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Name | Symbol | Market | Type |
---|---|---|---|
Nippon Telegraph and Telephone Corporation (PK) | USOTC:NTTYY | OTCMarkets | Depository Receipt |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.19 | -0.79% | 24.00 | 24.00 | 24.02 | 24.85 | 23.9401 | 24.85 | 243,095 | 19:26:47 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the
Securities Exchange Act of 1934
For the month of February, 2017
Commission File Number 1-8910
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
(Translation of registrants name into English)
OTEMACHI FIRST SQUARE, EAST TOWER
5-1, OTEMACHI 1-CHOME
CHIYODA-KU, TOKYO 100-8116 JAPAN
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2016
Attached are the registrants unaudited interim consolidated financial statements for the three and nine months ended December 31, 2016, including the notes thereto, prepared on the basis of accounting principles generally accepted in the United States. The attached financial statements were included in the registrants quarterly report which the registrant filed on February 13, 2017 with the Financial Services Agency of Japan. The registrants quarterly report filed with the Financial Services Agency included additional information not included in this report on Form 6-K. Such additional information is either immaterial or has been previously reported by the registrant. Most of the contents of this report on Form 6-K and the registrants quarterly report have previously been disclosed by the registrant in the registrants press release dated February 10, 2017, a copy of which was furnished under cover of Form 6-K on February 10, 2017.
The earnings projections of the registrant and its subsidiaries included in the press release contain forward-looking statements. The registrant desires to qualify for the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, and consequently is hereby filing cautionary statements identifying important factors that could cause the registrants actual results to differ materially from those set forth in the attachment.
The registrants forward-looking statements are based on a series of assumptions, projections, estimates, judgments and beliefs of the management of the registrant in light of information currently available to it regarding the registrant and its subsidiaries and affiliates, the economy and the telecommunications industry in Japan and overseas, and other factors. These projections and estimates may be affected by the future business operations of the registrant and its subsidiaries and affiliates, the state of the economy in Japan and abroad, possible fluctuations in the securities markets, the pricing of services, the effects of competition, the performance of new products, services and new businesses, changes to laws and regulations affecting the telecommunications industry in Japan and elsewhere, other changes in circumstances that could cause actual results to differ materially from any future results that may be derived from the forward-looking statements, as well as other risks included in the registrants most recent Annual Report on Form 20-F and other filings and submissions with the United States Securities and Exchange Commission.
No assurance can be given that the registrants actual results will not vary significantly from any expectation of future results that may be derived from the forward-looking statements included herein.
The information on any website referenced herein or in the attached material is not incorporated by reference herein or therein.
The attached material is a translation of the Japanese original. The Japanese original is authoritative.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NIPPON TELEGRAPH AND TELEPHONE CORPORATION |
||
By |
/s/ Takashi Ameshima |
|
Name: |
Takashi Ameshima |
|
Title: |
Vice President |
|
Investor Relations Office |
Date: February 13, 2017
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Millions of yen | ||||||||
March 31,
2016 |
December 31,
2016 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
¥ | 1,088,275 | ¥ | 664,835 | ||||
Short-term investments |
33,076 | 76,430 | ||||||
Notes and accounts receivable, trade |
2,733,116 | 2,819,785 | ||||||
Allowance for doubtful accounts (Note 8) |
(45,236 | ) | (51,995 | ) | ||||
Accounts receivable, other |
473,192 | 513,836 | ||||||
Inventories (Note 2) |
414,581 | 436,893 | ||||||
Prepaid expenses and other current assets |
469,529 | 669,999 | ||||||
Deferred income taxes |
260,446 | 229,758 | ||||||
|
|
|
|
|||||
Total current assets |
5,426,979 | 5,359,541 | ||||||
|
|
|
|
|||||
Property, plant and equipment: |
||||||||
Telecommunications equipment |
11,586,812 | 11,339,964 | ||||||
Telecommunications service lines |
15,870,097 | 15,991,347 | ||||||
Buildings and structures |
6,069,437 | 6,125,882 | ||||||
Machinery, vessels and tools |
1,996,898 | 2,026,534 | ||||||
Land |
1,273,209 | 1,283,818 | ||||||
Construction in progress |
382,196 | 442,097 | ||||||
|
|
|
|
|||||
37,178,649 | 37,209,642 | |||||||
Accumulated depreciation |
(27,626,728 | ) | (27,666,193 | ) | ||||
|
|
|
|
|||||
Net property, plant and equipment |
9,551,921 | 9,543,449 | ||||||
|
|
|
|
|||||
Investments and other assets: |
||||||||
Investments in affiliated companies |
515,716 | 480,591 | ||||||
Marketable securities and other investments |
474,247 | 485,769 | ||||||
Goodwill (Note 3) |
1,229,208 | 1,279,042 | ||||||
Software |
1,212,482 | 1,182,624 | ||||||
Other intangible assets |
391,977 | 450,737 | ||||||
Other assets |
1,486,840 | 1,481,073 | ||||||
Deferred income taxes |
746,561 | 761,416 | ||||||
|
|
|
|
|||||
Total investments and other assets |
6,057,031 | 6,121,252 | ||||||
|
|
|
|
|||||
Total assets |
¥ | 21,035,931 | ¥ | 21,024,242 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
1
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
The accompanying notes are an integral part of these financial statements.
2
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
NINE-MONTH PERIOD ENDED DECEMBER 31
Millions of yen, except per share data | ||||||||
2015 | 2016 | |||||||
Operating revenues (Note 6): |
||||||||
Fixed voice related services |
¥ | 994,477 | ¥ | 919,161 | ||||
Mobile voice related services |
624,583 | 651,378 | ||||||
IP/packet communications services |
2,819,532 | 2,842,376 | ||||||
Sale of telecommunications equipment |
725,765 | 650,100 | ||||||
System integration |
2,212,240 | 2,123,736 | ||||||
Other |
1,118,763 | 1,173,746 | ||||||
|
|
|
|
|||||
8,495,360 | 8,360,497 | |||||||
|
|
|
|
|||||
Operating expenses (Note 7): |
||||||||
Cost of services
|
1,733,371 | 1,751,417 | ||||||
Cost of equipment sold
|
699,493 | 654,772 | ||||||
Cost of system integration
|
1,577,673 | 1,496,570 | ||||||
Depreciation and amortization (Note 1) |
1,317,130 | 1,082,890 | ||||||
Impairment losses |
||||||||
Goodwill (Note 3) |
| 53,294 | ||||||
Other |
6,001 | 12,698 | ||||||
Selling, general and administrative expenses |
2,035,110 | 1,990,302 | ||||||
|
|
|
|
|||||
7,368,778 | 7,041,943 | |||||||
|
|
|
|
|||||
Operating income (Note 6) |
1,126,582 | 1,318,554 | ||||||
|
|
|
|
|||||
Other income (expenses): |
||||||||
Interest and amortization of bond discounts and issue costs |
(32,759 | ) | (28,168 | ) | ||||
Interest income |
13,253 | 13,176 | ||||||
Other, net (Note 4) |
14,092 | 3,635 | ||||||
|
|
|
|
|||||
(5,414 | ) | (11,357 | ) | |||||
|
|
|
|
|||||
Income before income taxes and equity in earnings (losses) of affiliated companies |
1,121,168 | 1,307,197 | ||||||
|
|
|
|
|||||
Income tax expense (benefit) (Note 4): |
||||||||
Current |
361,071 | 369,479 | ||||||
Deferred |
(44,969 | ) | 55,362 | |||||
|
|
|
|
|||||
316,102 | 424,841 | |||||||
|
|
|
|
|||||
Income before equity in earnings (losses) of affiliated companies |
805,066 | 882,356 | ||||||
Equity in earnings (losses) of affiliated companies (Note 4) |
6,160 | 14,247 | ||||||
|
|
|
|
|||||
Net income |
811,226 | 896,603 | ||||||
|
|
|
|
|||||
Less Net income attributable to noncontrolling interests |
207,162 | 227,875 | ||||||
|
|
|
|
|||||
Net income attributable to NTT (Note 1) |
¥ | 604,064 | ¥ | 668,728 | ||||
|
|
|
|
|||||
Per share of common stock*: |
||||||||
Weighted average number of shares outstanding |
2,108,972,712 | 2,053,571,790 | ||||||
Net income attributable to NTT (Note 1) |
¥ | 286.43 | ¥ | 325.64 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
* | Per share of common stock figures for the nine months ended December 31, 2015 have been adjusted to reflect the two-for-one stock split carried out on July 1, 2015. See Note 4 (Equity) for additional information. |
3
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
NINE-MONTH PERIOD ENDED DECEMBER 31
Millions of yen | ||||||||
2015 | 2016 | |||||||
Net income |
¥ | 811,226 | ¥ | 896,603 | ||||
Other comprehensive income (loss), net of tax (Note 4) |
||||||||
Unrealized gain (loss) on securities |
(21,679 | ) | 1,117 | |||||
Unrealized gain (loss) on derivative instruments |
(2,714 | ) | (2,415 | ) | ||||
Foreign currency translation adjustments |
(70,289 | ) | (97,527 | ) | ||||
Pension liability adjustments |
796 | 8,173 | ||||||
|
|
|
|
|||||
Total other comprehensive income (loss) |
(93,886 | ) | (90,652 | ) | ||||
|
|
|
|
|||||
Total comprehensive income (loss) |
717,340 | 805,951 | ||||||
|
|
|
|
|||||
Less Comprehensive income attributable to noncontrolling interests |
193,532 | 217,645 | ||||||
|
|
|
|
|||||
Total comprehensive income (loss) attributable to NTT |
¥ | 523,808 | ¥ | 588,306 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
4
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE-MONTH PERIOD ENDED DECEMBER 31
Millions of yen, except per share data | ||||||||
2015 | 2016 | |||||||
Operating revenues (Note 6): |
||||||||
Fixed voice related services |
¥ | 326,908 | ¥ | 299,845 | ||||
Mobile voice related services |
216,851 | 221,774 | ||||||
IP/packet communications services |
944,229 | 941,008 | ||||||
Sale of telecommunications equipment |
261,967 | 227,026 | ||||||
System integration |
774,941 | 726,665 | ||||||
Other |
381,506 | 419,851 | ||||||
|
|
|
|
|||||
2,906,402 | 2,836,169 | |||||||
|
|
|
|
|||||
Operating expenses (Note 7): |
||||||||
Cost of services
|
584,265 | 598,020 | ||||||
Cost of equipment sold
|
268,380 | 248,331 | ||||||
Cost of system integration
|
543,197 | 510,321 | ||||||
Depreciation and amortization |
445,491 | 366,417 | ||||||
Impairment losses |
||||||||
Goodwill (Note 3) |
| 48,823 | ||||||
Other |
2,370 | 2,501 | ||||||
Selling, general and administrative expenses |
669,581 | 669,686 | ||||||
|
|
|
|
|||||
2,513,284 | 2,444,099 | |||||||
|
|
|
|
|||||
Operating income (Note 6) |
393,118 | 392,070 | ||||||
|
|
|
|
|||||
Other income (expenses): |
||||||||
Interest and amortization of bond discounts and issue costs |
(10,695 | ) | (8,388 | ) | ||||
Interest income |
4,516 | 4,555 | ||||||
Other, net (Note 4) |
16,810 | 22,055 | ||||||
|
|
|
|
|||||
10,631 | 18,222 | |||||||
|
|
|
|
|||||
Income before income taxes and equity in earnings (losses) of affiliated companies |
403,749 | 410,292 | ||||||
|
|
|
|
|||||
Income tax expense (benefit) (Note 4): |
||||||||
Current |
121,805 | 122,801 | ||||||
Deferred |
(33,008 | ) | 20,596 | |||||
|
|
|
|
|||||
88,797 | 143,397 | |||||||
|
|
|
|
|||||
Income before equity in earnings (losses) of affiliated companies |
314,952 | 266,895 | ||||||
Equity in earnings (losses) of affiliated companies (Note 4) |
(1,352 | ) | 4,182 | |||||
|
|
|
|
|||||
Net income |
313,600 | 271,077 | ||||||
|
|
|
|
|||||
Less Net income attributable to noncontrolling interests |
86,855 | 78,445 | ||||||
|
|
|
|
|||||
Net income attributable to NTT (Note 1) |
¥ | 226,745 | ¥ | 192,632 | ||||
|
|
|
|
|||||
Per share of common stock: |
||||||||
Weighted average number of shares outstanding |
2,096,267,098 | 2,036,936,296 | ||||||
Net income attributable to NTT (Note 1) |
¥ | 108.17 | ¥ | 94.57 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
5
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE-MONTH PERIOD ENDED DECEMBER 31
Millions of yen | ||||||||
2015 | 2016 | |||||||
Net income |
¥ | 313,600 | ¥ | 271,077 | ||||
Other comprehensive income (loss), net of tax (Note 4) |
||||||||
Unrealized gain (loss) on securities |
2,477 | 19,419 | ||||||
Unrealized gain (loss) on derivative instruments |
(1,865 | ) | (406 | ) | ||||
Foreign currency translation adjustments |
(38,129 | ) | 81,346 | |||||
Pension liability adjustments |
(311 | ) | 2,361 | |||||
|
|
|
|
|||||
Total other comprehensive income (loss) |
(37,828 | ) | 102,720 | |||||
|
|
|
|
|||||
Total comprehensive income (loss) |
275,772 | 373,797 | ||||||
|
|
|
|
|||||
Less Comprehensive income attributable to noncontrolling interests |
80,919 | 104,680 | ||||||
|
|
|
|
|||||
Total comprehensive income (loss) attributable to NTT |
¥ | 194,853 | ¥ | 269,117 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
6
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE-MONTH PERIOD ENDED DECEMBER 31
Millions of yen | ||||||||
2015 | 2016 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
¥ | 811,226 | ¥ | 896,603 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Depreciation and amortization |
1,317,130 | 1,082,890 | ||||||
Impairment losses |
6,001 | 65,992 | ||||||
Deferred taxes |
(44,969 | ) | 55,362 | |||||
Losses on disposals of property, plant and equipment |
51,667 | 52,359 | ||||||
Gains on sales of property, plant and equipment |
(10,734 | ) | (15,488 | ) | ||||
Equity in (earnings) losses of affiliated companies |
(6,160 | ) | (14,247 | ) | ||||
(Increase) decrease in notes and accounts receivable, trade |
(124,105 | ) | (73,928 | ) | ||||
(Increase) decrease in inventories |
(109,244 | ) | (48,648 | ) | ||||
(Increase) decrease in other current assets |
(82,661 | ) | (141,477 | ) | ||||
Increase (decrease) in accounts payable, trade and accrued payroll |
(272,498 | ) | (232,575 | ) | ||||
Increase (decrease) in accrued consumption tax |
(42,449 | ) | 19,917 | |||||
Increase (decrease) in advances received |
46,444 | 39,665 | ||||||
Increase (decrease) in accrued taxes on income |
59,632 | (111,666 | ) | |||||
Increase (decrease) in other current liabilities |
41,649 | 34,197 | ||||||
Increase (decrease) in liability for employees retirement benefits |
45,775 | 38,421 | ||||||
Increase (decrease) in other long-term liabilities |
(13,680 | ) | 14,007 | |||||
Other |
(963 | ) | 54,387 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
1,672,061 | 1,715,771 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Payments for property, plant and equipment |
(935,828 | ) | (963,526 | ) | ||||
Payments for intangibles |
(267,884 | ) | (289,330 | ) | ||||
Proceeds from sales of property, plant and equipment |
37,295 | 24,531 | ||||||
Payments for purchases of non-current investments |
(41,404 | ) | (37,325 | ) | ||||
Proceeds from sales and redemptions of non-current investments |
46,312 | 47,739 | ||||||
Acquisitions of subsidiaries, net of cash acquired |
(119,632 | ) | (318,334 | ) | ||||
Payments for purchases of short-term investments |
(18,380 | ) | (135,628 | ) | ||||
Proceeds from redemptions of short-term investments |
17,542 | 92,695 | ||||||
Other |
(51,453 | ) | (51,735 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
¥ | (1,333,432 | ) | ¥ | (1,630,913 | ) | ||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
7
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE-MONTH PERIOD ENDED DECEMBER 31
Millions of yen | ||||||||
2015 | 2016 | |||||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of long-term debt |
¥ | 365,932 | ¥ | 159,613 | ||||
Payments for settlement of long-term debt |
(371,625 | ) | (271,613 | ) | ||||
Proceeds from issuance of short-term debt |
3,512,490 | 3,499,192 | ||||||
Payments for settlement of short-term debt |
(3,609,513 | ) | (3,269,802 | ) | ||||
Dividends paid (Note 4) |
(200,182 | ) | (247,993 | ) | ||||
Proceeds from sale of (payments for acquisition of) treasury stock, net |
(93,871 | ) | (278,028 | ) | ||||
Acquisition of shares of subsidiaries from noncontrolling interests |
(7,710 | ) | (155,124 | ) | ||||
Other |
(49,313 | ) | 70,810 | |||||
|
|
|
|
|||||
Net cash used in financing activities |
(453,792 | ) | (492,945 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(1,568 | ) | (12,715 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
(116,731 | ) | (420,802 | ) | ||||
Cash and cash equivalents at beginning of period |
849,174 | 1,088,275 | ||||||
Increase (decrease) in cash and cash equivalents due to change in fiscal year end of consolidated subsidiaries (Note 1) |
2,028 | (2,638 | ) | |||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
¥ | 734,471 | ¥ | 664,835 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
8
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Summary of significant accounting policies:
As permitted by the Regulation Concerning the Terminology, Forms and Preparation Methods of Quarterly Consolidated Financial Statements (Japanese Cabinet Office Ordinance No. 64 of 2007), the accompanying consolidated balance sheets at March 31 and December 31, 2016, the consolidated statements of income and the consolidated statements of comprehensive income for the three and nine months ended December 31, 2015 and 2016 and consolidated statements of cash flows for the nine months ended December 31, 2015 and 2016 of NTT and its subsidiaries (collectively with NTT, NTT Group) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Certain disclosures required by U.S. GAAP have been omitted.
(1) Change in Accounting Procedures for Consolidated Quarterly Financial Results
Change in depreciation method
NTT and its subsidiaries in Japan traditionally used the declining-balance method for calculating depreciation of property, plant, and equipment. Effective April 1, 2016, NTT and its subsidiaries adopted the straight-line method of depreciation.
As NTT Group plans to complete the expansion of its service areas for fiber-optic services and LTE services in the network business, it has been shifting the focus of its capital investments to improving the efficiency in using facilities while maintaining the current functionality. With respect to network services, NTT has started providing the Hikari Collaboration Model, the wholesale provision of fiber-optic access services, which can be used by customers of both fixed-line communications services and mobile communications services in the long-term. Through these efforts, NTT expects the stable usage of property, plant, and equipment going forward.
For these reasons, NTT believes that the straight-line depreciation method better reflects the pattern of consumption of the future benefits to be derived from those assets being depreciated.
The effect of the change in the depreciation method is recognized prospectively as a change in the accounting estimate pursuant to FASB ASC-250, Accounting Changes and Error Corrections.
In line with the change in the depreciation method, NTT reviewed the residual carrying amount of property, plant, and equipment and other necessary items and made changes where necessary.
As a result of the change in the depreciation method, depreciation expenses on a consolidated basis for the nine and three months ended December 31, 2016 decreased by ¥185,322 million and ¥58,659 million, respectively. Consolidated net income attributable to NTT and consolidated basic net income attributable to NTT per share for the nine and three months ended December 31, 2016 increased by ¥101,854 million and ¥31,037 million, and ¥49.60 and ¥15.24, respectively.
(2) Change in Fiscal Year End of Certain Subsidiaries
As of April 1, 2015, certain of NTTs consolidated subsidiaries changed their fiscal year ends from December 31 to March 31, thereby eliminating a three-month lag between their fiscal year ends and NTTs fiscal year end in NTTs quarterly consolidated financial statements. The elimination of this lag was applied as a change in accounting policy. NTT did not make any retrospective adjustments to its financial statements as these changes did not have a material impact on the consolidated financial statements for the fiscal year ended March 31, 2015. As a result of this change, NTTs retained earnings have increased by ¥700 million, and its accumulated other comprehensive income (loss), noncontrolling interests and redeemable noncontrolling interests have decreased by ¥9,702 million, ¥595 million and ¥419 million, respectively, as of the beginning of the previous fiscal year. In addition, the change in cash and cash equivalents resulting from this change in fiscal year end is presented in the consolidated statements of cash flows under Increase (decrease) in cash and cash equivalents due to change in fiscal year end of consolidated subsidiaries.
9
As of April 1, 2016, certain of NTTs consolidated subsidiaries changed their fiscal year ends from December 31 to March 31, thereby eliminating a three-month lag between their fiscal year ends and NTTs fiscal year end in NTTs quarterly consolidated financial statements. The elimination of this lag was applied as a change in accounting policy. NTT did not make any retrospective adjustments to its financial statements as these changes did not have a material impact on the consolidated financial statements for the nine months ended December 31, 2015 or the year ended March 31, 2016. As a result of this change, NTTs retained earnings, accumulated other comprehensive income (loss) and noncontrolling interests have decreased by ¥214 million, ¥1,454 million and ¥1,408 million, respectively, as of the beginning of the current fiscal year. In addition, the change in cash and cash equivalents resulting from this change in fiscal year end is presented in the consolidated statements of cash flows under Increase (decrease) in cash and cash equivalents due to change in fiscal year end of consolidated subsidiaries.
(3) Earnings per Share
Basic earnings per share (EPS) is computed based on the average number of shares outstanding during the period. Diluted EPS assumes the 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. Since NTT did not issue dilutive securities for the nine months ended December 31, 2015 and 2016, there is no difference between basic EPS and diluted EPS.
In addition, NTT carried out a two-for-one stock split on July 1, 2015. The adjusted figures reflecting the impact of the stock split are included in NTTs EPS figures for the nine months ended December 31, 2015.
(4) Reclassifications
Beginning April 1, 2016, other intangible asset impairments previously classified under Goodwill and other intangible asset impairments have been reclassified into Impairment losses Other, and goodwill impairments previously classified under Goodwill and other intangible asset impairments have been reclassified into Impairment losses Goodwill. In accordance with this reclassification, impairment losses of property, plant and equipment and software previously classified under Impairment losses have been reclassified into Impairment losses Other.
Certain items for prior periods financial statements have been reclassified to conform to the presentation for the nine months ended December 31, 2016.
10
(5) Recently Issued Accounting Standards
Revenue from Contracts with Customers
On May 28, 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers, which requires an entity to recognize the amount to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.
The FASB also issued ASU 2016-08 Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU2016-10 Identifying Performance Obligations and Licensing, ASU2016-12 Narrow-Scope Improvements and Practical Expedients, ASU2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in March, April, May and December 2016, respectively, to amend ASU 2014-09 partially.
On August 12, 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers: Deferral of the Effective Date, and deferred the effective date of ASU 2014-09 by one year. Consequently, the standard is expected to take effect for NTT Group on April 1, 2018. Early adoption of the standard as of April 1, 2017 would also be permitted.
NTT has not yet selected a transition method and is currently evaluating the effect that the ASU will have on NTT Groups consolidated financial statements and related disclosures.
Recognition and Measurement of Financial Assets and Financial Liabilities
On January 5, 2016, the FASB issued ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities, which significantly changes the income statement impact of equity investments held by an entity, and the recognition of changes in fair value of financial liabilities when the fair value option is elected. The new standard is expected to take effect for NTT Group on April 1, 2018. NTT is currently evaluating the effect of adopting the ASU.
Leases
On February 25, 2016, the FASB issued ASU 2016-02 Leases, which requires all lessees to recognize right-of-use assets and lease liabilities, principally. The new standard is expected to take effect for NTT Group on April 1, 2019. NTT is currently evaluating the effect of adopting the ASU.
2. Inventories:
Inventories at March 31 and December 31, 2016 comprised the following:
Millions of yen | ||||||||
March 31,
2016 |
December 31,
2016 |
|||||||
Telecommunications equipment to be sold and materials |
¥ | 153,463 | ¥ | 138,454 | ||||
Projects in progress |
142,845 | 183,648 | ||||||
Supplies |
118,273 | 114,791 | ||||||
|
|
|
|
|||||
Total |
¥ | 414,581 | ¥ | 436,893 | ||||
|
|
|
|
11
3. Goodwill:
As a result of the annual impairment test conducted for the fiscal year ending March 31, 2017, a goodwill impairment loss of ¥48,823 million was recognized during the nine months ended December 31, 2016 for goodwill attributable to the Dimension Data reporting unit in the long distance and international communications business segment. The fair value of the reporting unit was determined using the discount cashflow method.
12
4. Equity:
Outstanding shares and treasury stock
Changes in NTTs shares of common stock and treasury stock for the fiscal year ended March 31, 2016 and for the nine months ended December 31, 2016 are as follows:
Change in shares | ||||||||
Issued
shares |
Treasury
stock |
|||||||
Balance at March 31, 2015 |
1,136,697,235 | 78,097,606 | ||||||
Effect of stock split |
1,136,697,235 | 78,104,609 | ||||||
Acquisition of treasury stock under resolution of the board of directors |
| 21,000,000 | ||||||
Acquisition of treasury stock through purchase of less-than-one-unit shares |
| 58,082 | ||||||
Resale of treasury stock to holders of less-than-one-unit shares |
| (5,028 | ) | |||||
Cancellation of treasury stock under resolution of the board of directors |
(177,000,000 | ) | (177,000,000 | ) | ||||
Balance at March 31, 2016 |
2,096,394,470 | 255,269 | ||||||
Acquisition of treasury stock under resolution of the board of directors |
| 61,158,800 | ||||||
Acquisition of treasury stock through purchase of less-than-one-unit shares |
| 27,766 | ||||||
Resale of treasury stock to holders of less-than-one-unit shares |
| (1,288 | ) | |||||
|
|
|
|
|||||
Balance at December 31, 2016 |
2,096,394,470 | 61,440,547 | ||||||
|
|
|
|
On May 15, 2015, the board of directors of NTT authorized a two-for-one stock split of its common stock, with a record date of June 30, 2015 and an effective date of July 1, 2015. On July 1, 2015, each share of common stock held by shareholders as of the record date was split into two shares. Per share information for the nine months ended December 31, 2015 reflects the impact of the stock split.
On August 5, 2015, the board of directors of NTT resolved that NTT may acquire up to 21 million shares of its outstanding common stock for an amount in total not exceeding ¥100 billion from August 6, 2015 through October 30, 2015. Based on this resolution, NTT repurchased 21 million shares of its common stock for a total purchase price of ¥93,589 million between August 2015 and October 2015, and concluded the repurchase of its common stock authorized by board of directors resolution.
On November 6, 2015, the board of directors resolved that NTT may cancel 177 million shares currently held as treasury stock on November 13, 2015, and as a result of such cancellation conducted on November 13, 2015, additional paid-in capital decreased by ¥8 million, and retained earnings decreased by ¥590,679 million.
On May 13, 2016, the board of directors resolved that NTT may acquire up to 68 million shares of its outstanding common stock for an amount in total not exceeding ¥350 billion from May 16, 2016 through March 31, 2017. Based on this resolution, NTT repurchased 59,038,100 shares of its common stock at ¥267,384 million on June 14, 2016 using the ToSTNeT-3, and concluded the repurchase of its common stock authorized by board of directors resolution.
On December 12, 2016, the board of directors resolved that NTT may acquire up to 33 million shares of its outstanding common stock for an amount in total not exceeding ¥150 billion from December 13, 2016 through June 30, 2017. Based on this resolution, NTT repurchased 2,120,700 shares of its common stock for a total purchase price of ¥10,442 million in December 2016.
NTT also repurchased 7,861,900 shares of its common stock for a total purchase price of ¥39,558 million in January 2017.
13
Dividends
Cash dividends paid during the nine months ended December 31, 2016 were as follows:
Resolution |
The shareholders meeting on June 24, 2016 | |
Class of shares |
Common stock | |
Source of dividends |
Retained earnings | |
Total cash dividends paid |
¥125,768 million | |
Cash dividends per share |
¥60 | |
Record date |
March 31, 2016 | |
Date of payment |
June 27, 2016 | |
Resolution |
The board of directors meeting on November 11, 2016 | |
Class of shares |
Common stock | |
Source of dividends |
Retained earnings | |
Total cash dividends paid |
¥122,225 million | |
Cash dividends per share |
¥60 | |
Record date |
September 30, 2016 | |
Date of payment |
December 12, 2016 |
14
Changes in equity
Changes in total equity, NTT shareholders equity and equity attributable to noncontrolling interests for the nine months ended December 31, 2015 and 2016 are as follows:
Millions of yen | ||||||||||||
NTT shareholders
equity |
Noncontrolling
interests |
Total
equity |
||||||||||
Balance at March 31, 2015 |
¥ | 8,681,860 | ¥ | 2,367,950 | ¥ | 11,049,810 | ||||||
Adjustments due to change in fiscal year end of consolidated subsidiaries (Note 1) |
(9,002 | ) | (595 | ) | (9,597 | ) | ||||||
Balance at March 31, 2015 (as adjusted) |
8,672,858 | 2,367,355 | 11,040,213 | |||||||||
Dividends paid to NTT Shareholders |
(200,182 | ) | | (200,182 | ) | |||||||
Dividends paid to noncontrolling interests |
| (105,086 | ) | (105,086 | ) | |||||||
Acquisition of treasury stock |
(93,838 | ) | | (93,838 | ) | |||||||
Resale of treasury stock |
19 | | 19 | |||||||||
Other equity transactions |
1,440 | (11,166 | ) | (9,726 | ) | |||||||
Net income |
604,064 | 206,190 | 810,254 | |||||||||
Other comprehensive income (loss) |
(80,256 | ) | (13,801 | ) | (94,057 | ) | ||||||
Unrealized gain (loss) on securities |
(16,880 | ) | (4,799 | ) | (21,679 | ) | ||||||
Unrealized gain (loss) on derivative instruments |
(2,845 | ) | 131 | (2,714 | ) | |||||||
Foreign currency translation adjustments |
(61,065 | ) | (9,395 | ) | (70,460 | ) | ||||||
Pension liability adjustments |
534 | 262 | 796 | |||||||||
Balance at December 31, 2015 |
¥ | 8,904,105 | ¥ | 2,443,492 | ¥ | 11,347,597 | ||||||
|
|
|
|
|
|
|||||||
Millions of yen | ||||||||||||
NTT shareholders
equity |
Noncontrolling
interests |
Total
equity |
||||||||||
Balance at March 31, 2016 |
¥ | 8,833,806 | ¥ | 2,406,276 | ¥ | 11,240,082 | ||||||
Adjustments due to change in fiscal year end of consolidated subsidiaries (Note 1) |
(1,668 | ) | (1,408 | ) | (3,076 | ) | ||||||
Balance at March 31, 2016 (as adjusted) |
8,832,138 | 2,404,868 | 11,237,006 | |||||||||
Dividends paid to NTT Shareholders |
(247,993 | ) | | (247,993 | ) | |||||||
Dividends paid to noncontrolling interests |
| (112,680 | ) | (112,680 | ) | |||||||
Acquisition of treasury stock |
(277,958 | ) | | (277,958 | ) | |||||||
Resale of treasury stock |
6 | | 6 | |||||||||
Other equity transactions |
(11,161 | ) | (114,050 | ) | (125,211 | ) | ||||||
Net income |
668,728 | 226,721 | 895,449 | |||||||||
Other comprehensive income (loss) |
(80,422 | ) | (9,665 | ) | (90,087 | ) | ||||||
Unrealized gain (loss) on securities |
(1,960 | ) | 3,077 | 1,117 | ||||||||
Unrealized gain (loss) on derivative instruments |
(1,693 | ) | (722 | ) | (2,415 | ) | ||||||
Foreign currency translation adjustments |
(83,652 | ) | (13,310 | ) | (96,962 | ) | ||||||
Pension liability adjustments |
6,883 | 1,290 | 8,173 | |||||||||
Balance at December 31, 2016 |
¥ | 8,883,338 | ¥ | 2,395,194 | ¥ | 11,278,532 | ||||||
|
|
|
|
|
|
Changes in the redeemable noncontrolling interest are not included in the table.
15
Accumulated other comprehensive income (loss)
Changes in accumulated other comprehensive income (loss), net of applicable taxes, for the nine and three months ended December 31, 2015 and 2016 are as follows:
For the nine months ended December 31 |
Millions of yen | |||||||||||||||||||
Unrealized
gain (loss) on securities |
Unrealized
gain (loss) on derivative instruments |
Foreign
currency translation adjustments |
Pension
liability adjustments |
Total | ||||||||||||||||
Balance at March 31, 2015 |
¥ | 134,112 | ¥ | (4,809 | ) | ¥ | 224,432 | ¥ | (85,503 | ) | ¥ | 268,232 | ||||||||
Adjustments due to change in fiscal year end of consolidated subsidiaries (Note 1) |
1 | (354 | ) | (9,349 | ) | | (9,702 | ) | ||||||||||||
Balance at March 31, 2015 (as adjusted) |
134,113 | (5,163 | ) | 215,083 | (85,503 | ) | 258,530 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income before reclassification |
(9,752 | ) | (2,571 | ) | (70,026 | ) | 32 | (82,317 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income |
(11,927 | ) | (143 | ) | (263 | ) | 764 | (11,569 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income |
(21,679 | ) | (2,714 | ) | (70,289 | ) | 796 | (93,886 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less Comprehensive income attributable to noncontrolling interests |
(4,799 | ) | 131 | (9,224 | ) | 262 | (13,630 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2015 |
¥ | 117,233 | ¥ | (8,008 | ) | ¥ | 154,018 | ¥ | (84,969 | ) | ¥ | 178,274 | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
For the nine months ended December 31 |
Millions of yen | |||||||||||||||||||
Unrealized
gain (loss) on securities |
Unrealized
gain (loss) on derivative instruments |
Foreign
currency translation adjustments |
Pension
liability adjustments |
Total | ||||||||||||||||
Balance at March 31, 2016 |
¥ | 109,211 | ¥ | (10,272 | ) | ¥ | 119,053 | ¥ | (275,047 | ) | ¥ | (57,055 | ) | |||||||
Adjustments due to change in fiscal year end of consolidated subsidiaries (Note 1) |
| 107 | (1,591 | ) | 30 | (1,454 | ) | |||||||||||||
Balance at March 31, 2016 (as adjusted) |
109,211 | (10,165 | ) | 117,462 | (275,017 | ) | (58,509 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income before reclassification |
11,964 | (1,896 | ) | (98,032 | ) | (392 | ) | (88,356 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income |
(10,847 | ) | (519 | ) | 505 | 8,565 | (2,296 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income |
1,117 | (2,415 | ) | (97,527 | ) | 8,173 | (90,652 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less Comprehensive income attributable to noncontrolling interests |
3,077 | (722 | ) | (13,875 | ) | 1,290 | (10,230 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2016 |
¥ | 107,251 | ¥ | (11,858 | ) | ¥ | 33,810 | ¥ | (268,134 | ) | ¥ | (138,931 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
16
For the three months ended December 31 |
Millions of yen | |||||||||||||||||||
Unrealized
gain (loss) on securities |
Unrealized
gain (loss) on derivative instruments |
Foreign
currency translation adjustments |
Pension
liability adjustments |
Total | ||||||||||||||||
Balance at September 30, 2015 |
¥ | 113,266 | ¥ | (6,240 | ) | ¥ | 187,956 | ¥ | (84,816 | ) | ¥ | 210,166 | ||||||||
Other comprehensive income before reclassification |
13,330 | (2,009 | ) | (38,129 | ) | 9 | (26,799 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income |
(10,853 | ) | 144 | | (320 | ) | (11,029 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income |
2,477 | (1,865 | ) | (38,129 | ) | (311 | ) | (37,828 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less Comprehensive income attributable to noncontrolling interests |
(1,490 | ) | (97 | ) | (4,191 | ) | (158 | ) | (5,936 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2015 |
¥ | 117,233 | ¥ | (8,008 | ) | ¥ | 154,018 | ¥ | (84,969 | ) | ¥ | 178,274 | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended December 31 |
Millions of yen | |||||||||||||||||||
Unrealized
gain (loss) on securities |
Unrealized
gain (loss) on derivative instruments |
Foreign
currency translation adjustments |
Pension
liability adjustments |
Total | ||||||||||||||||
Balance at September 30, 2016 |
¥ | 95,022 | ¥ | (11,820 | ) | ¥ | (28,452 | ) | ¥ | (270,166 | ) | ¥ | (215,416 | ) | ||||||
Other comprehensive income before reclassification |
19,447 | (635 | ) | 80,841 | 39 | 99,692 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income |
(28 | ) | 229 | 505 | 2,322 | 3,028 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income |
19,419 | (406 | ) | 81,346 | 2,361 | 102,720 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less Comprehensive income attributable to noncontrolling interests |
7,190 | (368 | ) | 19,084 | 329 | 26,235 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2016 |
¥ | 107,251 | ¥ | (11,858 | ) | ¥ | 33,810 | ¥ | (268,134 | ) | ¥ | (138,931 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
17
Reclassifications out of accumulated other comprehensive income (loss) for the nine and three months ended December 31, 2015 and 2016 are as follows:
18
Equity transactions with noncontrolling interests
On February 5, 2016, the board of directors of NTT DOCOMO, INC. (NTT DOCOMO), a subsidiary of NTT, resolved to launch a tender offer to acquire up to 137,578,616 shares of its outstanding common stock from February 8, 2016 through March 7, 2016. Based on this resolution, NTT DOCOMO repurchased a total of 120,867,062 of its shares for an aggregate amount of ¥307,486 million, 117,924,500 shares of which NTT Group sold back to NTT DOCOMO. Due to NTT DOCOMOs repurchase transactions, NTTs ownership interest in NTT DOCOMO decreased from 66.7% to 65.7%. As a result, Additional paid-in capital increased by ¥42,150 million in the consolidated balance sheet as of March 31, 2016.
On April 28, 2016, the board of directors of NTT DOCOMO resolved that NTT DOCOMO may acquire up to 99,132,938 shares of its outstanding common stock for an amount in total not exceeding ¥192,514 million from May 2, 2016 through December 31, 2016. Based on this resolution, NTT DOCOMO repurchased 9,021,000 shares of its common stock at ¥24,433 million using the ToSTNeT-3 on May 18, 2016, and also repurchased 47,010,000 shares of its common stock at ¥125,174 million by way of market purchases based on the discretionary dealing contract until December 31, 2016. As a result, NTTs ownership interest in NTT DOCOMO increased from 65.7% to 66.7%. Primarily due to these transactions, Additional paid-in capital decreased by ¥5,972 million in the consolidated balance sheet as of December 31, 2016.
19
5. Fair value measurements:
The inputs to valuation techniques used to measure fair value are required to be categorized by the fair value hierarchy. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
|
Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
|
Level 2 Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
|
Level 3 Inputs are unobservable inputs for the asset or liability. |
Assets and liabilities measured at fair value on a recurring basis as of March 31 and December 31, 2016 are as follows:
Millions of yen | ||||||||||||||||
March 31, 2016 | ||||||||||||||||
Fair value measurements using | ||||||||||||||||
Total | Level 1 (*1) | Level 2 (*2) | Level 3 (*3) | |||||||||||||
Assets |
||||||||||||||||
Available-for-sale securities: |
||||||||||||||||
Domestic equity securities |
¥ | 197,613 | ¥ | 197,613 | ¥ | | ¥ | | ||||||||
Foreign equity securities |
131,817 | 131,817 | | | ||||||||||||
Domestic debt securities |
49,478 | 218 | 49,087 | 173 | ||||||||||||
Foreign debt securities |
37,499 | 10 | 37,489 | | ||||||||||||
Derivatives: |
||||||||||||||||
Forward exchange contracts |
2,578 | | 2,578 | | ||||||||||||
Interest rate swap agreements |
107 | | 107 | | ||||||||||||
Currency swap agreements |
61,703 | | 61,703 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Derivatives: |
||||||||||||||||
Forward exchange contracts |
12,148 | | 12,148 | | ||||||||||||
Interest rate swap agreements |
6,110 | | 6,110 | | ||||||||||||
Currency swap agreements |
13,838 | | 13,838 | | ||||||||||||
Currency option agreements |
2,414 | | 2,414 | | ||||||||||||
|
|
|
|
|
|
|
|
(*1) | Quoted prices for identical assets or liabilities in active markets |
(*2) | Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs derived principally from observable market data |
(*3) | Unobservable inputs |
There were no transfers between Level 1 and Level 2.
Level 3 reconciliation is not disclosed, since the amounts in Level 3 are immaterial.
20
Millions of yen | ||||||||||||||||
December 31, 2016 | ||||||||||||||||
Fair value measurements using | ||||||||||||||||
Total | Level 1 (*1) | Level 2 (*2) | Level 3 (*3) | |||||||||||||
Assets |
||||||||||||||||
Available-for-sale securities: |
||||||||||||||||
Domestic equity securities |
¥ | 198,482 | ¥ | 198,482 | ¥ | | ¥ | | ||||||||
Foreign equity securities |
126,209 | 126,209 | | | ||||||||||||
Domestic debt securities |
58,752 | 215 | 58,369 | 168 | ||||||||||||
Foreign debt securities |
43,425 | 9 | 43,178 | 238 | ||||||||||||
Derivatives: |
||||||||||||||||
Forward exchange contracts |
1,364 | | 1,364 | | ||||||||||||
Interest rate swap agreements |
233 | | 233 | | ||||||||||||
Currency swap agreements |
83,714 | | 83,714 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Derivatives: |
||||||||||||||||
Forward exchange contracts |
2,500 | | 2,500 | | ||||||||||||
Interest rate swap agreements |
4,324 | | 4,324 | | ||||||||||||
Currency swap agreements |
9,212 | | 9,212 | | ||||||||||||
Currency option agreements |
998 | | 998 | | ||||||||||||
|
|
|
|
|
|
|
|
(*1) | Quoted prices for identical assets or liabilities in active markets |
(*2) | Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs derived principally from observable market data |
(*3) | Unobservable inputs |
There were no transfers between Level 1 and Level 2.
Level 3 reconciliation is not disclosed, since the amounts in Level 3 are immaterial.
Available-for-sale securities
Available-for-sale securities comprise marketable equity securities and debt securities, and financial instruments classified as available-for-sale securities. If active market prices are available, fair value is measured by quoted prices for identical assets in active markets, which is classified as Level 1. If active market prices are not available, fair value is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2. In cases in which fair value is measured by inputs derived from unobservable data, it is classified as Level 3.
Derivatives
Derivatives comprise forward exchange contracts, interest rate swap agreements, currency swap agreements and currency option agreements. Fair value of derivatives is measured by inputs derived principally from observable market data provided by financial institutions, which is classified as Level 2.
21
Assets and liabilities measured at fair value on a nonrecurring basis for the nine months ended December 31, 2015 are immaterial.
Assets and liabilities measured at fair value on a nonrecurring basis for the nine months ended December 31, 2016 are as follows:
Millions of yen | ||||||||||||||||||||
For the nine months ended December 31, 2016 | ||||||||||||||||||||
Fair value measurements using | ||||||||||||||||||||
Total | Level 1 (*1) | Level 2 (*2) | Level 3 (*3) |
Impairment
losses (before tax) |
||||||||||||||||
Assets |
||||||||||||||||||||
Goodwill |
¥ | 227,871 | ¥ | | ¥ | | ¥ | 227,871 | ¥ | 53,294 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(*1) | Quoted prices for identical assets or liabilities in active markets |
(*2) | Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs derived principally from observable market data |
(*3) | Unobservable inputs |
Assets and liabilities measured at fair value on a nonrecurring basis for the three months ended December 31, 2015 are immaterial.
Assets and liabilities measured at fair value on a nonrecurring basis for the three months ended December 31, 2016 are as follows:
Millions of yen | ||||||||||||||||||||
For the three months ended December 31, 2016 | ||||||||||||||||||||
Fair value measurements using | ||||||||||||||||||||
Total | Level 1 (*1) | Level 2 (*2) | Level 3 (*3) |
Impairment
losses (before tax) |
||||||||||||||||
Assets |
||||||||||||||||||||
Goodwill |
¥ | 213,198 | ¥ | | ¥ | | ¥ | 213,198 | ¥ | 48,823 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(*1) | Quoted prices for identical assets or liabilities in active markets |
(*2) | Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs derived principally from observable market data |
(*3) | Unobservable inputs |
Goodwill
The fair value of the reporting units is determined by using various evaluation models based on inputs that are unobservable in the market such as discounted cash flow projections, which are classified as Level 3. For the nine and three months ended December 31, 2016, the weighted average cost of capital and the permanent growth rate amounted to 10.0% and 2.3%, respectively. Goodwill impairment losses are recorded in the long distance and international communications business segment.
22
6. Segment information:
Operating segments are components of the NTT Group 1) that engage in business activities, 2) whose operating results are regularly reviewed by NTT Groups chief operating decision maker to make decisions on the allocation of financial resources and to evaluate business performance, and 3) for which discrete financial information is available. Accounting policies used to determine segment profit/loss are consistent with those used to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United States.
The regional communications business segment principally comprises revenues from fixed voice related services, IP/packet communications services, sales of telecommunications equipment, and other operating revenues.
The long distance and international communications business segment principally comprises revenues from fixed voice related services, IP/packet communications services, system integration services, and other operating revenues.
The mobile communications business segment principally comprises revenues from mobile voice related services, IP/packet communications services, and sales of telecommunications equipment.
The data communications business segment comprises revenues from system integration services.
The other segment principally comprises operating revenues from such activities as building maintenance, real estate rental, systems development, leasing, and research and development.
23
Operating revenues:
Millions of yen | ||||||||
For the nine months ended December 31 |
2015 | 2016 | ||||||
Operating revenues: |
||||||||
Regional communications business |
||||||||
External customers |
¥ | 2,154,156 | ¥ | 2,019,725 | ||||
Intersegment |
366,079 | 415,117 | ||||||
|
|
|
|
|||||
Total |
2,520,235 | 2,434,842 | ||||||
Long distance and international communications business |
||||||||
External customers |
1,612,558 | 1,500,011 | ||||||
Intersegment |
62,892 | 70,630 | ||||||
|
|
|
|
|||||
Total |
1,675,450 | 1,570,641 | ||||||
Mobile communications business |
||||||||
External customers |
3,350,876 | 3,432,054 | ||||||
Intersegment |
32,625 | 37,194 | ||||||
|
|
|
|
|||||
Total |
3,383,501 | 3,469,248 | ||||||
Data communications business |
||||||||
External customers |
1,076,347 | 1,088,781 | ||||||
Intersegment |
71,441 | 75,857 | ||||||
|
|
|
|
|||||
Total |
1,147,788 | 1,164,638 | ||||||
Other |
||||||||
External customers |
301,423 | 319,926 | ||||||
Intersegment |
571,319 | 569,995 | ||||||
|
|
|
|
|||||
Total |
872,742 | 889,921 | ||||||
Elimination |
(1,104,356 | ) | (1,168,793 | ) | ||||
|
|
|
|
|||||
Consolidated Total |
¥ | 8,495,360 | ¥ | 8,360,497 | ||||
|
|
|
|
24
Millions of yen | ||||||||
For the three months ended December 31 |
2015 | 2016 | ||||||
Operating revenues: |
||||||||
Regional communications business |
||||||||
External customers |
¥ | 713,006 | ¥ | 667,608 | ||||
Intersegment |
126,659 | 146,801 | ||||||
|
|
|
|
|||||
Total |
839,665 | 814,409 | ||||||
Long distance and international communications business |
||||||||
External customers |
555,991 | 504,408 | ||||||
Intersegment |
22,219 | 27,388 | ||||||
|
|
|
|
|||||
Total |
578,210 | 531,796 | ||||||
Mobile communications business |
||||||||
External customers |
1,157,153 | 1,167,597 | ||||||
Intersegment |
11,320 | 13,615 | ||||||
|
|
|
|
|||||
Total |
1,168,473 | 1,181,212 | ||||||
Data communications business |
||||||||
External customers |
375,703 | 375,191 | ||||||
Intersegment |
26,372 | 27,391 | ||||||
|
|
|
|
|||||
Total |
402,075 | 402,582 | ||||||
Other |
||||||||
External customers |
104,549 | 121,365 | ||||||
Intersegment |
200,433 | 200,948 | ||||||
|
|
|
|
|||||
Total |
304,982 | 322,313 | ||||||
Elimination |
(387,003 | ) | (416,143 | ) | ||||
|
|
|
|
|||||
Consolidated Total |
¥ | 2,906,402 | ¥ | 2,836,169 | ||||
|
|
|
|
25
Segment profit:
Millions of yen | ||||||||
For the nine months ended December 31 |
2015 | 2016 | ||||||
Segment profit: |
||||||||
Regional communications business |
¥ | 232,179 | ¥ | 330,463 | ||||
Long distance and international communications business |
82,225 | 18,696 | ||||||
Mobile communications business |
683,021 | 839,336 | ||||||
Data communications business |
74,032 | 67,063 | ||||||
Other |
46,164 | 59,310 | ||||||
|
|
|
|
|||||
Total segment profit |
1,117,621 | 1,314,868 | ||||||
Elimination |
8,961 | 3,686 | ||||||
|
|
|
|
|||||
Consolidated Total |
¥ | 1,126,582 | ¥ | 1,318,554 | ||||
|
|
|
|
|||||
Millions of yen | ||||||||
For the three months ended December 31 |
2015 | 2016 | ||||||
Segment profit: |
||||||||
Regional communications business |
¥ | 77,568 | ¥ | 98,216 | ||||
Long distance and international communications business |
34,625 | (23,484 | ) | |||||
Mobile communications business |
221,855 | 255,598 | ||||||
Data communications business |
35,847 | 31,175 | ||||||
Other |
18,529 | 29,619 | ||||||
|
|
|
|
|||||
Total segment profit |
388,424 | 391,124 | ||||||
Elimination |
4,694 | 946 | ||||||
|
|
|
|
|||||
Consolidated Total |
¥ | 393,118 | ¥ | 392,070 | ||||
|
|
|
|
As indicated in (1) Change in Accounting Procedures for Consolidated Quarterly Financial Results in the Note 1: Summary of significant accounting policies:, effective April 1, 2016, NTT and its subsidiaries in Japan adopted the straight-line method of depreciation and made changes to the residual carrying amount of property, plant, and equipment where necessary.
As a result of the change in depreciation method, segment profit on a consolidated basis for the nine months ended December 31, 2016 increased by ¥66,632 million for Regional communications business, ¥5,788 million for Long distance and international communications business, ¥109,236 million for Mobile communications business, ¥3,977 million for Other, decreased by ¥311 million for Data communications business, and increased by ¥185,322 million for total. Segment profit on a consolidated basis for the three months ended December 31, 2016 increased by ¥15,411 million for Regional communications business, ¥1,434 million for Long distance and international communications business, ¥39,806 million for Mobile communications business, ¥218 million for Data communications business, ¥1,790 million for Other, and ¥58,659 million for total.
Transfers between operating segments are based on the values that approximate arms-length prices. Operating income is operating revenue less costs and operating expenses.
26
Segment assets:
Millions of yen | ||||||||
March 31,
2016 |
December 31,
2016 |
|||||||
Segment assets: |
||||||||
Data communications business |
¥ | 1,981,578 | ¥ | 2,233,465 | ||||
|
|
|
|
For the nine months ended December 31, 2016, total assets in the data communications business segment increased by ¥251,887 million. This is mainly due to the acquisitions of Dell Systems Corporation and other companies and IT services-related assets. The goodwill in accordance with these acquisitions is recorded in the data communications business segment. For details on these acquisitions, see note 10.
Other significant items:
Millions of yen | ||||||||
For the nine months ended December 31 |
2015 | 2016 | ||||||
Impairment losses Other: |
||||||||
Long distance and international communications business |
¥ | | ¥ | 53,294 | ||||
Consolidated Total |
¥ | | ¥ | 53,294 | ||||
|
|
|
|
Millions of yen | ||||||||
For the three months ended December 31 |
2015 | 2016 | ||||||
Impairment losses Other: |
||||||||
Long distance and international communications business |
¥ | | ¥ | 48,823 | ||||
Consolidated Total |
¥ | | ¥ | 48,823 | ||||
|
|
|
|
For goodwill impairment, see note 3.
There were no operating revenues from transactions with a single external customer amounting to 10% or more of NTT Groups revenues for the nine and three months ended December 31, 2015 and 2016.
27
7. Research and development expenses:
Research and development expenses are charged to income as incurred, and such amounts charged to income for the nine months ended December 31, 2015 and 2016 were ¥151,621 million and ¥146,013 million, respectively. Such amounts charged to income for the three months ended December 31, 2015 and 2016 were ¥51,321 million and ¥43,311 million, respectively.
8. Financing receivables:
NTT Group has certain Financing receivables, including loans and lease receivables. These financing receivables are mainly held by the financial subsidiaries of NTT. NTT manages these financing receivables by classifying them into Installment sales receivable, Lease receivable, Loans receivable, Credit receivable and Others.
The allowance for doubtful accounts against financing receivables collectively evaluated for impairment is computed based on each historical bad debt experience. The allowance for doubtful accounts against financing receivables individually evaluated for impairment is computed based on the estimated uncollectible amount based on an analysis of certain individual accounts. In addition, financing receivables that are determined to be uncollectible due to, among other factors, the condition of the debtor are written off at the time of determination.
Rollforward of allowance for doubtful accounts and recorded investment in financing receivables for the nine months ended December 31, 2015 and 2016, and the changes in doubtful accounts for the nine months ended December 31, 2015 and 2016 are as follows:
Millions of yen | ||||||||||||||||||||||||
Installment
sales receivable |
Lease
receivable |
Loans
receivable |
Credit
receivable |
Others | Total | |||||||||||||||||||
Allowance for doubtful accounts: |
||||||||||||||||||||||||
Balance at March 31, 2015 |
¥ | 5,658 | ¥ | 6,210 | ¥ | 961 | ¥ | 6,920 | ¥ | 4,688 | ¥ | 24,437 | ||||||||||||
Provision |
(268 | ) | 225 | 208 | 8,852 | (301 | ) | 8,716 | ||||||||||||||||
Charge off |
(83 | ) | (1,267 | ) | (253 | ) | (5,903 | ) | | (7,506 | ) | |||||||||||||
Recovery |
2 | 44 | | 2 | | 48 | ||||||||||||||||||
Balance at December 31, 2015 |
5,309 | 5,212 | 916 | 9,871 | 4,387 | 25,695 | ||||||||||||||||||
Collectively evaluated for impairment |
5,136 | 2,154 | 349 | 9,871 | 27 | 17,537 | ||||||||||||||||||
Individually evaluated for impairment |
173 | 3,058 | 567 | | 4,360 | 8,158 | ||||||||||||||||||
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|
|||||||||||||
Financing receivables: |
||||||||||||||||||||||||
Balance at December 31, 2015 |
1,027,138 | 392,712 | 79,418 | 322,876 | 4,829 | 1,826,973 | ||||||||||||||||||
Collectively evaluated for impairment |
1,026,878 | 389,213 | 77,928 | 322,876 | 391 | 1,817,286 | ||||||||||||||||||
Individually evaluated for impairment |
¥ | 260 | ¥ | 3,499 | ¥ | 1,490 | ¥ | | ¥ | 4,438 | ¥ | 9,687 | ||||||||||||
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28
Millions of yen | ||||||||||||||||||||||||
Installment
sales receivable |
Lease
receivable |
Loans
receivable |
Credit
receivable |
Others | Total | |||||||||||||||||||
Allowance for doubtful accounts: |
||||||||||||||||||||||||
Balance at March 31, 2016 |
¥ | 5,174 | ¥ | 4,359 | ¥ | 940 | ¥ | 11,006 | ¥ | 4,303 | ¥ | 25,782 | ||||||||||||
Provision |
(433 | ) | 381 | 3 | 13,561 | (488 | ) | 13,024 | ||||||||||||||||
Charge off |
(27 | ) | (534 | ) | (21 | ) | (10,404 | ) | | (10,986 | ) | |||||||||||||
Recovery |
1 | 58 | | 3 | | 62 | ||||||||||||||||||
Balance at December 31, 2016 |
4,715 | 4,264 | 922 | 14,166 | 3,815 | 27,882 | ||||||||||||||||||
Collectively evaluated for impairment |
4,639 | 1,592 | 442 | 14,166 | 52 | 20,891 | ||||||||||||||||||
Individually evaluated for impairment |
76 | 2,672 | 480 | | 3,763 | 6,991 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financing receivables: |
||||||||||||||||||||||||
Balance at December 31, 2016 |
1,021,189 | 424,660 | 99,771 | 397,139 | 4,349 | 1,947,108 | ||||||||||||||||||
Collectively evaluated for impairment |
1,021,102 | 421,480 | 98,192 | 397,139 | 527 | 1,938,440 | ||||||||||||||||||
Individually evaluated for impairment |
¥ | 87 | ¥ | 3,180 | ¥ | 1,579 | ¥ | | ¥ | 3,822 | ¥ | 8,668 | ||||||||||||
|
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|
|
9. Contingent liabilities:
Contingent liabilities at December 31, 2016, composed of loan guarantees and other contingencies, amounted to ¥80,991 million.
As of December 31, 2016, NTT Group had no material litigation or claims outstanding, pending or threatened against it, which would be expected to have a material adverse effect on NTTs consolidated financial position or results of operations.
10. Business combinations:
Acquisitions of Dell Systems Corporation and Other Companies and IT Services-Related Assets
On November 2, 2016 (U.S. time), NTT DATA CORPORATION (NTT DATA), a subsidiary of NTT, acquired 100% of the outstanding shares of Dell Systems Corporation, Dell Technology & Solutions Limited, and Dell Services Pte. Ltd., and 100% of the equity interests of U.S. Services L.L.C., from Dell Inc., through three of its subsidiaries including NTT DATA, Inc., and such companies became its consolidated subsidiaries. In addition, NTT DATA acquired Dell Groups IT services-related assets, mainly located in North America (NTT DATA Services department), through three of its subsidiaries including NTT DATA, Inc. The total acquisition cost for these acquisitions was ¥311,561 million in cash.
Through these acquisitions, NTT DATA intends to expand its business in various industries in North America and enhance its cloud services and BPO services using cutting-edge technology.
The costs associated with this acquisition in the amount of ¥3,583 million are included in Selling, general and administrative expenses in the consolidated statements of income.
These acquisitions will be recorded in accordance with the acquisition method. However, as the initial accounting for the business combination has not been completed, NTT tentatively recorded ¥146,375 million of goodwill in the consolidated financial statements. This goodwill represents a reasonable estimate of the expected synergies of the NTT DATA Services department from its future business expansion and is recorded in the data communications business segment.
In addition, only the balance sheet as of the date of the acquisition is consolidated for the nine months ended December 31, 2016.
29
11. Subsequent events:
For information on NTTs repurchase of its common stock, see note 4.
30
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