japanese Annual Securities Report in accordance with
the Financial Instruments and Exchange Law of Japan and regulations thereunder. Furthermore,
pursuant to the Regulations Concerning Listing of Securities issued by the Tokyo Stock Exchange,
TDK has delivered to the Tokyo Stock Exchange a report titled Report Concerning Corporate
Governance. Additionally, because the Companies Act requires that Large Companies (a company
with paid in capital of Five Hundred Million Japanese Yen (¥500,000,000) or more or debt of Twenty
Billion Japanese Yen (¥20,000,000,000) or more) determine whether or not to establish internal
control systems to ensure that the performance by directors of their duties comply with applicable
laws and regulations and the articles of incorporation of such Large Company and the internal
control systems provided under the Regulations Concerning Enforcement of the Companies Act to
ensure the integrity of the business activities of a company (collectively referred to as the
Internal Control System), the Board of Directors of TDK has passed resolutions to adopt the
detailed content of TDKs corporate governance system.
9.
|
|
Code of Business Conduct and Ethics
|
Listed companies must adopt and disclose a code of business conduct and ethics for directors,
officers and employees, and promptly disclose any waivers of the code for directors or executive
officers under the Rules. By contrast, although Japanese law does not require TDK to adopt or
disclose a code of business conduct and ethics, TDK has voluntarily adopted and disclosed one. See
Item 16B. Code of Ethics. Furthermore, TDK has incorporated such code of business conduct and
ethics into the Internal Control System indicated in the preceding paragraph.
- 65 -
The following table lists the number of TDK full-time employees as of March 31, 2008, 2007 and
2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
Japan
|
|
Overseas
|
|
Total
|
Electronic materials and components
|
|
|
7,904
|
|
|
|
49,324
|
|
|
|
57,228
|
|
Recording media
|
|
|
628
|
|
|
|
413
|
|
|
|
1,041
|
|
Corporate
|
|
|
1,851
|
|
|
|
92
|
|
|
|
1,943
|
|
|
Total
|
|
|
10,383
|
|
|
|
49,829
|
|
|
|
60,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
Japan
|
|
Overseas
|
|
Total
|
Electronic materials and components
|
|
|
7,724
|
|
|
|
40,520
|
|
|
|
48,244
|
|
Recording media
|
|
|
881
|
|
|
|
802
|
|
|
|
1,683
|
|
Corporate
|
|
|
1,644
|
|
|
|
43
|
|
|
|
1,687
|
|
|
Total
|
|
|
10,249
|
|
|
|
41,365
|
|
|
|
51,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2006
|
|
Japan
|
|
Overseas
|
|
Total
|
Electronic materials and components
|
|
|
7,697
|
|
|
|
42,419
|
|
|
|
50,116
|
|
Recording media
|
|
|
993
|
|
|
|
1,258
|
|
|
|
2,251
|
|
Corporate
|
|
|
1,516
|
|
|
|
40
|
|
|
|
1,556
|
|
|
Total
|
|
|
10,206
|
|
|
|
43,717
|
|
|
|
53,923
|
|
TDK has not experienced any strikes or significant labor disputes involving labor unions
during the period described above.
Approximately 77% of full-time employees of TDK are members of the TDK Labor Union, which is
affiliated with a multi-industry union, Japanese Association of Metal, Machinery and Manufacturing
Workers (JAM). About 45% of the full-time employees of TDK and its domestic subsidiaries are
members of unions affiliated with JAM.
As is customary in Japan, TDK negotiates with the TDK Labor Union for annual wage increases,
and twice a year for bonuses. TDK also renews the terms and conditions of labor contracts, other
than those relating to wage and bonuses, every year.
- 66 -
The following table lists the number of shares of common stock (which exclude shares
underlying stock acquisition rights) and shares of common stock underlying stock acquisition rights
owned by the Directors, Corporate Officers and Company Auditors of TDK as of June 27, 2008. The
total number of shares of common stock held is 27,400, and the total number of shares of common
stock underlying acquisition rights held is 163,000, as shown below, and these numbers constituted
an aggregate of 0.1% of all outstanding shares of common stock as of such date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
shares of
|
|
|
|
|
Number of
|
|
common stock
|
|
|
|
|
shares of
|
|
underlying
|
|
|
|
|
common
|
|
stock acquisi-
|
Name
|
|
Position
|
|
stock
|
|
tion rights
|
Hajime Sawabe
|
|
Representative Director, Chairperson and CEO
|
|
|
11,000
|
|
|
|
37,500
|
|
Takehiro Kamigama
|
|
Representative Director, President and COO
|
|
|
3,300
|
|
|
|
31,700
|
|
Seiji Enami
|
|
Director, Executive Vice President and CFO
|
|
|
1,100
|
|
|
|
4,400
|
|
Shinji Yoko
|
|
Director, Senior Vice President
|
|
|
3,000
|
|
|
|
22,900
|
|
Yasuhiro Hagihara
|
|
Director (outside)
|
|
|
1,000
|
|
|
|
2,700
|
|
Minoru Takahashi
|
|
Director, Senior Vice President
|
|
|
1,000
|
|
|
|
5,600
|
|
Kenichi Mori
|
|
Director (outside)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Takeshi Nomura
|
|
Corporate Officer, Senior Vice President
|
|
|
1,000
|
|
|
|
30,000
|
|
Takaya Ishigaki
|
|
Corporate Officer, Senior Vice President
|
|
|
|
|
|
|
7,500
|
|
Raymond Leung
|
|
Corporate Officer, Senior Vice President
|
|
|
3,600
|
|
|
|
2,000
|
|
Shiro Nomi
|
|
Corporate Officer, Senior Vice President
|
|
|
300
|
|
|
|
3,900
|
|
Shinichi Araya
|
|
Corporate Officer, Senior Vice President
|
|
|
|
|
|
|
2,400
|
|
Takeo Suzuki
|
|
Corporate Officer, Senior Vice President
|
|
|
|
|
|
|
|
Kenichiro Fujihara
|
|
Corporate Officer
|
|
|
100
|
|
|
|
1,700
|
|
Shinya Yoshihara
|
|
Corporate Officer
|
|
|
500
|
|
|
|
4,100
|
|
Atsuo Kobayashi
|
|
Corporate Officer
|
|
|
|
|
|
|
2,600
|
|
Junji Yoneyama
|
|
Corporate Officer
|
|
|
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Noboru Hara
|
|
Full-time Company Auditor
|
|
|
500
|
|
|
|
1,600
|
|
Masaaki Miyoshi
|
|
Full-time Company Auditor
|
|
|
1,000
|
|
|
|
|
|
Kaoru Matsumoto
|
|
Company Auditor (outside)
|
|
|
|
|
|
|
|
|
Ryoichi Ohno
|
|
Company Auditor (outside)
|
|
|
|
|
|
|
|
|
Yukio Yanase
|
|
Company Auditor (outside)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
27,400
|
|
|
|
163,000
|
|
- 67 -
Directors;
On May 28, 2008, TDKs Board of Directors passed a resolution to issue stock acquisition
rights as stock options for a stock-linked compensation plan (the Stock Acquisition Rights) to
Directors. This resolution was subject to approval of the election of directors at the Ordinary
General Meeting of Shareholders held on June 27, 2008. Upon resolution, the Board of Directors
determined the number of 139 Stock Acquisition Rights, each representing a stock option to purchase
100 shares of common stock of TDK, would be allotted to the 5 Directors on July 5, 2008. The Stock
Acquisition Rights are exercisable during the period from July 6, 2008 to July 5, 2028. The amount
to be paid by qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1 per
share of common stock.
Corporate Officers;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 27, 2008
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Corporate Officers, pursuant to Articles 236, 238 and 239 of
the Companies Act (
Kaisha-ho
). Upon approval, the Board of Directors adopted resolutions to issue
an aggregate of 107 Stock Acquisition Rights, each representing a stock option to purchase 100
shares of common stock of TDK, to the 8 Corporate Officers. The Stock Acquisition Rights are
exercisable during the period from July 6, 2008 to July 5, 2028. The amount to be paid by
qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1 per share of
common stock.
Key Employees of TDK and Directors and Key Employees of Subsidiaries;
TDK also obtained approval of the Ordinary General Meeting of Shareholders held on June 27,
2008 regarding the issuance of stock acquisition rights as stock options (the Stock Acquisition
Rights) to certain select senior executives, pursuant to Articles 236, 238 and 239 of the Companies
Act. Upon approval, the Board of Directors adopted resolutions to issue an up to 1,300 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of TDK,
to select key employees of TDK and Directors and key employees of subsidiaries.
Directors;
On May 15, 2007, TDKs Board of Directors passed a resolution to issue stock acquisition
rights as stock options for a stock-linked compensation plan (the Stock Acquisition Rights) to
Directors. This resolution was subject to approval of the election of directors at the Ordinary
General Meeting of Shareholders held on June 28, 2007. Upon resolution, the Board of Directors
determined the number of 86 Stock Acquisition Rights, each representing a stock option to purchase
100 shares of common stock of TDK, was allotted to the 7 Directors on July 7, 2007. The Stock
Acquisition Rights are exercisable during the period from July 8, 2007 to July 7, 2027. The amount
to be paid by qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1 per
share of common stock.
Corporate Officers;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 28, 2007
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Corporate Officers, pursuant to Articles 236, 238 and 239 of
the Companies Act (
Kaisha-ho
). Upon approval, the Board of Directors adopted resolutions to issue
an aggregate of 61 Stock Acquisition Rights, each representing a stock option to purchase 100
shares of common stock of TDK, to the 9 Corporate Officers. The Stock Acquisition Rights are
exercisable during the period from July 8, 2007 to July 7, 2027. The amount to be paid by
qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1 per share of
common stock.
- 68 -
Senior Executives, and Directors and Executives of Subsidiaries;
TDK also obtained approval of the Ordinary General Meeting of Shareholders held on June 28,
2007 regarding the issuance of stock acquisition rights as stock options (the Stock Acquisition
Rights) to certain select senior executives, pursuant to Articles 236, 238 and 239 of the Companies
Act. Upon approval, the Board of Directors adopted resolutions to issue an aggregate of 986 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of TDK,
to select senior executives of TDK, and the Directors and select senior executives of subsidiaries.
The Stock Acquisition Rights are exercisable during the period from July 1, 2009 to June 30, 2013.
The amount to be paid by qualified persons upon the exercise of each Stock Acquisition Rights is
set at ¥12,098 per share of common stock, which was calculated by a formula approved by
shareholders at the said annual shareholders meeting and is subject to an adjustment in certain
events, including but not limited to a stock split, stock dividend and issue of new shares at a
price less than the current market price of the shares of TDK. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of TDKs common stock on the
date of grant.
Directors;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2006
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Directors. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 108 Stock Acquisition Rights, each representing a stock option
to purchase 100 shares of common stock of TDK, to the 7 Directors. The Stock Acquisition Rights
are exercisable during the period from August 6, 2006 to August 5, 2026. The amount to be paid by
qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1 per share of
common stock.
Corporate Officers;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2006
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Corporate Officers, pursuant to Articles 236, 238 and 239 of
the Companies Act. Upon approval, the Board of Directors adopted resolutions to issue an aggregate
of 95 Stock Acquisition Rights, each representing a stock option to purchase 100 shares of common
stock of TDK, to the 10 Corporate Officers. The Stock Acquisition Rights are exercisable during
the period from August 6, 2006 to August 5, 2026. The amount to be paid by qualified persons upon
the exercise of each Stock Acquisition Rights is set at ¥1 per share of common stock.
Senior Executives, and Directors and Executives of Subsidiaries;
TDK also obtained approval of the Ordinary General Meeting of Shareholders held on June 29,
2006 regarding the issuance of stock acquisition rights as stock options (the Stock Acquisition
Rights) to select senior executives, pursuant to Articles 236, 238 and 239 of the Companies Act.
Upon approval, the Board of Directors adopted resolutions to issue an aggregate of 966 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of TDK,
to select senior executives of TDK, and the Directors and select senior executives of subsidiaries.
The Stock Acquisition Rights are exercisable during the period from August 1, 2008 to July 31,
2012. The amount to be paid by qualified persons upon the exercise of each Stock Acquisition
Rights is set at ¥9,072 per share of common stock, which was calculated by a formula approved by
shareholders at the said annual shareholders meeting and is subject to an adjustment in certain
events, including but not limited to a stock split, stock dividend and issue of new shares at a
price less than the current market price of the shares of TDK. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of TDKs common stock on the
date of grant.
- 69 -
Directors and Corporate Officers;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Board members and Corporate Officers, pursuant to Articles 280-20 and
280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 246 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 17 Directors and Corporate Officers of TDK. The Stock
Acquisition Rights issued on June 30, 2005 are fully vested on date of issuance and are exercisable
during the period from July 1, 2005 to June 30, 2025. The amount to be paid by qualified persons
upon the exercise of each Stock Acquisition Rights is set at ¥1 per share of common stock. Stock
option related compensation cost of ¥186 million had been recognized in fiscal 2006, representing
the amount attributed to service rendered during the current period of the amount by which the
market price of the underlying common stock exceeded the exercise price of stock options approved
for issuance at the Ordinary General Meeting of Shareholders held in June 2005.
Senior Executives, and Directors and Executives of Subsidiaries;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as stock options to select senior executives,
pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board
of Directors adopted resolutions to issue an aggregate of 906 Stock Acquisition Rights, each
representing an option to purchase 100 shares of common stock of TDK, to the then 172 select senior
executives of TDK, and the Directors and select senior executives of subsidiaries. The Stock
Acquisition Rights issued on August 11, 2005 are exercisable during the period from August 1, 2007
to July 31, 2011. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights is set at ¥8,134 per share of common stock, which was calculated by a formula
approved by shareholders at the said annual shareholders meeting and is subject to an adjustment in
certain events, including but not limited to a stock split, stock dividend and issue of new shares
at a price less than the current market price of the shares of TDK. The exercise price of each
Stock Acquisition Rights was equal to or greater than the fair market value of TDKs common stock
on the date of grant.
To cover these options and share-based compensation stock options issued on June 30, 2005, TDK
purchased on the Tokyo Stock Exchange (TSE) a total of 115,200 common shares with an aggregate
purchase price of ¥930 million from August 17, 2005 through August 22, 2005.
Directors, Corporate Officers and Senior Executives, and Directors and Executives of Subsidiaries;
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2004
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,343 Stock Acquisition Rights, each representing a stock
option to purchase 100 shares of common stock of TDK, to the then 187 Directors, Corporate Officers
and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights are exercisable during the period from August 1, 2006
to July 31, 2010. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights was set at ¥8,147 per share of common stock. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of TDKs common stock on the
date of grant. To cover these options TDK purchased on the TSE a total of 234,300 common shares
with an aggregate purchase price of ¥1,656 million from August 9, 2004 through August 16, 2004.
- 70 -
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 27, 2003
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,547 Stock Acquisition Rights, each representing a stock
option to purchase 100 shares of common stock of TDK, to the then 179 Directors, Corporate Officers
and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights issued on August 7, 2003 are exercisable during the
period from August 1, 2005 to July 31, 2009. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights was set at ¥6,954 per share of common stock. The
exercise price of each Stock Acquisition Rights was equal to or greater than the fair market value
of TDKs common stock on the date of grant. To cover these options TDK purchased on the TSE a
total of 260,000 common shares with an aggregate purchase price of ¥1,847 million from August 8,
2003 through August 18, 2003.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 27, 2002
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code, as amended. Upon approval, the Board of Directors
adopted resolutions to issue an aggregate of 2,236 Stock Acquisition Rights, each representing a
stock option to purchase 100 shares of common stock of TDK, to the then 197 Directors, Corporate
Officers and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights issued on August 9, 2002 are exercisable during the
period from August 1, 2004 to July 31, 2008. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights was set at ¥5,909 per share of common stock. The
exercise price of each Stock Acquisition Rights was equal to or greater than the fair market value
of TDKs common stock on the date of grant. To cover these options TDK purchased on the TSE a
total of 223,600 common shares with an aggregate purchase price of ¥1,209 million from August 12,
2002 through August 19, 2002.
The Ordinary General Meeting of Shareholders held on June 28, 2001 approved the implementation
of TDKs stock option plan for Directors and certain employees of TDK, and the purchase of TDKs
own shares for transfer to them under the plan, pursuant to Article 210-2 of Japanese Commercial
Code. Stock options were provided to the then 196 Directors on the Board, associate directors and
officials in amounts ranging from 500 to 10,000 common shares each, at an exercise price of ¥6,114
per share. The exercise price of each Stock Acquisition Right was equal to or greater than the
fair market value of TDKs common stock on the date of grant. To cover these options TDK purchased
on the TSE a total of 158,000 common shares with an aggregate purchase price of ¥917 million from
July 2, 2001 through July 23, 2001.
Employees
(excluding Directors and Corporate Officers) Shareholding Association
As of March 31, 2008, the number of members of the TDK Employees Shareholding Association
totaled 1,460. The Employees Shareholding Association accepts new memberships in March and
September of every year. Members are entitled to purchase shares of TDK, the maximum amount being
¥50,000 worth of TDK shares a month. In addition, members receive a monthly subsidy from TDK
equivalent to 5% of the purchase price of shares. The subsidy amounted to ¥17 million ($170
thousand) for fiscal 2008. The total amount of TDK shares having voting rights owned by the TDK
Employees Shareholding Association was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of class
|
|
Identity of person or group
|
|
|
Amount owned
|
|
|
Percent of class
|
Common stock
|
|
TDK Employees Shareholding Association
|
|
458,654 shares
|
|
|
0.36%
|
- 71 -
|
|
|
Item 7
.
|
|
Major Shareholders and Related Party Transactions
|
The table below lists the number of TDK shares held by holders of 5% or more of TDK shares and
their percentage ownership as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Shares owned
|
|
|
Name of major shareholder
|
|
(in thousands)
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Japan Trustee Services Bank, Ltd. (Trust account)
|
|
|
13,157
|
|
|
|
10.15
|
%
|
|
|
|
|
|
|
|
|
|
The Master Trust Bank of Japan, Ltd. (Trust account)
|
|
|
12,532
|
|
|
|
9.67
|
%
|
Major shareholders do not have voting rights different from other shareholders, subject to the
limitation on exercise as set forth in Item 10. B. Memorandum and Articles of Association
Common Stock Voting rights.
At March 31, 2008, there were 2,215,660 registered ADRs outstanding and 256 registered
holders, of which 2,215,242 ADRs were held by 202 registered U.S. holders.
The Depositary of ADRs of TDK is Citibank N.A. of New York.
TDK is not, directly or indirectly, owned or controlled by another corporation or by any
foreign government.
|
B.
|
|
Related party transaction
|
Since the beginning of TDKs last full fiscal year, TDK has not transacted with, nor does TDK
currently plan to transact with, a related party, except for transactions among TDK and its
subsidiaries.
|
C.
|
|
Interests of experts and counsel
|
Not applicable.
- 72 -
|
|
|
Item 8
.
|
|
Financial Information
|
|
A.
|
|
Consolidated statements and other financial information
|
Consolidated financial statements
TDKs audited financial statements are included under Item 17 Financial Statements. Except
for TDKs financial statements included under Item 17, no other information in this annual report
has been audited by TDKs independent auditors.
See Item 17. Financial Statements and the Notes to the Consolidated Financial Statements.
Export sales
Finished goods and materials sent out of Japan are mainly bound for consolidated subsidiaries
of TDK, and are not, therefore, recorded as exports on a consolidated basis. For this reason, the
proportion of exports to total net sales is not significant. For detailed discussion, see Item
5.A. Operating Results Geographic Segment Information.
Legal proceedings
TDK is the subject of certain litigation matters related to its business, however, there are
no pending legal proceedings to which TDK or any of its subsidiaries is a party or of which any of
their property is the subject which would have a significant effect on TDKs financial position or
profitability.
Dividend policy
Returning earnings to shareholders is one of TDKs highest management priorities. Therefore,
TDKs fundamental policy is to give consideration to a consistent increase in dividends based on
factors such as the return on equity (ROE), dividends as a percentage of equity (DOE) and TDKs
results of operations on a consolidated basis.
Except for the disclosure made herein, no significant change has occurred since the date of
the annual consolidated financial statements.
- 73 -
|
|
|
Item 9
.
|
|
The Offer and Listing
|
|
A.
|
|
Offer and listing details
|
The primary market for TDKs shares of common stock (Common Stock) is the Tokyo Stock Exchange
(the TSE). The shares are traded on the First Section of that exchange. In addition, TDKs
shares are listed on the New York Stock Exchange in the form of American Depositary Receipts
(ADRs), and on the London Stock Exchange in the form of shares of TDK.
The following table sets forth for the periods indicated the reported high and low sales
prices of TDKs shares of common stock on the TSE (in yen) and the reported high and low bid prices
for American Depositary Shares of which each represents one share of common stock in U.S. dollars,
as reported by the New York Stock Exchange.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. market
|
|
|
|
Yen per share of
|
|
|
price per American
|
|
|
|
Common stock
(1)
|
|
|
Depositary Share
(2)
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Annual highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2004
|
|
|
8,350
|
|
|
|
3,810
|
|
|
|
77.86
|
|
|
|
32.40
|
|
Year ended March 31, 2005
|
|
|
8,630
|
|
|
|
6,790
|
|
|
|
80.10
|
|
|
|
61.40
|
|
Year ended March 31, 2006
|
|
|
10,230
|
|
|
|
7,250
|
|
|
|
85.40
|
|
|
|
62.50
|
|
Year ended March 31, 2007
|
|
|
10,360
|
|
|
|
7,990
|
|
|
|
89.00
|
|
|
|
69.89
|
|
Year ended March 31, 2008
|
|
|
11,990
|
|
|
|
5,790
|
|
|
|
99.25
|
|
|
|
57.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st quarter
|
|
|
10,000
|
|
|
|
7,990
|
|
|
|
89.00
|
|
|
|
69.89
|
|
2nd quarter
|
|
|
9,470
|
|
|
|
8,190
|
|
|
|
80.49
|
|
|
|
70.49
|
|
3rd quarter
|
|
|
9,920
|
|
|
|
8,520
|
|
|
|
83.04
|
|
|
|
73.55
|
|
4th quarter
|
|
|
10,360
|
|
|
|
9,120
|
|
|
|
87.96
|
|
|
|
77.76
|
|
Year ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st quarter
|
|
|
11,940
|
|
|
|
9,770
|
|
|
|
97.08
|
|
|
|
81.90
|
|
2nd quarter
|
|
|
11,990
|
|
|
|
8,720
|
|
|
|
99.25
|
|
|
|
74.25
|
|
3rd quarter
|
|
|
10,490
|
|
|
|
7,150
|
|
|
|
90.49
|
|
|
|
66.14
|
|
4th quarter
|
|
|
8,210
|
|
|
|
5,790
|
|
|
|
75.26
|
|
|
|
57.50
|
|
Year ending March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st quarter
|
|
|
7,410
|
|
|
|
5,670
|
|
|
|
70.17
|
|
|
|
59.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2008
|
|
|
8,210
|
|
|
|
6,820
|
|
|
|
75.26
|
|
|
|
63.50
|
|
March 2008
|
|
|
7,350
|
|
|
|
5,790
|
|
|
|
70.00
|
|
|
|
58.76
|
|
April 2008
|
|
|
7,150
|
|
|
|
5,670
|
|
|
|
68.96
|
|
|
|
59.40
|
|
May 2008
|
|
|
7,340
|
|
|
|
6,670
|
|
|
|
70.13
|
|
|
|
64.34
|
|
June 2008
|
|
|
7,410
|
|
|
|
6,330
|
|
|
|
70.17
|
|
|
|
59.85
|
|
July 2008
(through July 25)
|
|
|
6,710
|
|
|
|
6,100
|
|
|
|
62.30
|
|
|
|
57.80
|
|
|
|
|
Notes:
|
|
(1)
|
|
As reported by the Tokyo Stock Exchange.
|
|
(2)
|
|
As reported by the New York Stock Exchange.
|
Not applicable.
- 74 -
See Item 9.A. Offer and listing details.
Not applicable.
Not applicable.
Not applicable.
- 75 -
|
|
|
Item 10
.
|
|
Additional Information
|
Not applicable.
|
B.
|
|
Memorandum and articles of association
|
Organization
TDK is a stock company
(kabushiki kaisha
) that was originally incorporated in Japan under the
then effective Commercial Code
(Shoho)
of Japan (March 9, 1899, Law No. 48) (the Commercial Code)
and is now subject to the Companies Act (
Kaishaho
) of Japan (July 26, 2005, Law No. 86) (the
Companies Act). It is registered in the Commercial Register
(shogyo tokibo)
maintained by the
Tokyo Legal Affairs Bureau (Registration Number: 0199-01-034849).
Objects and purposes
Article 2 of the Articles of Incorporation of TDK provides that its purpose is to engage in
the following lines of business:
|
(1)
|
|
Manufacture and sale of electric machinery and appliances;
|
|
|
(2)
|
|
Manufacture and sale of magnetic materials such as ferrite and magnet;
|
|
|
(3)
|
|
Manufacture and sale of electronic machinery and appliances such as automatic
inserting machine for electronic components, automatic mounter for electronic
components, and electronic measuring equipment and of components thereof;
|
|
|
(4)
|
|
Manufacture and sale of recording media such as magnetic tape, floppy disk and
optical disk and of data writing, reading and storage equipment therefor;
|
|
|
(5)
|
|
Manufacture and sale of ceramic materials such as electricity inductive ceramics,
piezoelectric ceramics, semiconductor ceramics and electricity insulating ceramics;
|
|
|
(6)
|
|
Manufacture and sale of circuit components such as coils and transformers;
|
|
|
(7)
|
|
Manufacture and sale of semiconductor;
|
|
|
(8)
|
|
Manufacture and sale of stabilizing power supplies (units to stabilize electric
current or voltage);
|
|
|
(9)
|
|
Manufacture and sale of machinery and appliances for medical use and medical
instruments and of components thereof;
|
|
|
(10)
|
|
Manufacture and sale of single crystal materials and each product applying the
same;
|
|
|
(11)
|
|
Manufacture and sale of precious metals, precious stones, artificial precious
stones and each product applying or utilizing the same;
|
|
|
(12)
|
|
Manufacture and sale of outer wall materials of buildings and structures;
|
|
|
(13)
|
|
Designing and contracting of construction work;
|
|
|
(14)
|
|
Development, production, sale and grant of license of software;
|
- 76 -
|
(15)
|
|
Manufacture, sale and contracting of applied product, machinery and tools and
equipment of each of the foregoing; and
|
|
|
(16)
|
|
Any and all businesses incidental or relating to each of the foregoing.
|
Directors
With respect to directors, the Companies Act, TDKs Articles of Incorporation, bylaws and
associated internal rules issued pursuant to the Articles provide in summary as follows
:
|
(a)
|
|
a director is not entitled to vote on a proposal or arrangement or contract in
which the director has a special interest;
|
|
|
(b)
|
|
the remuneration and retirement allowances for directors are determined at a
general meeting of shareholders and within the upper limit approved at the shareholders
meeting, the Board of Directors will determine the amount of compensation for each
director, however, the Board of Directors may, by its resolution, leave such decision to
the discretion of the companys Representative Director;
|
|
|
(c)
|
|
the Board of Directors have authority to approve long-term borrowing of ¥10
billion or more by resolution passed at a duly convened meeting of the Board of
Directors. The Representative Director is authorized by the Board of Directors to make
final decisions with respect to long-term borrowings in an amount less than ¥10 billion
and short-term borrowings (including issuance of commercial paper);
|
|
|
(d)
|
|
there are no provisions requiring the mandatory retirement of directors at a
specified age; and
|
|
|
(e)
|
|
share ownership is not required in order to be eligible to serve as a director.
|
Common Stock
General
Set forth below is information relating to TDKs Common Stock, including brief summaries of
the relevant provisions of TDKs Articles of Incorporation and Share Handling Regulations, as
currently in effect, and of the Companies Act and related legislation.
In order to assert shareholders rights against TDK, a shareholder must have its name and
address register ed on TDKs shareholder registry, in accordance with TDKs Share Handling
Regulations. For this purpose, shareholders are required to file their names, addresses and seals
with TDKs administrator of shareholder registry. Non-resident shareholders are required to
appoint a standing proxy in Japan or provide a mailing address in Japan. Japanese securities firms
and commercial banks customarily act as standing proxy and provide related services for standard
fees.
- 77 -
A shareholder may choose, at its discretion, to participate in the storage transfer system for
share certificates under the Act on Custody and Transfer of Share Certificate, Etc. of Japan (May
15, 1984, Law No. 30). Each participating shareholder may deposit certificates representing all or
part of its shares to be included in this storage transfer system with Japan Securities Depository
Center, Inc (JASDEC). If a depositary is not a participating institution with JASDEC, a
shareholder must deposit his certificates with a participating institution, such as a securities
company or bank having a clearing account with JASDEC. All shares deposited with the JASDEC will
be registered in the name of JASDEC on TDKs shareholder registry. Each participating shareholder
will in turn be registered on TDKs beneficial shareholder registry and be treated in the same way
as shareholders registered on TDKs shareholder registry.
For the purpose of transferring shares deposited at a participating institution with JASDEC,
delivery of share certificates is not required. Entry of the share transfer in the books
maintained by JASDEC for participating institutions, or in the book maintained by a participating
institution for its customers, has the same effect as delivery of share certificates. The
registered beneficial owners may exercise the rights attached to the shares, such as votes, and
will receive dividends (if any) and notices to shareholders directly from TDK. In cases where a
shareholder holds certain shares as a registered shareholder and certain other shares as a
registered beneficial owner, the aggregate number of such shares is used in determining the rights
attached to the shares, such as votes, and receiving dividends (if any) and notices to shareholders
directly from TDK. Beneficial owners may at any time withdraw their shares from deposit and
receive share certificates.
A new law, Act on Transfer of Bonds and Shares, Etc. (June 9, 2004, Law No. 88), establishing
a new storage transfer system for shares of listed companies and eliminating the issuance and use
of share certificates was promulgated in June 2004 and the relevant part of the law will come into
effect within five years of the date of the promulgation (the effective date is yet to be
determined). On the effective date, a new central clearing system will commence its operation and
the shares of all Japanese companies listed on any Japanese stock exchange, including the shares of
Common Stock of TDK, will become mandatorily subject to the new central clearing system. On the
same day, all existing share certificates will become null and void, however; companies are not
required to withdraw those share certificates from shareholders. Thereafter, the transfer of such
shares will be effected through entry in the books maintained under the new central clearing
system.
The registered beneficial holder of deposited shares underlying the American Depositary Shares
(ADSs) is the Depositary for the ADSs. Accordingly, holders of ADSs will not be able to directly
assert shareholders rights against TDK.
Authorized capital
Article 6 of the Articles of Incorporation of TDK provides that the total number of shares
authorized to be issued by TDK is four hundred and eighty million (480,000,000) shares.
As of March 31, 2008, 129,590,659 shares of Common Stock without having any par value were
issued, including 634,923 shares that are held by TDK as treasury shares.
There is no concept of par value of shares of capital stock under the Companies Act of
Japan. Thus, all shares of capital stock of TDK have no par value.
- 78 -
Dividends
Under the Companies Act, distributions of cash or other assets by a stock company to its
shareholders (
i.e.
, dividends) are referred to as distributions of Surplus. (Surplus is
defined in Restriction on Distribution of Surplus herein below). TDK is permitted to make a
distribution of Surplus to the shareholders any number of times per business year, subject to
certain limitations described in Restriction on Distribution of Surplus. The Companies Act
requires distributions of surplus to be authorized by a resolution of a general meeting of
shareholders. Distribution may also be made pursuant to a resolution of the Board of Directors if
all of the requirements set forth below are satisfied:
|
(a)
|
|
TDKs Articles of Incorporation provide that the Board of Directors has the
authority to determine to make distributions of Surplus;
|
|
|
(b)
|
|
the normal term of office of TDKs directors terminates on or prior to the date
of conclusion of the ordinary general meeting of shareholders held for the last business
year ending within one year from the election of the directors; and
|
|
|
(c)
|
|
TDKs non-consolidated annual financial statements and certain documents for the
latest business year present fairly its assets and profit or loss, as required by the
Regulations of Company Accounting of Japan (February 7, 2006, the Ministry of Justice
Ordinance No. 13) (the Company Accounting Regulations).
|
Under the Articles of Incorporation of TDK, a year-end dividend may be distributed to
shareholders or pledgees appearing in the shareholder registry (including the beneficial owners who
deposited their shares with JASDEC as mentioned above) as of March 31 of each year pursuant to a
resolution of a general meeting of shareholders. An interim dividend may be distributed to
shareholders of record as of September 30 of each year pursuant to a resolution of the Board of
Directors. In addition, under the Companies Act, TDK may make further distributions of Surplus by
a resolution of a general meeting of shareholders. TDK is not obliged to pay any dividends that
are unclaimed for a period of three years after the date on which they first became payable.
Distributions of Surplus may be made in cash or in kind in proportion to the number of shares
held by each shareholder. A resolution of shareholders meeting must specify the kind and
aggregate book value of the assets to be distributed, the manner of allocation of such assets to
shareholders, and the effective date of the distribution. If a distribution of Surplus is to be
made in kind, TDK may, pursuant to a resolution passed at a shareholders meeting, grant a right to
its shareholders to require TDK to make such distribution in cash instead of in kind. If no such
right is granted to shareholders, the relevant distribution of Surplus must be approved by a
special resolution of a general meeting of shareholders.
In Japan, the ex-dividend date, the date that marks the point in time whereby a shareholder
who acquired TDK shares on and after such date does not have a right to receive the distribution
made, and record date for dividends precede the date of determination of the amount of the
dividend. The price of shares generally goes ex-dividend on the third business day prior to the
record date.
Restriction on Distributions of Surplus
When TDK makes a distribution of Surplus, it must, until the aggregate amount of its capital
reserves and retained earnings reserves reaches one-quarter of its stated capital, set aside in its
capital reserves and/or retained earnings reserves an amount equal to one-tenth of the amount of
Surplus so distributed pursuant to the Company Accounting Regulations.
- 79 -
The amount of Surplus at any given time must be calculated in accordance with the following
formula: A + B + C + D (E + F + G)
In the above formula, the alphabet from A to G is defined as follows:
A= the total amount of other capital surplus and other retained earnings, as each such amount
appears in TDKs non-consolidated balance sheet as of the end of the last business year;
B= (if TDK has disposed of its treasury stock after the end of the last business year) the amount
of the consideration for such treasury stock received by TDK less the book value thereof;
C= (if TDK has reduced its stated capital after the end of the last business year) the amount of
any such reduction less the portion thereof that has been transferred to capital reserves or
retained earnings reserves (if any);
D= (if TDK has reduced its capital reserves or retained earnings reserves after the end of the
last business year) the amount of any such reduction less the portion thereof that has been
transferred to stated capital (if any);
E= (if TDK has cancelled its treasury stock after the end of the last business year) the book
value of such treasury stock;
F= (if TDK has distributed Surplus to its shareholders after the end of the last business year)
the total book value of the Surplus so distributed;
G= certain other amounts set forth in the Company Accounting Regulations, including (if TDK has
reduced Surplus and increased its stated capital, capital reserves or retained earnings reserves
after the end of the last business year) the amount of such reduction and (if TDK has distributed
Surplus to the shareholders after the end of the last business year) the amount set aside in the
capital reserves or retained earnings reserves (if any) as required by the Company Accounting
Regulations.
The aggregate book value of Surplus distributed by TDK may not exceed a prescribed
distributable amount (the Distributable Amount), as calculated on the effective date of such
distribution. The Distributable Amount at any given time shall be equal to the amount of Surplus
less the aggregate of the following:
(a)
|
|
the book value of TDKs treasury stock;
|
|
(b)
|
|
the amount of consideration for the treasury stock disposed of by TDK after the end of the
last business year; and
|
|
(c)
|
|
certain other amounts set forth in the Company Accounting Regulations, including (if the sum
of one-half of goodwill and deferred assets (X) does not exceed the total of stated capital,
capital reserves, retained earnings reserves (Y) and other capital surplus, each such amount
being that appearing on the non-consolidated balance sheet as of the end of the last fiscal
year) X minus Y.
|
- 80 -
If TDK elects to be treated as a company with respect to which consolidated balance sheets
should also be taken into consideration in the calculation of the Distributable Amount (
renketsu
haito kisei tekiyo kaisha
), it will be required to further deduct from the amount of Surplus the
excess amount, if any of (x) the total amount of shareholders equity appearing on its
non-consolidated balance sheet as of the end of the last business year and certain other amounts
set forth in the Company Accounting Regulations over (y) the total amount of shareholders equity
and certain other amounts set forth in the Company Accounting Regulations appearing on its
consolidated balance sheet as of the end of the last business year.
If TDK has prepared interim financial statements as described below, and if such interim
financial statements have been approved (unless exempted by the Companies Act of Japan) by a
general meeting of shareholders and approved by the Board of Directors, the Distributable Amount
must be adjusted to take into account the amount of profit or loss, and the amount of consideration
for the treasury stock disposed of by TDK, during the period in respect of which such interim
financial statements have been prepared. TDK may prepare non-consolidated interim financial
statements consisting of a balance sheet as of any date subsequent to the end of the last business
year and an income statement for the period from the first day of the current business year to the
date of such balance sheet. All interim financial statements so prepared by TDK must be approved
by the Board of Directors and audited by its accounting auditor, as required by the Company
Accounting Regulations.
Share splits
Under the Companies Act, the Board of Directors of TDK may at any time make share splits by
its resolution. Generally, upon share splits, shareholders will not be required to exchange share
certificates held by them for new share certificates. In respect of shares deposited with JASDEC,
new shares resulting from the share split will automatically be deposited with JASDEC, and
shareholders who directly possess share certificates will receive additional certificates
representing the additional shares resulting from the share split. Before a share split, TDK must
give public notice of the share split, specifying the record date for the share split, not less
than two weeks prior to the record date.
Under the Companies Act, the Board of Directors of TDK may increase the authorized share
capital up to the number reflecting the rate of share splits and amend the Articles of
Incorporation of TDK without the approval of a shareholders meeting.
Consolidation of shares
TDK may at any time consolidate shares issued into a smaller number of shares by a special
resolution of a general meeting of shareholders. When a consolidation of shares is to be made, TDK
must give public notice and notice to each shareholder that, within a period of not less than one
month specified in the notice, share certificates must be submitted to TDK for exchange. Directors
of TDK must disclose the reason for the consolidation of shares at the general meeting of
shareholders.
General meeting of shareholders
The ordinary general meeting of shareholders of TDK for each fiscal year is normally held in
June in each year in Chuo-ku, Tokyo, Japan (address of principal executive office) or any adjacent
place thereto or in Ichikawa-shi, Chiba, Japan. In addition, TDK may hold an extraordinary general
meeting of shareholders whenever necessary by giving notice of convocation thereof at least two
weeks prior to the date set for the meeting.
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Notice of convocation of a shareholders meeting setting forth the place, time and purpose
thereof, must be mailed to each shareholder having votes (or, in the case of a non-resident
shareholder, to his or her standing proxy or mailing address in Japan) at least two weeks prior to
the date set for the meeting. Under the Companies Act, such notice may be given to shareholders by
electromagnetic method, subject to the consent by the relevant shareholders. The record date for
an ordinary general meeting of shareholders is March 31 of each year.
Any shareholder or group of shareholders holding at least 3 percent of the total number of
votes for a period of six months or more may require the convocation of a general meeting of
shareholders for a particular purpose. Unless such shareholders meeting is convened promptly or a
convocation notice of a meeting which is to be held not later than eight weeks from the day of such
demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene such
shareholders meeting.
Any shareholder or group of shareholders holding at least 300 votes or 1 percent of the total
number of votes for a period of six months or more may propose a matter to be considered at a
general meeting of shareholders by submitting a request to a Representative Director at least eight
weeks prior to the date set for such meeting.
Votes
Vote Per Unit: So long as TDK maintains the unit share system (see
Unit share system,
below
) a holder of shares constituting one or more whole units is entitled to one vote per unit of
shares subject to the limitations described herein.
Vote Required: Except as otherwise provided by law or by the Articles of Incorporation, a
resolution can be adopted at a general meeting of shareholders by a majority of the number of votes
of all the shareholders represented at the meeting.
Quorum: The Companies Act and TDKs Articles of Incorporation provide, however, that the
quorum for the election of Directors and Company Auditors and the dismissal of Directors shall not
be less than one-third of the total number of votes of the shareholders who can exercise votes.
Cumulative Voting: TDKs shareholders are not entitled to cumulative voting in the election
of Directors and Company Auditors.
Length of Director Term: TDK does not have a staggered Board of Directors; each TDK director
must stand for election annually.
Limitation: A company, partnership or other similar business enterprise that holds shares of
TDK stock may not exercise its votes with respect to such TDK shares if TDK and its subsidiaries,
either alone or together, hold shares or membership interests representing 25 percent or more of
the voting power of such shareholder or has any relationship with such shareholder as provided in
the Regulations for the Enforcement of the Companies Act of Japan (February 7, 2006, the Ministry
of Justice Ordinance No. 12) (the Enforcement Regulations) under which TDK may substantially
control the management of such shareholder.
Method of Voting: Shareholders may exercise their votes through proxies, provided that the
proxies are also shareholders holding votes. TDKs shareholders may cast their votes in writing.
Shareholders may also exercise their votes by electromagnetic method when TDK decides to permit
such method of exercising votes.
The votes of holders of ADSs are exercised by the depositary based on instructions from those
holders.
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Special Shareholders Resolutions: The Companies Act and TDKs Articles of Incorporation
provide that a quorum of one-third of the total votes of all the shareholders and the approval by
at least two-thirds of the votes of all the shareholders represented at the meeting (the special
shareholders resolutions) is required to approve company actions specifically provided in the
Companies Act and TDKs Articles of Incorporation, if applicable, such as:
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a reduction in amount of stated capital,
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amendment of the Articles of Incorporation (except amendments which the Board
of Directors are authorized to make under the Companies Act as described in
Share Splits and Unit Share Systems),
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establishment of a 100 percent parent-subsidiary relationship by way of share
exchange or share transfer,
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a dissolution, merger or consolidation,
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a company split,
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the transfer of the whole or an important part of the Companys business,
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the taking over of the whole of the business of any other corporation,
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any issuance of new shares at a particularly favorable price, stock
acquisition rights (
shinkabu yoyakuken
) with particularly favorable
conditions or bonds with stock acquisition rights (
shinkabu yoyakuken-tsuki
shasai
) with particularly favorable conditions to persons other than
shareholders,
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exemption of part of Directors or Company Auditors liabilities to the Company,
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distribution of Surplus in kind with respect to which shareholders are not
granted the right to require the Company to make such distribution in cash
instead of in kind,
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purchase of shares by the Company from a specific shareholder other than its
subsidiaries, and
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consolidation of shares.
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Subscription rights
Holders of TDKs shares of Common Stock have no pre-emptive rights under its Articles of
Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as
the Board of Directors determines, subject to the limitations as to the offering of new shares at a
particularly favorable price mentioned under
Votes
above. The Board of Directors may, however,
determine that shareholders shall be given subscription rights regarding a particular issue or
transfer of shares, in which case such rights must be given on uniform terms to all shareholders as
at a record date of which not less than two weeks prior public notice must be given. Such
subscription rights are nontransferable. However, a shareholder may be allotted stock acquisition
rights without consideration thereto, and transfer such rights.
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Stock acquisition rights
Subject to certain requirements, TDK may issue stock acquisition rights by a resolution of the
Board of Directors. Holders of stock acquisition rights may exercise their rights to acquire a
certain number of shares within the exercise period as prescribed in the terms of their stock
acquisition rights. Upon exercise of stock acquisition rights, TDK will be obliged to issue the
relevant number of new shares or alternatively to transfer the necessary number of existing shares
held by it (treasury stock).
Liquidation rights
In the event of a liquidation of TDK, the assets remaining after payment of all debts and
liquidation expenses and taxes will be distributed among shareholders in proportion to the
respective numbers of shares of common stock held.
Liability to Further Calls or Assessments
All of the Companys currently outstanding shares, including shares represented by the ADSs,
are fully paid and nonassessable.
Administrator of Shareholders Registry
The Chuo Mitsui Trust and Banking Company, Limited (CMTBC) is the administrator of
shareholders registry for TDKs shares. CMTBCs office is located at 33-1, Shiba 3-chome,
Minato-ku, Tokyo. CMTBC maintains TDKs shareholders registry and records transfers of record
ownership upon presentation of share certificates.
Record date
March 31 is the record date for TDKs year-end dividends. So long as TDK maintains in its
Articles of Incorporation a provision for the unit of shares, the shareholders and beneficial
shareholders who are registered as the holders of one unit of shares or more in TDKs shareholder
registry and/or beneficial shareholder registry at the end of each March 31 are also entitled to
exercise shareholders rights at the ordinary general meeting of shareholders with respect to the
business year ending on such March 31. September 30 is the record date for interim dividends. In
addition, TDK may set a record date for determining the shareholders and/or beneficial shareholders
entitled to other rights and for other purposes by giving at least two weeks prior public notice.
The price of shares generally goes ex-dividends or ex-rights on Japanese stock exchanges on
the third business day prior to a record date (or if the record date is not a business day, the
fourth business day prior thereto), for the purpose of dividends or rights offerings.
Acquisition of TDKs treasury shares
TDK may acquire its treasury shares (i) by way of purchase on any Japanese stock exchange on
which its shares are listed or by way of takeover bid (pursuant to a resolution of the Board of
Directors in accordance with the Articles of Incorporation of TDK), (ii) from a specific
shareholder other than a subsidiary (pursuant to a special resolution of a general meeting of
shareholders), or (iii) from a subsidiary (pursuant to a resolution of a meeting of the Board of
Directors).
- 84 -
When such acquisition is made by TDK from a specific party other than a subsidiary of TDK, any
other shareholder may make a demand to a Representative Director, more than five calendar days
prior to the relevant shareholders meeting, that TDK also purchase the shares held by such
shareholder. If, however, the purchase price for the TDK shares proposed to be acquired by TDK
does not exceed the then market price calculated by a method provided in the Enforcement
Regulations, then such shareholders do not have such a right.
Any such acquisition of TDKs shares must satisfy certain requirements, including that the
total amount of the purchase price may not exceed the amount of the Distributable Amount (See
Distribution of Surplus
above.).
Shares acquired by TDK may be held by it for any period or may be cancelled by resolution of
the Board of Directors. TDK may also transfer to any person the shares held by it, subject to a
resolution of the Board of Directors, and subject also to other requirements applicable to the
issuance of new shares including the limitation as to the offering of new shares at a particularly
favorable price mentioned in
Votes
above. TDK may also utilize its treasury shares for the
purpose of transfer to any person upon exercise of stock acquisition rights or for the purpose of
acquiring another company by merger, share exchange or company split through exchange of treasury
shares for shares or assets of the acquired company.
The Companies Act generally prohibits any subsidiary of TDK from acquiring shares of TDK.
Unit share system
Pursuant to the Articles of Incorporation of TDK, 100 shares of TDK constitute one unit.
Although the number of shares constituting a new unit is included in the Articles of Incorporation,
any amendment to the Articles of Incorporation reducing (but not increasing) the number of shares
constituting a unit or eliminating the provisions for the unit of shares may be made by the
resolution of the Board of Directors rather than by the special shareholders resolution, which is
otherwise required for amending the Articles of Incorporation. The number of shares constituting
one new unit, however, cannot exceed 1,000.
Votes under the unit share system: Under the unit share system, shareholders shall have one
vote for each unit of shares that they hold. Any number of shares less than a full unit will carry
no votes.
Share certificates for less than a unit: Unless TDKs Board of Directors adopts a resolution
to eliminate the provision for the unit shares from the Articles of Incorporation or the
shareholders amend the Articles of Incorporation by a special shareholders resolution to eliminate
the provision not to issue share certificates for less than a unit of shares, a share certificate
for any number of shares less than a unit will in general not be issued. As the transfer of shares
normally requires the delivery of the share certificates therefor, any fraction of a unit for which
no share certificates are issued is not transferable.
Repurchase or sale by TDK of shares constituting less than a unit: A holder of shares less
than one unit may require TDK to purchase such shares, or sell such number of shares which, if
combined with the shares already held by such holder, would constitute one unit of shares, at their
market value in accordance with the provisions of the Share Handling Regulations of TDK.
- 85 -
Effect of the unit share system on holders of American Depositary Receipts (ADRs): A holder
who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit of shares of
Common Stock. Although, as discussed above, under the unit share system holders of less than a
unit have the right to require TDK to purchase their shares, holders of ADRs evidencing ADSs that
represent other than integral multiples of whole units are unable to exchange their ADRs and
withdraw the corresponding underlying shares of Common Stock representing less than a unit and,
therefore, are unable, as a practical matter, to exercise the rights to require TDK to purchase
such underlying shares unless TDKs Articles of Incorporation are amended to eliminate the
provision not to issue share certificates for the numbers of shares less than a unit. The unit
share system does not affect the transferability of ADRs, which may be transferred in lots of any
size.
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Reporting of substantial shareholdings
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The Financial Instruments and Exchange Law of Japan and regulations thereunder require any
person who has become, beneficially and solely or jointly, a holder of more than 5% of the total
issued shares of capital stock of a company listed on any Japanese stock exchange (including a
holder of ADRs which represents more than 5% of such total issued shares) to file with the
Director-General of a competent Local Finance Bureau of the Ministry of Finance within five
business days a report concerning such shareholdings.
A similar report must also be filed in respect of any subsequent change of 1 percent or more
in any such holding or any change in material matters set out in reports previously filed, with
certain exceptions (for example, such report will not be required if the ratio of stock holding
changes by 1% or more but the number of shares held by such holder remains same.). For this
purpose, shares issuable to such person upon exercise of stock acquisition rights, conversion of
convertible bond with stock acquisition rights or exercise of options represented by covered
warrants and securities issued by foreign entities such as ADRs.are taken into account in
determining both the number of shares held by such holder and the issuers total issued share
capital. Copies of such report must also be furnished to the issuer of such shares and all
Japanese stock exchanges on which the shares are listed.
Except for the general limitation under Japanese anti-trust and anti-monopoly regulations
against holding of shares of capital stock of a Japanese corporation which leads or may lead to a
restraint of trade or monopoly, and except for general limitations under the Companies Act or TDKs
Articles of Incorporation on the rights of shareholders applicable regardless of residence or
nationality, there is no limitation under Japanese laws and regulations applicable to TDK or under
its Articles of Incorporation on the rights of non-resident or foreign shareholders to hold the
shares of Common Stock of TDK or exercise votes thereon.
There is no provision in TDKs Articles of Incorporation or bylaws that would have an effect
of delaying, deferring or preventing a change in control of TDK and that would operate only with
respect to merger, consolidation, acquisition or corporate restructuring involving TDK.
All contracts entered into by TDK during the two years prior to the date of this annual report
were entered into in the ordinary course of business.
- 86 -
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Japanese Foreign Exchange Regulations
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The Foreign Exchange and Foreign Trade Law of Japan, frequently referred to as the Foreign
Exchange Law, and the cabinet orders and ministerial ordinances thereunder govern the issuance of
shares by companies and the acquisition and holding of shares by exchange non-residents and
foreign investors under the Foreign Exchange Law.
Exchange non-residents are:
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individuals who do not reside in Japan; and
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corporations whose principal offices are not located in Japan.
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Generally, branches and other offices located within Japan of non-resident corporations are
regarded as exchange residents of Japan and branches and other offices of Japanese corporations
located outside Japan are regarded as exchange non-residents of Japan.
Foreign investors are:
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individuals who do not reside in Japan;
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corporations which are organized under the laws of foreign
countries or whose principal offices are located outside
Japan;
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corporations in which more than 50 percent of the shares are
held (directly or indirectly) by individuals who do not reside
in Japan and/or corporations which are organized under the
laws of foreign countries or whose principal offices are
located outside Japan; and
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entities a majority of the officers (or officers having the power of
representation) of which are persons who do not reside in Japan, who or which make a
foreign direct investment as defined in the Foreign Exchange Law.
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Any individuals or corporations that do not correspond to any of the above may be regarded as
a foreign investor when they acquire or hold shares on behalf of foreign investor.
In general, the acquisition of shares of a Japanese company, including TDK, in an exchange by
a non-resident of Japan with a resident of Japan is not subject to any prior filing requirements,
but such exchange is subject to a post reporting requirement of the Minister of Finance by the
resident of Japan.
In the case where a foreign investor intends to acquire listed shares (whether from a resident
or a non-resident of Japan, from another foreign investor or from or through a designated
securities company) and as a result of such acquisition the number of shares held, directly or
indirectly, by such foreign investor would become 10 percent or more of the total outstanding
shares of the company, the foreign investor must generally report such acquisition to the Minister
of Finance and other Ministers having jurisdiction over the business of the subject company within
15 days from and including the date of such acquisition. In certain exceptional cases, a prior
notification is required in respect of such acquisition.
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Due to the amendments to the Foreign Exchange Law effective on April 1, 1998, all aspects of
foreign exchange and foreign trade transactions that were previously subject to advance licensing
or other prior notifications or prior approvals, with minor exceptions, were changed to require
only post-transaction reporting. However, in cases where the Cabinet makes the decision to take
countermeasures for maintenance of Japans peace and security or where the Minister of Finance
deems that, if a transaction is carried out without any restriction, it would prevent Japan from
faithfully performing the treaties or other international agreements concluded thereby, or prevent
Japan from contributing to the international effort for international peace and the achievement of
the objective of the Foreign Exchange Law would become difficult etc., the Minister of Finance may
impose an obligation to obtain a license for carrying out a transaction on a resident or
non-resident who is to carry out the transaction.
Potential Consequences Resulting from an Acquisition of Listed Shares
In the event that a foreign investor acquires shares of a Japanese company listed on a
Japanese stock exchange (listed shares) and if the foreign investors direct and indirect total
holdings are 10 percent or more of the issued shares of the company after the acquisition, the
foreign investor must file a report of the acquisition with the Minister of Finance and any other
competent Minister within 15 days from and including the date of such acquisition. However, in
certain limited circumstances (for example, if a Japanese company manufactures products for
military use), a prior notification of such an acquisition must be filed with the Minister of
Finance and any other competent Minister, who may then modify or prohibit the proposed acquisition.
The acquisition of shares by exchange non-residents as a result of share splits is not subject to
any of the foregoing requirements.
Potential Consequences Resulting from Dividends and Proceeds of Sales
Under the current Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan
of, shares held by exchange non-residents may, in general, be converted into foreign currency and
repatriated abroad.
Potential Consequences Resulting from the Sale of Securities to Exchange Non-Resident
A Japanese resident is required to file a report with the Minister of Finance concerning the
transfer of securities for value exceeding ¥100 million to an exchange non-resident within 20 days
of the date of the transfer. If an exchange resident issues or offers its securities for value of
¥1 billion or more outside Japan, the exchange resident must file a report of the issuance or
offering of securities with the Minister of Finance within 20 days of the date of the closing.
American Depositary Shares
The deposit of shares of Common Stock by a non-resident of Japan, the issuance of ADRs in
exchange therefor and the withdrawal of the underlying shares of Common Stock upon surrender of
ADRs are not subject to any formalities or restrictions referred to under Potential Consequences
Resulting from an Acquisition of Listed Shares above, except where, as a result of such deposit or
withdrawal, the aggregate number of shares held by the depositary (or its nominee) or the holder
surrendering ADRs, as the case may be, would be 10 percent or more of the total outstanding shares
of Common Stock, in which event the reporting to the Minister of Finance of Japan and other
competent Minister may be required as outlined in the first sentence under the same heading.
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The following summarizes the major Japanese national tax and U.S. federal income (and not
estate or gift) tax consequences of the ownership, acquisition and disposition of shares of Common
Stock of TDK and of ADRs representing shares of Common Stock of TDK by a U.S. holder(defined
below) that is a non-resident of Japan or a non-Japanese corporation without a permanent
establishment, as defined in the Internal Revenue Code, the Treasury Regulations thereto and the
Treaty (defined below), in Japan. The summary is not a comprehensive description of all of the tax
considerations that may be relevant to any particular investor, and does not take into account
specific individual circumstances of any particular investor. Accordingly, holders of shares of
Common Stock or ADRs of TDK are encouraged to consult their tax advisors regarding their particular
circumstances.
Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese
withholding tax on dividends paid by Japanese corporations. Share splits are not subject to
Japanese income tax.
The rate of Japanese withholding tax applicable to dividends on TDKs shares paid by TDK to
non-resident shareholders is 7 percent for dividends paid on or before March 31, 2009 and 15
percent thereafter, except for any individual shareholder who holds 5 percent or more of the issued
shares, for whom the applicable rate is 20 percent.
Japan has income tax treaties, conventions or agreements which generally provide that the
withholding tax rate may not exceed 15 percent for portfolio investors with, among others,
Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. In case of the Japan-U.S. tax treaty, however, as a result of a recent amendment,
the maximum withholding tax rate has been reduced, generally to 10 percent for portfolio investors
effective from July 1, 2004. Under Japanese tax law, the maximum rate applicable under the tax
treaties, conventions or agreements shall be applicable except when such maximum rate is more than
the Japanese statutory rate.
TDK, as a Japanese corporation, may be obligated to withhold a certain amount from any
payments by TDK to its shareholder that is a non-resident of Japan or a non-Japanese corporation.
Specifically, according to Articles 212-1 and 212-2 of the Income Tax Law of Japan, TDK has the
obligation to withhold the amount determined by the applicable tax rate (as discussed above) from
its dividends to such of its shareholders.
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This discussion applies only U.S. holders of TDK shares or ADRs as capital assets for U.S.
federal income tax purposes and it does not address special classes of holders, such as:
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certain financial institutions;
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insurance companies;
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dealers and traders in securities or foreign currencies;
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persons holding TDK shares or ADRs as part of a hedge, straddle,
conversion or other integrated transaction;
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persons whose functional currency for U.S. federal income tax purposes
is not the U.S. dollar;
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partnerships or other entities classified as partnerships for U.S.
federal income tax purposes;
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persons liable for the alternative minimum tax;
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tax-exempt organizations;
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persons holding TDK shares or ADRs that own or are deemed to own 10
percent or more of any class of TDK stock; or
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persons who acquired TDK shares or ADRs pursuant to the exercise of
any employee stock option or otherwise as compensation.
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This discussion is based on the Internal Revenue Code of 1986, as amended (the Internal
Revenue Code), administrative pronouncements, judicial decisions and final, temporary and proposed
Treasury Regulations (the Treasury Regulations), and the Treaty (as defined below). These laws
are subject to change, possibly on a retroactive basis. It is also based in part on
representations by the depositary of underlying shares in connection with the ADRs, under the
Second Amended and Restated Deposit Agreement (Deposit Agreement) and assumes that each
obligation under the deposit agreement and any related agreement will be performed in accordance
with its terms.
As used herein, a U.S. holder is a beneficial owner of TDK shares or ADRs that is, for U.S.
federal tax purposes:
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a citizen or resident of the United States;
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a corporation, or other entity taxable as a corporation, created or
organized in or under the laws of the United States or any political
subdivision thereof; or
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an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.
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In general, if a U.S. holder holds ADRs, such holder will be treated for U.S. federal income
tax purposes as the holder of the underlying shares represented by those ADRs.
Accordingly, no gain or loss will be recognized if a U.S. holder exchanges ADRs for the
underlying shares represented by those ADRs.
United States Taxation with respect to shares of Common Stock and ADRs
Taxation of Capital Gains
Subject to the PFIC rules discussed below, U.S. holders that sell or otherwise dispose of
shares or ADRs will recognize capital gain or loss by the seller, for U.S. federal income tax
purposes, equal to the difference between the U.S. dollar value of the amount realized and the tax
basis, determined in U.S. dollars, in the shares or ADRs disposed. Capital gain of a noncorporate
U.S. holder that is recognized in taxable years beginning before January 1, 2011 is generally taxed
at a maximum rate of 15 percent, where the disposed property has been held by the seller for more
than one year. The gain or loss by a U.S. holder upon the sale of ADRs will generally be income or
loss from sources within the United States for foreign tax credit limitation purposes (described
below).
Taxation of Dividends
Dividends received by a U.S. holder of Common Stock or ADRs will be taxed as ordinary income
that is subject to a maximum rate of 35 percent, for amounts sold prior to January 1, 2011, unless
such dividends are qualified dividends. Qualified dividends are those paid with respect to
shares or ADRs held by an individual (or an entity owned by an individual that is disregarded for
U.S. federal income tax purposes) for more than 60 days during the 121-day period, beginning 60
days before the ex-dividend date and must also meet certain other requirements. Qualified
dividends will be subject to taxation at a maximum rate of 15 percent prior to January 1, 2011.
Dividends paid with respect to the Common Stock shares or ADRs, generally will be qualified
dividends, assuming that TDK is not a PFIC (as discussed below). The U.S. dollar amount of
dividends received that are not qualified dividends will be taxed as ordinary income.
The amount of the dividend distribution that a shareholder must include in income as a U.S.
holder will be the U.S. dollar value of the Japanese yen payments made, determined at the spot
Japanese yen/U.S. dollar rate on the date the dividend distribution is includible in income, and
will include any amounts withheld for Japanese taxes, regardless of whether the payment is in fact
converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange
fluctuations when such payment is actually converted into U.S. dollars will be treated as ordinary
income or loss and will not be eligible for the special tax rate applicable to qualified dividend
income. U.S. holders should consult their own tax advisors regarding the calculation and U.S.
federal income tax treatment of foreign currency gain or loss. The gain or loss generally will be
income or loss from sources within the United States for foreign tax credit limitation purposes.
Distributions in excess of current and accumulated earnings and profits, as determined for United
States federal income tax purposes, will be treated as a non-taxable return of capital to the
extent of their basis in the shares or ADRs and thereafter as capital gain.
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Passive Foreign Investment Companies
Shareholders of non-U.S. corporations that are treated as Passive Foreign Investment Companies
(PFIC) are subject to potentially negative tax consequences. If TDK is treated as a PFIC, and a
U.S. holder does not make a QEF election, as described below, special rules apply with respect to:
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gain realized on the sale or other disposition of shares or ADRs ; and
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any excess distributions to a U.S. holder (generally, an excess distribution is
any distribution from a PFIC during a single taxable year that is greater than 125
percent of the average annual distributions received by a U.S. holder in respect of
the shares or ADRs during the three preceding taxable years or, if shorter, such
U.S. holders holding period for the shares or ADRs).
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Pursuant to these special rules, the following would apply to gains from TDK stock and
distributions from TDK if it were a PFIC:
|
|
|
the gain or excess distribution will be allocated ratably over the holding
period for the shares or ADRs,
|
|
|
|
|
the amount allocated to the taxable year in which the U.S holder realized the
gain or excess distribution and any taxable year prior to the first year in which
TDK was a PFIC will be taxed as ordinary income,
|
|
|
|
|
the amount allocated to each other year, with certain exceptions, will be taxed
at the highest tax rate in effect for that year, and
|
|
|
|
|
the interest charge generally applicable to underpayments of tax will be imposed
in respect of the tax attributable to each such year.
|
A non-U.S. corporation is a PFIC in any year if at least 75 percent of its income consists of
dividends, interest, royalties, rents and gains from commodities and securities transaction, or
other passive items, or if at least 50 percent of its assets produce such passive income. TDK
believes that it is not a PFIC and has never been classified as a PFIC.
U.S. holders of PFIC stock or ADRs regularly traded on a qualified exchange, may elect to make
an election to have such PFIC treated as a qualified electing fund (QEF). If a QEF election is
made, the PFIC rules above do not apply, and the U.S. holders mark such shares or ADRs to market
and annually include as ordinary income the excess, if any, of the fair market value of the shares
or ADRs at the end of the taxable year over the adjusted basis in the shares or ADRs. Electing
U.S. holders will be allowed to take an ordinary loss with respect of the excess, if any, of the
adjusted basis of their shares or ADRs over their fair market value at the end of the taxable year
(but only to the extent of the net amount of previously included income as a result of the
mark-to-market election). The basis in the shares or ADRs will be adjusted to reflect any such
income or loss amounts. Notwithstanding such election, dividend payments from a PFIC are not
treated as qualified dividends and are not subject to the 15 percent tax rate.
- 92 -
Treaty Between U.S. and Japan
The U.S. and Japan executed the Convention between the United States of America and Japan for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Tax on Income
on November 6, 2003 (the Treaty). Pursuant to the Treaty, dividends paid by TDK to U.S. holders
are generally subject to a maximum 10 percent withholding tax in Japan. Such tax may be reduced to
a maximum of 5 percent if the beneficial owner of the dividend is a company that owns at least 10
percent of TDKs voting stock. Under the Treaty, no withholding tax is due on dividends
beneficially owned by a tax exempt pension fund that is resident in the U.S., if the dividends are
not from such funds direct or indirect operation of a trade or business.
Under the Japanese Income Tax Law applicable through March 31, 2009, the temporary rate of
Japanese withholding tax on dividends paid with respect to listed shares, such as those paid by
TDK, to non-resident holders, is currently 7 percent (20 percent for holders of 5 percent or more
of the total issued shares). Pursuant to the Treaty, if the tax rate under Japanese tax law is
lower than that provided for by the Treaty, then the domestic tax rate is still applicable. U.S.
holders that are not pension funds and that do not own 5 percent or more of TDKs shares, would be
taxed with the lower Japanese domestic tax rate. For purposes of the Treaty and Japanese tax law,
U.S. holders of ADRs will be treated as owners of the shares underlying the ADRs. If a U.S. holder
wishes to take advantage of the Treaty, a special application must be filed. U.S. holders are
urged to speak to their tax advisors regarding the availability and advisability of Treaty
benefits.
Foreign Tax Credit
U.S. holders may be entitled to take a credit against their U.S. income tax liability with
respect to taxes withheld by or paid to Japan on dividends or gains from the sale of TDK Common
Stock or ADRs pursuant to the foreign tax credit rules provided for in the Internal Revenue Code
and Treasury Regulations. There are limitations to the amount of Japanese tax that is credited.
For example, special rules apply in determining the foreign tax credit allowed with respect to
qualified dividends and distributions by a PFIC. U.S. holders are urged to speak to their tax
advisors regarding any limitations on the amount of Japanese tax that may be credited against their
U.S. income tax liabilities.
Information Reporting and Backup Withholding
U.S. holders may be required to provide their taxpayer identification numbers to payors of
dividends and sales proceeds that are made within the United States or through certain U.S.-related
financial intermediaries. Payors may be required to withhold up to 30 percent of payments to U.S.
holders (referred to as backup withholding) if such U.S. holders fail to provide tax
identification numbers and certify that no loss of backup withholding has occurred, unless the U.S.
holder is a corporation or a recipient not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. holder will be allowed as a
credit against such holders U.S. federal income tax liability and may entitle the U.S. holder to a
refund, provided that the required information, generally, a tax return, is furnished to the
Internal Revenue Service.
|
F.
|
|
Dividends and paying agents
|
Not applicable.
- 93 -
Not applicable.
According to the Securities Exchange Act of 1934, as amended, TDK is subject to requirements
of information disclosure. TDK files or furnishes various reports, exhibits and other information,
including its Annual Report on Form 20-F, with the Securities Exchange Commission (the SEC).
These reports, exhibits and other information may be inspected at the SECs Public Reference Room
at 100 F Street N.E., Room 1580, Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains an internet website at www.sec.gov, from which reports and information filed or furnished
with the SEC can be electronically accessed. These materials may also be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
|
I.
|
|
Subsidiary information
|
Not applicable.
- 94 -
|
|
|
Item 11
.
|
|
Quantitative and Qualitative Disclosures about Market Risk
|
TDK is subject to market risk associated with changes in foreign currency exchange rates,
stock prices, and interest rates. Foreign exchange risk is considered the primary market risk
exposure. TDK has a policy for procedures and controls to manage market risk sensitive
instruments. In order to hedge foreign currency exchange rate risk and interest rate risk, TDK
uses derivative financial instruments. TDK does not hold or issue derivative financial instruments
for trading purposes.
Foreign exchange risk
Forward exchange contracts have been entered into to hedge adverse effects of foreign currency
exchange rate fluctuations mainly on foreign-currency-denominated trade receivables and
foreign-currency-denominated forecasted transactions.
At March 31, 2008 and 2007, TDK and certain of its subsidiaries had forward exchange contracts
to sell and buy foreign currencies (principally U.S. dollars and Japanese Yen) and currency option
contracts for a total contract amount of ¥13,324 million ($133,240 thousand) and ¥13,834 million
($138,340 thousand), respectively.
The following table provides information about TDKs derivative instruments related to foreign
exchange risk as of March 31, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
Forward exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions of yen)
|
|
|
Average
|
|
|
(millions of yen)
|
|
|
Average
|
|
|
|
Contract
|
|
|
Fair
|
|
|
contractual
|
|
|
Contract
|
|
|
Fair
|
|
|
contractual
|
|
|
|
amounts
|
|
|
value
|
|
|
rate
|
|
|
amounts
|
|
|
value
|
|
|
rate
|
|
|
|
|
To sell USD / receive Baht
|
|
¥
|
6,232
|
|
|
¥
|
(218
|
)
|
|
|
32.66
|
|
|
¥
|
|
|
|
¥
|
|
|
|
|
|
|
To sell Baht / receive USD
|
|
|
6,012
|
|
|
|
168
|
|
|
|
32.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To sell Euro / receive Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,677
|
|
|
|
(4
|
)
|
|
|
155.92
|
|
To sell USD / receive Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,604
|
|
|
|
78
|
|
|
|
120.11
|
|
To sell USD / receive Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
(2
|
)
|
|
|
13.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
12,244
|
|
|
¥
|
(50
|
)
|
|
|
|
|
|
¥
|
8,434
|
|
|
¥
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Currency option contracts
|
|
(millions of yen)
|
|
Average
|
|
|
(millions of yen)
|
|
Average
|
|
|
|
Contract
|
|
|
Fair
|
|
|
contractual
|
|
|
Contract
|
|
|
Fair
|
|
|
contractual
|
|
|
|
amounts
|
|
|
value
|
|
|
rate
|
|
|
amounts
|
|
|
value
|
|
|
rate
|
|
|
|
|
|
To sell USD / receive USD
|
|
¥
|
1,080
|
|
|
¥
|
18
|
|
|
|
108.00
|
|
|
¥
|
5,400
|
|
|
¥
|
82
|
|
|
|
120.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
1,080
|
|
|
¥
|
18
|
|
|
|
|
|
|
¥
|
5,400
|
|
|
¥
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk
TDKs exposure to market risk related to changes in interest rates relates primarily to its
debt securities. TDK has outstanding debt securities with fixed rates. TDK, to the extent
possible, plans to limit its issuance of debt securities to short-term debt securities. TDK
believes that the fair values of interest rate sensitive instruments as of March 31, 2008 and 2007,
and potential, near-term losses affecting future earnings, fair values, and/or cash flows from
reasonable near-term changes in interest rates are immaterial. See also Item 17 Financial
StatementsNote 7 to the Consolidated Financial Statements Short-Term and Long-Term Debt.
- 95 -
Stock price risk
TDKs exposure to market risk involving changes in stock prices relates only to its equity
securities categorized as available-for-sale securities. TDK purchases equity securities to strengthen relationship with the invested companies as customers as part of its sales strategy, but not as a
means of investing surplus funds. Therefore, TDK intends to hold the equity securities over a long period. The aggregate cost and fair value of these equity securities
were ¥22.8 billion ($228 million) and ¥21.0 billion ($210 million) as of March 31, 2008, and ¥11.9
billion ($119 million) and ¥15.0 billion ($150 million) as of March 31, 2007, respectively. As of
March 31, 2008, these securities mainly represented investments in companies in the transportation,
communications and electronic equipment industries, and the cost and fair value of these equity
securities were ¥21.2 billion ($212 million) and ¥19.4 billion ($194 million), respectively. As of
March 31, 2007, these securities mainly represented investments in companies in the transportation,
communications and electronic equipment industries, and the cost and fair value of the equity
securities were ¥11.5 billion ($115 million) and ¥13.8 billion ($138 million), respectively.
TDKs portfolio of equity securities, including available-for-sale securities, at March 31,
2008 and 2007, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
Yen (Millions)
|
|
|
Yen (Millions)
|
|
Cost
|
|
Gross
|
|
|
Gross
|
|
|
Fair value
|
|
|
Cost
|
|
|
Gross
|
|
|
Gross
|
|
|
Fair value
|
|
|
|
unrealized
|
|
|
unrealized
|
|
|
|
|
|
|
|
|
|
|
unrealized
|
|
|
unrealized
|
|
|
|
|
|
|
|
holding
|
|
|
holding
|
|
|
|
|
|
|
|
|
|
|
holding
|
|
|
holding
|
|
|
|
|
|
|
|
gains
|
|
|
losses
|
|
|
|
|
|
|
|
|
|
|
gains
|
|
|
losses
|
|
|
|
|
|
|
|
|
¥ 22,800
|
|
2,276
|
|
|
|
4,039
|
|
|
|
21,037
|
|
|
|
11,919
|
|
|
|
3,566
|
|
|
|
488
|
|
|
|
14,997
|
|
|
|
|
|
|
|
Item 12
.
|
|
Description of Securities Other than Equity Securities
|
Not applicable.
- 96 -
PART II
|
|
|
Item 13
.
|
|
Defaults, Dividend Arrearages and Delinquencies
|
None.
|
|
|
Item 14
.
|
|
Material Modifications to the Rights of Security Holders and Use of Proceeds
|
None.
|
|
|
Item 15
.
|
|
Controls and Procedures
|
Disclosure Controls and Procedures
TDKs disclosure controls and procedures are designed to provide reasonable assurance that
information required to be disclosed in reports filed or furnished under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized, and reported on a timely basis.
As of March 31, 2008, TDK, under the supervision and with the participation of its management,
including TDKs chief executive officer and the chief financial officer, performed an evaluation of
the effectiveness of its disclosure controls and procedures; as such term is defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on this evaluation, TDKs
chief executive officer and chief financial officer concluded that TDKs disclosure controls and
procedures are effective in providing reasonable assurance that the information TDK is required to
disclose in the reports it files or furnishes under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported in a timely manner.
Managements Annual Report on Internal Control over Financial Reporting
The management of TDK is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is defined in Rule
13a-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under
the supervision of, TDKs principal executive and principal financial officers and effected by
TDKs board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. TDKs internal control over
financial reporting includes policies and procedures that:
|
(1)
|
|
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the company;
|
|
|
(2)
|
|
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and
|
|
|
(3)
|
|
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of TDKs assets that could have a material
effect on the financial statements.
|
- 97 -
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect all misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
TDKs management assessed the effectiveness of internal control over financial reporting as of
March 31, 2008. In making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission in
Internal Control-Integrated Framework
(the COSO criteria).
Based on its assessment, management concluded that, as of March 31, 2008, TDKs internal
control over financial reporting was effective.
Report of the Registered Public Accounting Firm
The
effectiveness of managements internal control over financial
reporting as of March 31, 2008 has been audited by TDKs independent registered public accounting firm, KPMG AZSA & Co.
Their report dated July 28, 2008 is included
in the Report of Independent Registered Public Accounting Firm contained in Item 17
.
Changes in Internal Controls over Financial Reporting
There has been no change in TDKs internal control over financial reporting that occurred
during the fiscal year ended March 31, 2008 that has materially affected, or is reasonably likely
to materially affect, its internal control over financial reporting.
|
|
|
Item 15T
.
|
|
Controls and Procedures
|
Not applicable.
|
|
|
Item 16A
.
|
|
Audit Committee Financial Expert
|
The registrant, a foreign private issuer, has at least one audit committee financial expert
serving on its audit committee. TDKs board of auditors has determined that Ryoichi Ohno qualifies
as an audit committee financial expert pursuant to regulations adopted by the SEC. Mr. Ohno is
an outside company auditor within the meaning of the Company Law. See Item 6.C. Board practices
Significant differences in corporate governance practices between TDK and U.S. listed companies on
the New York Stock Exchange
. Mr. Ohno was registered as a U.S. Certified Public Accountant in
1988 and elected as one of TDKs company auditors at an Ordinary General Meeting of Shareholders
held in June 2004. See Item 6.A. Directors and senior management for additional information
regarding Mr. Ohno.
- 98 -
TDK has established a code of business ethics (TDK Code of Ethics) that applies to all TDK
employees and corporate officers, including the Chief Executive Officer and Chief Financial
Officer. TDK, through the TDK Code of Ethics, actively promotes ethical business practices on a
worldwide basis. The TDK Business Ethics & CSR Committee (formerly named TDK Business Ethics
Committee) has been charged with the oversight of the ethics program at TDK. It has built a
global ethics framework which encompasses domestic and overseas subsidiaries. Built into the
framework is a direct communication means called the helpline for employees to report to
supervisors, managers, and the TDK Business Ethics & CSR Committee matters relating to business
ethics issues and offer suggestions. The TDK Code of Ethics is attached as Exhibit 11.1 to this
annual report. TDK has not granted a waiver or implicit waiver from any provision of the TDK Code
of Ethics in the most recently completed fiscal year.
|
|
|
Item 16C.
|
|
Principal Accountant Fees and Services
|
The following table discloses the aggregate fees accrued or paid to KPMG AZSA & Co. and KPMG
International member firms for each of the last two fiscal years and briefly describes the services
performed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Yen in millions)
|
|
|
Years ended March 31
|
|
|
2008
|
|
2007
|
|
|
|
Audit fees
|
|
|
1,154
|
|
|
|
1,071
|
|
Audit-related fees
|
|
|
44
|
|
|
|
14
|
|
Tax fees
|
|
|
206
|
|
|
|
308
|
|
All other fees
|
|
|
15
|
|
|
|
19
|
|
|
Total
|
|
|
1,419
|
|
|
|
1,412
|
|
|
Audit fees consist of fees for Audit Services. Audit Services are professional services
rendered by the accounting auditor (KPMG AZSA & Co. and KPMG International member firms) for the
audit of TDKs annual financial statements and services that are normally provided by the
accounting auditor in connection with statutory and regulatory filings or engagements: (i) services
associated with statutory audits and (ii) services associated with U.S. SEC registration statements
or other periodic filings.
Audit-related fees consist of fees for Audit-Related Services. Audit-Related Services are
professional services relating to the Audit Services: (i) audits of employee benefit plans; and
(ii) financial due diligence.
Tax fees consist of fees for Tax Services: (i) federal and local tax compliance; (ii) review
of federal, local and international income, franchise, and other tax returns; (iii) transfer
pricing documentation assistance; and (iv) domestic and foreign indirect taxes.
Audit and Non-Audit Services Pre-Approval Policy
Subject to the confirmation as stipulated below, no pre-approval of the Board of Directors, in
the context of the United States Sarbanes-Oxley Act of 2002 (Sarbox Act) or the U.S. SEC rules,
is required for any non-audit services rendered by any Non-Outside Auditor. Any contracts
involving such services shall be processed in the usual manner in accordance with the applicable
laws, in-house rules or any other regulations. In December 2003 (further amended in July 2004), to
ensure compliance with Sarbox Act and the SEC regulations, TDK incorporated Audit and Non-Audit
Services Pre-Approval Policy (Pre-Approval Policy).
- 99 -
The Pre-Approval Policy provides that any person who wishes to retain a Non-Outside Auditor
for non-audit services (Retainer) is not allowed to do so unless both of the following conditions
are met:
|
(i)
|
|
The Retainer has received a letter of confirmation from such public accounting
firm that the public accounting firm is neither the Outside Auditor nor a person
associated with the Outside Auditor; and
|
|
|
(ii)
|
|
The Retainer has confirmed that such public accounting firm does not appear on
the list of persons associated with the Outside Auditor, which is contained in the
database system (Pre-Approval Database) within the TDK intranet system.
|
The foregoing letter of confirmation shall be regularly renewed at least once every 12 months
and the manager of the Pre-Approval Database described in that Database shall update the list of
associated persons to reflect changes or modifications as reported by the Outside Auditor.
The types of services generally described in above explanation for audit fees, audit-related
fees and tax fees shall be pre-approved by the Board of Directors. Those services described are
provided for the sake of establishing general criteria as to the types of services requiring
pre-approval. The Board of Directors shall evaluate and determine whether or not to pre-approve
each application for such services.
As stipulated in the Pre-Approval Policy, TDK is prohibited from causing the Outside Auditor
to provide, and the Outside Auditor is prohibited from rendering such services generally described
as follows: (i) bookkeeping or other services related to the accounting records or financial
statements of the audit client; (ii) financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial
services; (v) internal audit outsourcing services; (vi) management functions or human resources;
(vii) broker or dealer, investment adviser or investment banking services; (viii) legal services
and expert services unrelated to the audit; and (ix) any other service that the Board of Directors
determines, by regulation, is impermissible. When such an application is received, the Board of
Directors must not pre-approve the application.
In accordance with the Sarbox Act and related SEC Rules, audit or non-audit services which do
not fit in with any of the types generally described in the explanation above for audit fees,
audit-related fees and tax fees may have to be pre-approved by the Board of Directors. The Board
of Directors shall evaluate and determine whether or not to pre-approve each application for such
services.
TDK may engage the Outside Auditor to render an audit or non-audit service pursuant to the
Audit Policy without obtaining individual pre-approval by the Board of Directors, provided that all
of the following conditions are met:
|
(i)
|
|
the service to be rendered shall fall under any of the types listed in above
explanation for audit fees, audit-related fees and tax fees;
|
|
|
(ii)
|
|
the engagement to render the service shall commence within one year from the time
when the Board of Directors adopts the Audit Policy;
|
|
|
(iii)
|
|
the fee for the service to be rendered shall be less than 40,000,000 yen
(Individual Fee Limit); and
|
|
|
(iv)
|
|
the total amount of fees payable to the Outside Auditor by TDK on account of
non-audit services with respect to any fiscal year shall not exceed the total amount of
audit fees payable to the Outside Auditor by TDK with respect to such year (Overall Fee
Limit).
|
- 100 -
The appointed director (Seiji Enami) must confirm whether an audit or non-audit service to be
rendered by the Outside Auditor meets the foregoing conditions. The appointed director also shall
report to the Board of Directors all audit and non-audit services in which the Outside Auditor is
engaged in accordance with this Section. The Board of Directors must appoint a director as the
appointed director and after the appointment the appointed director must be listed in the
Pre-Approval Database.
Any divisions or departments of TDK, which contemplate or attempt to receive audit or
non-audit services from an Outside Auditor or Non-Outside Auditor, shall report its intention and
submit designated information, using the Pre-Approval Database.
The appointed director must evaluate such audit or non-audit services to be rendered either by
the Outside Auditor or Non-Outside Auditor reported electronically through the Pre-Approval
Database and must confirm whether any given reported services requires pre-approval by the Board of
Directors. The appointed director shall request pre-approval to the Board of Directors if
pre-approval by the Board of Directors is required as discussed above.
In making a pre-approval determination, the Board of Directors is required to consider the
following:
|
(i)
|
|
Whether the Outside Auditor cannot function in the role of management;
|
|
|
(ii)
|
|
Whether the Outside Auditor cannot audit its own work; and
|
|
|
(iii)
|
|
Whether the Outside Auditor cannot serve in an advocacy role for its client.
|
The Pre-Approval Policy provides that the Board of Directors must not pre-approve, in the
absence of strong countervailing considerations, non-audit services proposed to be performed by the
Outside Auditor if the total amount of fees payable to the Outside Auditor by TDK on account of
non-audit services with respect to any fiscal year exceeds the total amount of audit fees payable
to the Outside Auditor by TDK with respect to such year.
|
|
|
Item 16D.
|
|
Exemptions from the Listing Standards for Audit Committees
|
Based on the general exemption contained in Rule 10A-3(c)(3) under the Exchange Act for
companies with a Board of Company Auditors such as TDK, TDK does not have an audit committee which
can act independently and satisfy the other requirements of Rule 10A-3 under the Exchange Act.
According to Rule 10A-3 under the Exchange Act and NYSE listing standards, TDKs Board of
Company Auditors may act in place of an audit committee. The Board of Company Auditors meets the
following requirements of the general exemption contained in Rule 10A-3(c)(3):
|
|
|
the Board of Company Auditors is established pursuant to the Companies Act;
|
|
|
|
|
as required by the Companies Act, the Board of Company Auditors is separate from the
Board of Directors;
|
|
|
|
|
the Board of Company Auditors is not elected by the management of TDK and no executive
officer of TDK is a member of the Board of Company Auditors;
|
|
|
|
|
the Companies Act provides for the standards for independence of the Board of Company
Auditors from the management of TDK;
|
|
|
|
|
in accordance with the Companies Act, the Board of Company Auditors of TDK is
responsible, to the extent permitted by law, for the appointment, retention and supervision
of the work of a registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services for TDK; and
|
- 101 -
|
|
|
Under the Companies Act, the establishment of the procedures for the receipt, retention,
and treatment of complaints and their confidential, anonymous submission by employees is a
responsibility of the Board of Directors, not the Company Auditors or the Board of Company
Auditors, and thus, the Board of Directors of TDK has established such procedures. In
addition, each Company Auditor of TDK has the authority to engage independent counsel and
other advisers if such engagement is necessary to carry out his/her duties. Furthermore,
each Company Auditor may require TDK to pay any and all expenses necessary for carrying out
his/her duties, including compensation of any advisers employed by him/her and ordinary
administrative expenses.
|
TDKs reliance on Rule 10A-3(c)(3) does not, in its opinion, materially adversely affect the
ability of its Board of Company Auditors to act independently and to satisfy the other requirements
of Rule 10A-3.
|
|
|
Item 16E.
|
|
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|
The following table sets forth certain information with respect to TDKs purchases of our own
shares during the year ended March 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
Shares that May
|
|
|
Total
|
|
|
Average
|
|
|
Part of Publicly
|
|
Yet Be
|
|
|
Number
|
|
|
Price Paid
|
|
|
Announced
|
|
Purchased Under
|
|
|
of Shares
|
|
per Share
|
|
Plans or
|
|
the Plans or
|
Period
|
|
Purchased
|
|
(Yen)
|
|
Programs
|
|
Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1 to April 30, 2007
|
|
|
73
|
|
|
|
10,270.96
|
|
|
|
|
|
|
|
|
|
May 1 to May 31, 2007
|
|
|
190
|
|
|
|
10,244.16
|
|
|
|
3,599,000
|
|
|
|
|
|
June 1 to June 30, 2007
|
|
|
58
|
|
|
|
11,418.10
|
|
|
|
|
|
|
|
|
|
July 1 to July 31, 2007
|
|
|
493
|
|
|
|
11,408.62
|
|
|
|
|
|
|
|
|
|
August 1 to August 31, 2007
|
|
|
121
|
|
|
|
9,475.37
|
|
|
|
|
|
|
|
|
|
September 1 to September 30, 2007
|
|
|
17
|
|
|
|
9,728.82
|
|
|
|
|
|
|
|
|
|
October 1 to October 31, 2007
|
|
|
343
|
|
|
|
9,989.74
|
|
|
|
|
|
|
|
|
|
November 1 to November 30, 2007
|
|
|
290
|
|
|
|
8,387.10
|
|
|
|
|
|
|
|
|
|
December 1 to December 31, 2007
|
|
|
217
|
|
|
|
8,223.13
|
|
|
|
|
|
|
|
|
|
January 1 to January 31, 2008
|
|
|
94
|
|
|
|
8,237.87
|
|
|
|
|
|
|
|
|
|
February 1 to February 29, 2008
|
|
|
29
|
|
|
|
7,606.90
|
|
|
|
|
|
|
|
|
|
March 1 to March 31, 2008
|
|
|
336
|
|
|
|
7,017.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,261
|
|
|
|
9,416.53
|
|
|
|
3,599,000
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Under the Companies Act, a holder of shares constituting less than one full unit may request
TDK to purchase such shares at their market value (See Item 10. Additional
InformationCommon Stock
Unit share
system
). All purchases described in the above table
were made pursuant to such requests by shareholders.
|
- 102 -
PART III
|
|
|
Item 17.
|
|
Financial Statements
|
Index of Consolidated Financial Statements of TDK Corporation and subsidiaries:
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
104
|
|
|
|
|
|
|
Consolidated Statements of Income
for the years ended March 31, 2008, 2007 and 2006
|
|
|
106
|
|
Consolidated Balance Sheets as of March 31, 2008 and 2007
|
|
|
107
|
|
|
|
|
|
|
Consolidated Statements of Stockholders Equity
for the years ended March 31, 2008, 2007 and 2006
|
|
|
109
|
|
Consolidated Statements of Cash Flows
for the years ended March 31, 2008, 2007 and 2006
|
|
|
110
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
111
|
|
|
|
|
|
|
Schedule for the years ended March 31, 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
Schedule II Valuation and Qualifying Accounts
|
|
|
156
|
|
Schedules other than those listed above have been omitted as they are not applicable or the
information is presented in the consolidated financial statements and related notes.
Financial statements of 50% or less owned persons accounted for by the equity method have been
omitted as, in the aggregate, they do not meet the tests of a significant subsidiary at a 20% level
as of or for the years ended March 31, 2008, 2007 and 2006.
- 103 -
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TDK Corporation:
We have audited the accompanying consolidated balance sheets of TDK Corporation and subsidiaries
(the Company) as of March 31, 2008 and 2007, and the related consolidated statements of income,
stockholders equity, and cash flows for each of the years in the three-year period ended March 31,
2008, expressed in Japanese yen. In connection with our audits of the consolidated financial
statements, we also have audited financial statement schedule as listed in the accompanying index.
These consolidated financial statements and financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
The Company declined to present segment information for each of the years in the three-year period
ended March 31, 2008. In our opinion, disclosures of segment and related information about the
different types of business activities in which the company engages and the different economic
environments in which it operates are required by U.S. generally accepted accounting principles. The
omission of segment information results in an incomplete presentation of the Companys consolidated
financial statements.
In our opinion, except for the omission of segment information as discussed in the preceding
paragraph, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of TDK Corporation and subsidiaries as of March 31, 2008 and 2007,
and the results of their operations and their cash flows for each of the years in the three-year
period ended March 31, 2008, in conformity with U.S. generally accepted accounting principles. Also
in our opinion, the related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Companys internal control over financial reporting as of March 31,
2008, based on criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated July
28, 2008 expressed an unqualified opinion on the effectiveness of the Companys internal control
over financial reporting.
The accompanying consolidated financial statements as of and for the year ended March 31, 2008 have
been translated into United States dollars solely for convenience of the reader. We have audited
the translation and, in our opinion, the consolidated financial statements, expressed in Japanese
yen, have been translated into United States dollars on the basis set forth in Note 2 to the
consolidated financial statements.
/s/KPMG AZSA & Co.
Tokyo, Japan
July 28, 2008
- 104 -
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TDK Corporation:
We have audited the internal control over financial reporting of TDK Corporation and subsidiaries
(the Company) as of March 31, 2008, based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, TDK Corporation and subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of March 31, 2008, based on criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of TDK Corporation and subsidiaries as of
March 31, 2008 and 2007, the related consolidated statements of income, stockholders equity, and
cash flows for each of the years in the three-year period ended March 31, 2008, and the financial
statement schedule as listed in the accompanying index, expressed in Japanese yen, and our report
dated July 28, 2008 expressed a qualified opinion on those consolidated financial statements and
the financial statement schedule because of the omission of segment information required by U.S.
generally accepted accounting principles.
/s/KPMG AZSA & Co.
Tokyo, Japan
July 28, 2008
- 105 -
Consolidated statements of income
For the years ended March 31, 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Yen
|
|
(Thousands)
|
|
|
|
(Millions)
|
|
(Note 2)
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
Net sales (Notes 21 and 26)
|
|
¥
|
866,285
|
|
|
|
862,025
|
|
|
|
795,180
|
|
|
$
|
8,662,850
|
|
Cost of sales (Note 26)
|
|
|
635,529
|
|
|
|
622,819
|
|
|
|
585,780
|
|
|
|
6,355,290
|
|
|
|
|
Gross profit
|
|
|
230,756
|
|
|
|
239,206
|
|
|
|
209,400
|
|
|
|
2,307,560
|
|
Selling, general and administrative expenses (Note 26)
|
|
|
158,921
|
|
|
|
159,106
|
|
|
|
142,052
|
|
|
|
1,589,210
|
|
Gain on sale of business to Imation Corp. (Note 24)
|
|
|
(15,340
|
)
|
|
|
|
|
|
|
|
|
|
|
(153,400
|
)
|
Restructuring cost (Note 17)
|
|
|
|
|
|
|
510
|
|
|
|
6,825
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
87,175
|
|
|
|
79,590
|
|
|
|
60,523
|
|
|
|
871,750
|
|
Other income (deductions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
8,284
|
|
|
|
7,025
|
|
|
|
3,605
|
|
|
|
82,840
|
|
Interest expense
|
|
|
(218
|
)
|
|
|
(200
|
)
|
|
|
(149
|
)
|
|
|
(2,180
|
)
|
Equity in earnings of affiliates
|
|
|
1,969
|
|
|
|
1,489
|
|
|
|
1,368
|
|
|
|
19,690
|
|
Gain (loss) on securities, net (Note 4)
|
|
|
(2,081
|
)
|
|
|
(212
|
)
|
|
|
(286
|
)
|
|
|
(20,810
|
)
|
Foreign exchange gain (loss)
|
|
|
(3,670
|
)
|
|
|
973
|
|
|
|
948
|
|
|
|
(36,700
|
)
|
Other net
|
|
|
46
|
|
|
|
0
|
|
|
|
94
|
|
|
|
460
|
|
|
|
|
|
|
|
4,330
|
|
|
|
9,075
|
|
|
|
5,580
|
|
|
|
43,300
|
|
|
|
|
Income from continuing operations
before income taxes
|
|
|
91,505
|
|
|
|
88,665
|
|
|
|
66,103
|
|
|
|
915,050
|
|
Income taxes (Note 8)
|
|
|
19,948
|
|
|
|
16,985
|
|
|
|
21,057
|
|
|
|
199,480
|
|
|
|
|
Income from continuing operations
before minority interests
|
|
|
71,557
|
|
|
|
71,680
|
|
|
|
45,046
|
|
|
|
715,570
|
|
Minority interests, net of tax
|
|
|
96
|
|
|
|
1,555
|
|
|
|
635
|
|
|
|
960
|
|
|
|
|
Income from continuing operations
|
|
|
71,461
|
|
|
|
70,125
|
|
|
|
44,411
|
|
|
|
714,610
|
|
Discontinued operations (Note 22):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of discontinued business
(including loss on disposal of ¥224 million in 2006)
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
Net income
|
|
¥
|
71,461
|
|
|
|
70,125
|
|
|
|
44,101
|
|
|
$
|
714,610
|
|
|
|
|
Amounts per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (except number of
|
|
|
U.S. Dollars
|
|
|
|
common shares outstanding)
|
|
|
(Note 2)
|
|
|
|
|
Income from continuing operations per share (Note 20):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
¥
|
551.72
|
|
|
|
529.88
|
|
|
|
335.84
|
|
|
$
|
5.52
|
|
Diluted
|
|
|
551.19
|
|
|
|
529.29
|
|
|
|
335.54
|
|
|
|
5.51
|
|
Loss from discontinued operations per share (Note 20):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
(2.34
|
)
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
(2.34
|
)
|
|
|
|
|
Net income per share (Note 20):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
¥
|
551.72
|
|
|
|
529.88
|
|
|
|
333.50
|
|
|
$
|
5.52
|
|
Diluted
|
|
|
551.19
|
|
|
|
529.29
|
|
|
|
333.20
|
|
|
|
5.51
|
|
Weighted average basic common shares
outstanding (in thousands) (Note 20)
|
|
|
129,525
|
|
|
|
132,342
|
|
|
|
132,239
|
|
|
|
|
|
Weighted average diluted common shares
outstanding (in thousands) (Note 20)
|
|
|
129,649
|
|
|
|
132,488
|
|
|
|
132,355
|
|
|
|
|
|
Cash dividends paid during the year (Note 10)
|
|
¥
|
120.00
|
|
|
|
100.00
|
|
|
|
80.00
|
|
|
$
|
1.20
|
|
|
See accompanying notes to consolidated financial statements.
- 106 -
Consolidated balance sheets
As of March 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Yen
|
|
|
(Thousands)
|
|
|
|
(Millions)
|
|
|
(Note 2)
|
|
ASSETS
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
¥
|
166,105
|
|
|
|
289,169
|
|
|
$
|
1,661,050
|
|
Short-term investments
|
|
|
1,179
|
|
|
|
11,071
|
|
|
|
11,790
|
|
Marketable securities (Note 4)
|
|
|
3,986
|
|
|
|
1,063
|
|
|
|
39,860
|
|
Trade receivables (Note 21):
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
7,925
|
|
|
|
9,546
|
|
|
|
79,250
|
|
Accounts (Note 26)
|
|
|
153,175
|
|
|
|
175,079
|
|
|
|
1,531,750
|
|
Allowance for doubtful receivables
|
|
|
(3,982
|
)
|
|
|
(6,311
|
)
|
|
|
(39,820
|
)
|
|
|
|
Net trade receivables
|
|
|
157,118
|
|
|
|
178,314
|
|
|
|
1,571,180
|
|
|
|
|
Inventories (Note 6)
|
|
|
88,816
|
|
|
|
89,789
|
|
|
|
888,160
|
|
Income tax receivables (Note 8)
|
|
|
1,340
|
|
|
|
276
|
|
|
|
13,400
|
|
Assets held for sale (Note 18)
|
|
|
919
|
|
|
|
2,125
|
|
|
|
9,190
|
|
Prepaid expenses and other current
assets (Notes 8 and 26)
|
|
|
43,357
|
|
|
|
43,563
|
|
|
|
433,570
|
|
|
|
|
Total current assets
|
|
|
462,820
|
|
|
|
615,370
|
|
|
|
4,628,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in securities
(Notes 4 and 5)
|
|
|
68,714
|
|
|
|
32,641
|
|
|
|
687,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
23,161
|
|
|
|
21,696
|
|
|
|
231,610
|
|
Buildings
|
|
|
194,248
|
|
|
|
194,005
|
|
|
|
1,942,480
|
|
Machinery and equipment
|
|
|
546,362
|
|
|
|
508,972
|
|
|
|
5,463,620
|
|
Construction in progress
|
|
|
22,229
|
|
|
|
14,605
|
|
|
|
222,290
|
|
|
|
|
|
|
|
786,000
|
|
|
|
739,278
|
|
|
|
7,860,000
|
|
Less accumulated depreciation
|
|
|
(518,851
|
)
|
|
|
(492,575
|
)
|
|
|
(5,188,510
|
)
|
|
|
|
Net property, plant and equipment
|
|
|
267,149
|
|
|
|
246,703
|
|
|
|
2,671,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
(Note 19)
|
|
|
30,020
|
|
|
|
17,539
|
|
|
|
300,200
|
|
Intangible assets
(Note 19)
|
|
|
63,322
|
|
|
|
31,005
|
|
|
|
633,220
|
|
Deferred income taxes
(Note 8)
|
|
|
11,257
|
|
|
|
9,666
|
|
|
|
112,570
|
|
Other assets
(Notes 9 and 13)
|
|
|
32,251
|
|
|
|
36,380
|
|
|
|
322,510
|
|
|
|
|
|
|
¥
|
935,533
|
|
|
|
989,304
|
|
|
$
|
9,355,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
- 107 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Yen
|
|
|
(Thousands)
|
|
|
|
(Millions)
|
|
|
(Note 2)
|
|
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS EQUITY
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt (Note 7)
|
|
¥
|
8,898
|
|
|
|
3,013
|
|
|
$
|
88,980
|
|
Current installments of long-term debt (Note 7)
|
|
|
294
|
|
|
|
514
|
|
|
|
2,940
|
|
Trade payables:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
2,981
|
|
|
|
4,155
|
|
|
|
29,810
|
|
Accounts (Note 26)
|
|
|
73,410
|
|
|
|
77,616
|
|
|
|
734,100
|
|
Accrued salaries and wages
|
|
|
23,858
|
|
|
|
24,562
|
|
|
|
238,580
|
|
Accrued expenses (Notes 9, 17 and 26)
|
|
|
39,976
|
|
|
|
36,555
|
|
|
|
399,760
|
|
Income taxes payables (Note 8)
|
|
|
7,660
|
|
|
|
13,245
|
|
|
|
76,600
|
|
Other current liabilities (Note 8)
|
|
|
4,884
|
|
|
|
5,880
|
|
|
|
48,840
|
|
|
|
|
Total current liabilities
|
|
|
161,961
|
|
|
|
165,540
|
|
|
|
1,619,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current installments
(Note 7)
|
|
|
152
|
|
|
|
532
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement and severance benefits
(Note 9)
|
|
|
33,990
|
|
|
|
32,290
|
|
|
|
339,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
(Note 8)
|
|
|
5,998
|
|
|
|
7,526
|
|
|
|
59,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities
(Note 8)
|
|
|
13,171
|
|
|
|
6,501
|
|
|
|
131,710
|
|
|
|
|
Total liabilities
|
|
|
215,272
|
|
|
|
212,389
|
|
|
|
2,152,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
3,684
|
|
|
|
14,203
|
|
|
|
36,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
(Notes 13 and 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized 480,000,000 shares;
issued 129,590,659 shares in 2008;
and 133,189,659 shares in 2007
outstanding 128,955,736 shares in 2008
and 132,434,205 shares in 2007
|
|
|
32,641
|
|
|
|
32,641
|
|
|
|
326,410
|
|
Additional paid-in capital
|
|
|
63,887
|
|
|
|
63,695
|
|
|
|
638,870
|
|
Legal reserve (Note 10)
|
|
|
19,510
|
|
|
|
18,844
|
|
|
|
195,100
|
|
Retained earnings (Note 10)
|
|
|
688,719
|
|
|
|
671,350
|
|
|
|
6,887,190
|
|
Accumulated other comprehensive income (loss)
(Notes 8, 9 and 12)
|
|
|
(81,583
|
)
|
|
|
(17,846
|
)
|
|
|
(815,830
|
)
|
Treasury stock at cost; 634,923 shares in 2008
and 755,454 shares in 2007 (Note 11)
|
|
|
(6,597
|
)
|
|
|
(5,972
|
)
|
|
|
(65,970
|
)
|
|
|
|
Total stockholders equity
|
|
|
716,577
|
|
|
|
762,712
|
|
|
|
7,165,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
935,533
|
|
|
|
989,304
|
|
|
$
|
9,355,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 108 -
Consolidated statements of stockholders equity
For the years ended March 31, 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-
|
|
|
|
|
|
Retained
|
|
comprehensive
|
|
|
|
|
|
Total stock-
|
|
|
Common stock
|
|
in capital
|
|
Legal reserve
|
|
earnings
|
|
income (loss)
|
|
Treasury stock
|
|
holders equity
|
|
|
|
|
|
|
|
|
|
|
|
(Note 10)
|
|
(Note 10)
|
|
(Note 8, 9 and 12)
|
|
(Note 11)
|
|
|
|
|
Balance at March 31, 2005
|
|
¥
|
32,641
|
|
|
¥
|
63,051
|
|
|
¥
|
16,918
|
|
|
¥
|
585,557
|
|
|
¥
|
(51,657
|
)
|
|
¥
|
(7,443
|
)
|
|
¥
|
639,067
|
|
|
Non-cash compensation charges
under stock option plans
|
|
|
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,578
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,578
|
)
|
Transferred to legal reserve
|
|
|
|
|
|
|
|
|
|
|
599
|
|
|
|
(599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,101
|
|
|
|
|
|
|
|
|
|
|
|
44,101
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,100
|
|
|
|
|
|
|
|
26,100
|
|
Minimum pension liability
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,719
|
|
|
|
|
|
|
|
2,719
|
|
Net unrealized gains (losses)
on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892
|
|
|
|
|
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(955
|
)
|
|
|
(955
|
)
|
Exercise of stock option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(222
|
)
|
|
|
|
|
|
|
1,109
|
|
|
|
887
|
|
|
Balance at March 31, 2006
(as previously reported)
|
|
¥
|
32,641
|
|
|
¥
|
63,237
|
|
|
¥
|
17,517
|
|
|
¥
|
618,259
|
|
|
¥
|
(21,946
|
)
|
|
¥
|
(7,289
|
)
|
|
¥
|
702,419
|
|
|
Adjustment for the cumulative
effect on prior years of
the adoption of SAB
No. 108 (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,287
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,287
|
)
|
|
|
|
Balance at March 31, 2006
(after adjustment)
|
|
|
32,641
|
|
|
|
63,237
|
|
|
|
17,517
|
|
|
|
615,972
|
|
|
|
(21,946
|
)
|
|
|
(7,289
|
)
|
|
|
700,132
|
|
|
|
|
Non-cash compensation charges
under stock option plans
|
|
|
|
|
|
|
458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
458
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,230
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,230
|
)
|
Transferred to legal reserve
|
|
|
|
|
|
|
|
|
|
|
1,327
|
|
|
|
(1,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,125
|
|
|
|
|
|
|
|
|
|
|
|
70,125
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,383
|
|
|
|
|
|
|
|
4,383
|
|
Minimum pension liability
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,290
|
|
|
|
|
|
|
|
2,290
|
|
Net unrealized gains (losses)
on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to initially apply
SFAS 158, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,649
|
)
|
|
|
|
|
|
|
(2,649
|
)
|
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
(32
|
)
|
Exercise of stock option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(190
|
)
|
|
|
|
|
|
|
1,349
|
|
|
|
1,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2007
|
|
¥
|
32,641
|
|
|
¥
|
63,695
|
|
|
¥
|
18,844
|
|
|
¥
|
671,350
|
|
|
¥
|
(17,846
|
)
|
|
¥
|
(5,972
|
)
|
|
¥
|
762,712
|
|
|
Non-cash compensation charges
under stock option plans
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
Adjustment for change in equity
method interest
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(134
|
)
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,683
|
)
|
|
|
|
|
|
|
|
|
|
|
(15,683
|
)
|
Transferred to legal reserve
|
|
|
|
|
|
|
|
|
|
|
666
|
|
|
|
(666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,461
|
|
|
|
|
|
|
|
|
|
|
|
71,461
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,757
|
)
|
|
|
|
|
|
|
(55,757
|
)
|
Pension liability adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,684
|
)
|
|
|
|
|
|
|
(4,684
|
)
|
Net unrealized gains (losses)
on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,296
|
)
|
|
|
|
|
|
|
(3,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,250
|
)
|
|
|
(39,250
|
)
|
Retirement of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,410
|
)
|
|
|
|
|
|
|
37,410
|
|
|
|
|
|
Exercise of stock option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(333
|
)
|
|
|
|
|
|
|
1,215
|
|
|
|
882
|
|
Adjustment for employee stock
awards to be reclassified as a
liability
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
|
Balance at March 31, 2008
|
|
¥
|
32,641
|
|
|
¥
|
63,887
|
|
|
¥
|
19,510
|
|
|
¥
|
688,719
|
|
|
¥
|
(81,583
|
)
|
|
¥
|
(6,597
|
)
|
|
¥
|
716,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands) (Note 2)
|
|
Balance at March 31, 2007
|
|
$
|
326,410
|
|
|
$
|
636,950
|
|
|
$
|
188,440
|
|
|
$
|
6,713,500
|
|
|
$
|
(178,460
|
)
|
|
$
|
(59,720
|
)
|
|
$
|
7,627,120
|
|
|
Non-cash compensation charges
under stock option plans
|
|
|
|
|
|
|
3,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
Adjustment for change in equity
method interest
|
|
|
|
|
|
|
(1,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,340
|
)
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(156,830
|
)
|
|
|
|
|
|
|
|
|
|
|
(156,830
|
)
|
Transferred to legal reserve
|
|
|
|
|
|
|
|
|
|
|
6,660
|
|
|
|
(6,660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
714,610
|
|
|
|
|
|
|
|
|
|
|
|
714,610
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(557,570
|
)
|
|
|
|
|
|
|
(557,570
|
)
|
Pension liability adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,840
|
)
|
|
|
|
|
|
|
(46,840
|
)
|
Net unrealized gains (losses)
on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,960
|
)
|
|
|
|
|
|
|
(32,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(392,500
|
)
|
|
|
(392,500
|
)
|
Retirement of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(374,100
|
)
|
|
|
|
|
|
|
374,100
|
|
|
|
|
|
Exercise of stock option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,330
|
)
|
|
|
|
|
|
|
12,150
|
|
|
|
8,820
|
|
Adjustment for employee stock
awards to be reclassified as a
liability
|
|
|
|
|
|
|
(490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(490
|
)
|
|
Balance at March 31, 2008
|
|
$
|
326,410
|
|
|
$
|
638,870
|
|
|
$
|
195,100
|
|
|
$
|
6,887,190
|
|
|
$
|
(815,830
|
)
|
|
$
|
(65,970
|
)
|
|
$
|
7,165,770
|
|
|
See accompanying notes to consolidated financial statements.
- 109 -
Consolidated statements of cash flows
For the years ended March 31, 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Yen
|
|
|
(Thousands)
|
|
|
|
(Millions)
|
|
|
(Note 2)
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
¥
|
71,461
|
|
|
|
70,125
|
|
|
|
44,101
|
|
|
$
|
714,610
|
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
71,461
|
|
|
|
70,125
|
|
|
|
44,411
|
|
|
|
714,610
|
|
Adjustments to reconcile net income to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
71,297
|
|
|
|
65,337
|
|
|
|
58,540
|
|
|
|
712,970
|
|
Loss on disposal of property and equipment
|
|
|
2,955
|
|
|
|
2,649
|
|
|
|
3,220
|
|
|
|
29,550
|
|
Deferred income taxes
|
|
|
(1,885
|
)
|
|
|
(1,878
|
)
|
|
|
(696
|
)
|
|
|
(18,850
|
)
|
Loss (gain) on securities, net
|
|
|
2,081
|
|
|
|
212
|
|
|
|
286
|
|
|
|
20,810
|
|
Gain on sale of business to Imation Corp.
|
|
|
(15,340
|
)
|
|
|
|
|
|
|
|
|
|
|
(153,400
|
)
|
Gain on sale of a subsidiary
|
|
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,740
|
)
|
Changes in assets and liabilities, net of effects of acquisition of businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in trade receivables
|
|
|
(13,791
|
)
|
|
|
11,241
|
|
|
|
(16,886
|
)
|
|
|
(137,910
|
)
|
Decrease (increase) in inventories
|
|
|
(14,952
|
)
|
|
|
892
|
|
|
|
(287
|
)
|
|
|
(149,520
|
)
|
Decrease (increase) in other current assets
|
|
|
(9,090
|
)
|
|
|
6,202
|
|
|
|
(8,748
|
)
|
|
|
(90,900
|
)
|
Increase (decrease) in trade payables
|
|
|
16,723
|
|
|
|
(5,272
|
)
|
|
|
7,101
|
|
|
|
167,230
|
|
Increase (decrease) in accrued expenses
|
|
|
8,745
|
|
|
|
(7,068
|
)
|
|
|
12,347
|
|
|
|
87,450
|
|
Increase (decrease) in income taxes payables, net
|
|
|
(849
|
)
|
|
|
4,004
|
|
|
|
(10,689
|
)
|
|
|
(8,490
|
)
|
Increase (decrease) in other current liabilities
|
|
|
1,962
|
|
|
|
(1,808
|
)
|
|
|
216
|
|
|
|
19,620
|
|
Increase (decrease) in retirement and severance benefits, net
|
|
|
(2,221
|
)
|
|
|
(74
|
)
|
|
|
981
|
|
|
|
(22,210
|
)
|
Other net
|
|
|
2,591
|
|
|
|
921
|
|
|
|
(678
|
)
|
|
|
25,910
|
|
|
|
|
Net cash provided by operating activities
|
|
|
119,413
|
|
|
|
145,483
|
|
|
|
89,118
|
|
|
|
1,194,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(84,312
|
)
|
|
|
(70,440
|
)
|
|
|
(73,911
|
)
|
|
|
(843,120
|
)
|
Proceeds from sale and maturity of short-term investments
|
|
|
18,508
|
|
|
|
20,046
|
|
|
|
|
|
|
|
185,080
|
|
Payment for purchase of short-term investments
|
|
|
(8,540
|
)
|
|
|
(31,089
|
)
|
|
|
|
|
|
|
(85,400
|
)
|
Proceeds from sale and maturity of investments in securities
|
|
|
1,177
|
|
|
|
23
|
|
|
|
4,263
|
|
|
|
11,770
|
|
Payment for purchase of investments in securities
|
|
|
(17,834
|
)
|
|
|
(3,638
|
)
|
|
|
(4,227
|
)
|
|
|
(178,340
|
)
|
Acquisitions of assets
|
|
|
(37,155
|
)
|
|
|
|
|
|
|
|
|
|
|
(371,550
|
)
|
Proceeds from sale of businesses
|
|
|
3,264
|
|
|
|
|
|
|
|
|
|
|
|
32,640
|
|
Acquisition of subsidiaries, net of cash acquired
|
|
|
(18,182
|
)
|
|
|
|
|
|
|
(32,868
|
)
|
|
|
(181,820
|
)
|
Acquisition of affiliates
|
|
|
(2,206
|
)
|
|
|
|
|
|
|
|
|
|
|
(22,060
|
)
|
Proceeds from sale of tangible and intangible assets
|
|
|
3,000
|
|
|
|
3,678
|
|
|
|
3,373
|
|
|
|
30,000
|
|
Acquisition of minority interests
|
|
|
(15,855
|
)
|
|
|
(6
|
)
|
|
|
(2,587
|
)
|
|
|
(158,550
|
)
|
Proceeds from sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1,538
|
|
|
|
|
|
Other net
|
|
|
388
|
|
|
|
(62
|
)
|
|
|
(363
|
)
|
|
|
3,880
|
|
|
|
|
Net cash used in investing activities
|
|
|
(157,747
|
)
|
|
|
(81,488
|
)
|
|
|
(104,782
|
)
|
|
|
(1,577,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
|
|
|
|
|
|
|
|
269
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
(9,242
|
)
|
|
|
(2,143
|
)
|
|
|
(218
|
)
|
|
|
(92,420
|
)
|
Increase (decrease) in short-term debt, net
|
|
|
3,574
|
|
|
|
(1,456
|
)
|
|
|
3,688
|
|
|
|
35,740
|
|
Proceeds from exercise of stock options
|
|
|
882
|
|
|
|
1,159
|
|
|
|
887
|
|
|
|
8,820
|
|
Cash paid to acquire treasury stock
|
|
|
(39,250
|
)
|
|
|
(32
|
)
|
|
|
(955
|
)
|
|
|
(392,500
|
)
|
Dividends paid
|
|
|
(15,683
|
)
|
|
|
(13,230
|
)
|
|
|
(10,578
|
)
|
|
|
(156,830
|
)
|
Other net
|
|
|
(367
|
)
|
|
|
(160
|
)
|
|
|
(218
|
)
|
|
|
(3,670
|
)
|
|
|
|
Net cash used in financing activities
|
|
|
(60,086
|
)
|
|
|
(15,862
|
)
|
|
|
(7,125
|
)
|
|
|
(600,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows:
|
|
|
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
Investing cash flows:
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
Financing cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(24,644
|
)
|
|
|
2,019
|
|
|
|
10,712
|
|
|
|
(246,440
|
)
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(123,064
|
)
|
|
|
50,152
|
|
|
|
(12,491
|
)
|
|
|
(1,230,640
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
289,169
|
|
|
|
239,017
|
|
|
|
251,508
|
|
|
|
2,891,690
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
¥
|
166,105
|
|
|
|
289,169
|
|
|
|
239,017
|
|
|
$
|
1,661,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
- 110 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations and Summary of Significant Accounting Policies
(a) Nature of Operations
TDK, a Tokyo-based company founded in 1935, is a multinational manufacturer of ferrite
products and a producer of inductor, ceramic capacitors, magnetic head and other components and
recording media. TDKs two business segments are electronic materials and components, and
recording media, which accounted for 94.4 percent and 5.6 percent of net sales, respectively, for
the year ended March 31, 2008. The main products which are manufactured and sold by the two
business segments are as follows:
|
(i)
|
|
Electronic materials and components products:
|
|
|
|
|
Ferrite cores, Rare-earth magnets, Multilayer ceramic chip
capacitors, Inductors (Coils,
Transformers), Switching power supplies, HDD heads, and Rechargeable batteries
|
|
|
(ii)
|
|
Recording media products:
|
|
|
|
|
Audio tapes, Video tapes, CD-Rs, DVDs, and Tape-based data storage media for computers
|
TDK sells electronic materials and components products to the electric industry, mainly in
Asia and Japan, and recording media products mainly in Japan, Europe, and North America.
(b) Basis of Presentation
TDK and its domestic subsidiaries maintain their books of account in conformity with financial
accounting standards of Japan, and its foreign subsidiaries in conformity with those of the
countries of their domicile.
The consolidated financial statements presented herein reflect certain adjustments, not
recorded on the primary books of TDK and subsidiaries, to present the financial position, results
of operations, and cash flows in conformity with U.S. generally accepted accounting principles (the
U.S. GAAP).
(c) Consolidation Policy
The consolidated financial statements include the accounts of TDK, its subsidiaries and those
variable interest entities where TDK is the primary beneficiary under Financial Accounting
Standards Board (FASB) Interpretation No. 46 (revised December 2003) (FIN 46R), Consolidation
of Variable Interest Entities. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The investments in affiliates in which TDKs ownership is 20 percent to 50 percent and where
TDK exercises significant influence over their operating and financial policies are accounted for
by the equity method. All significant intercompany profits from these affiliates have been
eliminated.
(d) Cash Equivalents and Short-term Investments
Cash equivalents include all highly liquid investments with an original maturity of three
months or less. All other highly liquid investments not considered to be cash equivalents are
classified as short-term investments. TDK determines the appropriate classification of its
investments at the time of purchase.
(e) Allowance for Doubtful Receivables
The allowance for doubtful receivables is TDKs best estimate of the amount of probable credit
losses in TDKs existing trade receivables. An additional reserve for individual receivables is
recorded when TDK becomes aware of a customers inability to meet its financial obligations, such
as in the case of bankruptcy filings or deterioration in a customers operating results or
financial position. If customer circumstances change, estimates of the recoverability of
receivables would be further adjusted.
- 111 -
(f) Investments in Securities
TDK classifies its debt and equity securities into one of three categories: trading,
available-for-sale, or held-to-maturity. Trading securities are bought and held principally for
the purpose of selling them in the near term. Held-to-maturity securities are those securities in
which TDK has the ability and intent to hold the security until maturity. All securities not
included in trading or held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums
or discounts. Unrealized holding gains and losses on trading securities are included in earnings.
Unrealized holding gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component of accumulated other
comprehensive income (loss) until realized. As of March 31, 2008 and 2007, TDK did not hold any
trading or held-to-maturity securities. Available-for sale securities, which mature or are
expected to be sold in less than one year, are classified as marketable securities.
A decline in the fair value of any available-for-sale security below cost that is deemed to be
other-than-temporary results in a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established. To determine whether an
impairment is other-than-temporary, TDK periodically reviews the fair value of available-for-sale
securities for possible impairment by taking into consideration the financial and operating
conditions of the issuer, the general market conditions in the issuers industry, degree and period
of the decline in fair value and other relevant factors.
Nonmarketable securities are recorded at cost. TDK periodically evaluates whether an event or
change in circumstances may have a significant adverse effect on the fair value of the investment.
Factors considered in accessing whether an indication of impairment exists include the financial
and operating conditions of the issuer, the general market conditions in the issuers industry and
other relevant factors. If an indication of impairment is present, TDK estimates the fair value of
nonmarketable securities. If the fair value is less than cost and the impairment is determined to
be other-than-temporary, a nonmarketable security is written down to its impaired value through a
charge to earnings.
(g) Inventories
Inventories are stated at the lower of cost or market. Cost is determined principally by the
average cost method.
The cost elements for finished goods and work in process include direct costs for materials
such as primary materials and purchased semi-finished products, direct labor costs such as basic
salaries, bonuses, and legal welfare expenses, direct costs such as expenses paid to
subcontractors, and indirect manufacturing costs comprising material costs, labor costs and other
overhead costs.
(h) Property, Plant and Equipment
Depreciation of property, plant and equipment is principally computed by the declining-balance
method for assets located in Japan and of certain foreign subsidiaries and by the straight-line
method for assets of other foreign subsidiaries based on the following estimated useful lives:
|
|
|
Buildings
|
|
3 to 60 years
|
Machinery and equipment
|
|
2 to 22 years
|
(i) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
- 112 -
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. TDK uses a specific identification
method to release the residual tax effects associated with components of accumulated other
comprehensive income resulting from a change in tax law or rate.
TDK adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes on April 1, 2007. FIN 48 establishes the threshold for recognizing the benefits of
tax-return positions in the consolidated financial statements as more-likely-than -not to be
sustained by the taxing authority, and prescribes a measurement methodology for those positions
meeting the recognition threshold. See Note 8 for further discussion of the effect of adopting FIN
48 on TDKs consolidated financial statements.
(j) Stock Option Plan
TDK accounts for stock options based on Statement of Financial Accounting Standards No. 123
(revised 2004) (SFAS 123R), Share-Based Payment. SFAS 123R requires TDK to measure the cost of
employee services received in exchange for equity awards based on the grant date fair value of the
awards. Stock based compensation expense for the year ended March 31, 2008 includes the unvested
portion of the grant date fair value of awards issued prior to adoption previously calculated for
disclosure purpose, and compensation expense for all equity awards granted subsequent to April 1,
2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R.
TDK uses the straight-line attribution method to recognize stock-based compensation expense over
the requisite service period for the entire award. As a result of the adopting SFAS 123R,
compensation expenses related to stock options TDK recognized for the years ended March 31, 2008
and 2007 were ¥375 million ($3,750 thousand) and ¥458 million, respectively. The related tax
benefits TDK recognized for the years ended March 31, 2008 and 2007 were ¥65 million ($650
thousand) and ¥67 million, respectively.
Prior to April 1, 2006, TDK accounted for equity awards granted under its stock option plans
under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 (APB
25), Accounting for Stock Issued to Employees and provided the required pro forma disclosure
amounts prescribed by Statement of Financial Accounting Standards No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure. TDK recognized the stock option related
compensation expense of ¥186 million for the year ended March 31, 2006 pursuant to APB 25. No tax
benefit was recognized in relation to this compensation expense.
- 113 -
The following table illustrates the effects on both income from continuing operations and net
income if the fair-value-based method had been applied to all outstanding and unvested stock based
awards with such costs recognized ratably over the vesting period of the underlying instruments.
|
|
|
|
|
|
|
Yen
|
|
|
|
(Millions)
|
|
|
|
2006
|
|
|
Income from continuing operations, as reported
|
|
¥
|
44,411
|
|
Add compensation expense recognized under intrinsic value
method
|
|
|
186
|
|
Deduct total stock-based employee compensation expense
determined under fair-value-based method for all awards
|
|
|
(607
|
)
|
|
|
|
|
Pro forma income from continuing operations
|
|
¥
|
43,990
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
Basic income from continuing operations per share:
|
|
|
|
|
As reported
|
|
¥
|
335.84
|
|
Pro forma
|
|
|
332.66
|
|
Diluted income from continuing operations per share:
|
|
|
|
|
As reported
|
|
¥
|
335.54
|
|
Pro forma
|
|
|
332.39
|
|
|
|
|
|
|
|
|
|
Yen
|
|
|
|
(Millions)
|
|
|
|
2006
|
|
|
Net income, as reported
|
|
¥
|
44,101
|
|
Add compensation expense recognized under intrinsic value
method
|
|
|
186
|
|
Deduct total stock-based employee compensation expense
determined under fair-value-based method for all awards
|
|
|
(607
|
)
|
|
|
|
|
Pro forma net income
|
|
¥
|
43,680
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
Basic net income per share:
|
|
|
|
|
As reported
|
|
¥
|
333.50
|
|
Pro forma
|
|
|
330.32
|
|
Diluted net income per share:
|
|
|
|
|
As reported
|
|
¥
|
333.20
|
|
Pro forma
|
|
|
330.05
|
|
|
(k) Research and Development Expenses
Research and development costs are expensed as incurred.
(l) Advertising Costs
Advertising costs are expensed as incurred.
(m) Shipping and Handling Fees and Costs
Shipping and handling costs amounted to ¥13,063 million ($130,630 thousand), ¥15,134 million
and ¥15,326 million for the years ended March 31, 2008, 2007 and 2006, respectively, and are
included in selling, general and administrative expenses in the consolidated statements of income.
- 114 -
(n) Foreign Currency Translation
Foreign currency financial statements have been translated in accordance with Statement of
Financial Accounting Standards No. 52 (SFAS 52), Foreign Currency Translation. Under SFAS 52,
the assets and liabilities of TDKs subsidiaries located outside Japan are translated into Japanese
yen at the rates of exchange in effect at the balance sheet date. Revenue and expense items are
translated at the average exchange rates prevailing during the year. Gains and losses resulting
from foreign currency transactions are included in other income (deductions), and those resulting
from translation of financial statements of foreign subsidiaries are excluded from the statements
of income and are accumulated in stockholders equity as a component of accumulated other
comprehensive income (loss).
(o) Use of Estimates
Management of TDK has made a number of estimates and assumptions relating to the reporting of
assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities
to prepare these consolidated financial statements in conformity with the U.S. GAAP. Significant
items subject to such estimates and assumptions include the valuation of intangible assets,
property, plant and equipment, trade receivables, inventories, investment in securities, and
deferred income tax assets, and assumptions related to the estimation of actuarial determined
employee benefit obligations. Actual results could differ from those estimates.
(p) Accounting for the Impairment of Long-Lived Assets
Property, plant and equipment and certain identifiable intangibles with finite useful lives
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted
and without interest charges) expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed of by sale are
reported at the lower of the carrying amount or fair value less costs to sell.
(q) Goodwill and Other Intangible Assets
Goodwill is not amortized, but instead is tested for impairment at least annually or more
frequently if certain indicators arise. Intangible assets with finite useful lives are amortized
over their respective estimated useful lives. Intangible assets determined to have an indefinite
useful life are not amortized, but instead are tested for impairment annually until the life is
determined to no longer be indefinite.
TDK conducts its annual impairment test of goodwill and other indefinite lived intangible
assets in the fourth quarter of each fiscal year.
(r) Derivative Financial Instruments
TDK has elected not to apply hedge accounting. Accordingly, changes in the fair value of
derivatives are recognized in earnings in the period of the changes.
(s) Net Income per Share
Basic net income per share has been computed by dividing net income available to common
stockholders by the weighted-average number of common shares outstanding during each year. Diluted
net income per share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock of TDK.
- 115 -
(t) Revenue Recognition
TDK generates revenue principally through the sale of electronic materials and components and
recording media under separate contractual arrangements for each. TDK recognizes revenue when
persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have
been transferred to the customer, the sales price is fixed or determinable, and collectibility is
probable.
Revenue from sales of electronic materials and components including electronic materials,
electronic devices and recording devices is recognized when the products are received by customers
based on the free-on board destination sales term. With regards to sales of electronic materials
and components, TDKs policy is not to accept product returns unless the products are defective.
The conditions of acceptance are governed by the terms of the contract or customer arrangement and
those not meeting the predetermined specification are not recorded as revenue.
Revenue from sales of recording media products such as videotape and DVDs is also recognized
when the products are received by customers based on the free-on board destination sales term or
when the products are delivered to carriers on the Carriage and Insurance Paid to (CIP).
TDK offers sales incentives through various programs to certain resellers and retailers.
These sales incentives include product discounts, volume-based discounts, marketing development
funds (MDFs), rebates and coupons, and are accounted for in accordance with Emerging Issues Task
Force Issue No. 01-9 Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of Vendors Product) (EITF 01-9). Generally, under EITF 01-9, consideration given by a
vendor to a customer is presumed to be a reduction of the selling price of goods and services, and
therefore, should be recognized as a reduction of revenue in the vendors income statement. The
presumption may be overcome based on certain factors. These sales incentives totaled to ¥5,042
million ($50,420 thousand), ¥14,034 million and ¥13,479 million for the years ended March 31, 2008,
2007 and 2006, respectively.
A number of product discounts are based on a certain percentage off the invoice price
predetermined by spot contracts or based on contractually agreed upon amounts with resellers and
retailers. Product discounts are recognized as a reduction of revenue at the time the related
revenue is recognized and amounted to ¥2,247 million ($22,470 thousand), ¥6,586 million and ¥7,415
million for the years ended March 31, 2008, 2007 and 2006, respectively.
Volume-based discounts are provided only if the resellers and retailers achieve a specified
cumulative level of revenue transactions in a year or less period. Liabilities are recognized as a
reduction of revenue for the expected sales incentive at the time the related revenue is recognized
and are initially based on the estimation of sales volume by using historical experience on an
individual customer basis. Estimates of expected sales incentives are evaluated and adjusted
periodically based on actual revenue transactions and forecasts for the balance of the year or
incentive period. Volume-based discounts recognized as a reduction of revenue amounted to ¥1,390
million ($13,900 thousand), ¥3,815 million and ¥2,646 million for the years ended March 31, 2008,
2007 and 2006, respectively.
MDFs are provided to certain resellers and retailers as a contribution to or a sponsored fund
for customers marketing programs, such as customers coupons, catalog, sales contests and
advertisements, mostly in the form of a subsidy. Under this program, we do not receive an
identifiable benefit sufficiently separable from our customers. Accordingly, MDFs are accounted
for as a reduction of revenue based on the annual contract or at the time TDK has incurred the
obligation, if earlier, and amounted to ¥606 million ($6,060 thousand), ¥1,692 million and ¥1,970
million for the years ended March 31, 2008, 2007 and 2006, respectively.
- 116 -
Consumer promotions mainly consist of coupons and mail-in rebates offered to end users, that
are reimbursed by TDK to retailers or end users for the coupons or mail-in rebates redeemed.
Liabilities are recognized at the time related revenue is recognized (or at the time of the offer
if the sale to retailers occurs before the offer) for the expected number of coupons or mail-in
rebates to be redeemed. TDK uses historical rates of redemption on similar offers for similar
products to estimate redemption rates for current incentive offerings. Consumer promotions
recognized as a reduction of revenue amounted to ¥658 million ($6,580 thousand), ¥1,436 million and
¥995 million for the years ended March 31, 2008, 2007 and 2006, respectively.
TDK also provides slotting fees paid to certain retailers for putting TDK products at
attractive areas or shelves in the store. Slotting fees are recognized as a reduction of revenue
at the time TDK has incurred the obligation. Slotting fees recognized as a reduction of revenue
amounted to ¥42 million ($420 thousand), ¥365 million and ¥274 million for the years ended March
31, 2008, 2007 and 2006, respectively.
Additionally, TDK has advertising programs with certain resellers and retailers where TDK
agrees to reimburse them for advertising cost incurred by them to put TDK products on their flyers,
catalogs and billboards. TDK receives an identifiable benefit (advertising) in return for the
consideration and that benefit is sufficiently separable because TDK could have purchased that
advertising from other parties. Also, TDK can reasonably estimate the fair value of the benefit
through obtaining sufficient evidence from the resellers and retailers in the form of the invoice
issued by the third party providing the service to the resellers and retailers. Therefore, such
advertising programs are expensed as selling, general and administrative expenses at the time TDK
has incurred the obligation and amounted to ¥99 million ($990 thousand), ¥140 million and ¥179
million for the years ended March 31, 2008, 2007 and 2006, respectively.
TDK allows limited right of returns in certain cases and reduces revenue for estimated future
returns based upon historical experience at the time the related revenue is recorded.
Warranties offered on TDKs products are insignificant.
(u) Considering the Effects of Prior Year Misstatements
In September 2006, the United States Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements. SAB 108 requires TDK to quantify
misstatements using both the balance-sheet and income-statement approaches and to evaluate whether
either approach results in quantifying an error that is material in light of relevant quantitative
and qualitative factors. When the effect of initial adoption is determined to be material, SAB 108
allows TDK to record that effect as a transitional cumulative-effect adjustment to
beginning-of-year retained earnings. Upon adoption of SAB 108 during the year ended March 31,
2007, TDK corrected prior year misstatements through a cumulative-effect adjustment to the
beginning of the year retained earnings. Prior to the adoption of SAB 108, TDK had not recorded
accrued vacations in accordance with Statement of Financial Accounting Standards No. 43 (SFAS
43), Accounting for Compensated Absences, which had previously been considered immaterial to the
prior year consolidated financial statements. The adjustment for the accrued vacation decreased
the beginning of year retained earnings by ¥2,287 million. TDK recorded a decrease in an accrued
vacation expense in the amount of ¥5 million, net of related income taxes, relating to SFAS 43 for
the year ended March 31, 2007.
- 117 -
(v) New Accounting Standards Not Yet Adopted
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (SFAS
157), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective
for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff
Positions No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification
or Measurement under Statement 13 and No. FAS 157-2, Effective Date of FASB Statement No. 157,
which partially delay the effective date of SFAS 157 for one year for certain nonfinancial assets
and liabilities and remove certain leasing transactions from its scope. TDK does not expect the
adoption of SFAS 157 to have a material effect on TDKs consolidated financial position and results
of operations.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158 (SFAS
158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an
amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS 158 requires TDK to measure the
fair value of plan assets and benefit obligations as of the date of its fiscal year-end. The
measurement date provision will be effective for TDKs fiscal year ending March 31, 2009. TDK
currently uses a December 31 measurement date, and is evaluating the effect of changing measurement
date on TDKs consolidated financial position and results of operations.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS
159), The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment
of Statement of Financial Accounting Standards No. 115. SFAS 159 provides companies with an
option to report selected financial assets and liabilities at fair value. Unrealized gains and
losses on items for which the fair value option has been elected will be recognized in earnings.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. TDK does not expect the
adoption of SFAS 159 to have a material effect on TDKs consolidated financial position and results
of operations.
In December 2007, the United States Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 110 (SAB 110). SAB 110 amends the SECs views discussed in Staff
Accounting Bulletin No. 107 (SAB 107) regarding the use of the simplified method in developing
estimates of the expected lives of share options in accordance with SFAS 123(R). TDK will continue
to use the simplified method until TDK has the historical data necessary to provide reasonable
estimates of expected lives in accordance with SAB 107, as amended by SAB 110.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised
2007) (SFAS 141(R)), Business Combinations. SFAS 141(R) establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS 141(R) also establishes disclosure requirements to enable the
evaluation of the nature and financial effects of the business combination. SFAS 141(R) is
effective for fiscal years beginning on or after December 15, 2008. TDK is currently evaluating
the effect that the adoption of SFAS 141(R) will have on TDKs consolidated financial position and
results of operations.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (SFAS
160), Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51.
SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries
held by parties other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parents ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS
160 also establishes disclosure requirements that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for
fiscal years beginning on or after December 15, 2008. TDK is currently evaluating the effect that
the adoption of SFAS 160 will have on TDKs consolidated financial position and results of
operations.
- 118 -
(w) Reclassifications
Certain reclassifications have been made to the prior years consolidated financial statements
to conform to the presentation used for the year ended March 31, 2008.
2. Financial Statement Translation
The consolidated financial statements are expressed in Japanese yen, the functional currency
of TDK. Supplementally, the Japanese yen amounts as of and for the year ended March 31, 2008, have
also been translated into U.S. dollar amounts, solely for the convenience of the reader, at the
rate of ¥100=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on March
31, 2008. This translation should not be construed as a representation that the amounts shown
could be converted into U.S. dollars at such rate.
3. Foreign Operations
Amounts included in the consolidated financial statements relating to subsidiaries operating
in foreign countries are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
Yen (Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
Net assets
|
|
¥
|
499,909
|
|
|
|
490,186
|
|
|
|
435,381
|
|
|
$
|
4,999,090
|
|
Net sales
|
|
|
693,993
|
|
|
|
674,969
|
|
|
|
626,626
|
|
|
|
6,939,930
|
|
Net income
|
|
|
48,833
|
|
|
|
47,599
|
|
|
|
28,582
|
|
|
|
488,330
|
|
|
4. Marketable Securities and Investments in Securities
Marketable securities and investments in securities at March 31, 2008 and 2007, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
Yen (Millions)
|
|
|
(Thousands)
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
Short-term marketable securities
|
|
¥
|
3,986
|
|
|
|
1,063
|
|
|
$
|
39,860
|
|
Long-term marketable securities
|
|
|
22,026
|
|
|
|
15,912
|
|
|
|
220,260
|
|
Nonmarketable securities
|
|
|
426
|
|
|
|
357
|
|
|
|
4,260
|
|
Investments in affiliates (Note 5)
|
|
|
46,262
|
|
|
|
16,372
|
|
|
|
462,620
|
|
|
|
|
|
|
¥
|
72,700
|
|
|
|
33,704
|
|
|
$
|
727,000
|
|
|
|
|
- 119 -
Marketable securities and investments in securities include available-for-sale securities.
Information with respect to such securities at March 31, 2008 and 2007, is as follows:
As of March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
Holding
|
|
|
Holding
|
|
|
|
|
Yen (Millions):
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
|
Equity securities
|
|
¥
|
22,800
|
|
|
|
2,276
|
|
|
|
4,039
|
|
|
|
21,037
|
|
Debt securities
|
|
|
4,972
|
|
|
|
3
|
|
|
|
|
|
|
|
4,975
|
|
|
|
|
|
|
¥
|
27,772
|
|
|
|
2,279
|
|
|
|
4,039
|
|
|
|
26,012
|
|
|
|
|
As of March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
Holding
|
|
|
Holding
|
|
|
|
|
Yen (Millions):
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
|
Equity securities
|
|
¥
|
11,919
|
|
|
|
3,566
|
|
|
|
488
|
|
|
|
14,997
|
|
Debt securities
|
|
|
1,983
|
|
|
|
|
|
|
|
5
|
|
|
|
1,978
|
|
|
|
|
|
|
¥
|
13,902
|
|
|
|
3,566
|
|
|
|
493
|
|
|
|
16,975
|
|
|
|
|
As of March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
Holding
|
|
|
Holding
|
|
|
|
|
U.S. Dollars (Thousands):
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
|
Equity securities
|
|
$
|
228,000
|
|
|
|
22,760
|
|
|
|
40,390
|
|
|
|
210,370
|
|
Debt securities
|
|
|
49,720
|
|
|
|
30
|
|
|
|
|
|
|
|
49,750
|
|
|
|
|
|
|
$
|
277,720
|
|
|
|
22,790
|
|
|
|
40,390
|
|
|
|
260,120
|
|
|
|
|
Debt securities classified as available-for-sale at March 31, 2008 have a weighted average
remaining term of 1.7 years.
The proceeds from sale and maturity of available-for-sale securities are ¥1,177 million
($11,770 thousand), ¥23 million and ¥4,263 million for the years ended March 31, 2008, 2007 and
2006, respectively. The gross realized gains on the sale and settlement of available-for-sale
securities are ¥47 million ($470 thousand), ¥3 million and ¥714 million for the years ended March
31, 2008, 2007 and 2006, respectively. TDK recorded an impairment of ¥2,128 million ($21,280
thousand), ¥215 million and ¥1,000 million on certain available-for-sale securities and
nonmarketable securities representing other-than-temporary declines in the fair value for the years
ended March 31, 2008, 2007 and 2006, respectively.
At March 31, 2008, all of the available-for-sale securities with unrealized losses had been in
a continuous unrealized loss position for less than 12 months.
The aggregate cost of nonmarketable securities accounted for under the cost method at March
31, 2008, 2007 and 2006 totaled ¥426 million ($4,260 thousand), ¥357 million and ¥596 million,
respectively, and, as of March 31, 2008 and 2007, those securities were not evaluated for
impairment because (a) TDK did not estimate the fair value of those investments as it was not
practicable to estimate the fair value of the investment and (b) TDK did not identify any events or
changes in circumstances that might have had significant adverse effect on the fair value of those
investments.
As of March 31, 2008 and 2007, certain debt securities in the amount of ¥990 million ($9,900
thousand) and ¥1,972 million, respectively were pledged as collateral for extended custom duty
payments to Tokyo Customs.
- 120 -
5. Investments in Affiliates
Investments in affiliates accounted for by the equity method consist of 20.1 percent of the
common stock of Imation Corp., a recording media sales company, at March 31, 2008, and 29.5 percent
of the common stock of Semiconductor Energy Laboratory Co., Ltd., a research and development
company, 34.0 percent of the common stock of Toppan TDK Label Co., Ltd., a magnetic products
manufacturing company, and four other affiliated companies, collectively, which are not
significant, at March 31, 2008 and 2007. As of March 31, 2008 and 2007, the difference between
TDKs carrying value of investments in affiliates and its share of the underlying net equity in
such affiliates substantially consists of unamortized amounts of equity-method goodwill of ¥4,226
million ($42,260 thousand) and ¥999 million, respectively.
As of March 31, 2008, TDKs carrying value of its investment in Imation Corp. was ¥28,598
million and the market value of TDKs investment in shares of Imation Corp. common stock was
¥17,636 million. TDKs management believes the excess of carrying value over the market value is
temporary.
As of March 31, 2008, consolidated retained earnings included undistributed earnings of
affiliates accounted for by the equity method in the amount of ¥10,421 million ($104,210 thousand).
6. Inventories
Inventories at March 31, 2008 and 2007, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2008
|
|
Finished goods
|
|
¥
|
34,856
|
|
|
|
38,546
|
|
|
$
|
348,560
|
|
Work in process
|
|
|
23,070
|
|
|
|
22,158
|
|
|
|
230,700
|
|
Raw materials
|
|
|
30,890
|
|
|
|
29,085
|
|
|
|
308,900
|
|
|
|
|
|
|
¥
|
88,816
|
|
|
|
89,789
|
|
|
$
|
888,160
|
|
|
|
|
7. Short-Term and Long-Term Debt
Short-term debt and weighted average interest rates at March 31, 2008 and 2007, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
Weighted average
|
|
|
(Millions)
|
|
(Thousands)
|
|
interest rate
|
|
|
2008
|
|
2007
|
|
2008
|
|
2008
|
|
2007
|
|
Short-term bank
loans unsecured
|
|
¥
|
8,898
|
|
|
|
3,013
|
|
|
$
|
88,980
|
|
|
|
1.45
|
%
|
|
|
1.81
|
%
|
|
Long-term debt at March 31, 2008 and 2007, is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2008
|
|
Loans from banks, secured, due fiscal 2010-2012
(weighted average: 2008 - 0.89%, 2007 - 0.93%)
|
|
¥
|
165
|
|
|
|
255
|
|
|
$
|
1,650
|
|
Lease obligation (weighted average: 2008 - 6.03%,
2007 - 5.16%)
|
|
|
281
|
|
|
|
791
|
|
|
|
2,810
|
|
|
|
|
|
|
|
446
|
|
|
|
1,046
|
|
|
|
4,460
|
|
Less current installments
|
|
|
294
|
|
|
|
514
|
|
|
|
2,940
|
|
|
|
|
|
|
¥
|
152
|
|
|
|
532
|
|
|
$
|
1,520
|
|
|
|
|
- 121 -
The aggregate annual maturities of long-term debt outstanding at March 31, 2008, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
Yen (Millions)
|
|
(Thousands)
|
|
Year ending March 31,
|
|
|
|
|
|
|
|
|
2009
|
|
¥
|
294
|
|
|
$
|
2,940
|
|
2010
|
|
|
82
|
|
|
|
820
|
|
2011
|
|
|
48
|
|
|
|
480
|
|
2012
|
|
|
22
|
|
|
|
220
|
|
|
|
|
|
|
¥
|
446
|
|
|
$
|
4,460
|
|
|
|
|
Short-term and long-term bank loans were made under general agreements that provide that under
certain circumstances security and guarantees for present and future indebtedness will be given
upon request of the bank, and that the bank shall have the right, as the obligations become due, or
in the event of their default, to offset cash deposits against such obligations due to the bank.
As of March 31, 2008 and 2007, property, plant and equipment having a net book value of ¥2,112
million ($21,120 thousand) and ¥2,200 million, respectively were pledged as a collateral for
long-term debt from banks.
There were no debt covenants, or cross-default provisions under TDKs financing arrangements.
Furthermore, there were no subsidiary level dividend restrictions under the financing arrangements.
8. Income Taxes
TDK and its domestic subsidiaries are subject to a national corporate tax of 30 percent, an
inhabitants tax of between 5.2 percent and 6.2 percent and a deductible enterprise tax of between
7.7 percent and 8.0 percent, which in the aggregate resulted in a statutory rate of approximately
40.4 percent for the years ended March 31, 2008, 2007 and 2006.
The effective tax rates of TDK for the years ended March 31, 2008, 2007 and 2006, are
reconciled with the Japanese statutory tax rate in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Japanese statutory tax rate
|
|
|
40.4
|
%
|
|
|
40.4
|
%
|
|
|
40.4
|
%
|
Expenses not deductible for tax purposes
|
|
|
1.1
|
|
|
|
1.1
|
|
|
|
1.6
|
|
Non taxable income
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
Difference in statutory tax rates of foreign subsidiaries
|
|
|
(15.7
|
)
|
|
|
(15.0
|
)
|
|
|
(13.9
|
)
|
Change in the valuation allowance
|
|
|
1.5
|
|
|
|
(1.1
|
)
|
|
|
4.7
|
|
Investment tax credit
|
|
|
(1.2
|
)
|
|
|
(0.5
|
)
|
|
|
(0.1
|
)
|
Research and development tax credit
|
|
|
(2.8
|
)
|
|
|
(4.5
|
)
|
|
|
(1.4
|
)
|
Prior-year tax adjustments
|
|
|
(0.8
|
)
|
|
|
(0.6
|
)
|
|
|
1.4
|
|
Other
|
|
|
(0.5
|
)
|
|
|
(0.4
|
)
|
|
|
(0.7
|
)
|
|
|
|
Effective tax rate
|
|
|
21.8
|
%
|
|
|
19.2
|
%
|
|
|
31.9
|
%
|
|
|
|
- 122 -
Total income taxes for the years ended March 31, 2008, 2007 and 2006 are allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
|
U.S.Dollars
|
|
|
(Millions)
|
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
Income from continuing operations
|
|
¥
|
19,948
|
|
|
|
16,985
|
|
|
|
21,057
|
|
|
$
|
199,480
|
|
Stockholders equity, accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
914
|
|
|
|
4
|
|
|
|
8
|
|
|
|
9,140
|
|
Net unrealized gains (losses) on securities
|
|
|
(1,534
|
)
|
|
|
88
|
|
|
|
849
|
|
|
|
(15,340
|
)
|
Minimum pension liability adjustments
|
|
|
|
|
|
|
1,037
|
|
|
|
2,074
|
|
|
|
|
|
Pension liability adjustments to initially apply SFAS 158
|
|
|
|
|
|
|
(1,022
|
)
|
|
|
|
|
|
|
|
|
Pension liability adjustments
|
|
|
(3,396
|
)
|
|
|
|
|
|
|
|
|
|
|
(33,960
|
)
|
|
|
|
Total income taxes
|
|
¥
|
15,932
|
|
|
|
17,092
|
|
|
|
23,988
|
|
|
$
|
159,320
|
|
|
|
|
Income from continuing operations before income taxes and income taxes for the years ended
March 31, 2008, 2007 and 2006, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From
|
|
|
|
|
Continuing
|
|
|
|
|
Operations
|
|
|
|
|
Before Income
|
|
Income Taxes
|
|
|
Taxes
|
|
Current
|
|
Deferred
|
|
Total
|
|
|
|
Yen (Millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese
|
|
¥
|
37,005
|
|
|
|
13,615
|
|
|
|
718
|
|
|
|
14,333
|
|
Foreign
|
|
|
54,500
|
|
|
|
8,218
|
|
|
|
(2,603
|
)
|
|
|
5,615
|
|
|
|
|
|
|
¥
|
91,505
|
|
|
|
21,833
|
|
|
|
(1,885
|
)
|
|
|
19,948
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese
|
|
|
35,189
|
|
|
|
11,947
|
|
|
|
537
|
|
|
|
12,484
|
|
Foreign
|
|
|
53,476
|
|
|
|
6,916
|
|
|
|
(2,415
|
)
|
|
|
4,501
|
|
|
|
|
|
|
|
88,665
|
|
|
|
18,863
|
|
|
|
(1,878
|
)
|
|
|
16,985
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese
|
|
|
28,004
|
|
|
|
11,160
|
|
|
|
657
|
|
|
|
11,817
|
|
Foreign
|
|
|
38,099
|
|
|
|
10,593
|
|
|
|
(1,353
|
)
|
|
|
9,240
|
|
|
|
|
|
|
|
66,103
|
|
|
|
21,753
|
|
|
|
(696
|
)
|
|
|
21,057
|
|
|
|
|
U.S. Dollars
(Thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese
|
|
$
|
370,050
|
|
|
|
136,150
|
|
|
|
7,180
|
|
|
|
143,330
|
|
Foreign
|
|
|
545,000
|
|
|
|
82,180
|
|
|
|
(26,030
|
)
|
|
|
56,150
|
|
|
|
|
|
|
$
|
915,050
|
|
|
|
218,330
|
|
|
|
(18,850
|
)
|
|
|
199,480
|
|
|
|
|
- 123 -
The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at March 31, 2008 and 2007, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2008
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, principally due to allowance for doubtful receivables
|
|
¥
|
543
|
|
|
|
712
|
|
|
$
|
5,430
|
|
Inventories
|
|
|
1,429
|
|
|
|
1,191
|
|
|
|
14,290
|
|
Accrued business tax
|
|
|
675
|
|
|
|
702
|
|
|
|
6,750
|
|
Accrued expenses
|
|
|
6,077
|
|
|
|
7,049
|
|
|
|
60,770
|
|
Retirement and severance benefits
|
|
|
9,740
|
|
|
|
11,298
|
|
|
|
97,400
|
|
Net operating loss carryforwards
|
|
|
21,485
|
|
|
|
21,132
|
|
|
|
214,850
|
|
Tax credit carryforwards
|
|
|
1,911
|
|
|
|
1,413
|
|
|
|
19,110
|
|
Pension liability adjustments
|
|
|
5,433
|
|
|
|
2,247
|
|
|
|
54,330
|
|
Property, plant and equipment, principally due to differences in depreciation
|
|
|
4,917
|
|
|
|
4,019
|
|
|
|
49,170
|
|
Other
|
|
|
1,831
|
|
|
|
1,700
|
|
|
|
18,310
|
|
|
|
|
Total gross deferred tax assets
|
|
|
54,041
|
|
|
|
51,463
|
|
|
|
540,410
|
|
Less valuation allowance
|
|
|
(21,039
|
)
|
|
|
(22,233
|
)
|
|
|
(210,390
|
)
|
|
|
|
Net deferred tax assets
|
|
¥
|
33,002
|
|
|
|
29,230
|
|
|
$
|
330,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, principally due to differences in valuation
|
|
|
(5,729
|
)
|
|
|
(6,139
|
)
|
|
|
(57,290
|
)
|
Undistributed earnings of foreign subsidiaries and affiliated companies
|
|
|
(3,792
|
)
|
|
|
(3,378
|
)
|
|
|
(37,920
|
)
|
Net unrealized gains on securities
|
|
|
(58
|
)
|
|
|
(1,597
|
)
|
|
|
(580
|
)
|
Acquired intangible assets
|
|
|
(7,183
|
)
|
|
|
(5,255
|
)
|
|
|
(71,830
|
)
|
Other
|
|
|
(1,002
|
)
|
|
|
(1,186
|
)
|
|
|
(10,020
|
)
|
|
|
|
Total gross deferred tax liabilities
|
|
|
(17,764
|
)
|
|
|
(17,555
|
)
|
|
|
(177,640
|
)
|
|
|
|
Net deferred tax assets
|
|
¥
|
15,238
|
|
|
|
11,675
|
|
|
$
|
152,380
|
|
|
|
|
- 124 -
The net changes in the total valuation allowance were a decrease of ¥1,194 million ($11,940
thousand) for the years ended March 31, 2008, and an increase of ¥1,935 million and ¥4,889 million
for the years ended March 31, 2007 and 2006, respectively. The valuation allowance primarily
relates to deferred tax assets associated with net operating loss carryforwards incurred by certain
foreign subsidiaries. Of ¥21,039 million ($210,390 thousand) in valuation allowances at March 31,
2008, ¥1,773 million ($17,730 thousand) was related to preacquisition tax benefits. In the future,
if TDK determines that the realization of these deferred tax assets is more likely than not, the
reversal of the related valuation allowance will reduce goodwill instead of the provision for
taxes. The decrease in the valuation allowance attributable to preacquisition tax benefits
recognized during the years ended March 31, 2008 and 2006 amounted to ¥75 million ($750 thousand)
and ¥154 million, respectively. The reversal of the valuation allowance upon realization of tax
benefits resulted in a reduction of goodwill. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible and tax carryforwards are utilized. Management considered the
scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not TDK will realize the benefits of these
deductible differences and tax carryforwards, net of the existing valuation allowance at March 31,
2008.
At March 31, 2008, certain subsidiaries have net operating loss carryforwards for income tax
purposes of ¥72,055 million ($720,550 thousand) which are available to offset future taxable
income, if any.
Periods available to offset future taxable income vary in each tax jurisdiction and range from
one year to an indefinite period as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
Yen (Millions)
|
|
(Thousands)
|
|
|
|
Within 1 year
|
|
¥
|
3,992
|
|
|
$
|
39,920
|
|
1 to 5 years
|
|
|
7,080
|
|
|
|
70,800
|
|
5 to 20 years
|
|
|
12,898
|
|
|
|
128,980
|
|
Indefinite periods
|
|
|
48,085
|
|
|
|
480,850
|
|
|
|
|
|
|
¥
|
72,055
|
|
|
$
|
720,550
|
|
|
|
|
At March 31, 2008, certain subsidiaries have tax credit carryforwards for income tax purposes
of ¥1,911 million ($19,110 thousand) which are available to reduce future income taxes, if any.
Approximately ¥244 million ($2,440 thousand) of the tax credit carryforwards expire through 2028,
while the remainder have an indefinite carryforward period.
Net deferred income tax assets and liabilities at March 31, 2008 and 2007, are reflected in
the accompanying consolidated balance sheets under the following captions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2008
|
Prepaid expenses and other current assets
|
|
¥
|
10,031
|
|
|
|
9,615
|
|
|
$
|
100,310
|
|
Deferred income taxes (noncurrent assets)
|
|
|
11,257
|
|
|
|
9,666
|
|
|
|
112,570
|
|
Other current liabilities
|
|
|
(52
|
)
|
|
|
(80
|
)
|
|
|
(520
|
)
|
Deferred income taxes (noncurrent
liabilities)
|
|
|
(5,998
|
)
|
|
|
(7,526
|
)
|
|
|
(59,980
|
)
|
|
|
|
|
|
¥
|
15,238
|
|
|
|
11,675
|
|
|
$
|
152,380
|
|
|
|
|
- 125 -
As of March 31, 2008 and 2007, TDK did not recognize deferred tax liabilities of approximately
¥86,721 million ($867,210 thousand) and ¥74,027 million, respectively, for certain portions of
undistributed earnings of foreign subsidiaries because TDK currently does not expect those
unremitted earnings to reverse and become taxable to TDK in the foreseeable future. A deferred tax
liability will be recognized when TDK expects that it will recover those undistributed earnings in
a taxable manner, such as through receipt of dividends or sale of the investments. As of March 31,
2008 and 2007, the undistributed earnings of these subsidiaries are approximately ¥375,526 million
($3,755,260 thousand) and ¥317,439 million, respectively.
TDK adopted the provisions of FIN48 on April 1, 2007. Upon adoption of FIN48, TDK identified
unrecognized tax benefits of ¥5,420 million which were reflected in the balance of prior year tax
liabilities, and no cumulative effect adjustment was required.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as
follows:
|
|
|
|
|
|
|
Yen (Millions)
|
|
Balance at April 1, 2007
|
|
¥
|
5,420
|
|
Additions for tax positions of the current year
|
|
|
726
|
|
Additions for tax positions of prior years
|
|
|
2,112
|
|
Reductions for tax positions of prior years
|
|
|
(1,795
|
)
|
Settlements with taxing authorities during the period
|
|
|
(204
|
)
|
Other
|
|
|
(762
|
)
|
|
|
|
|
Balance at March 31, 2008
|
|
¥
|
5,497
|
|
|
|
|
|
The total amount of unrecognized tax benefits that, if recognized, would reduce the effective
tax rate as of March 31, 2008 is ¥4,297 million.
Although TDK believes its estimates and assumptions used to identify unrecognized tax benefits
are reasonable, there is uncertainty about the final determination of tax audit settlements and any
related litigation which could affect the effective tax rate in the future periods. As at March
31, 2008, TDK is not aware of any significant changes in its unrecognized tax benefits over the
next twelve months.
TDK classifies interest and penalties related to unrecognized tax benefits as interest expense
and other expense, respectively, in the consolidated statements of income. Interest and penalties
accrued as of March 31, 2008 as well as interest and penalties recorded in interest expense and
other expense for the year then ended are not material.
TDK files income tax returns in Japan and various foreign tax jurisdictions. In Japan, TDK is
no longer subject to regular income tax examinations by the tax authority for fiscal years ended on
or before March 31, 2007. While there has been no specific indication by the tax authority that
TDK will be subject to a transfer pricing examination in the near future, the tax authority could
conduct a transfer pricing examination for fiscal years ended on or after March 31, 2002. In other
major foreign tax jurisdictions, including the United States and Hong Kong, TDK is no longer
subject to income tax examinations by tax authorities for fiscal years ended on or before March 31,
2000 with few exceptions. The tax authorities are currently conducting income tax examinations of
TDKs income tax returns for certain fiscal years ended on or after March 31, 2001 in major foreign
tax jurisdictions.
- 126 -
9. Retirement and Severance Benefits
TDK and certain of its subsidiaries sponsor contributory and noncontributory retirement and
severance plans that provide for pension or lump-sum benefit payments, based on length of service,
employee salary and certain other factors, to substantially all employees who retire or terminate
their employment for reasons other than dismissal for cause. Corporate statutory auditors
participate in an unfunded retirement plan sponsored by TDK.
TDK and its subsidiaries use a December 31 measurement date for the majority of the plans.
On March 31, 2007, TDK adopted the recognition and disclosure provisions of SFAS 158. SFAS
158 required TDK to recognize the funded status (i.e., the difference between the fair value of
plan assets and the projected benefit obligations) of its pension plans in the consolidated balance
sheets, with a corresponding adjustment to accumulated other comprehensive income (loss), net of
tax. The adjustment to accumulated other comprehensive income (loss) at adoption represents the
unrecognized net actuarial loss and unrecognized prior service cost, which were previously netted
against the plans funded status in the consolidated balance sheets pursuant to the provisions of
Statement of Financial Accounting Standards No. 87, Employees Accounting for Pensions. These
amounts will be subsequently recognized as net periodic benefit cost pursuant to TDKs historical
accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in
subsequent periods and are not recognized as net periodic benefit cost in the same periods will be
recognized as a component of other comprehensive income (loss). Those amounts will be subsequently
recognized as a component of net periodic benefit cost on the same basis as the amounts recognized
in accumulated other comprehensive income (loss) at adoption of SFAS 158.
The adoption of SFAS 158 had no effect on the consolidated statement of income for the year
ended March 31, 2007, or for any prior period presented, and it will not effect TDKs operating
results in future periods.
- 127 -
Reconciliations of beginning and ending balances of the benefit obligations and the fair value
of the plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2008
|
|
2007
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Change in benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligations at beginning of period
|
|
¥
|
177,650
|
|
|
|
13,335
|
|
|
|
180,175
|
|
|
|
13,117
|
|
Service cost
|
|
|
5,765
|
|
|
|
702
|
|
|
|
6,052
|
|
|
|
729
|
|
Interest cost
|
|
|
3,845
|
|
|
|
593
|
|
|
|
3,550
|
|
|
|
636
|
|
Actuarial (gain) loss
|
|
|
(936
|
)
|
|
|
478
|
|
|
|
(7,263
|
)
|
|
|
3
|
|
Benefits paid
|
|
|
(6,151
|
)
|
|
|
(461
|
)
|
|
|
(5,094
|
)
|
|
|
(1,181
|
)
|
Curtailment/settlement
|
|
|
|
|
|
|
(720
|
)
|
|
|
|
|
|
|
|
|
Sale of business
|
|
|
(244
|
)
|
|
|
(950
|
)
|
|
|
|
|
|
|
|
|
Others
|
|
|
(44
|
)
|
|
|
406
|
|
|
|
230
|
|
|
|
(71
|
)
|
Translation adjustment
|
|
|
|
|
|
|
(1,690
|
)
|
|
|
|
|
|
|
102
|
|
|
|
|
Benefit obligations at end of period
|
|
|
179,885
|
|
|
|
11,693
|
|
|
|
177,650
|
|
|
|
13,335
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
of plan assets at beginning of period
|
|
|
177,877
|
|
|
|
7,184
|
|
|
|
167,157
|
|
|
|
5,703
|
|
Actual return on plan assets
|
|
|
(2,348
|
)
|
|
|
151
|
|
|
|
10,248
|
|
|
|
795
|
|
Employer contributions
|
|
|
3,976
|
|
|
|
1,237
|
|
|
|
4,831
|
|
|
|
1,379
|
|
Benefits paid
|
|
|
(4,982
|
)
|
|
|
(200
|
)
|
|
|
(4,310
|
)
|
|
|
(830
|
)
|
Curtailment/settlement
|
|
|
|
|
|
|
(365
|
)
|
|
|
|
|
|
|
|
|
Sale of business
|
|
|
|
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
Translation adjustment
|
|
|
|
|
|
|
(1,055
|
)
|
|
|
|
|
|
|
137
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
174,523
|
|
|
|
6,202
|
|
|
|
177,877
|
|
|
|
7,184
|
|
|
|
|
Funded status
|
|
¥
|
(5,362
|
)
|
|
|
(5,491
|
)
|
|
|
227
|
|
|
|
(6,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
(Thousands)
|
|
|
|
2008
|
|
|
|
Japanese
|
|
Foreign
|
|
|
|
plans
|
|
plans
|
|
|
|
Change in benefit obligations:
|
|
|
|
|
|
|
|
|
|
Benefit obligations at beginning of period
|
|
$
|
1,776,500
|
|
|
|
133,350
|
|
|
Service cost
|
|
|
57,650
|
|
|
|
7,020
|
|
|
Interest cost
|
|
|
38,450
|
|
|
|
5,930
|
|
|
Actuarial (gain) loss
|
|
|
(9,360
|
)
|
|
|
4,780
|
|
|
Benefits paid
|
|
|
(61,510
|
)
|
|
|
(4,610
|
)
|
|
Curtailment/settlement
|
|
|
|
|
|
|
(7,200
|
)
|
|
Sale of business
|
|
|
(2,440
|
)
|
|
|
(9,500
|
)
|
|
Others
|
|
|
(440
|
)
|
|
|
4,060
|
|
|
Translation adjustment
|
|
|
|
|
|
|
(16,900
|
)
|
|
|
|
|
|
Benefit obligations at end of period
|
|
|
1,798,850
|
|
|
|
116,930
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of
period
|
|
|
1,778,770
|
|
|
|
71,840
|
|
|
Actual return on plan assets
|
|
|
(23,480
|
)
|
|
|
1,510
|
|
|
Employer contributions
|
|
|
39,760
|
|
|
|
12,370
|
|
|
Benefits paid
|
|
|
(49,820
|
)
|
|
|
(2,000
|
)
|
|
Curtailment/settlement
|
|
|
|
|
|
|
(3,650
|
)
|
|
Sale of business
|
|
|
|
|
|
|
(7,500
|
)
|
|
Others
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
|
|
|
|
(10,550
|
)
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
1,745,230
|
|
|
|
62,020
|
|
|
|
|
|
|
Funded status
|
|
$
|
(53,620
|
)
|
|
|
(54,910
|
)
|
|
|
|
|
|
- 128 -
Amounts recognized in the consolidated balance sheet as of March 31, 2008 and 2007 consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2008
|
|
2007
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Other assets
|
|
¥
|
24,450
|
|
|
|
|
|
|
|
27,537
|
|
|
|
|
|
Accrued expenses
|
|
|
(1,313
|
)
|
|
|
|
|
|
|
(1,171
|
)
|
|
|
|
|
Retirement and severance benefits
|
|
|
(28,499
|
)
|
|
|
(5,491
|
)
|
|
|
(26,139
|
)
|
|
|
(6,151
|
)
|
|
|
|
|
|
¥
|
(5,362
|
)
|
|
|
(5,491
|
)
|
|
|
227
|
|
|
|
(6,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
|
|
|
2008
|
|
|
|
Japanese
|
|
|
Foreign
|
|
|
|
plans
|
|
|
plans
|
|
|
|
Other assets
|
|
$
|
244,500
|
|
|
|
|
|
Accrued expenses
|
|
|
(13,130
|
)
|
|
|
|
|
Retirement and severance benefits
|
|
|
(284,990
|
)
|
|
|
(54,910
|
)
|
|
|
|
|
|
|
$
|
(53,620
|
)
|
|
|
(54,910
|
)
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2008 and
2007 consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Japanese
|
|
|
Foreign
|
|
|
Japanese
|
|
|
Foreign
|
|
|
|
plans
|
|
|
plans
|
|
|
plans
|
|
|
plans
|
|
|
Net actuarial loss
|
|
¥
|
33,519
|
|
|
|
2,526
|
|
|
|
27,438
|
|
|
|
2,531
|
|
Prior service benefit
|
|
|
(21,958
|
)
|
|
|
32
|
|
|
|
(23,983
|
)
|
|
|
100
|
|
|
|
|
|
|
¥
|
11,561
|
|
|
|
2,558
|
|
|
|
3,455
|
|
|
|
2,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
|
|
|
2008
|
|
|
|
Japanese
|
|
Foreign
|
|
|
|
plans
|
|
plans
|
|
|
Net actuarial loss
|
|
¥
|
335,190
|
|
|
|
25,260
|
|
Prior service benefit
|
|
|
(219,580
|
)
|
|
|
320
|
|
|
|
|
|
|
|
¥
|
115,610
|
|
|
|
25,580
|
|
|
|
Accumulated benefit obligation for all defined benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2008
|
|
2007
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Accumulated benefit obligation
|
|
¥
|
170,784
|
|
|
|
9,669
|
|
|
|
165,477
|
|
|
|
11,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
|
|
2008
|
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
Accumulated benefit obligation
|
|
$
|
1,707,840
|
|
|
|
96,690
|
|
|
- 129 -
The projected benefit obligations and the fair value of plan assets for the pension plans with
projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and
the fair value of plan assets for the pension plans with accumulated benefit obligations in excess
of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2008
|
|
2007
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Plans with projected benefit
obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligations
|
|
¥
|
55,138
|
|
|
|
11,693
|
|
|
|
53,998
|
|
|
|
13,335
|
|
Fair value of plan assets
|
|
|
32,869
|
|
|
|
6,202
|
|
|
|
34,350
|
|
|
|
7,184
|
|
Plans with accumulated benefit
obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligations
|
|
¥
|
52,913
|
|
|
|
4,049
|
|
|
|
49,499
|
|
|
|
11,409
|
|
Fair value of plan assets
|
|
|
32,869
|
|
|
|
187
|
|
|
|
33,423
|
|
|
|
7,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
(Thousands)
|
|
|
2008
|
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
Plans with projected benefit obligations
in excess of plan assets:
|
|
|
|
|
|
|
|
|
Projected benefit obligations
|
|
$
|
551,380
|
|
|
|
116,930
|
|
Fair value of plan assets
|
|
|
328,690
|
|
|
|
62,020
|
|
Plans with accumulated benefit
obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
Accumulated benefit obligations
|
|
$
|
529,130
|
|
|
|
40,490
|
|
Fair value of plan assets
|
|
|
328,690
|
|
|
|
1,870
|
|
|
- 130 -
Net periodic benefit cost for TDKs employee retirement and severance defined benefit plans
for the years ended March 31, 2008, 2007 and 2006 consisted of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Service cost-benefits earned
during the year
|
|
¥
|
5,765
|
|
|
|
702
|
|
|
|
6,052
|
|
|
|
729
|
|
|
|
5,928
|
|
|
|
659
|
|
Interest cost on projected
benefit obligation
|
|
|
3,845
|
|
|
|
593
|
|
|
|
3,550
|
|
|
|
636
|
|
|
|
3,478
|
|
|
|
572
|
|
Expected return on plan assets
|
|
|
(5,562
|
)
|
|
|
(521
|
)
|
|
|
(4,425
|
)
|
|
|
(453
|
)
|
|
|
(3,003
|
)
|
|
|
(383
|
)
|
Amortization of transition assets
|
|
|
|
|
|
|
|
|
|
|
(1,276
|
)
|
|
|
|
|
|
|
(1,331
|
)
|
|
|
|
|
Recognized actuarial loss
|
|
|
893
|
|
|
|
85
|
|
|
|
1,408
|
|
|
|
137
|
|
|
|
3,255
|
|
|
|
190
|
|
Amortization of unrecognized
prior service benefit
|
|
|
(2,025
|
)
|
|
|
9
|
|
|
|
(2,041
|
)
|
|
|
12
|
|
|
|
(2,041
|
)
|
|
|
|
|
Curtailment charge
|
|
|
|
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement loss
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
2,916
|
|
|
|
1,258
|
|
|
|
3,268
|
|
|
|
1,061
|
|
|
|
6,286
|
|
|
|
1,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
(Thousands)
|
|
|
|
2008
|
|
|
|
Japanese
|
|
Foreign
|
|
|
|
plans
|
|
plans
|
|
|
Service cost-benefits earned during the
year
|
|
$
|
57,650
|
|
|
|
7,020
|
|
Interest cost on projected benefit
obligation
|
|
|
38,450
|
|
|
|
5,930
|
|
Expected return on plan assets
|
|
|
(55,620
|
)
|
|
|
(5,210
|
)
|
Amortization of transition assets
|
|
|
|
|
|
|
|
|
Recognized actuarial loss
|
|
|
8,930
|
|
|
|
850
|
|
Amortization of unrecognized prior
service benefit
|
|
|
(20,250
|
)
|
|
|
90
|
|
Curtailment charge
|
|
|
|
|
|
|
3,490
|
|
Settlement loss
|
|
|
|
|
|
|
410
|
|
|
|
|
$
|
29,160
|
|
|
|
12,580
|
|
|
Other changes in plan assets and benefit obligations recognized in other comprehensive income
(loss) for the year ended March 31, 2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
U.S. Dollars (Thousands)
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Current year actuarial (gain) loss
|
|
¥
|
6,974
|
|
|
|
654
|
|
|
$
|
69,740
|
|
|
|
6,540
|
|
Amortization of actuarial loss
|
|
|
(893
|
)
|
|
|
(85
|
)
|
|
|
(8,930
|
)
|
|
|
(850
|
)
|
Amortization of prior service benefit
|
|
|
2,025
|
|
|
|
(9
|
)
|
|
|
20,250
|
|
|
|
(90
|
)
|
Curtailment charge
|
|
|
|
|
|
|
(210
|
)
|
|
|
|
|
|
|
(2,100
|
)
|
Settlement loss
|
|
|
|
|
|
|
(41
|
)
|
|
|
|
|
|
|
(410
|
)
|
Sale of business
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
(510
|
)
|
|
|
|
¥
|
8,106
|
|
|
|
258
|
|
|
$
|
81,060
|
|
|
|
2,580
|
|
|
- 131 -
The estimated net actuarial loss and prior service benefit for the defined pension plans that
will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost
over the next year are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
U.S. Dollars (Thousands)
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Net actuarial loss
|
|
¥
|
1,156
|
|
|
|
125
|
|
|
$
|
11,560
|
|
|
|
1,250
|
|
Prior service benefit
|
|
|
(2,025
|
)
|
|
|
4
|
|
|
|
(20,250
|
)
|
|
|
40
|
|
|
Assumptions
Weighted-average assumptions used to determine
benefit obligations at March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Discount rate
|
|
|
2.2
|
%
|
|
|
5.1
|
%
|
|
|
2.2
|
%
|
|
|
4.8
|
%
|
Assumed rate of increase
in future compensation
levels
|
|
|
3.0
|
%
|
|
|
3.1
|
%
|
|
|
3.0
|
%
|
|
|
2.8
|
%
|
|
Weighted-average assumptions used to determine net periodic benefit cost for the years ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Discount rate
|
|
|
2.2
|
%
|
|
|
4.8
|
%
|
|
|
2.0
|
%
|
|
|
5.0
|
%
|
|
|
2.0
|
%
|
|
|
5.1
|
%
|
Assumed rate of
increase in future
compensation levels
|
|
|
3.0
|
%
|
|
|
2.8
|
%
|
|
|
3.0
|
%
|
|
|
3.0
|
%
|
|
|
3.0
|
%
|
|
|
3.0
|
%
|
Expected long-term
rate of return on
plan assets
|
|
|
3.5
|
%
|
|
|
6.1
|
%
|
|
|
3.0
|
%
|
|
|
6.2
|
%
|
|
|
2.5
|
%
|
|
|
6.4
|
%
|
|
TDK determines the expected long-term rate of return based on the expected long-term return of
the various asset categories in which it invests. TDK considers the current expectations for
future returns and the actual historical returns of each plan asset category.
Plan assets
The weighted-average asset allocations of TDKs benefit plans at March 31, 2008 and 2007 by
asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Equity securities
|
|
|
58.2
|
%
|
|
|
62.1
|
%
|
|
|
62.6
|
%
|
|
|
63.6
|
%
|
Debt securities
|
|
|
25.0
|
%
|
|
|
29.3
|
%
|
|
|
24.8
|
%
|
|
|
17.7
|
%
|
Cash
|
|
|
2.9
|
%
|
|
|
4.4
|
%
|
|
|
2.5
|
%
|
|
|
3.7
|
%
|
Other
|
|
|
13.9
|
%
|
|
|
4.2
|
%
|
|
|
10.1
|
%
|
|
|
15.0
|
%
|
|
|
|
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
- 132 -
TDKs investment policies are designed to ensure adequate plan assets are available to provide
future payments of pension benefits to eligible participants. Taking into account the expected
long-term rate of return on plan assets, TDK formulates a model portfolio comprised of the
optimal combination of equity securities and debt securities. Plan assets are invested in
individual equity and debt securities using the guidelines of the model portfolio in order to
produce a total return that will match the expected return on a mid-term to long-term basis. TDK
evaluates the gap between expected return and actual return of invested plan assets on an annual
basis to determine if such differences necessitate a revision in the formulation of the model
portfolio. TDK revises the model portfolio when and to the extent considered necessary to
achieve the expected long-term rate of return on plan assets.
Contributions
TDK expects to contribute ¥4,117 million ($41,170 thousand) to its Japanese defined benefit
plans and ¥306 million ($3,060 thousand) to its foreign defined benefit plans for the year ending
March 31, 2009.
Estimated future benefit payments
The benefits are expected to be paid from the pension plans in each year 2009 through 2018 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
(Millions)
|
|
U.S.
Dollars
(Thousands)
|
|
|
Japanese
|
|
Foreign
|
|
Japanese
|
|
Foreign
|
|
|
plans
|
|
plans
|
|
plans
|
|
plans
|
|
Year ending March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
¥
|
7,046
|
|
|
|
454
|
|
|
$
|
70,460
|
|
|
|
4,540
|
|
2010
|
|
|
7,661
|
|
|
|
386
|
|
|
|
76,610
|
|
|
|
3,860
|
|
2011
|
|
|
7,635
|
|
|
|
481
|
|
|
|
76,350
|
|
|
|
4,810
|
|
2012
|
|
|
8,057
|
|
|
|
479
|
|
|
|
80,570
|
|
|
|
4,790
|
|
2013
|
|
|
7,244
|
|
|
|
575
|
|
|
|
72,440
|
|
|
|
5,750
|
|
2014 2018
|
|
|
38,245
|
|
|
|
3,422
|
|
|
|
382,450
|
|
|
|
34,220
|
|
|
10.
|
|
Legal Reserve and Dividends
|
The Japanese Companies Act provides that an amount equal to 10 percent of cash dividends and
other distributions from retained earnings paid by TDK and its Japanese subsidiaries be
appropriated as a legal reserve. No further appropriations are required when the total amount of
the additional paid-in capital and the legal reserve equals 25 percent of their respective stated
capital. The Japanese Companies Act also provides that additional paid-in capital and the legal
reserve are available for appropriations by the resolution of the shareholders. Certain foreign
subsidiaries are also required to appropriate their earnings to legal reserves under the laws of
the respective countries. Cash dividends and appropriations to the legal reserve charged to
retained earnings in accordance with Japanese Companies Act for the years ended March 31, 2008,
2007 and 2006 represent dividends paid out during those years and the related appropriations to the
legal reserve. The accompanying consolidated financial statements do not include any provision for
the dividend resolved by the Ordinary General Meeting of Shareholders of ¥70 ($0.7) per share
aggregating ¥9,026 million ($90,260 thousand) in respect of the year ended March 31, 2008.
Cash dividends per common share are computed based on dividends paid for the year.
- 133 -
The Board of Directors, which was held on May 15, 2007 regarding the issuance of stock
acquisition rights as share-based compensation stock options (the Stock Acquisition Rights) to
Directors pursuant to Articles 236, 238 and 239 of the Companies Act, adopted resolutions to issue
an aggregate of 86 Stock Acquisition Rights, each representing an option to purchase 100 shares of
common stock of TDK, to the then 7 Directors of TDK. The Stock Acquisition Rights issued on July
7, 2007 are fully vested on date of issuance and have the exercise period of 20 years. The amount
to be paid by qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1
($0.01) per share of common stock.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 28, 2007
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Corporate Officers, pursuant to Articles 236, 238 and 239 of the
Companies Act. Upon approval, the Board of Directors adopted resolutions to issue an aggregate of
61 Stock Acquisition Rights, each representing an option to purchase 100 shares of common stock of
TDK, to the then 9 Corporate Officers of TDK. The Stock Acquisition Rights issued on July 7, 2007
are fully vested on date of issuance and have the exercise period of 20 years. The amount to be
paid by qualified persons upon the exercise of each Stock Acquisition Rights is set at ¥1 ($0.01)
per share of common stock.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 28, 2007
regarding the issuance of stock acquisition rights as stock options to select senior executives of
TDK, and the Directors and select senior executives of subsidiaries, pursuant to Articles 236, 238
and 239 of the Japanese Companies Act. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 986 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 186 select senior executives of TDK, and the Directors
and select senior executives of subsidiaries. 10 Stock Acquisition Rights issued to the then 2
select senior executives of TDK on July 20, 2007 and 976 Stock Acquisition Rights issued to the
then 184 select senior executives of TDK, and the Directors and select senior executives of
subsidiaries on July 11, 2007 are vested based on 2 years of continuous service after the issuance
and have the exercise period of 4 years. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights is set at ¥12,098 ($120.98) per share of common stock,
which was calculated by a formula approved by shareholders at the aforementioned annual
shareholders meeting and is subject to an adjustment in certain events, including but not limited
to a stock split, stock dividend and issue of new shares at a price less than the current market
price of the shares of TDK. The exercise price of each Stock Acquisition Rights was equal to or
greater than the fair market value of TDKs common stock on the date of grant.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2006
regarding the issuance of the Stock Acquisition Rights to Directors and Corporate Officers,
pursuant to Articles 236, 238 and 239 of the Companies Act. Upon approval, the Board of Directors
adopted resolutions to issue an aggregate of 203 Stock Acquisition Rights, each representing an
option to purchase 100 shares of common stock of TDK, to the then 17 Directors and Corporate
Officers of TDK. The Stock Acquisition Rights issued on August 5, 2006 are fully vested on date of
issuance and have the exercise period of 20 years. The amount to be paid by qualified persons upon
the exercise of each Stock Acquisition Rights is set at ¥1 per share of common stock.
- 134 -
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2006
regarding the issuance of stock acquisition rights as stock options to select senior executives of
TDK, and the Directors and select senior executives of subsidiaries, pursuant to Articles 236, 238
and 239 of the Companies Act. Upon approval, the Board of Directors adopted resolutions to issue
an aggregate of 966 Stock Acquisition Rights, each representing an option to purchase 100 shares of
common stock of TDK, to the then 179 select senior executives of TDK, and the Directors and select
senior executives of subsidiaries. The Stock Acquisition Rights issued on August 5, 2006 are
vested based on 2 years of continuous service after the issuance and have the exercise period of 4
years. The amount to be paid by qualified persons upon the exercise of each Stock Acquisition
Rights is set at ¥9,072 per share of common stock, which was calculated by a formula approved by
shareholders at the aforementioned annual shareholders meeting and is subject to an adjustment in
certain events, including but not limited to a stock split, stock dividend and issuance of new
shares at a price less than the current market price of the shares of TDK. The exercise price of
each Stock Acquisition Rights was equal to or greater than the fair market value of TDKs common
stock on the date of grant.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Board members and Corporate Officers, pursuant to Articles 280-20 and
280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 246 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 17 Directors and Corporate Officers of TDK. The Stock
Acquisition Rights issued on June 30, 2005 are fully vested on date of issuance and have the
exercise period of 20 years. The amount to be paid by qualified persons upon the exercise of each
Stock Acquisition Rights is set at ¥1 per share of common stock.
TDK obtained approval of the Ordinary General Meeting of Shareholders held in June 2005, 2004,
2003 and 2002 regarding the issuance of stock acquisition rights as stock options, pursuant to
Articles 280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors
adopted resolutions to issue an aggregate of 906, 2,343, 2,547 and 2,236 Stock Acquisition Rights,
each representing a stock option to purchase 100 shares of common stock of TDK, to the then 172,
187, 179 and 197 Directors, Corporate Officers and select senior executives of TDK, and the
Directors and select senior executives of its subsidiaries, respectively. The Stock Acquisition
Rights issued on August 11, 2005, August 6, 2004, August 7, 2003 and August 9, 2002 are vested
based on 2 years of continuous service after the issuance and have the exercise period of 4 years,
respectively. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights was set at ¥8,134, ¥8,147, ¥6,954 and ¥5,909 per share of common stock,
respectively. The exercise price of each Stock Acquisition Rights was equal to or greater than the
fair market value of TDKs common stock on the date of grant.
At March 31, 2008, TDK has ¥154 million ($1,540 thousand) of total unrecognized stock option
related compensation cost that will be recognized over the weighted average period of 1.1 year.
Cash received from stock option exercises was ¥882 million ($8,820 thousand) for the year ended
March 31, 2008. The total intrinsic value of options exercised during the years ended March 31,
2008, 2007 and 2006 is ¥207 million ($2,070 thousand), ¥421 million and ¥269 million, respectively.
The total fair value of options vested during the years ended March 31, 2008, 2007 and 2006 is
¥373 million ($3,730 thousand), ¥683 million and ¥759 million, respectively.
- 135 -
A summary of the status of TDKs stock option plans as of March 31, 2008, 2007 and 2006, and
of the activity during the years ending on those dates, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
average
|
|
|
remaining
|
|
|
intrinsic
|
|
|
|
of
|
|
|
exercise
|
|
|
contractual
|
|
|
value
|
|
|
|
shares
|
|
|
price
|
|
|
term
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
|
|
|
|
|
|
Yen
|
|
|
Years
|
|
|
(Millions)
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
653,000
|
|
|
¥
|
7,191
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
113,300
|
|
|
|
10,528
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
121,600
|
|
|
|
7,165
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
18,600
|
|
|
|
7,538
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
626,100
|
|
|
|
7,790
|
|
|
|
4.4
|
|
|
|
351
|
|
Exercisable at end of year
|
|
|
432,400
|
|
|
|
6,533
|
|
|
|
4.3
|
|
|
|
351
|
|
Expected to vest after end of year
|
|
|
193,700
|
|
|
|
10,597
|
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
828,200
|
|
|
¥
|
8,244
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
116,900
|
|
|
|
7,497
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
170,400
|
|
|
|
6,787
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
121,700
|
|
|
|
15,212
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
653,000
|
|
|
|
7,191
|
|
|
|
4.3
|
|
|
|
1,978
|
|
Exercisable at end of year
|
|
|
465,800
|
|
|
|
6,618
|
|
|
|
4.1
|
|
|
|
1,678
|
|
Expected to vest after end of year
|
|
|
187,200
|
|
|
|
8,618
|
|
|
|
4.8
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
868,600
|
|
|
¥
|
8,293
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
115,200
|
|
|
|
6,397
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
139,700
|
|
|
|
6,308
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
15,900
|
|
|
|
14,563
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
828,200
|
|
|
|
8,244
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
504,300
|
|
|
|
8,308
|
|
|
|
|
|
|
|
|
|
|
(1)
The aggregate intrinsic value is calculated as the
difference between the exercise price of the underlying awards and the closing
stock price of ¥5,890 ($58.90) of our common stock on March 31, 2008 and
¥10,220 of our common stock on March 30, 2007.
- 136 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
|
|
|
|
Number
|
|
|
average
|
|
|
remaining
|
|
|
Aggregate
|
|
|
|
of
|
|
|
exercise
|
|
|
contractual
|
|
|
intrinsic
|
|
|
|
shares
|
|
|
price
|
|
|
term
|
|
|
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
Years
|
|
|
(Thousands)
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
653,000
|
|
|
$
|
71.91
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
113,300
|
|
|
|
105.28
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
121,600
|
|
|
|
71.65
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
18,600
|
|
|
|
75.38
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
626,100
|
|
|
|
77.90
|
|
|
|
4.4
|
|
|
|
3,510
|
|
Exercisable at end of year
|
|
|
432,400
|
|
|
|
65.33
|
|
|
|
4.3
|
|
|
|
3,510
|
|
Expected to vest after end of year
|
|
|
193,700
|
|
|
|
105.97
|
|
|
|
4.8
|
|
|
|
|
|
|
Information about stock options outstanding at March 31, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
Number
|
|
remaining
|
|
|
|
|
|
outstanding at
|
|
contractual
|
|
Weighted average
|
|
Range of exercise prices
|
|
March 31, 2008
|
|
term
|
|
exercise price
|
|
Yen
|
|
|
|
|
|
(years)
|
|
Yen
|
|
U.S. Dollars
|
|
1
|
|
|
59,600
|
|
|
|
18.1
|
|
|
|
1
|
|
|
|
0.01
|
|
5,909
|
|
|
38,100
|
|
|
|
0.3
|
|
|
|
5,909
|
|
|
|
59.09
|
|
6,954
|
|
|
105,600
|
|
|
|
1.3
|
|
|
|
6,954
|
|
|
|
69.54
|
|
8,134
|
|
|
87,100
|
|
|
|
3.3
|
|
|
|
8,134
|
|
|
|
81.34
|
|
8,147
|
|
|
142,000
|
|
|
|
2.3
|
|
|
|
8,147
|
|
|
|
81.47
|
|
9,072
|
|
|
96,100
|
|
|
|
4.3
|
|
|
|
9,072
|
|
|
|
90.72
|
|
12,098
|
|
|
97,600
|
|
|
|
5.3
|
|
|
|
12,098
|
|
|
|
120.98
|
|
1 to 12,098
|
|
|
626,100
|
|
|
|
4.4
|
|
|
|
7,790
|
|
|
|
77.90
|
|
- 137 -
The fair value of these stock options was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
The Stock Acquisition Rights the exercise price is equal to or greater than the market price of
the stock on the grant date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
(1)
|
|
|
2007
|
|
|
2006
|
|
|
Grant-date fair value
|
|
¥
|
2,011
|
|
|
¥
|
1,976
|
|
|
¥
|
2,325
|
|
|
|
|
($20.11
|
)
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
4.0 years
|
|
|
4.0 years
|
|
|
4.0 years
|
Risk-free interest rate
|
|
|
1.33
|
%
|
|
|
1.23
|
%
|
|
|
0.54
|
%
|
Expected volatility
|
|
|
26.09
|
%
|
|
|
32.76
|
%
|
|
|
38.93
|
%
|
Expected dividend yield
|
|
|
0.97
|
%
|
|
|
1.00
|
%
|
|
|
0.96
|
%
|
|
(1) Grant-date fair value and Expected volatility are weighted-average assumptions at date of
grant for options as of July 11 and July 20, 2007 as mentioned above.
The Stock Acquisition Rights the exercise price is less than the market price of the stock on
the grant date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Grant-date fair value
|
|
¥
|
11,014
|
|
|
¥
|
8,139
|
|
|
¥
|
7,235
|
|
|
|
|
($110.14
|
)
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
5.5 years
|
|
|
5.5 years
|
|
|
5.5 years
|
Risk-free interest rate
|
|
|
1.59
|
%
|
|
|
1.47
|
%
|
|
|
0.47
|
%
|
Expected volatility
|
|
|
31.25
|
%
|
|
|
38.84
|
%
|
|
|
44.46
|
%
|
Expected dividend yield
|
|
|
0.95
|
%
|
|
|
0.96
|
%
|
|
|
0.80
|
%
|
|
- 138 -
12. Other Comprehensive Income (Loss)
Change in accumulated other comprehensive income (loss) for the years ended March 31, 2008,
2007 and 2006, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
|
|
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
¥
|
(16,688
|
)
|
|
|
(21,071
|
)
|
|
|
(47,171
|
)
|
|
$
|
(166,880
|
)
|
Adjustments for period
|
|
|
(55,757
|
)
|
|
|
4,383
|
|
|
|
26,100
|
|
|
|
(557,570
|
)
|
|
|
|
Balance at end of period
|
|
|
(72,445
|
)
|
|
|
(16,688
|
)
|
|
|
(21,071
|
)
|
|
|
(724,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
1,769
|
|
|
|
1,693
|
|
|
|
801
|
|
|
|
17,690
|
|
Adjustments for period
|
|
|
(3,296
|
)
|
|
|
76
|
|
|
|
892
|
|
|
|
(32,960
|
)
|
|
|
|
Balance at end of period
|
|
|
(1,527
|
)
|
|
|
1,769
|
|
|
|
1,693
|
|
|
|
(15,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
|
|
|
|
(2,568
|
)
|
|
|
(5,287
|
)
|
|
|
|
|
Adjustments for period
|
|
|
|
|
|
|
2,290
|
|
|
|
2,719
|
|
|
|
|
|
Adjustment
for application of SFAS158
|
|
|
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
|
|
|
|
|
|
|
|
|
(2,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension liability adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
(2,927
|
)
|
|
|
|
|
|
|
|
|
|
|
(29,270
|
)
|
Adjustments for period
|
|
|
(4,684
|
)
|
|
|
|
|
|
|
|
|
|
|
(46,840
|
)
|
Adjustment for application of
SFAS158
|
|
|
|
|
|
|
(2,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
|
(7,611
|
)
|
|
|
(2,927
|
)
|
|
|
|
|
|
|
(76,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
(17,846
|
)
|
|
|
(21,946
|
)
|
|
|
(51,657
|
)
|
|
|
(178,460
|
)
|
Adjustments for period
|
|
|
(63,737
|
)
|
|
|
6,749
|
|
|
|
29,711
|
|
|
|
(637,370
|
)
|
Adjustment for application of
SFAS158
|
|
|
|
|
|
|
(2,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
¥
|
(81,583
|
)
|
|
|
(17,846
|
)
|
|
|
(21,946
|
)
|
|
$
|
(815,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 139 -
Tax effects allocated to each component of other comprehensive income (loss) and
reclassification adjustments for the years ended March 31, 2008, 2007 and 2006, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
|
(Millions)
|
|
|
|
|
Tax
|
|
|
|
|
Before tax
|
|
(expense)
|
|
Net-of-tax
|
|
|
amount
|
|
or benefit
|
|
amount
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount arising during the year on
investments in foreign entities held
at end of period
|
|
¥
|
(56,565
|
)
|
|
|
(103
|
)
|
|
|
(56,668
|
)
|
Reclassification adjustments for the
portion of gains and losses realized
upon sale and liquidation of
investments in foreign entities
|
|
|
911
|
|
|
|
|
|
|
|
911
|
|
|
|
|
Net foreign
currency translation adjustments
|
|
|
(55,654
|
)
|
|
|
(103
|
)
|
|
|
(55,757
|
)
|
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses)
arising for period
|
|
|
(6,343
|
)
|
|
|
2,145
|
|
|
|
(4,198
|
)
|
Reclassification adjustments for
(gains) losses realized in net
income
|
|
|
1,513
|
|
|
|
(611
|
)
|
|
|
902
|
|
|
|
|
Net unrealized gains (losses)
|
|
|
(4,830
|
)
|
|
|
1,534
|
|
|
|
(3,296
|
)
|
Pension liability adjustments
|
|
|
(8,080
|
)
|
|
|
3,396
|
|
|
|
(4,684
|
)
|
|
|
|
Other comprehensive income (loss)
|
|
¥
|
(68,564
|
)
|
|
|
4,827
|
|
|
|
(63,737
|
)
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount arising during the year on
investments in foreign entities held at
end of period
|
|
¥
|
4,298
|
|
|
|
(4)
|
|
|
|
4,294
|
|
Reclassification adjustments for the
portion of gains and losses realized upon
sale and liquidation of investments in
foreign entities
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
|
|
|
Net foreign currency translation
adjustments
|
|
|
4,387
|
|
|
|
(4
|
)
|
|
|
4,383
|
|
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising for period
|
|
|
171
|
|
|
|
(91
|
)
|
|
|
80
|
|
Reclassification adjustments for (gains)
losses realized in net income
|
|
|
(7
|
)
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
|
Net unrealized gains (losses)
|
|
|
164
|
|
|
|
(88
|
)
|
|
|
76
|
|
Minimum pension liability adjustments
|
|
|
3,327
|
|
|
|
(1,037
|
)
|
|
|
2,290
|
|
|
|
|
Other comprehensive income (loss)
|
|
¥
|
7,878
|
|
|
|
(1,129
|
)
|
|
|
6,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
¥
|
26,108
|
|
|
|
(8)
|
|
|
|
26,100
|
|
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising for period
|
|
2,128
|
|
|
(856
|
)
|
|
|
1,272
|
|
Reclassification adjustments for (gains)
losses realized in net income
|
|
|
(387
|
)
|
|
|
7
|
|
|
|
(380
|
)
|
|
|
|
Net unrealized gains (losses)
|
|
|
1,741
|
|
|
|
(849
|
)
|
|
|
892
|
|
Minimum pension liability adjustments
|
|
|
4,793
|
|
|
|
(2,074
|
)
|
|
|
2,719
|
|
|
|
|
Other comprehensive income (loss)
|
|
¥
|
32,642
|
|
|
|
(2,931
|
)
|
|
|
29,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 140 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
(Thousands)
|
|
|
|
|
Tax
|
|
|
|
|
Before tax
|
|
(expense)
|
|
Net-of-tax
|
|
|
amount
|
|
or benefit
|
|
amount
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount arising during the year on investments
in foreign entities held at end of period
|
|
$
|
(565,650
|
)
|
|
|
(1,030
|
)
|
|
|
(566,680
|
)
|
Reclassification adjustments for the
portion of gains and losses realized upon
sale and liquidation of investments in
foreign entities
|
|
|
9,110
|
|
|
|
|
|
|
|
9,110
|
|
|
|
|
Net foreign currency translation adjustments
|
|
|
(556,540
|
)
|
|
|
(1,030
|
)
|
|
|
(557,570
|
)
|
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising
for period
|
|
|
(63,430
|
)
|
|
|
21,450
|
|
|
|
(41,980
|
)
|
Reclassification adjustments for (gains)
losses realized in net income
|
|
|
15,130
|
|
|
|
(6,110
|
)
|
|
|
9,020
|
|
|
|
|
Net unrealized gains (losses)
|
|
|
(48,300
|
)
|
|
|
15,340
|
|
|
|
(32,960
|
)
|
Pension liability adjustments
|
|
|
(80,800
|
)
|
|
|
33,960
|
|
|
|
(46,840
|
)
|
|
|
|
Other
comprehensive income (loss)
|
|
$
|
(685,640
|
)
|
|
|
48,270
|
|
|
|
(637,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Leases
TDK and its subsidiaries occupy offices and other facilities under various cancellable lease
agreements expiring in fiscal 2009 through 2010. Lease deposits made under such agreements,
aggregating ¥1,234 million ($12,340 thousand) and ¥1,456 million, at March 31, 2008 and 2007,
respectively, are included in other assets on the accompanying consolidated balance sheets.
The following is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancellable lease terms in excess of one year as
of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
Year ending March 31,
|
|
|
|
|
|
|
|
|
2009
|
|
¥
|
4,965
|
|
|
$
|
49,650
|
|
2010
|
|
|
3,619
|
|
|
|
36,190
|
|
2011
|
|
|
2,537
|
|
|
|
25,370
|
|
2012
|
|
|
1,703
|
|
|
|
17,030
|
|
2013
|
|
|
1,476
|
|
|
|
14,760
|
|
Later years
|
|
|
4,701
|
|
|
|
47,010
|
|
|
|
|
|
|
¥
|
19,001
|
|
|
$
|
190,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Commitments and Contingent Liabilities
At March 31, 2008, commitments outstanding for the purchase of property, plant and equipment
approximated ¥32,855 million ($328,550 thousand). TDK has entered into several purchase agreements
with certain suppliers whereby TDK committed to purchase a minimum amount of raw materials to be
used in the manufacture of its products. Future minimum purchases remaining under the agreements
approximated ¥7,189 million ($71,890 thousand) at March 31, 2008.
- 141 -
TDK and certain of its subsidiaries provide guarantees to third parties on bank loans of its
employees. The guarantees on behalf of the employees are made for their housing loans. For each
guarantee issued, in the event the employee defaults on payment, TDK would be required to make
payments under its guarantee. The maximum amount of undiscounted payments TDK would have to make
in the event of default is ¥4,764 million ($47,640 thousand) and ¥5,286 million at March 31, 2008
and 2007, respectively. As of March 31, 2008, the liability recognized for the estimated fair
value of TDKs obligation under the guarantee arrangement is not material.
Several claims against TDK and certain subsidiaries are pending. Provision has been made for
the estimated liabilities for the items. In the opinion of management, based upon discussion with
counsel, any additional liability not currently provided for will not materially affect the
consolidated financial position and results of operations of TDK.
15.
|
|
Risk Management Activities and Derivative Financial Instruments
|
TDK and its subsidiaries operate internationally which exposes them to the risk of changes in
foreign exchange rates and interest rates; derivative financial instruments are utilized to reduce
these risks. TDK and its subsidiaries do not hold or issue financial instruments for trading
purposes. TDK and its subsidiaries are exposed to credit related losses in the event of
nonperformance by the counterparties to those financial instruments, but does not expect any
counterparties to fail to meet their obligations given their high credit ratings. The credit
exposure of forward foreign exchange contracts and currency option contracts is represented by the
fair values of contracts.
Forward exchange contracts and currency option contracts have been entered into to hedge
adverse effects of foreign currency exchange rate fluctuations mainly on
foreign-currency-denominated trade receivables and foreign-currency-denominated forecasted
transactions.
At March 31, 2008 and 2007, TDK and certain of its subsidiaries had forward exchange contracts
to sell and buy foreign currencies (principally U.S. dollars and Japanese yen) and currency option
contracts for a total contract amount of ¥13,324 million ($133,240 thousand) and ¥13,834 million,
respectively. Gains or losses on forward exchange contracts and currency option contracts were
included in foreign exchange gain (loss) in the consolidated statements of income. These contracts
were measured at fair value and were included in prepaid expenses and other current assets or other
current liabilities, as the case may be, in the consolidated balance sheets.
16.
|
|
Fair Value of Financial Instruments
|
The following methods and assumptions were used to estimate the fair value of financial
instruments in cases for which it is practicable:
(a)
|
|
Cash and cash equivalents, Short-term investments, Trade receivables, Other current assets,
Short-term debt, Trade payables, Accrued salaries and wages, Accrued expenses, Income taxes
payables and Other current liabilities.
|
The carrying amount approximates fair value because of the short maturity of these
instruments.
(b)
|
|
Marketable securities and Investments in securities
|
The fair values of marketable securities and investments in securities are estimated based on
quoted market prices for these instruments. For other securities for which there are no quoted
market prices, a reasonable estimate of fair values could not be made without incurring excessive
costs.
- 142 -
The fair value of TDKs long-term debt is estimated based on the amount of future cash flows
associated with the instrument discounted using TDKs current borrowing rate for similar debt of
comparable maturity, or based on the quoted market prices for the same or similar issues.
(d)
|
|
Forward Foreign Exchange Contracts and Foreign Currency Option Contracts
|
The fair values of forward foreign exchange contracts and foreign currency option contracts
are estimated by obtaining quotes from financial institutions.
The carrying amounts and estimated fair values of TDKs financial instruments at March 31,
2008 and 2007, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
As of March 31, 2008
|
|
Carrying amount
|
|
Estimated fair value
|
|
Nonderivatives:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities for which it is:
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
¥
|
3,986
|
|
|
|
3,986
|
|
Investments in securities and other
assets for which it is:
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
|
28,863
|
|
|
|
28,863
|
|
Not practicable to estimate fair value
|
|
|
598
|
|
|
|
|
|
Liability:
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
|
|
|
(446
|
)
|
|
|
(446
|
)
|
Derivatives:
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts in a:
|
|
|
|
|
|
|
|
|
Gain position
|
|
|
|
|
|
|
|
|
Loss position
|
|
|
(50
|
)
|
|
|
(50
|
)
|
Currency option contracts in a:
|
|
|
|
|
|
|
|
|
Gain position
|
|
|
18
|
|
|
|
18
|
|
Loss position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
As of March 31, 2007
|
|
Carrying amount
|
|
Estimated fair value
|
|
Nonderivatives:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities for which it is:
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
¥
|
1,063
|
|
|
|
1,063
|
|
Investments in securities and other assets
for which it is:
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
|
23,608
|
|
|
|
23,608
|
|
Not practicable to estimate fair value
|
|
|
563
|
|
|
|
|
|
Liability:
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
|
|
|
(1,046
|
)
|
|
|
(1,046
|
)
|
Derivatives:
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts in a:
|
|
|
|
|
|
|
|
|
Gain position
|
|
|
78
|
|
|
|
78
|
|
Loss position
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Currency option contracts in a:
|
|
|
|
|
|
|
|
|
Gain position
|
|
|
82
|
|
|
|
82
|
|
Loss position
|
|
|
|
|
|
|
|
|
|
- 143 -
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
As of March 31, 2008
|
|
Carrying amount
|
|
Estimated fair value
|
|
Nonderivatives:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities for which it is:
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
$
|
39,860
|
|
|
|
39,860
|
|
Investments in securities and other
assets for which it is:
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
|
288,630
|
|
|
|
288,630
|
|
Not practicable to estimate fair value
|
|
|
5,980
|
|
|
|
|
|
Liability:
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
|
|
|
(4,460
|
)
|
|
|
(4,460
|
)
|
Derivatives:
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts in a:
|
|
|
|
|
|
|
|
|
Gain position
|
|
|
|
|
|
|
|
|
Loss position
|
|
|
(500
|
)
|
|
|
(500
|
)
|
Currency option contracts in a:
|
|
|
|
|
|
|
|
|
Gain position
|
|
|
180
|
|
|
|
180
|
|
Loss position
|
|
|
|
|
|
|
|
|
|
The carrying amounts of the nonderivative assets and liabilities are included in the
consolidated balance sheets under the indicated captions. The carrying amounts of forward foreign
exchange contracts and foreign currency option contracts in a gain position are included in prepaid
expenses and other current assets, while those in a loss position are included in other current
liabilities.
Limitations
Fair value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
On March 8, 2006, TDKs board of directors decided to restructure certain of its recording
media business, including the withdrawal from the manufacturing of recordable CD and DVDs.
Pursuant to that decision, TDK shut down the production facilities at its European subsidiary,
TDK Recording Media Europe S.A. in Luxembourg in April 2006. In March 2006, TDK recorded a
restructuring cost of ¥6,825 million which included a charge of ¥3,309 million relating to employee
termination benefits. As a result of the restructuring, a total of 350 regular employees were
terminated through May 31, 2006. In addition, TDK recorded a restructuring cost of ¥2,594 million
relating to an impairment of property, plant and equipment in connection with the decision to shut
down production facilities at its European subsidiary.
In 2007, TDK recorded a restructuring cost of ¥510 million which included an additional charge
of ¥441 million relating to employee termination benefits and ¥190 million relating to an
impairment of building held for sale in connection with the TDK Recording Media Europe S.A.
restructuring.
- 144 -
The impact of the restructuring activities for the years ended March 31, 2008 and 2007 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
|
|
|
|
Impairment
|
|
Gain on
|
|
|
|
|
|
|
Workforce
|
|
on property,
|
|
sales of
|
|
|
|
|
|
|
reduction
|
|
plant and
|
|
assets held
|
|
Other
|
|
|
|
|
obligations
|
|
equipment
|
|
for sale
|
|
liabilities
|
|
Total
|
|
March 31, 2006
|
|
¥
|
3,023
|
|
|
|
|
|
|
|
|
|
|
|
680
|
|
|
|
3,703
|
|
Costs and expenses
|
|
|
441
|
|
|
|
190
|
|
|
|
|
|
|
|
412
|
|
|
|
1,043
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
(533
|
)
|
|
|
|
|
|
|
(533
|
)
|
Payments
|
|
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
|
|
4,464
|
|
Non-cash adjustments
|
|
|
|
|
|
|
190
|
|
|
|
(533
|
)
|
|
|
|
|
|
|
(343
|
)
|
|
|
|
March 31, 2007
|
|
¥
|
32
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
92
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
92
|
|
Non-cash adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
¥
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
|
March 31, 2007
|
|
$
|
320
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
920
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
920
|
|
Non-cash adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring liabilities were included in Accrued expenses in the consolidated balance sheets
as of March 31, 2007.
There were no restructuring liabilities as of March 31, 2008.
At March 31,2008, assets held for sale consists of certain property, plant and equipment in
Japan in accordance with FASB Statement of Financial Accounting Standards No. 144 (SFAS 144),
Accounting for the Impairment or Disposal of Long-Lived Assets. TDK expects these assets to be
sold during the year ended March 31, 2009. During the year ended March 31, 2008, assets held for
sale decreased by ¥1,206 million ($12,060 thousand) mainly from completion of sale of certain
assets in connection with the restructuring activities in Europe (Note 17) in the amount of ¥853
million and completion of sale of certain assets in Japan in the amount of ¥172 million.
At March 31, 2007, assets held for sale consists of certain property, plant and equipment,
which were classified as held for sale in connection with the restructuring activities in Europe
(Note 17) and certain property, plant and equipment in Japan. During the year ended March 31,
2007, assets held for sale decreased by ¥1,985 million mainly from write-downs of ¥912 million on
certain assets held for sale in Japan reflecting the reassessment of its fair value less cost to
sell and completion of sale of certain assets in Europe in the amount of ¥1,491 million.
- 145 -
The components of the assets held for sale at March 31, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2008
|
|
Assets held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
¥
|
919
|
|
|
|
2,125
|
|
|
$
|
9,190
|
|
|
|
|
19.
|
|
Goodwill and Other Intangible Assets
|
The components of acquired intangible assets excluding goodwill at March 31, 2008 and 2007,
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2008
|
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
Amount
|
|
Amortization
|
|
Net Amount
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent
|
|
¥
|
34,425
|
|
|
|
5,893
|
|
|
|
28,532
|
|
Customer relationships
|
|
|
12,315
|
|
|
|
2,145
|
|
|
|
10,170
|
|
Software
|
|
|
8,571
|
|
|
|
4,936
|
|
|
|
3,635
|
|
Unpatented technologies
|
|
|
16,936
|
|
|
|
2,012
|
|
|
|
14,924
|
|
Other
|
|
|
2,970
|
|
|
|
1,201
|
|
|
|
1,769
|
|
|
|
|
Total
|
|
|
75,217
|
|
|
|
16,187
|
|
|
|
59,030
|
|
|
|
|
Unamortized intangible assets
|
|
¥
|
4,292
|
|
|
|
|
|
|
|
4,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
2007
|
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
Amount
|
|
Amortization
|
|
Net Amount
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent
|
|
¥
|
13,388
|
|
|
|
3,888
|
|
|
|
9,500
|
|
Customer relationships
|
|
|
11,001
|
|
|
|
1,333
|
|
|
|
9,668
|
|
Software
|
|
|
9,660
|
|
|
|
5,890
|
|
|
|
3,770
|
|
Unpatented technologies
|
|
|
4,163
|
|
|
|
954
|
|
|
|
3,209
|
|
Other
|
|
|
2,721
|
|
|
|
870
|
|
|
|
1,851
|
|
|
|
|
Total
|
|
|
40,933
|
|
|
|
12,935
|
|
|
|
27,998
|
|
|
|
|
Unamortized intangible assets
|
|
¥
|
3,007
|
|
|
|
|
|
|
|
3,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
|
|
2008
|
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
Amount
|
|
Amortization
|
|
Net Amount
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent
|
|
$
|
344,250
|
|
|
|
58,930
|
|
|
|
285,320
|
|
Customer relationships
|
|
|
123,150
|
|
|
|
21,450
|
|
|
|
101,700
|
|
Software
|
|
|
85,710
|
|
|
|
49,360
|
|
|
|
36,350
|
|
Unpatented technologies
|
|
|
169,360
|
|
|
|
20,120
|
|
|
|
149,240
|
|
Other
|
|
|
29,700
|
|
|
|
12,010
|
|
|
|
17,690
|
|
|
|
|
Total
|
|
|
752,170
|
|
|
|
161,870
|
|
|
|
590,300
|
|
|
|
|
Unamortized intangible assets
|
|
$
|
42,920
|
|
|
|
|
|
|
|
42,920
|
|
|
|
|
- 146 -
Intangible assets subject to amortization are amortized using the straight-line method over
their estimated useful lives to their estimated residual value of zero. The useful lives are 5
years to 18 years for the Patents, 5 to 17 years for Customer relationships, 2 to 7 years for
Internal-use Software, 3 years to 15 years for Unpatented technologies and 5 to 8 years for Other
intangible assets.
Aggregate amortization expense for the years ended March 31, 2008, 2007 and 2006 was ¥5,771
million ($57,710 thousand), ¥3,942 million and ¥3,618 million, respectively. Estimated
amortization expense for the next five years is: ¥7,998 million in 2009, ¥7,813 million in 2010,
¥7,130 million in 2011, ¥6,074 million in 2012, and ¥5,366 million in 2013.
The changes in the carrying amount of goodwill by segment for the years ended March 31, 2008
and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen (Millions)
|
|
|
Electronic
|
|
|
|
|
|
|
materials and
|
|
Recording
|
|
|
|
|
components
|
|
media
|
|
Total
|
|
March 31, 2006
|
|
¥
|
19,453
|
|
|
|
|
|
|
|
19,453
|
|
Additions
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
Deductions
|
|
|
(1,978
|
)
|
|
|
|
|
|
|
(1,978
|
)
|
Translation adjustment
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
|
March 31, 2007
|
|
|
17,539
|
|
|
|
|
|
|
|
17,539
|
|
Additions
|
|
|
15,144
|
|
|
|
|
|
|
|
15,144
|
|
Deductions
|
|
|
(609
|
)
|
|
|
|
|
|
|
(609
|
)
|
Translation adjustment
|
|
|
(2,054
|
)
|
|
|
|
|
|
|
(2,054
|
)
|
|
March 31, 2008
|
|
¥
|
30,020
|
|
|
|
|
|
|
|
30,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (Thousands)
|
|
|
Electronic
|
|
|
|
|
|
|
materials and
|
|
Recording
|
|
|
|
|
components
|
|
media
|
|
Total
|
|
March 31, 2007
|
|
$
|
175,390
|
|
|
|
|
|
|
|
175,390
|
|
Additions
|
|
|
151,440
|
|
|
|
|
|
|
|
151,440
|
|
Deductions
|
|
|
(6,090
|
)
|
|
|
|
|
|
|
(6,090
|
)
|
Translation adjustment
|
|
|
(20,540
|
)
|
|
|
|
|
|
|
(20,540
|
)
|
|
March 31, 2008
|
|
$
|
300,200
|
|
|
|
|
|
|
|
300,200
|
|
|
Goodwill additions during the year ended March 31, 2008 primarily represent the excess of
purchase price over the fair value of assets acquired and liabilities assumed in connection with
the acquisition of 99.0 percent of Magnecomp Precision Technology Public Company Limited and 41.3
percent of Densei-Lambda K.K. in the amount of ¥10,143 million and ¥3,074 million (Note 23),
respectively. Goodwill is not deductible for tax purpose.
Goodwill deductions during the year ended March 31, 2007 primarily represent a
post-acquisition adjustments (purchase price allocation) associated with the acquisition of Lambda
Power Business (Note 23) and the additional acquisition of minority interests at certain Asian
subsidiary in the amounts of ¥1,298 million and ¥608 million, respectively.
- 147 -
A reconciliation of the numerators and denominators of the basic and diluted net income per
share computations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
Income from continuing
operations available to
common stockholders
|
|
¥
|
71,461
|
|
|
|
70,125
|
|
|
|
44,411
|
|
|
$
|
714,610
|
|
Loss from discontinued
operations available to
common stockholders
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders
|
|
¥
|
71,461
|
|
|
|
70,125
|
|
|
|
44,101
|
|
|
$
|
714,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares (Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
Weighted average common shares
outstanding Basic
|
|
|
129,525
|
|
|
|
132,342
|
|
|
|
132,239
|
|
Effect of dilutive stock options
|
|
|
124
|
|
|
|
146
|
|
|
|
116
|
|
|
|
|
Weighted average common shares
outstanding Diluted
|
|
|
129,649
|
|
|
|
132,488
|
|
|
|
132,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
Income from
continuing
operations per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
¥
|
551.72
|
|
|
|
529.88
|
|
|
|
335.84
|
|
|
$
|
5.52
|
|
Diluted
|
|
|
551.19
|
|
|
|
529.29
|
|
|
|
335.54
|
|
|
|
5.51
|
|
Loss from
discontinued
operations per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
(2.34
|
)
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
(2.34
|
)
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
¥
|
551.72
|
|
|
|
529.88
|
|
|
|
333.50
|
|
|
$
|
5.52
|
|
Diluted
|
|
|
551.19
|
|
|
|
529.29
|
|
|
|
333.20
|
|
|
|
5.51
|
|
|
For the years ended March 31, 2008, 2007 and 2006, stock options to purchase 193,700 shares,
96,600 shares and 116,100 shares, respectively, were excluded from the calculation of diluted
earnings per share as the effect would have been antidilutive.
21.
|
|
Business and Credit Concentrations
|
A significant customer, Samsung Electronics H.K. Co., Ltd., related to electronic materials
and components business accounted for 11.9 percent, 10.9 percent and 9.1 percent of TDKs net sales
for the years ended March 31, 2008, 2007 and 2006, respectively, and 7.6 percent and 4.8 percent of
trade receivables at March 31, 2008 and 2007, respectively.
- 148 -
22.
|
|
Discontinued Operations
|
On March 31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly
owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital (Buyer). The sale of TSC is
part of TDKs continuing shift away from non-core products and technologies. The sale agreement
also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. The
payments are contingent upon certain milestones being met related to future revenue targets
extending through April 2007. No earn-out payments were earned through the measurement period
ended April 30, 2007. The transaction was completed on April 8, 2005. TDK has accounted for the
sale of TSC as a discontinued operation pursuant to SFAS 144, as TSC meets the definition of a
component of an entity. The results of operations for this subsidiary have been reported as
discontinued operations for all periods presented. Accordingly, certain financial statement
information and related footnote disclosures related to prior periods have been reclassified.
Selected financial information for the year ended March 31, 2006 for the discontinued
operations, is summarized as follows:
|
|
|
|
|
|
Yen (Millions)
|
|
|
2006
|
|
Net sales
|
|
¥
|
45
|
|
|
|
Loss from operations before income taxes (including loss on
disposal of ¥224 million in 2006)
|
|
|
310
|
Income tax expense
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
¥
|
310
|
|
|
|
|
|
|
|
|
|
|
- 149 -
(1)
|
|
Magnecomp Precision Technology Public Company Limited
|
On November 7, 2007 (acquisition date), TDK acquired 1,549,551 thousand shares, or 74.3
percent of the outstanding shares (inclusive of the option noted below), of Thailand-based
Magnecomp Precision Technology Public Company Limited (MPT) from Magnecomp International Limited
presently known as InnoTek Limited (InnoTek), a Singapore-based company, for total purchase
price, including direct cost, of ¥14,962 million ($149,620 thousand). MPT became a subsidiary of
TDK as a result of the acquisition.
TDK holds an option to purchase from InnoTek and InnoTek holds an option to put to TDK 208,486
thousand shares in 18 months from the acquisition date. The option was considered to be a part of
the purchase consideration and was included in the total purchase price, all of which was paid in
cash, with the exception of $16,500 thousand which will be paid upon settlement of the option.
In December 2007, TDK acquired an additional 513,963 thousand shares in MPT by a tender offer.
TDK also purchased an additional 1,164 thousand shares in a series of open market transactions.
The total purchase price to acquire these additional shares was ¥5,902 million ($59,020 thousand).
As a result of these transactions, TDKs interest in MPT has increased to 99.0 percent by
March 31, 2008.
MPT has technological strengths and expertise in the design and manufacture of suspension
assemblies, a key component of HDD magnetic heads. TDK believes the acquisition of MPT will help
TDK to strengthen the competitiveness of its HDD magnetic heads business.
TDK has included the results of operations of MPT and its subsidiaries in its consolidated
financial statements since the acquisition date.
The purchase price has been allocated based on the fair value of the net assets acquired,
including identifiable intangible assets and liabilities assumed, at the date of acquisition. The
excess of the purchase price over the net of amounts assigned to the fair value of the tangible and
identifiable intangible assets acquired and the liabilities assumed is recorded as goodwill.
As a result of the preliminary purchase price allocation, TDK recognized goodwill of ¥10,143
million ($101,430 thousand) and intangible assets, primarily consisting of unpatented technologies
with a weighted average useful life of approximately 3.5 years, of ¥ 3,240 million ($32,400
thousand). Goodwill is not deductible for tax purposes.
- 150 -
(2)
|
|
Lambda Power Business
|
On October 1, 2005, TDK acquired 58.7 percent of the issued and outstanding common shares of
Lambda Power Business from U.K.-based Invensys plc. The results of Lambda Power Businesss
operations have been included in the accompanying consolidated financial statements of TDK since
that date. The acquisition is intended to establish a more resilient operating base for TDK in the
power supply field, which is expected to continue to grow in the years ahead, by combining TDKs
strengths with those of the various businesses of Lambda Power Business. The total purchase price
was ¥24,202 million, net of cash acquired of ¥4,305 million.
The purchase price has been allocated based on the fair value of the assets acquired,
including identifiable intangible assets and liabilities assumed, at the date of acquisition. The
excess of the cost of the acquisition over the net of amounts assigned to the fair value of the
tangible and identifiable intangible assets acquired and the liabilities assumed is recorded as
goodwill. Goodwill is not deductible for tax purposes. The following table summarizes the
estimated fair value of the assets acquired and liabilities assumed at the date of the acquisition.
|
|
|
|
|
|
|
Yen
|
|
|
|
(Millions)
|
|
|
Current assets
|
|
¥
|
23,176
|
|
Property, plant and equipment
|
|
|
9,673
|
|
Intangible assets
|
|
|
13,686
|
|
Goodwill
|
|
|
4,854
|
|
Other assets
|
|
|
5,090
|
|
|
|
|
|
Total assets acquired
|
|
|
56,479
|
|
|
|
|
|
Current liabilities
|
|
|
(13,429
|
)
|
Noncurrent liabilities
|
|
|
(9,583
|
)
|
Minority interests
|
|
|
(9,265
|
)
|
|
|
|
|
Total liabilities assumed
|
|
|
(32,277
|
)
|
|
|
|
|
Net assets acquired
|
|
¥
|
24,202
|
|
|
|
|
|
The acquired intangible assets which are being amortized have a weighted average useful life
of approximately 15 years. The intangible assets include customer relationships of ¥9,778 million
(16-years weighted average useful life), patented technology of ¥1,134 million (8-years weighted
average useful life), and other intangible assets of ¥550 million (1-year weighted average useful
life). The acquired intangible assets which are not being amortized include trademarks of ¥2,132
million and other intangible assets of ¥92 million.
Goodwill was subsequently adjusted to ¥3,556 million for the recognition of previously
unrecognized tangible and intangible assets and the related tax effects.
- 151 -
Pro Forma Results
The following unaudited pro forma financial information presents the combined results of
operations of TDK and Lambda Power Business as if the acquisition had occurred as of April 1, 2005.
The results of Lambda Power Business have been included in the historical financial statements of
TDK since the date of acquisition. The unaudited pro forma financial information is not intended
to represent or be indicative of TDKs consolidated results of operations or financial condition
that would have been reported had the acquisition been completed as of the beginning of the period
presented and should not be taken as indicative of the TDKs future consolidated results of
operations or financial condition.
(Unaudited)
|
|
|
|
|
|
|
Yen
|
|
|
(Millions)
|
|
|
2006
|
|
Net sales
|
|
¥
|
816,431
|
|
Income from continuing operations
|
|
|
44,188
|
|
Loss from discontinued operations
|
|
|
310
|
|
Net income
|
|
|
43,878
|
|
|
|
|
|
|
|
|
Yen
|
|
|
2006
|
|
Income from continuing operations
per share:
|
|
|
|
|
Basic
|
|
¥
|
334.15
|
|
Diluted
|
|
|
333.86
|
|
Loss from discontinued operations
per share:
|
|
|
|
|
Basic
|
|
¥
|
(2.34
|
)
|
Diluted
|
|
|
(2.34
|
)
|
Net income per share:
|
|
|
|
|
Basic
|
|
¥
|
331.81
|
|
Diluted
|
|
|
331.52
|
|
|
Unaudited pro forma net income for 2006 includes ¥698 million (net of tax effect) for the
amortization of acquired intangibles.
On January 1, 2006, all of companies of Lambda Power Group became subsidiaries of
DENSEI-LAMBDA K.K. (DENSEI-LAMBDA).
Additional acquisition
On November 15, 2007, TDK acquired an additional 37.5 percent of the issued and outstanding
common shares of DENSEI-LAMBDA by a tender offer. TDK had initially acquired 58.7 percent of the
outstanding shares on October 1, 2005, and DENSEI-LAMBDA has been a consolidated subsidiary of TDK
since the initial acquisition. TDK purchased 8,111 thousands shares for approximately ¥14,525
million in total by the tender offer increasing TDKs interest in DENSEI-LAMBDA to 96.3 percent.
DENSEI-LAMBDA engages mainly in the power supply business including the manufacture and sale
of switching power supplies and uninterruptible power supplies. The recent market environment in
connection with the power supply business and the electronic materials and components businesses is
growing and expanding not only within the existing field of industrial equipment but also into new
fields, such as automobile and digital home appliances. In order to pursue the business growth
under such environment, TDK completed the tender offer to turn DENSEI-LAMBDA into a wholly owned
subsidiary.
- 152 -
On February 29, 2008, TDK purchased an additional 775 thousands of common shares subject to
class-wide call (3.7 percent of issued and outstanding common stock) for ¥1,330 million in total.
As a result of this transaction, DENSEI-LAMBDA became a wholly owned subsidiary of TDK.
As a result of the preliminary purchase price allocation, the purchase price has been
allocated based on the fair value of the net assets acquired, including identifiable intangible
assets and liabilities assumed, at the date of acquisition. The excess of the purchase price over
the net of amounts assigned to the fair value of the tangible and identifiable intangible assets
acquired and the liabilities assumed are recorded as goodwill. Goodwill is not deductible for tax
purposes.
The acquired intangible assets which are being amortized have a weighted average useful life
of approximately 12 years. The intangible assets include customer relationships of ¥1,485 million
(15-year weighted average useful life), technologies of ¥743 million (12-year weighted average
useful life), and other intangible assets of ¥361 million (2-year weighted average useful life).
The acquired intangible assets which are not being amortized include trademarks of ¥1,403 million.
Goodwill recorded with respect to the above step-acquisitions was ¥3,074 million.
(3)
|
|
Amperex Technology Limited
|
On May 17, 2005, TDK acquired 100 percent of the issued and outstanding shares of Amperex
Technology Limited (ATL), a Hong Kong based company engages in the production and sale of polymer
lithium batteries with about 3,000 employees, for the total purchase price of approximately ¥8,666
million, net of cash acquired. In connection with this transaction, TDK recognized goodwill of
¥3,803 million and intangible assets of ¥3,497 million.
24.
|
|
Sale of Business to Imation Corp.
|
On August 1, 2007, pursuant to a definitive agreement between TDK and Imation Corp.
(Imation) dated April 19, 2007, TDK transferred substantially all of the assets relating to TDK
branded world wide recording media business and use of the TDK brand name for current and future
recording media products to Imation. TDK entered into this transaction to strengthen and grow its
recording media products sales business by partnering with Imation. TDK retained its research and
development, manufacturing and OEM recording media operations to improve competitiveness of the
recoding media operations.
Under the terms of the agreement, TDK has transferred all the shares of its 6 subsidiaries and
certain assets and liabilities relating to the recording media business of its 3 subsidiaries to
Imation. The transaction was closed on August 1, 2007 for $250 million. The total consideration
included Imation common stock constituting 16.6 percent (6,826 thousands shares) of Imations
common stock and cash of $29 million. TDK recognized ¥15,340 million ($153,400 thousand) on the
consolidated statements of income as Gain on sale of business to Imation Corp. for the year ended
March 31, 2008, which includes the excess of the target working capital amount under the
contractual provision. TDK may receive additional cash of up to $70 million contingent on future
financial performance compared to targeted gross margin for three years until December 2010.
TDK recorded the investment at fair value as of the acquisition date.
As a result of the transaction, TDK became the largest shareholder in Imation and obtained the
right to nominate a representative to serve on Imations Board of Directors. TDKs ownership stake
in Imation shall not exceed 22 percent on a fully diluted basis pursuant to the Investor Rights
Agreement, and TDK agreed to a three-year lock-up on sales of the Imation shares acquired in this
transaction.
- 153 -
On December 5, 2007, TDK acquired an additional 2.4 percent (915 thousands shares) of
Imations outstanding common stock for ¥2,207 million ($22,070 thousand) in a series of open market
transaction. In addition, Imation repurchased its own stock between August 1, 2007 and December 5,
2007, which resulted in a further increase in TDKs interest in Imation by 1.1 percent.
As a result of the transactions described above, TDKs ownership in Imation increased from
16.6 percent to 20.1 percent. Accordingly, TDK changed its accounting for the investment in
Imation to the equity-method of accounting and has retroactively reflected the change in accounting
to the initial acquisition date.
The preliminary allocation of the purchase price included acquired intangible assets,
including trademarks, customer relationships and non-competition agreements. The trademarks,
customer relationships and non-competition agreements are being amortized over respective useful
lives. The excess of the purchase price over the fair value allocated to the net assets, including
intangible assets, is investor level goodwill in the amount of $32 million.
25.
|
|
Acquisition of HDD Head Related Assets
|
On September 26, 2007, TDK reached an agreement with Alps Electric Co., Ltd. (Alps)
regarding a transfer of Alps manufacturing and other equipment and intellectual property rights
such as patents and unpatented technologies with respect to its HDD head business for an aggregate
of ¥34,429 million ($344,290 thousand).
The purpose of this acquisition is to improve the efficiency of TDKs operation and offer
enhanced technologies in its HDD head business, thereby strengthening the international
competitiveness.
The acquisition of the equipment and intangible assets was recorded based on the relative fair
value of each asset. The total acquisition cost was allocated to the equipment and intangible
assets in the amount of ¥7,184 million ($71,840 thousand) and ¥27,143 million ($271,430 thousand),
respectively.
Amortization periods for the acquired intangible assets range from 7 to 14 years.
26.
|
|
Related Party Transaction
|
Receivables and payables include the following balances with affiliated companies at March 31,
2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2008
|
|
Due from
|
|
¥
|
6,212
|
|
|
|
4,134
|
|
|
$
|
62,120
|
|
Due to
|
|
|
3,654
|
|
|
|
4,211
|
|
|
|
36,540
|
|
Purchases, research and development expenses, and sales include the following transactions
with affiliated companies for the years ended March 31, 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
Gross purchase
|
|
¥
|
42,707
|
|
|
|
54,082
|
|
|
|
56,022
|
|
|
$
|
427,070
|
|
Less raw materials
sold with no
mark-up
|
|
|
(32,569
|
)
|
|
|
(43,327
|
)
|
|
|
(46,580
|
)
|
|
|
(325,690
|
)
|
|
|
|
Net purchases
|
|
|
10,138
|
|
|
|
10,755
|
|
|
|
9,442
|
|
|
|
101,380
|
|
Research and
development
expenses
|
|
|
1,626
|
|
|
|
1,642
|
|
|
|
2,141
|
|
|
|
16,260
|
|
Sales
|
|
|
8,645
|
|
|
|
217
|
|
|
|
249
|
|
|
|
86,450
|
|
|
- 154 -
|
|
|
27.
|
|
Supplementary Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
(a) Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
¥57,387
|
|
|
|
50,058
|
|
|
|
45,528
|
|
|
$
|
573,870
|
|
Rent
|
|
|
8,991
|
|
|
|
8,794
|
|
|
|
7,739
|
|
|
|
89,910
|
|
Maintenance and repairs
|
|
|
14,820
|
|
|
|
13,494
|
|
|
|
13,732
|
|
|
|
148,200
|
|
Advertising costs
|
|
|
3,639
|
|
|
|
4,570
|
|
|
|
4,828
|
|
|
|
36,390
|
|
|
(b) Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
¥227
|
|
|
|
239
|
|
|
|
749
|
|
|
|
$2,270
|
|
Income taxes
|
|
|
¥26,613
|
|
|
|
15,364
|
|
|
|
32,789
|
|
|
$
|
266,130
|
|
|
Noncash activities
In fiscal 2008, as mentioned in Note 24, there were noncash investing activities to acquire
shares of Imation common stock worth $221 million (16.6 percent of the total outstanding Imation
shares) as part of consideration for transferring the TDK brand world wide recording media business
to Imation.
Also, noncash investing activities related to the purchase of subsidiaries were as follows:
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
U.S. Dollars
|
|
|
(Millions)
|
|
(Thousands)
|
|
|
|
Short-term debt assumed in connection with
business acquisition
|
|
¥
|
2,480
|
|
|
$
|
24,800
|
|
Long-term debt assumed in connection with
business acquisition
|
|
|
8,769
|
|
|
|
87,690
|
|
In fiscal 2007, there were no material noncash investing and financing activities.
In fiscal 2006, noncash investing activities related to the purchase of subsidiaries were as
follows:
|
|
|
|
|
|
|
Yen
|
|
|
(Millions)
|
Short-term debt assumed in connection with business acquisition
|
|
|
¥781
|
|
Long-term debt assumed in connection with business acquisition
|
|
|
2,107
|
|
- 155 -
Schedule II
TDK CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In millions of yen)
Years ended March 31, 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
beginning
|
|
|
Charged to
|
|
|
Acquisition
|
|
|
Bad debts
|
|
|
Translation
|
|
|
end of
|
|
|
|
of period
|
|
|
earnings
|
|
|
(Sale)
|
|
|
written off
|
|
|
adjustment
|
|
|
period
|
|
Year ended
March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful receivables
|
|
¥
|
6,311
|
|
|
|
259
|
|
|
|
(893
|
)
|
|
|
1,104
|
|
|
|
(591
|
)
|
|
|
3,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful receivables
|
|
¥
|
4,064
|
|
|
|
2,405
|
|
|
|
|
|
|
|
234
|
|
|
|
76
|
|
|
|
6,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful receivables
|
|
¥
|
2,560
|
|
|
|
322
|
|
|
|
1,033
|
|
|
|
71
|
|
|
|
220
|
|
|
|
4,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 156 -
|
|
|
Item 18.
|
|
Financial Statements
|
We have provided our financial statements under Item 17.
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
1.1
|
|
ARTICLES OF INCORPORATION (English translation)
|
|
|
|
1.2
|
|
REGULATIONS OF THE BOARD OF DIRECTORS (English translation)
|
|
|
|
1.3
|
|
REGULATIONS OF THE BOARD OF COMPANY AUDITORS (English
translation)
|
|
|
|
2.1
|
|
SHARE HANDLING REGULATIONS (English translation)
|
|
|
|
8.1
|
|
List of Significant Subsidiaries
|
|
|
|
11.1
|
|
TDK CODE OF ETHICS (English translation)
|
|
|
|
12.1
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of CEO of the Company
|
|
|
|
12.2
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of CFO of the Company
|
|
|
|
13.1
|
|
Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 of CEO of the Company (certificate is not
deemed filed for purpose of Section 18 of the Securities
Exchange Act of 1934 and is not deemed to be incorporated
by reference into any filing under the Securities Act of
1933 or the Securities Exchange Act 0f 1934).
|
|
|
|
13.2
|
|
Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 of CFO of the Company (certificate is not
deemed filed for purpose of Section 18 of the Securities
Exchange Act of 1934 and is not deemed to be incorporated
by reference into any filing under the Securities Act of
1933 or the Securities Exchange Act 0f 1934).
|
- 157 -
SIGNATURES
The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
|
|
|
|
|
|
|
TDK Corporation
(Registrant)
|
|
Date: July 28, 2008
|
By:
|
/s/Hajime Sawabe
|
|
|
|
Name:
|
Hajime Sawabe
|
|
|
|
Title:
|
Representative Director, Chairperson and CEO
|
|
|
- 158 -