FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of December, 2002
Advantest Corporation
---------------------
(Translation of Registrant's Name Into English)
Shinjuku-NS Building
--------------------
4-1 Nishi-Shinjuku 2-chome
--------------------------
Shinjuku-ku
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Tokyo 163-0880
--------------
Japan
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(Address of Principal Executive Offices)
(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 X Form 40-F
---
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):_________)
Materials Contained in this Report:
(1) Executive summary of the registrant's Japanese-language Interim Securities
Report, which was submitted to the Chief of the Kanto Local Finance Bureau
of the Ministry of Finance of Japan on December 26, 2002. (All financial
information for the current interim period was prepared in accordance with
generally accepted accounting principles in the U.S.; however, financial
information for the previous fiscal year and interim period were prepared
in accordance with generally accepted accounting principles in Japan.)
(2) English-language translation of the registrant's Interim Consolidated
Financial Statements for the six-month period ended September 30, 2002,
which was filed with the Chief of the Kanto Local Finance Bureau as part of
the registrant's Interim Securities Report. (All financial information for
the current interim period was prepared in accordance with generally
accepted accounting principles in the U.S.; however, financial information
for the previous fiscal year and interim period were prepared in accordance
with generally accepted accounting principles in Japan.)
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.
Advantest Corporation
By: /s/ Hitoshi Owada
----------------------------
Name: Hitoshi Owada
Title: Managing Director and
Senior Vice President,
Administration and Finance Division
Date: December 27, 2002
EXHIBIT I
Japanese Interim Securities Report for the fiscal half-year from April 1, 2002
through September 30, 2002, as submitted to the Chief of the Kanto Local Finance
Bureau of the Ministry of Finance of Japan on December 26, 2002, consisting of
73 pages (excluding cover and table of contents), which included the following
information:
Part I Company Information
1. Corporate Overview
o Significant financial indices
o Description of business
o Information on subsidiaries and affiliates
o Employee information
2. Business Information
o Summary of business results
o Production, orders and sales
o Management initiatives
o Material agreements (none)
o Research and development
3. Capital Assets
o Changes in capital assets (none)
o Plans for the acquisition and retirement of capital assets
4. Company Data
o Share data
- Total number of shares, etc.
- Stock options, etc.
- Total number of outstanding shares, amount of capital, etc.
- Significant shareholders
- Shares with voting rights
o Movements in share price
o Changes in directors
5. Accounting Information
o Audited consolidated interim financial statements and notes
o Audited unconsolidated interim financial statements and notes
6. Other Filings of the Company
Part II Information on Guarantors (none)
EXHIBIT II
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim and FY2002 was
prepared in accordance with Japanese GAAP.)
1 INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) Interim Consolidated Financial Statements (FY2001 Interim and FY2001)
(i) Interim Consolidated Balance Sheets (In millions of yen)
-------------------------------------------------------------------------------------------
FY2001 interim FY2001
Consolidated balance
(As of September 30, sheet summary
2001) (As of March 31, 2002)
----------------------------------------------------
Amount Percentage Amount Percentage
-------------------------------------------------------------------------------------------
(Assets) % %
I Current assets
1. Cash and deposits 101,086 105,932
2. Trade notes and *3 57,517 33,729
accounts receivable
3. Inventories 81,798 52,887
4. Deferred tax assets 12,406 16,178
5. Other 2,593 3,098
Allowance for doubtful (215) (533)
accounts
----------------- ------------------
Total current assets 255,187 75.5 211,294 69.3
----------------- ------------------
II Noncurrent assets
(1) Property, plant and *1*2
equipment
1. Buildings and 21,797 22,700
structures
2. Machinery and 6,905 6,734
delivery equipment
3. Tools and furniture 8,440 8,791
4. Land 18,524 18,500
5. Construction in 2,716 1,491
progress
----------------- ------------------
Total property, plant 58,384 17.2 58,218 19.1
and equipment
-----------------
(2) Intangible fixed assets 6,955 2.1 6,789 2.2
----------------- ------------------
(3) Investments and other
assets
1. Investment in securities 8,848 8,244
2. Long-term loans 148 138
3. Deferred tax assets 5,922 17,693
4. Other 2,628 2,696
----------------- ------------------
Total investments and 17,548 5.2 28,773 9.4
other assets
----------------- ------------------
Total noncurrent assets 82,888 24.5 93,780 30.7
----------------- ------------------
Total assets 338,076 100.0 305,075 100.0
================= ==================
1
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim and FY2002 was
prepared in accordance with Japanese GAAP.)
(In millions of yen)
-------------------------------------------------------------------------------------------
FY2001 interim FY2001
Consolidated balance
(As of September 30, sheet summary
2001) (As of March 31, 2002)
----------------------------------------------------
Amount Percentage Amount Percentage
-------------------------------------------------------------------------------------------
(Liabilities) % %
I Current liabilities
1. Notes and accounts payable 10,759 4,441
2. Income tax payable 1,618 678
3. Deferred tax liabilities 39 101
4. Allowance for product 5,529 2,836
warranty
5. Other 12,672 15,064
----------------- ------------------
Total current liabilities 30,620 9.1 23,122 7.6
----------------- ------------------
II Noncurrent liabilities
1. Bonds 26,700 26,700
2. Long-term borrowings *2 189 168
3. Deferred tax liabilities 473 445
4. Allowance for retirement 9,613 9,322
benefits
5. Allowance for officers' 976 1,083
retirement benefits
6. Consolidation adjustments 25 15
7. Other 1,118 1,103
----------------- ------------------
Total noncurrent liabilities 39,096 11.5 38,838 12.7
----------------- ------------------
Total liabilities 69,716 20.6 61,960 20.3
----------------- ------------------
(Minority interests)
Minority interests 256 0.1 273 0.1
(Stockholders' equity)
I Common stock 32,362 9.6 32,362 10.6
II Additional paid-in capital 32,973 9.7 32,973 10.8
III Consolidated retained 210,476 62.3 181,246 59.4
earnings
IV Net unrealized holding gains 121 0.0 11 0.0
on other securities
V Translation adjustments (5,409) (1.6) (1,318) (0.4)
VI Treasury stock (2,421) (0.7) (2,434) (0.8)
----------------- ------------------
Total stockholders' equity 268,103 79.3 242,841 79.6
----------------- ------------------
Total liabilities and 338,076 100.0 305,075 100.0
stockholders' equity
================= ==================
2
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim and FY2002 was
prepared in accordance with Japanese GAAP.)
(ii) Interim Consolidated Statements of Income (In millions of yen)
------------------------------------------------------------------------------------------------------
FY2001
FY2001 interim Consolidated statement of income
summary
(April 1, 2001 through [April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------
Amount Percentage Amount Percentage
------------------------------------------------------------------------------------------------------
% %
I Net sales 65,086 100.0 95,244 100.0
II Cost of sales 31,668 48.7 76,311 80.1
--------- ---------
Gross profit 33,417 51.3 18,932 19.9
III Selling, general and *1 28,939 44.4 55,485 58.3
administrative expenses
--------- ---------
Operating income (loss) 4,478 6.9 (36,552) (38.4)
IV Non-operating income
1. Interest income 353 562
2. Dividends income 17 157
3. Amortization of 8 36
consolidation adjustments
4. Miscellaneous income *2 1,948 2,328 3.6 1,587 2,345 2.5
------ -------
V Non-operating expenses
1. Interest expenses 243 516
2. Equity in losses of affiliates 280 794
3. Miscellaneous expenses *3 748 1,272 2.0 1,274 2,585 2.7
------ --------- ------- ---------
Ordinary income (loss) 5,534 8.5 (36,793) (38.6)
--------- ---------
Income (loss) before income
taxes and minority interests
in consolidated subsidiaries 5,534 8.5 (36,793) (38.6)
Income taxes 1,464 1,233
Income taxes - deferred 225 1,689 2.6 (15,158) (13,924) (14.6)
------- --------- ---------
Less: minority interests 51 0.1 80 0.1
in consolidated subsidiaries --------- ---------
Net income (loss) 3,793 5.8 (22,949) (24.1)
========= ==========
3
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim and FY2002 was
prepared in accordance with Japanese GAAP.)
(iii) Interim Consolidated Statements of Retained Earnings (In millions of yen)
------------------------------------------------------------------------------------------
FY2001
FY2001 interim Consolidated statement of
retained earnings
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
-------------------------------------------------------
Amount Amount
------------------------------------------------------------------------------------------
I Consolidated retained
earnings at beginning of
period 209,453 209,453
II Decreases in consolidated
retained earnings
1. Dividends 2,485 4,971
2. Bonuses to directors 270 270
3. Bonuses to corporate 15 2,770 15 5,256
auditors
---------- ----------
III Net income (loss) 3,793 (22,949)
-------------- ---------------
IV Consolidated retained 210,476 181,246
earnings at end of period
============== ===============
4
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim and FY2002 was
prepared in accordance with Japanese GAAP.)
(iv) Interim Consolidated Statements of Cash Flows (In millions of yen)
------------------------------------------------------------------------------------------------
FY2001
FY2001 interim Consolidated statement
of cash flow summary
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
-------------------------------------------------
Amount Amount
------------------------------------------------------------------------------------------------
I Cash flows from operating activities
Income (loss) before income taxes
and minority interests in
consolidated subsidiaries 5,534 (36,793)
Depreciation and amortization 4,832 10,919
Amortization of consolidation (8) (18)
adjustments
Increase (decrease) in allowance for (991) (673)
doubtful accounts
Increase (decrease) in allowance for 609 319
retirement benefits
Increase (decrease) in allowance for 25 132
officers' retirement benefits
Interest and dividend income (370) (719)
Interest expenses 243 516
Foreign exchange gain or loss (546) (810)
Gain (loss) on sale of investment (22) (22)
securities
Gain (loss) on sale of property, (3) (147)
plant and equipment
Loss on disposal of property, plant 118 342
and equipment
Decrease (increase) in trade 46,595 72,155
accounts receivable
Increase (decrease) in inventories (373) 29,143
Increase (decrease) in trade (27,184) (34,314)
accounts payable
Decrease (increase) in consumption 284 262
taxes receivable
Bonuses to officers (285) (285)
Other (4,114) (3,771)
-------------- -------------
Subtotal 24,344 36,236
Interest and dividends received 395 598
Interest paid (255) (529)
Income taxes paid (26,401) (27,731)
-------------- -------------
Cash flows from operating activities (1,917) 8,574
5
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim and FY2002 was
prepared in accordance with Japanese GAAP.)
(In millions of yen)
------------------------------------------------------------------------------------------------
FY2001
FY2001 interim Consolidated statement
of cash flow summary
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------
Amount Amount
------------------------------------------------------------------------------------------------
II Cash flows from investing activities
Acquisition of property, plant and (10,030) (13,175)
equipment
Proceeds from sale of property, 574 644
plant and equipment
Acquisition of intangible fixed (1,344) (2,373)
assets
Acquisition of investment securities (2,217) (2,228)
Proceeds from sale of investment 25 38
securities
Payments for loans (3) (4)
Proceeds from collection of loans 49 59
Acquisition of equity method (1,425) (1,425)
affiliates
Other 188 (122)
-------------- -------------
Cash flows from investing activities (14,183) (18,586)
III Cash flows from financing activities
Repayments on long-term borrowings (21) (43)
Redemption of bonds (4,300) (4,300)
Proceeds from issuance of shares 307 308
Acquisition of treasury stock (30) (43)
Proceeds from sale of treasury stock 30 31
Dividends paid (2,482) (4,968)
Dividends paid to minority (1) (1)
shareholders
-------------- -------------
Cash flows from financing activities (6,497) (9,015)
IV Net effect of exchange rate changes 142 1,418
on cash and cash equivalents
-------------- -------------
V Net increase (decrease) in cash and (22,455) (17,609)
cash equivalents
VI Cash and cash equivalents at 123,541 123,541
beginning of period
-------------- -------------
VII Cash and cash equivalents at end of 101,086 105,932
period
============== ==============
6
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Significant Accounting Policies in the Preparation of Interim Consolidated
Financial Statements
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
1. Scope of Consolidation 1. Scope of Consolidation
All 46 subsidiaries of the company are All 41 subsidiaries of the company are
consolidated. consolidated.
Of the consolidated subsidiaries, Advantest Of the consolidated subsidiaries, Advantest
Academy, Advantest Taiwan Engineering Inc. and Academy, Advantest Taiwan Engineering Inc. and
Advantest America Design Center, Inc. are new Advantest America Design Center, Inc. are new
companies established during the interim period companies established during the fiscal year
and became consolidated subsidiaries beginning and became consolidated subsidiaries beginning
from this consolidated interim period. from this consolidated fiscal year. In
addition, Advantest Technologies Co., Ltd.,
Advantest Components Co., Ltd. and ACT Advanced
Circuit Testing GmbH terminated operation
during this consolidated fiscal year and are
thus excluded from the scope of consolidation.
Advantest Europe Corporation (Holding) GmbH,
Advantest (Europe) GmbH and Advantest Test
Engineering Solutions GmbH were merged, with
Advantest (Europe) GmbH being the surviving
entity.
2. Application of the Equity Method 2. Application of the Equity Method
Number of affiliates accounted for under the Number of affiliates accounted for under the
equity method: 1 equity method: 1
Name of company: Name of company:
Japan Engineering Co., Ltd. Japan Engineering Co., Ltd.
Effective from this consolidated interim period, Effective from this consolidated fiscal year,
Japan Engineering Co., Ltd. was accounted for Japan Engineering Co., Ltd. was accounted for
under the equity method as a result of an under the equity method as a result of an
acquisition of its shares by the company during acquisition of its shares by the company during
this interim period. this fiscal year.
3.Interim Period of Consolidated Subsidiaries 3.Fiscal Year of Consolidated Subsidiaries
Of the consolidated subsidiaries, the interim Of the consolidated subsidiaries, the fiscal
period of Advantest (Suzhou) Co., Ltd. ends on year of Advantest (Suzhou) Co., Ltd. ends on
June 30. In preparing these interim consolidated December 31. In preparing these consolidated
financial statements, the company used interim financial statements, the company used financial
financial statements of the above subsidiary as statements of the above subsidiary as of that
of that date, and made necessary consolidation date, and made necessary consolidation
adjustments regarding significant transactions adjustments regarding significant transactions
between that date and the last day of the between that date and the last day of the
consolidated interim period. consolidated fiscal year.
4. Certain Accounting Policies 4. Certain Accounting Policies
(1) Valuation of Assets (1) Valuation of Assets
(i) Securities (i) Securities
Other Securities Other Securities
Securities with fair value Securities with fair value
Stated at fair value based on market Stated at fair value based on market
prices at end of interim period. prices at end of fiscal year. (Unrealized
(Unrealized holding gains and losses are holding gains and losses are accounted
accounted for as a component of for as a component of stockholders'
stockholders' equity; cost of other equity; cost of other securities sold is
securities sold is determined using the determined using the moving average
moving average method.) method.)
Securities not practicable to fair value Securities not practicable to fair value
Stated at cost using the moving average Same as described on the left.
method.
(ii) Derivatives (ii) Derivatives
Stated at fair value. Same as described on the left.
7
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
(iii)Inventories (iii)Inventories
Finished products Same as described on the left.
Principally stated at cost using the
periodic average method.
Raw material
Principally stated at lower of cost or
market using the periodic average method.
Work in progress
Stated at cost using the periodic average
method.
Supplies
Stated at cost using the specific
identification method.
(2) Depreciation and Amortization (2) Depreciation and Amortization
(i)Depreciation of property, plant and equipment (i)Depreciation of property, plant and equipment
Principally computed using the declining Same as described on the left.
balance method
However, buildings (excluding attached
improvements) acquired on or after April 1,
1998 are depreciated using the straight line
method.
(ii) Amortization of intangible fixed assets (ii) Amortization of intangible fixed assets
Computed using the straight-line method. Same as described on the left.
However, software (for internal use) is
depreciated using the straight-line method
over its estimated useful life of 5 years.
(3) Significant Allowances (3) Significant Allowances
(i)Allowance for doubtful accounts (i)Allowance for doubtful accounts
To prepare for credit losses on accounts To prepare for credit losses on accounts
receivables and loans, etc., allowances equal receivables and loans, etc., allowances equal
to the estimated amount of uncollectible to the estimated amount of uncollectible
receivables is provided for general receivables is provided for general
receivables based on historical write-off receivables based on historical write-off
ratio, and bad receivables based on ratio, and bad receivables based on
case-by-case determination of collectibility. case-by-case determination of collectibility.
(Change of accounting policy) (Change of accounting policy)
Allowance for doubtful accounts for general Allowance for doubtful accounts for general
receivables was determined in the past using receivables was determined in the past using
percentages set by the company. After percentages set by the company. After
reviewing the status of the company's reviewing the status of the company's
transactions, the company believes that the transactions, the company believes that the
risk of credit losses for this category of risk of credit losses for this category of
receivables is low. It has therefore adopted receivables is low. It has therefore adopted
the use of historical write-off ratio for the the use of historical write-off ratio for the
determination of the amount of allowance for determination of the amount of allowance for
doubtful accounts to be provided. doubtful accounts to be provided.
The impact of this change on the interim The impact of this change on the
consolidated financial statements is consolidated financial statements is
insignificant. insignificant.
The impact of this change on segment The impact of this change on segment
information is described in "Segment information is described in "Segment
Information". Information".
(ii) Allowance for Product Warranty (ii) Allowance for Product Warranty
To reasonably account for repair costs To reasonably account for repair costs
covered under product warranty in the covered under product warranty in the
respective period from which they arise, the respective period from which they arise, the
allowance for a given year is provided in an allowance for a given year is provided in an
amount determined based on the ratio of repair amount determined based on the ratio of
costs in that year to net sales in the repair costs in that year to net sales in the
preceding year. preceding fiscal year.
8
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
(iii)Allowance for Retirement Benefits (iii)Allowance for Retirement Benefits
To provide for retirement benefits for To provide for retirement benefits for
domestic employees, an allowance for domestic employees, allowance for retirement
retirement benefits is provided in the amount benefits is determined based on the estimated
deemed to have accrued at the end of the retirement benefit obligations and pension
consolidated interim period, determined based assets at the end of the consolidated fiscal
on the estimated retirement benefit year.
obligations and pension assets at the end of
the consolidated fiscal year. Unrecognized past service liabilities are
amortized on a straight-line basis over the
Any actuarial gains and losses are amortized average remaining service years of 17 years.
on a straight line basis over fixed years (17
years) within the average remaining years of Any actuarial gains and losses are amortized
service of employees, and the amount is on a straight line basis over fixed years (17
recorded in the consolidated fiscal year years) within the average remaining years of
subsequent to its occurrence. service of employees, and the amount is
recorded in the consolidated fiscal year
subsequent to its occurrence.
(iv) Allowance for Officers' Retirement Benefits (iv) Allowance for Officers' Retirement Benefits
To provide for officers' retirement benefits, To provide for officers' retirement
an allowance is provided for the aggregate benefits, an allowance is provided for the
amount payable at the end of the consolidated aggregate amount payable at the end of the
interim period pursuant to the company's rules consolidated fiscal year pursuant to the
on officers' retirement benefits. company's rules on officers' retirement
benefits.
(Change in presentation)
Interim consolidated balance sheets
-----------------------------------
"Allowance for officers' retirement benefits"
was previously included in "Other" under
"Non-current liabilities", but is now
presented as a separate item starting from
this consolidated interim period.
Interim consolidated statements of cash flow
--------------------------------------------
"Increase (decrease) in allowance for
officers' retirement benefits" was previously
included in "Increase (decrease) in allowance
for retirement benefits", but is now presented
as a separate item starting from this
consolidated interim period.
(4)Accounting for Lease Transactions (4)Accounting for Lease Transactions
Finance lease transactions not involving a Same as described on the left.
transfer of title to the lessee are accounted in
the same way as usual operating lease
transactions.
(5)Accounting for Hedges (5)Accounting for Hedges
Not applicable. Same as described on the left.
(6)Accounting for Consolidated Overseas Subsidiaries (6)Accounting for Consolidated Overseas
Subsidiaries
Consolidated overseas subsidiaries follow
accounting principles generally accepted in the Same as described on the left
country of their domicile. There are no
significant differences between accounting
principles adopted by these consolidated
overseas subsidiaries and those of the parent
company.
(7) Accounting of consumption taxes (7) Accounting of consumption taxes
Consumption tax and local consumption tax are Same as described on the left.
accounted using the net-of-tax method.
9
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
5. Definition of funds on interim consolidated 5. Definition of funds on consolidated statements
statements of cash flows of cash flows
Funds (cash and cash equivalents) on the Funds (cash and cash equivalents) on the
interim consolidated statements of cash flows consolidated statements of cash flows include
include cash on hand, immediately accessible cash on hand, immediately accessible bank
bank deposits, and short-term investments with deposits, and short-term investments with a
a maturity of under 3 months from the day of maturity of under 3 months from the day of
acquisition that are easily exchangeable into acquisition that are easily exchangeable into
cash and that bear low fluctuation risks. cash and that bear low fluctuation risks.
10
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Additional Information
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
(Accounting standards used by consolidated ----
overseas subsidiaries)
Advantest's overseas sales subsidiaries had
previously recognized sales upon shipment.
Beginning in the second half of the previous
fiscal year, sales is now recognized upon
completion of installation.
The impact of this change on the consolidated
financial statements of the previous interim
period is not material.
The impact of this change on segment information
is described in "Segment Information".
11
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Notes to Interim Consolidated Financial Statements
(Interim consolidated balance sheets)
------------------------------------------------------------------------------------------------------
FY2001 interim FY2001
(As of September 30, 2001) (As of March 31, 2002)
------------------------------------------------------------------------------------------------------
*1. Accumulated depreciation of property, *1. Accumulated depreciation of property, plant
plant and equipment and equipment
(Y)58,964 million (Y)62,402 million
------------------------------------------------------------------------------------------------------
*2. Assets pledged as collateral *2. Assets pledged as collateral
Buildings (Y)241 million Buildings (Y)234 million
Land (Y)193 million Land (Y)193 million
----------------- ----------------
(Y)435 million Total (Y)428 million
Total
Liabilities secured by the above Liabilities secured by the above
Long-term borrowings (Y)74 million Long-term borrowings (Y)67 million
------------------------------------------------------------------------------------------------------
*3. The settlement of trade notes maturing *3. The settlement of trade notes maturing on
on the last day of an interim period the last day of a fiscal year
The settlement of trade notes maturing The settlement of trade notes maturing on
on the last day of an interim period the last day of a fiscal year is accounted
is accounted on the clearance day. As on the clearance day. As the last day of
the last day of this interim period this fiscal year falls on a bank holiday,
falls on a bank holiday, trade notes trade notes maturing on the last day of the
maturing on the last day of the fiscal year, in the following amount, were
interim period, in the following included in trade notes outstanding at the
amount, were included in trade notes end of fiscal year.
outstanding at the end of interim
period.
Trade notes receivable (Y)248 million Trade notes receivable (Y)39 million
------------------------------------------------------------------------------------------------------
4. Liability for guarantees 4. Liability for guarantees
The company committed loan guarantees The company committed loan guarantees to
to the following persons: the following persons:
Loan guarantee commitments Loan guarantee commitments
Yokohama Image Yokohama Image
Communication Techno Communication Techno Station,
Station, Ltd. (Y)129 million Ltd. (Y)108 million
------------------------------------------------------------------------------------------------------
12
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(Interim Consolidated Statements of Income)
----------------------------------------------------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
----------------------------------------------------------------------------------------------------
*1. Selling, general and administrative *1. Selling, general and administrative
expenses consist primarily of the expenses consist primarily of the
following components in the following following components in the following
amounts: amounts:
Salaries (Y)3,861 million Salaries (Y)8,020 million
Bonuses (Y)1,144 million Bonuses (Y)1,723 million
Depreciation and (Y)1,384 million Depreciation and (Y)3,011 million
amortization amortization
Research and (Y)13,692 million Research and development(Y)26,739 million
development expenses expenses
Provision for (Y)5,529 million Provision for allowance (Y)2,836 million
allowance for product for product warranties
warranties
----------------------------------------------------------------------------------------------------
*2. Significant components of miscellaneous *2. Significant components of miscellaneous
income income
Foreign exchange gain (Y)736 million Reversal of allowance for (Y)714 million
doubtful accounts
Reversal of allowance (Y)947 million
for doubtful accounts
----------------------------------------------------------------------------------------------------
*3. Significant components of miscellaneous *3. Significant components of miscellaneous
expenses expenses
Loss on revaluation of (Y)552 million Loss on revaluation of (Y)791 million
investment securities investment securities
----------------------------------------------------------------------------------------------------
(Interim Consolidate Statement of Cash Flows)
---------------------------------------------------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
---------------------------------------------------------------------------------------------------
Reconciliation of cash and cash Reconciliation of cash and cash
equivalents on interim consolidated equivalents on interim consolidated
statements of cash flow and accounts on statements of cash flow and accounts on
interim consolidated balance sheets at end consolidated balance sheets at end of
of period period
(As of September 30, 2001) (As of March 31, 2002)
Cash and deposits (Y)101,086 million Cash and deposits (Y)105,932 million
Time deposits with - Time deposits with terms -
terms above 3 months above 3 months
Short-term investment - Short-term investment -
securities securities
------------------- ------------------
Cash and cash (Y)101,086 million Cash and cash equivalents (Y)105,932 million
equivalents =================== ==================
---------------------------------------------------------------------------------------------------
13
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(Lease Transactions)
-------------------------------------------------------------------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
-------------------------------------------------------------------------------------------------------------------
1. Leases entered into by Advantest group companies 1. Leases entered into by Advantest group companies
as lessee as lessee
Leases other than those deemed to involve a Leases other than those deemed to involve a
transfer of title to the lessee transfer of title to the lessee
(1)Equivalents of acquisition costs, accumulated (1)Equivalents of acquisition costs, accumulated
depreciation and net book value depreciation and net book value
Tools Tools
and and
furniture Other Total furniture Other Total
------------------------------- --------------------------------
(In millions) (In millions)
Acquisition cost (Y)1,362 (Y)692 (Y)2,054 Acquisition cost (Y)1,060 (Y)505 (Y)1,565
equivalent equivalent
Accumulated depreciation 961 463 1,425 Accumulated 798 363 1,161
equivalent depreciation equivalent
------------------------------- --------------------------------
Net book value equivalent 400 228 629 Net book value 261 142 404
equivalent
(2)Outstanding future lease payments at end of (2)Outstanding future lease payments at end of
interim period fiscal year
Due within one year (Y)369 million Due within one year (Y)267 million
Due after one year (Y)259 million Due after one year (Y)136 million
------------------------- ------------------------
Total (Y)629 million Total (Y)404 million
(Note) Acquisition cost equivalent and (Note)Acquisition cost equivalent and
outstanding future lease payments at end outstanding future lease payments at end
of period were determined using the of period were determined using the
interest payment inclusive method because interest payment inclusive method because
the outstanding future lease payments at the outstanding future lease payments at
end of period as a percentage of plant, end of period as a percentage of plant,
equipment and property at end of period equipment and property at end of period
was small. was small.
(3)Lease payments and depreciation expense (3)Lease payments and depreciation expense
equivalent equivalent
Lease payments (Y)247 million Lease payments (Y)453 million
Depreciation expense (Y)247 million Depreciation expense (Y)453 million
equivalent equivalent
(4)Depreciation expense equivalent is calculated (4)Depreciation expense equivalent is calculated
by applying the straight-line method with no by applying the straight-line method with no
residual value over the lease term. residual value over the lease term.
Operating Leases
Outstanding future lease payments
Due within one year (Y)32 million Due within one year (Y)48 million
Due after one year (Y)34 million Due after one year (Y)40 million
------------------------- ------------------------
Total (Y)66 million Total (Y)89 million
14
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
------------------------------------------------------------------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
------------------------------------------------------------------------------------------------------------------
2. Leases entered into by Advantest group 2. Leases entered into by Advantest group
companies as lessor companies as lessor
Operating Leases Operating Leases
Outstanding future lease income Outstanding future lease income
Due within one year (Y)928 million Due within one year (Y)1,182 million
Due after one year (Y)1,093 million Due after one year (Y)934 million
------------------------- ------------------------
Total (Y)2,021 million Total (Y)2,116 million
------------------------------------------------------------------------------------------------------------------
(Securities)
(FY2001 Interim) (As of September 30, 2001)
Securities
1. Other securities with fair value (In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001 interim (As of September 30, 2001)
---------------------------------------------------------------------------------
Cost Carrying amount on Difference
interim
consolidated
balance sheet
--------------------------------------------------------------------------------------------------------------------
(1) Stocks 2,292 2,534 241
(2) Bonds - - -
Government and municipal - - -
bonds, etc.
Corporate bonds - - -
Other - - -
(3) Other - - -
--------------------------------------------------------------------------------------------------------------------
Total 2,292 2,534 241
--------------------------------------------------------------------------------------------------------------------
2. Securities not practicable to fair value (In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001 interim (As of September 30, 2001)
---------------------------------------------------------------
Carrying amount on interim consolidated balance sheet
--------------------------------------------------------------------------------------------------------------------
Other securities
Unlisted stocks (excluding stocks traded 5,200
over the counter)
--------------------------------------------------------------------------------------------------------------------
(Note) Impairment of other securities is accounted for when the fair value
drops below 50% of cost and is therefore deemed to have "dropped
significantly".
15
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(FY2001) (As of March 31, 2002)
Securities
1. Other securities with fair value (In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001 (As of March 31, 2002)
---------------------------------------------------------------------------------
Cost Carrying amount on Difference
interim consolidated
balance sheet
--------------------------------------------------------------------------------------------------------------------
(1) Stocks 1,704 1,780 75
(2) Bonds - - -
Government and municipal - - -
bonds, etc.
Corporate bonds - - -
Other - - -
(3) Other - - -
--------------------------------------------------------------------------------------------------------------------
Total 1,704 1,780 75
--------------------------------------------------------------------------------------------------------------------
2. Securities not practicable to fair value (In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001 (As of March 31, 2002)
---------------------------------------------------------------
Carrying amount on interim consolidated balance sheet
--------------------------------------------------------------------------------------------------------------------
Other securities
Unlisted stocks (excluding stocks traded 5,515
over the counter)
--------------------------------------------------------------------------------------------------------------------
(Note) Impairment of other securities is accounted for when the fair value
drops below 50% of cost and is therefore deemed to have "dropped
significantly".
(Derivatives)
(FY2001 Interim) (As of September 30, 2001)
Contract amounts, fair value and gain (loss) on revaluation of
derivative transactions
(In millions of yen)
----------------------------------------------------------------------------------------------------------------
Type of derivative Nature of transaction Contract amount Fair value Gain (Loss) on
revaluation
----------------------------------------------------------------------------------------------------------------
Foreign currencies Forward exchange - - -
contracts
----------------------------------------------------------------------------------------------------------------
(FY2001) (As of March 31, 2002)
Contract amounts, fair value and gain (loss) on revaluation of
derivative transactions
(In millions of yen)
----------------------------------------------------------------------------------------------------------------
Type of derivative Nature of transaction Contract amount Fair value Gain (Loss) on
revaluation
----------------------------------------------------------------------------------------------------------------
Foreign currencies Forward exchange 1,845 1,860 (14)
contracts
----------------------------------------------------------------------------------------------------------------
16
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(Segment Information)
(Business Segment Information) (In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001 interim
(April 1, 2001 through
September 30, 2001)
-------------------------------------------------------------------------------
Automatic
Measuring test Elimination
instrument equipment and
segment segment Total corporate Consolidated
--------------------------------------------------------------------------------------------------------------------
Net sales
(1) Sales to unaffiliated 14,418 50,667 65,086 --- 65,086
customers
(2) Inter-segment --- --- --- --- ---
--------------------------------------------------------------------------------------------------------------------
Total 14,418 50,667 65,086 --- 65,086
--------------------------------------------------------------------------------------------------------------------
Operating expenses 13,262 43,127 56,389 4,217 60,607
--------------------------------------------------------------------------------------------------------------------
Operating income 1,156 7,539 8,696 (4,217) 4,478
--------------------------------------------------------------------------------------------------------------------
(In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001
(April 1, 2001 through
March 31, 2002)
-------------------------------------------------------------------------------
Automatic
Measuring test Elimination
instrument equipment and
segment segment Total corporate Consolidated
--------------------------------------------------------------------------------------------------------------------
Net sales
(1) Sales to unaffiliated 21,038 74,205 95,244 --- 95,244
customers
(2) Inter-segment --- --- --- --- ---
-------------------------------------------------------------------------------
Total 21,038 74,205 95,244 --- 95,244
--------------------------------------------------------------------------------------------------------------------
Operating expenses 28,904 93,721 122,626 9,171 131,797
--------------------------------------------------------------------------------------------------------------------
Operating income (loss) (7,866) (19,515) (27,381) (9,171) (36,552)
--------------------------------------------------------------------------------------------------------------------
Note 1: Division of segments
Business segments are organized by functional category of products.
Note 2: Unallocated corporate operating expenses included under "Elimination
and corporate" were (Y)4,217 million in FY2001 interim and (Y)9,171 in
FY2001. They consist primarily of expenses for basic research and costs
of the administrative operations of the headquarters.
Note 3: Change of accounting policies
(FY2001 interim)
Allowance for doubtful accounts
As described in "Significant Accounting Policies in the Preparation of
Interim Consolidated Financial Statements", the company changed its
accounting policy for allowance for doubtful accounts effective from
this consolidated interim period. Previously, allowance for doubtful
accounts was provided for each category of receivables based on
percentages set by the company for each such category of receivables.
After the change, allowance for doubtful accounts for general
receivables was determined using historical write-off ratio, while
allowance for doubtful accounts for bad receivables was determined
based on case-by-case evaluation of collectibility. The impact of this
change on each of the business segments is insignificant.
Accounting for overseas consolidated subsidiaries
As described in "Additional Information", the company changed the
revenue recognition standard for its overseas sales subsidiaries
effective from the second half of the previous consolidated fiscal
year. The impact of this change on each of the business segments is
insignificant.
17
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(FY2001)
Allowance for doubtful accounts
As described in "Significant Accounting Policies in the Preparation of
Consolidated Financial Statements", the company changed its accounting
policy for allowance for doubtful accounts effective from this
consolidated fiscal year. Previously, allowance for doubtful accounts
was provided for each category of receivables based on percentages set
by the company for each such category of receivables. After the change,
allowance for doubtful accounts for general receivables was determined
using historical write-off ratio, while allowance for doubtful accounts
for bad receivables was determined based on case-by-case evaluation of
collectibility. The impact of this change on each of the business
segments is insignificant.
(Geographic Segment Information)
(In millions of yen)
---------------------------------------------------------------------------------------------------------------------
FY2001 interim
(April 1, 2001 through
September 30, 2001)
---------------------------------------------------------------------------------------------------------------------
Japan North Europe Asia Total Elimination
America and Consolidated
corporate
---------------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 36,113 13,238 4,443 11,290 65,086 - 65,086
customers
(2)Inter-segment 18,666 1,420 502 1,719 22,308 (22,308) -
---------------------------------------------------------------------------------------------------------------------
Total 54,780 14,658 4,945 13,010 87,394 (22,308) 65,086
---------------------------------------------------------------------------------------------------------------------
Operating expenses 50,302 14,249 4,904 10,632 80,089 (19,481) 60,607
---------------------------------------------------------------------------------------------------------------------
Operating income 4,477 408 41 2,378 7,305 (2,827) 4,478
---------------------------------------------------------------------------------------------------------------------
(In millions of yen)
---------------------------------------------------------------------------------------------------------------------
FY2001
(April 1, 2001 through
March 31, 2002)
---------------------------------------------------------------------------------------------------------------------
Japan North Europe Asia Total Elimination
America and Consolidated
corporate
---------------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 53,137 18,291 8,676 15,138 95,244 --- 95,244
customers
(2)Inter-segment 27,173 2,751 902 2,917 33,744 (33,744) ---
---------------------------------------------------------------------------------------------------------------------
Total 80,310 21,043 9,579 18,056 128,989 (33,744) 95,244
---------------------------------------------------------------------------------------------------------------------
Operating expenses 112,450 20,998 9,421 15,869 158,740 (26,943) 131,797
---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (32,140) 44 157 2,186 (29,751) (6,801) (36,552)
---------------------------------------------------------------------------------------------------------------------
Note 1: Geographical segments are organized by physical proximity of countries
or regions.
Note 2: Each of the geographical segments includes primarily the following
countries or regions:
(1) North America.........U.S.
(2) Europe................Germany, France, etc.
(3) Asia..................South Korea, Taiwan, Singapore, etc.
Note 3: Unallocated corporate operating expenses included under "Elimination
and corporate" were (Y)4,299 million in FY2001 interim and (Y)9,337
million in FY2001. They consist primarily of expenses for basic
research and costs of the administrative operations of the
headquarters.
18
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Note 4: Change of accounting policies
(FY2001 interim)
Allowance for doubtful accounts
As described in "Significant Accounting Policies in the Preparation of
Interim Consolidated Financial Statements", the company changed its
accounting policy for allowance for doubtful accounts effective from
this consolidated interim period. Previously, allowance for doubtful
accounts was provided for each category of receivables based on
percentages set by the company for each such category of receivables.
After the change, allowance for doubtful accounts for general
receivables was determined using historical write-off ratio, while
allowance for doubtful accounts for bad receivables was determined
based on case-by-case evaluation of collectibility. The impact of this
change on each of the geographical segments is insignificant.
Accounting for overseas consolidated subsidiaries
As described in "Additional Information", the company changed the
revenue recognition standard for its overseas sales subsidiaries
effective from the second half of the previous consolidated fiscal
year. The impact of this change on each of the geographical segments is
insignificant.
(FY2001)
Allowance for doubtful accounts
As described in "Significant Accounting Policies in the Preparation of
Consolidated Financial Statements", the company changed its accounting
policy for allowance for doubtful accounts effective from this
consolidated fiscal year. Previously, allowance for doubtful accounts
was provided for each category of receivables based on percentages set
by the company for each such category of receivables. After the change,
allowance for doubtful accounts for general receivables was determined
using historical write-off ratio, while allowance for doubtful accounts
for bad receivables was determined based on case-by-case evaluation of
collectibility. The impact of this change on each of the geographical
segments is insignificant.
(Overseas Sales)
(In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001 interim
(April 1, 2001 through
September 30, 2001)
--------------------------------------------------------------------------------------------------------------------
North Europe Asia Total
America
--------------------------------------------------------------------------------------------------------------------
I Overseas sales 14,030 4,434 20,900 39,365
--------------------------------------------------------------------------------------------------------------------
II Consolidated sales 65,086
--------------------------------------------------------------------------------------------------------------------
III Overseas sales as a percentage of 21.6% 6.8% 32.1% 60.5%
consolidated sales
--------------------------------------------------------------------------------------------------------------------
(In millions of yen)
--------------------------------------------------------------------------------------------------------------------
FY2001
(April 1, 2001 through
March 31, 2002)
--------------------------------------------------------------------------------------------------------------------
North Europe Asia Total
America
--------------------------------------------------------------------------------------------------------------------
I Overseas sales 19,143 8,284 30,068 57,495
--------------------------------------------------------------------------------------------------------------------
II Consolidated sales 95,244
--------------------------------------------------------------------------------------------------------------------
III Overseas sales as a percentage of 20.1% 8.7% 31.6% 60.4%
consolidated sales
--------------------------------------------------------------------------------------------------------------------
Note 1: Geographical segments are organized by physical proximity of countries
or regions.
Note 2: Each of the geographical segments includes primarily the following
countries or regions:
(1) North America.........U.S., Canada
(2) Europe................Germany, France, Ireland, etc.
(3) Asia..................South Korea, Taiwan, Singapore, etc.
Note 3: Overseas sales are sales revenues in countries or regions outside Japan
by the company or its consolidated subsidiaries.
19
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Note 4: Change of accounting policies
(FY2001 interim)
Accounting for consolidated overseas subsidiaries
As described in "Additional Information", the company changed the
revenue recognition standard for its overseas sales subsidiaries
effective from the second half of the previous consolidated fiscal
year. The impact of this change on overseas sales is insignificant.
(Per Share Data)
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
Net assets per share Net assets per share
(Y)2,695.61 (Y)2,441.65
Basic interim net income per share Basic net loss per share
(Y)38.15 (Y)230.76
Diluted interim net income per share Diluted net income per share is not presented
because net income for the fiscal year is
(Y)38.11 negative.
--------------------------------------------------------- --------------------------------------------------------
(Significant Subsequent Developments)
--------------------------------------------------------- --------------------------------------------------------
FY2001 interim FY2001
(April 1, 2001 through (April 1, 2001 through
September 30, 2001) March 31, 2002)
--------------------------------------------------------- --------------------------------------------------------
----
It was resolved at Advantest's general
shareholders' meeting held on June 27, 2002 that
Advantest may, in accordance with Article 210 of
the Commercial Code of Japan, purchase up to
3,000,000 shares of its common stock at a maximum
price of (Y)35,000 million anytime between the end
of such meeting and the end of the general
shareholders' meeting for the next consolidated
fiscal year.
20
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(2) Interim Consolidated Financial Statements (FY2002 Interim)
(i) Interim Consolidated Balance Sheet (In millions of yen)
----------------------------------------------------------------------------------------------
FY2002 interim
(As of September 30, 2002)
----------------------------------------------------------------------------------------------
Notes Amount Percentage
----------------------------------------------------------------------------------------------
(Assets) %
Cash and cash equivalents 89,480
Trade accounts receivable, less allowance for 33,620
doubtful accounts of(Y)476 million
Inventories 46,588
Deferred tax assets 13,065
Other current assets 2,787
-----------
Total current assets 185,540 64.7
Investment securities *4, 6 7,882 2.7
Property, plant and equipment, net *3, 7, 9 57,750 20.2
Deferred tax assets 26,709 9.3
Intangible assets, at cost, less accumulated *7 6,292 2.2
amortization
Other assets 2,471 0.9
-----------
Total assets 286,644 100.0
-----------
----------------------------------------------------------------------------------------------
(Liabilities)
Current installments of long-term debt *6, 9 43
Current installments of obligations under 185
capital leases
Trade accounts payable 8,146
Income taxes payable 699
Deferred tax liabilities 40
Accrued bonus 1,972
Accrued expenses 7,195
Accrued warranty expenses 1,778
-----------
Total current liabilities 20,058 6.9
Long-term debt, excluding current installments *6, 9 26,847 9.4
Obligations under capital leases, excluding 56 0.0
current installments
Deferred tax liabilities 616 0.2
Accrued pension and severance cost 14,577 5.1
Other liabilities 2,196 0.8
-----------
Total liabilities 64,350 22.4
-----------
----------------------------------------------------------------------------------------------
21
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(In millions of yen)
----------------------------------------------------------------------------------------------
FY2002 interim
(As of September 30, 2002)
----------------------------------------------------------------------------------------------
(Minority interests)
Minority interests 234 0.1
(Stockholders' equity)
Common stock,
Authorized 220,000,000 shares; issued
99,783,385 shares 32,363 11.3
Capital surplus 32,973 11.5
Retained earnings 173,737 60.6
Accumulated other comprehensive income (loss) *4, 10 (3,898) (1.3)
Treasury stock, 1,527,656 shares (13,115) (4.6)
-----------
Total stockholders' equity 222,060 77.5
-----------
Total liabilities and stockholders' equity 286,644 100.0
-----------
----------------------------------------------------------------------------------------------
22
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(ii) Interim Consolidated Statement of Income (In millions of yen)
---------------------------------------------------------------------------------------------------
FY2002 interim
(April 1, 2002 through
September 30, 2002)
---------------------------------------------------------------------------------------------------
Notes Amount Percentage
(%)
---------------------------------------------------------------------------------------------------
Net sales 41,113 100.0
Cost of sales *2 (g)(h), 8 22,959 55.8
-------------
Gross profit 18,154 44.2
Research and development expenses *2 (g)(h), 8 11,586 28.2
Selling, general and administrative *2 (g)(h)(j), 8 13,523 32.9
expenses
-------------
Operating income (loss) (6,955) (16.9)
Other income (expense):
Interest and dividends income 228
Interest expense (247)
Minority interests (41)
Equity in earnings (losses) of affiliates 9
Other 346 295 0.7
----------------------------
Interim income (loss) before income (6,660) (16.2)
taxes
Income taxes (2,891) (7.0)
-------------
Interim net income (loss) (3,769) (9.2)
-------------
---------------------------------------------------------------------------------------------------
(In yen)
---------------------------------------------------------------------------------------------------
FY2002 interim
(April 1, 2002 through
September 30, 2002)
---------------------------------------------------------------------------------------------------
Notes Amount
---------------------------------------------------------------------------------------------------
Interim net income (loss) per share: *12
Basic (38.21)
Diluted (38.21)
---------------------------------------------------------------------------------------------------
23
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(iii) Interim Consolidated Statement of Stockholders' Equity (In millions of yen)
----------------------------------------------------------------------------------------
FY2002 interim
(April 1, 2002 through
September 30, 2002)
----------------------------------------------------------------------------------------
Notes Amount
----------------------------------------------------------------------------------------
Common stock:
Balance at beginning of period 32,363
----------------------------
Balance at end of period 32,363
----------------------------
Capital surplus:
Balance at beginning of period 32,973
----------------------------
Balance at end of period 32,973
----------------------------
Retained earnings:
Balance at beginning of period 178,998
Interim net income (loss) (3,769)
Cash dividends,(Y)20 per share (1,492)
----------------------------
Balance at end of period 173,737
----------------------------
Accumulated other comprehensive income (loss): *4, 10
Balance at beginning of period (1,184)
Other comprehensive income (loss), net of tax (2,714)
----------------------------
Balance at end of period (3,898)
----------------------------
Treasury stock:
Balance at beginning of period (2,434)
Treasury stock purchased (10,681)
----------------------------
Balance at end of period (13,115)
----------------------------
Total stockholders' equity 222,060
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Disclosure of comprehensive income (loss):
Interim net income (loss) (3,769)
Other comprehensive income (loss), net *10 (2,714)
of tax
----------------------------
Total interim comprehensive income (loss) (6,483)
----------------------------------------------------------------------------------------
24
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(iv) Interim Consolidated Statement of Cash Flows (In millions of yen)
-------------------------------------------------------------------------------------------
FY2002 Interim
(April 1, 2002 through
September 30, 2002)
-------------------------------------------------------------------------------------------
Notes Amount
-------------------------------------------------------------------------------------------
Cash flows from operating activities:
Interim net income (loss) (3,769)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 5,582
Provision for doubtful accounts (57)
Loss (gain) on sale of non-marketable 6
securities, net
Equity in losses (earnings) of affiliates (9)
Loss (gain) on sale of property, plant and 4
equipment
Deferred income taxes (increase) (3,818)
Decrease (increase) in trade accounts receivable (1,272)
Decrease (increase) in inventories 5,928
Increase (decrease) in trade accounts payable 4,022
Increase (decrease) in income taxes payable 628
Increase (decrease) in accrued expenses and (5,623)
bonus
Increase (decrease) in accrued warranty expenses (1,058)
Other 1,341
----------------------
Net cash provided by operating activities 1,905
----------------------
Cash flows from investing activities:
Proceeds from sale of non-marketable securities 2
Proceeds from sale of property, plant and equipment 83
Purchases of software (383)
Capital expenditures (4,276)
Other (620)
----------------------
Net cash used in investing activities (5,194)
----------------------
Cash flows from financing activities:
Principal payments on long-term debt (21)
Principal payments on obligations under capital (152)
leases
Payments to acquire treasury stock (10,681)
Dividends paid (1,492)
----------------------
Net cash used in financing activities (12,346)
----------------------
Net effect of exchange rate changes on cash and cash (817)
equivalents
----------------------
Net change in cash and cash equivalents (16,452)
Cash and cash equivalents at beginning of period 105,932
----------------------
Cash and cash equivalents at end of period 89,480
-------------------------------------------------------------------------------------------
25
(All financial information for FY2002 interim was prepared in accordance with
U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(In millions of yen)
-------------------------------------------------------------------------------------------
FY2002 Interim
(April 1, 2002 through
September 30, 2002)
-------------------------------------------------------------------------------------------
Notes Amount
-------------------------------------------------------------------------------------------
Supplemental Data
Cash paid during the interim period for:
Income taxes (118)
Interests 239
-----------------------------------------------------------------------------------------------
26
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Notes to Consolidated Financial Statement
Note 1. Accounting principles, procedures and the presentation of interim
consolidated financial statements
(a) Terminology, form and method of preparation of the interim consolidated
financial statements
Advantest prepares these interim consolidated financial statements in
accordance with the accounting principles, procedures, terminology,
form and mode of preparation in the U.S. required in connection with
the issuance of American Depository Shares (ARB, APB, SFAS, etc.).
(b) The preparation of interim consolidated financial statements and
registration with the U.S. Securities and Exchange Commission
Advantest Corporation began listing on the New York Stock Exchange on
September 17, 2001 (local time) through the issuance of American
Depository Shares, and is registered with the U.S. Securities and
Exchange Commission on Form 20-F (equivalent to the Annual Securities
Report in Japan) for FY2001 and FY2002. In connection with the
registration on Form 20-F, Advantest prepared consolidated financial
statements for the fiscal years 2000, 2001 and 2002 in accordance with
U.S. GAAP.
(c) Scope of consolidation and application of the equity method
----------------------------------------------------------------------------------------------------
FY2002 Interim FY2001
(As of September 30, (As of March 31,
2002) 2002) Increase (decrease)
----------------------------------------------------------------------------------------------------
Domestic 22 23 (1)
--------------------- ---------------------- -------------------- -----------------------
Overseas 19 18 1
--------------------- ---------------------- -------------------- -----------------------
Consolidated subsidiaries 41 41 0
-------------------------------- ---------------------- -------------------- -----------------------
Equity method affiliates 1 1 0
-------------------------------- ---------------------- -------------------- -----------------------
Total 42 42 0
-------------------------------- ---------------------- -------------------- -----------------------
Changes in consolidated subsidiaries:
Newly included (1): Advantest America Measuring Solutions, Inc.
Excluded (1): Advantest Business Corporation
(d) Significant differences from the preparation of financial statements
under Japanese GAAP
Of the accounting principles, procedures and mode of presentation
adopted by Advantest Corporation and its consolidated subsidiaries
(collectively "Advantest"), the followings are the significant
differences from the preparation of financial statements using the
accounting principles, procedure and mode of presentation under
Japanese GAAP:
(i) Scope of consolidation and application of the equity method
The scope of consolidation and application of the equity method is
determined based on percentage of voting rights. There was no
difference than if the scope were determined using the control
criteria or influence criteria.
(ii) Appropriation of earnings
Earnings appropriated for officers' bonuses are accounted for
under selling, general and administrative expenses.
(iii) Accounting for lease transactions
Regarding significant lease transactions, plant, property and
equipment and capital lease obligations are recognized if the
lease is considered a capital lease under SFAS No. 13, "Accounting
for Leases".
(iv) Allowance for compensated absences
In accordance with SFAS No. 43, "Accounting for Compensated
Absences", an allowance is provided for the right of employees to
receive compensated absences in the future.
27
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(v) Accrued pension and severance cost
Accrued pension and severance cost is accounted for based on SFAS
No. 87, "Employers' Accounting for Pensions". The transitional
difference on adoption of this standard was retroactively
recognized from the effective date of SFAS No. 87 and amortized
over 15 years.
(vi) Goodwill
In accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets", goodwill is no longer amortized, but instead is tested
for impairment before impairment is recognized.
Note 2. Significant Accounting Policies
(a) Description of business
Advantest is engaged in the design, manufacture, and sale of automated
test equipment for semiconductors. Advantest has a diverse product line
that meets the needs of semiconductor manufacturers, as well as
assembly and test services companies worldwide, for sophisticated
systems that test the operation and performance of different types of
semiconductors. Advantest equips its automated test equipment with
sophisticated, yet easy-to-use, operating systems and testing software.
Advantest supports its products and customers through a worldwide
customer service network staffed by trained technical and maintenance
personnel.
Advantest also designs, manufactures, and sells standard and customized
measuring instruments that are used by the communications, electric
equipment and systems industries. These instruments are used by
Advantest's customers to improve time-to-market, lower costs of
manufacturing and improve the quality of their products.
The Company was incorporated on December 2, 1954 under the name of
Takeda Riken Industry Co., Ltd. as a limited liability, joint-stock
company in Japan under the Commercial Code of Japan. Takeda Riken
Industry Co., Ltd. changed its legal name to Advantest Corporation in
1985.
(b) Cash Equivalents
Cash equivalents consist of overnight deposits and certificates of
deposit with an initial term of less than three months. For purposes of
the statements of cash flows, Advantest considers all highly liquid
debt instruments with original maturities of three months or less to be
cash equivalents.
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the average method.
(d) Investments in Affiliated Companies
Investments in affiliated companies owned 20% to 50%, where Advantest
exercises significant influence, are accounted for on the equity
method.
(e) Investment Securities
Investment securities at September 30, 2002 consist of equity
securities. Advantest classifies its equity securities in one of two
categories: trading or available-for-sale. Trading securities are
bought and held principally for the purpose of selling them in the near
term. All equity securities not included in trading are classified as
available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses on trading securities are included
in earnings. Unrealized holding gains and losses, net of the related
tax effect, on available-for-sale securities are excluded from earnings
and are reported as a separate component of other comprehensive income
(loss) until realized. Realized gains and losses from sale of
available-for-sale securities are determined on a
specific-identification basis.
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. Dividend income
is recognized when earned.
As of September 30, 2002, all equity securities held by Advantest are
classified as available-for-sale.
28
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(f) Derivative Financial Instruments
Derivative financial instruments are accounted for under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", and
SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FASB Statement No. 133".
SFAS No. 133, as amended, standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts. Under SFAS No. 133, as amended, entities are required to
carry all derivative instruments in the consolidated balance sheets at
fair value. The accounting for changes in the fair value (that is,
gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, if
so, on the reason for holding it. If certain conditions are met,
entities may elect to designate a derivative instrument as a hedge of
exposures to changes in fair values, cash flows, or foreign currencies.
If the hedged exposure is a fair value exposure, the gain or loss on
the derivative instrument is recognized in earnings in the period of
change together with the offsetting loss or gain on the hedged item
attributable to the risk being hedged. If the hedged exposure is a cash
flow exposure, the effective portion of the gain or loss on the
derivative instrument is reported initially as a component of other
comprehensive income (loss) and subsequently reclassified into earnings
when the forecasted transaction affects earnings. Any amounts excluded
from the assessment of hedge effectiveness as well as the ineffective
portion of the gain or loss are reported in earnings immediately. If
the derivative instrument is not designated as a hedge, the gain or
loss is recognized in earnings in the period of change.
Advantest regularly enters into foreign exchange forward contracts to
manage currency exposure, resulting from changes in foreign currency
exchange rates, on trade accounts receivable. However, these contracts
do not qualify for hedge accounting since they do not meet the hedging
criteria contained in SFAS No. 133.
Foreign exchange forward contracts generally have maturities of less
than two months. These contracts are used to reduce Advantest's risk
associated with exchange rate movements, as gains and losses on these
contracts are intended to offset exchange losses and gains on
underlying exposures. Changes in fair value of foreign exchange forward
contracts are recognized in earnings under the caption of other income
(expense).
Advantest does not, as a matter of policy, enter into derivative
transactions for the purpose of currency speculation.
(g) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments.
Depreciation is computed principally using the declining-balance method
except for buildings and machinery and equipment under capital leases
for the Company and its domestic subsidiaries and the straight-line
method over estimated useful lives of the assets for foreign
subsidiaries. Buildings are principally depreciated using the
straight-line method over their estimated useful lives. Depreciation
for machinery and equipment under capital leases is computed using the
straight-line method over the lease term. The depreciation period
ranges from 3 years to 50 years for buildings, 2 years to 10 years for
machinery and equipment, and 2 years to 20 years for furniture and
fixtures.
Depreciation expense was (Y)4,344 million during this interim period.
(h) Intangible Assets and Other Assets
Intangible assets principally consist of licenses, goodwill and
computer software for internal-use, including computer software under
capital leases. Other assets consist of investments, security deposits
and prepaid expenses, of which no one individual item was material to
the consolidated financial statements of Advantest.
Certain costs incurred to purchase or develop software for internal-use
during the application development stage are capitalized. With respect
to internal-use software costs, Advantest expenses costs incurred
during the preliminary project stage which includes costs for making
strategic decisions about the project, determining performance and
system requirements, and vendor demonstration costs. Advantest also
expenses costs incurred for internal-use software in the
post-implementation stage such as training and maintenance costs. Costs
incurred to establish the technological feasibility of software
products to be sold as part of the automated test equipment are
recorded as research and development costs in the consolidated
statements of income. Costs incurred subsequent to establishing
technological
29
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
feasibility with respect to such software have also been expensed by
Advantest as such costs have been insignificant.
The cost of software is amortized straight-line over the estimated
useful life, which is generally five years. The cost of computer
software under capital leases is amortized straight-line over the lease
term. Amortization expense was (Y)1,179 million during this interim
period.
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 required the use of the purchase
method of accounting for business combinations and established certain
criteria for the recognition of intangible assets separately from
goodwill. Under SFAS No. 142 goodwill in no longer amortized, but
instead is tested for impairment at least annually. Intangible assets
are amortized over their respective estimated useful lives and reviewed
for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Any recognized intangible
assets determined to have an indefinite useful life will not be
amortized, but instead is tested for impairment until its life is
determined to be no longer indefinite.
SFAS No. 141 requires Advantest to evaluate its existing intangible
assets and goodwill and to make any necessary reclassifications in
order to conform to the new separation requirements at the date of
adoption. Upon adoption of SFAS No. 142, Advantest is required to
reassess the useful lives and residual values of all intangible assets
and make any necessary amortization period adjustments by June 30,
2002. In connection with the transitional impairment evaluation, SFAS
No. 142 will require Advantest to perform an assessment of whether
there is an indication that goodwill is impaired as of April 1, 2002.
To accomplish this, Advantest must (1) identify its reporting units,
(2) determine the carrying amount of each reporting units by assigning
the assets and liabilities, including the existing goodwill and
intangible assets to those reporting units, and (3) determine the fair
value of each reporting unit. Advantest has completed the first step of
this transitional assessment by September 30, 2002. In the event that
the carrying amount of such reporting unit exceeded fair value,
Advantest would be required to proceed to the second step to measure
the implied fair value of goodwill. However, no material impairment of
goodwill was detected at the first step. Advantest does not expect the
adoption of SFAS No. 141 and No. 142 to have a material impact on its
consolidated financial statements.
(i) Revenue Recognition
Automated test equipment
------------------------
Revenue from sales of automated test equipment which require
installation work is recognized when the related installation work is
completed and the equipment is accepted by the customer. Revenue from
sales of parts for automated test equipment such as backup boards,
which do not require installation work by Advantest, is recognized upon
shipment if the terms of the sale are free on board ("FOB") shipping
point or upon delivery if the terms are FOB destination.
Measuring instruments
---------------------
Revenue from sales of measuring instruments which do not require
installation work by Advantest is recognized upon shipment if the terms
of the sale are FOB shipping point and upon delivery if the terms are
FOB destination. Revenue from sales of measuring instruments which
require installation work is recognized when the related installation
work is completed and the instrument is accepted by the customer.
Advantest utilizes distributors to market certain of its measuring
instruments which do not require installation work. Advantest
recognizes revenues from sales of measuring instruments to distributors
upon shipment or delivery of instruments to the distributors.
Service fee
-----------
Revenue from fixed-price, long-term service contracts is recognized on
the straight-line basis over the contract term.
Operating lease
---------------
Revenue from operating leases is recognized mainly on the straight-line
basis over the lease term.
(j) Shipping and Handling Costs
Shipping and handling costs totaled (Y)398 million during this interim
period, and are included in selling, general and administrative
expenses in the consolidated statements of income.
30
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(k) Accrued Warranty Expenses
Advantest's products are generally subject to warranty, and Advantest
provides an allowance for such estimated costs when product revenue is
recognized. To prepare for future repairs during warranty periods,
estimated repair expenses over the warranty period are accrued based on
the historical ratio of actual repair expenses to corresponding sales.
(l) Research and Development
Research and development costs are expensed as incurred.
(m) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the 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.
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.
(n) Stock-Based Compensation
Advantest applies the intrinsic value-based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations, in accounting for its
stock-based compensation plans. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price.
(o) Accrued Pension and Severance Cost
The Company and certain of its subsidiaries have retirement and
severance defined benefit plans covering substantially all of their
employees. The benefits are based on years of service and the
employee's compensation and vest after one year of service. Prior
service cost that results from amendments to the plan is amortized over
the average remaining service period of the employees expected to
receive benefits. Unrecognized net gain and loss is amortized over the
average remaining service life of employees expected to receive
benefits.
(p) Use of Estimates
Management of Advantest has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America. Actual results could differ
from those estimates.
(q) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of
Advantest accounts for long-lived assets in accordance with the
provisions of SFAS No. 144. SFAS No. 144 requires that long-lived
assets and certain identifiable intangibles be 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 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 exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less
costs to sell.
(r) Interim net Income (Loss) per Share
Interim basic net income (loss) per share is calculated by dividing
interim net income (loss) by the weighted average number of shares
outstanding during the interim period. Interim diluted net income per
share is calculated by dividing interim net income by the sum of the
weighted average number of shares plus additional shares that would
have been outstanding if potential dilutive shares had been issued for
granted stock options and warrants.
(s) Segment Information
Advantest discloses information regarding segments in accordance with
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 131 establishes standards for
31
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
reporting of financial information about operating segments in annual
financial statements. In addition, Advantest also discloses geographic
segment information regarding the net sales and operating income (loss)
of the company and its subsidiaries in consideration of the disclosure
requirements under the Securities Exchange Law of Japan.
(t) Translation of Foreign Financial Statements
Foreign currency financial statements have been translated in
accordance with SFAS No. 52, "Foreign Currency Translation". Under SFAS
No. 52, the balance sheet accounts of non-Japanese subsidiaries, which
are denominated in currencies other than the Japanese yen, are
translated at rates of exchange prevailing at end of period. Revenue
and expense accounts are translated at average rates of exchange in
effect during the period. Resulting translation adjustments are
included as a separate component of other comprehensive income (loss).
(u) Foreign Currency Transactions
Assets and liabilities denominated in foreign currencies are translated
at the applicable current rates on the balance sheet date. All revenue
and expenses associated with foreign currencies are converted at the
rates of exchange prevailing when such transactions occur. The
resulting exchange gains or losses are reflected in other income
(expense) in the accompanying consolidated statements of income.
(v) New Accounting Standards
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 applies to legal obligations
associated with the retirement of long-lived assets that result from
the acquisition, construction, development and (or) the normal
operation of a long-lived assets, except for certain obligations of
lessees. SFAS No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it
is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset and subsequently allocated to
expense over the asset's useful life. Advantest is required to adopt
the provisions of SFAS No. 143 on April 1, 2003. Currently, the effect
on Advantest's consolidated financial statements of adopting SFAS No.
143 has not been determined.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 addresses
financial accounting and reporting associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring". The principal difference between SFAS No. 146 and EITF
Issue 94-3 relates to the recognition of liability for costs associated
with an exit or disposal activity. SFAS No. 146 requires a liability be
recognized only when its falls within the definition of liability under
the basic principles of the FASB. In addition, SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal
activity be recognized and measured at fair value. Advantest is
required to adopt the provisions of SFAS No. 146 for exit or disposal
activities initiated after January 1, 2003. Currently, the effect on
Advantest's consolidated financial statements of adopting SFAS No. 146
has not been determined.
Note 3. Property, Plant and Equipment
Property, plant and equipment is composed of the following:
Yen
(Millions)
------------------
September 30, 2002
------------------
Land 18,480
Buildings 50,882
Machinery and equipment 25,757
Furniture and fixtures 27,308
Construction in progress 1,097
--------------------
123,524
Less accumulated depreciation (65,774)
--------------------
57,750
--------------------
Note 4. Investment Securities
32
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Marketable securities consist of equity securities with an aggregate
fair value of (Y)1,939 million, gross unrealized gains, which are
determined based on the specific-identification method, of (Y)298
million, gross unrealized losses of (Y)265 million, and acquisition
cost of (Y)1,906 million as of September 30, 2002. Gross realized
losses were (Y)148 million for the interim period.
Advantest maintains long-term investment securities, included in
marketable securities and other investments, issued by nonpublic
companies, which are recorded at cost. In addition, the fair values of
such securities were not readily determinable.
Note 5. Derivative Financial Instruments
Derivative financial instruments are utilized by Advantest primarily to
reduce foreign currency exchange risk. Advantest does not hold or issue
financial instruments for trading purposes. Advantest generally does
not require or place collateral for these financial instruments.
Derivative financial instruments contain an element of risk in the
event the counterparties are unable to meet the terms of the
agreements. However, Advantest minimizes risk exposure by limiting the
counterparties to major international banks and financial institutions
meeting established credit guidelines. Management of Advantest does not
expect any counterparty to default on its obligations and, therefore,
does not expect to incur any losses due to counterparty default on its
obligations.
At September 30, 2002, Advantest had foreign exchange forward contracts
to receive Japanese yen for U.S. dollars. The notional amounts of these
contracts were (Y)714 million at September 30, 2002. The fair values of
these contracts at September 30, 2002 are shown in note 6 to the
consolidated financial statements. These contracts do not qualify for
hedge accounting since they do not meet the hedging criteria contained
in SFAS No. 133. Changes in the fair values are recognized in earnings
under the caption of other income (expense).
Note 6. Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair
values of Advantest's financial instruments at September 30, 2002. The
fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties.
Yen (Millions)
--------------
September 30, 2002
------------------
Carrying Fair
Amount Value
------ -----
Financial assets:
Investment securities for which it is:
Practicable to estimate fair value 1,939 1,939
Not practicable to estimate
fair value 5,347 5,347
Financial liabilities:
Foreign exchange forward contracts 20 20
Long-term debt including current 26,890 27,532
installments
The carrying amounts shown in the table are included in the
consolidated balance sheets under the indicated captions.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Cash and cash equivalents, trade accounts receivable, other current
assets, trade accounts payable, and accrued expenses (nonderivatives):
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Investment securities: The fair values of equity investments are based
on quoted market prices at the reporting date for those investments. It
was not practicable to estimate the fair value of nonpublic companies;
those investments are carried at their original cost.
33
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Long-term debt: The fair value of Advantest's long-term debt is
estimated by discounting the future cash flows of each instrument at
rates currently offered to Advantest for similar debt instruments of
comparable maturities by financial institutions.
Note 7. Leases - Lessor
Advantest provides leases that enable its customers to acquire
automated test equipment. All leases are classified as operating
leases. Lease terms range from 1 year to 5 years, and certain of the
lease agreements are cancelable. The gross amount of machinery and
equipment and the related accumulated depreciation on operating leases
as of September 30, 2002 were as follows:
Yen
(Millions)
------------------
September 30, 2002
------------------
Machinery and equipment 6,851
Less accumulated depreciation (2,370)
------------------
4,481
------------------
Future minimum rental income from equipment on noncancelable operating
leases as of September 30, 2002 is as follows:
Yen
1 year ending September 30, (Millions)
--------------------------- ----------
2003 1,120
2004 415
2005 79
2006 6
2007 1
Total future minimum rental income 1,621
Note 8. Leases - Lessee
Advantest has several noncancelable operating leases, primarily for
computer and office equipment that expire over the next 6 years. Rent
expense, including rental payments for cancelable leases, for the
interim period was (Y)790 million.
Future minimum lease payments under noncancelable operating leases
(with initial or remaining lease terms in excess of one year) as of
September 30, 2002 are as follows:
Yen
1 year ending September 30, (Millions)
--------------------------- ----------
2003 387
2004 305
2005 281
2006 251
2007 243
Later years 54
----------
Total minimum lease payments 1,521
----------
Note 9. Assets Pledged as Collateral and Secured Liabilities
As of September 30, 2002, property, plant and equipment in the carrying
amount of (Y)421 million was pledged as collateral for certain debt
obligations in the amount of (Y)60 million.
34
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Note 10. Other Comprehensive Income (Loss)
The accumulated balances for each classification of other comprehensive
income (loss) are as follows:
Yen (Millions)
---------------------------------------------------
Foreign Accumulated
currency Net unrealized other
translation gains on comprehensive
adjustments securities income (loss)
----------- ---------- -------------
Balance at March 31, 2002 (1,196) 12 (1,184)
Change during the interim period (2,667) (109) (2,786)
Reclassification adjustments for
realized portion - 72 72
----------- ------------- -----------
(2,677) (37) (2,714)
----------- ------------- -----------
Balance at September 30, 2002 (3,873) (25) (3,898)
----------- ------------- -----------
The related tax effects allocated to each component of other
comprehensive income (loss) are as follows:
Yen (Millions)
----------------------------------------------
Before-tax Tax (expense) Net-of-tax
amount of benefit amount
----------- ------------- -----------
FY2002 Interim:
Foreign currency translation adjustments (2,677) - (2,677)
Net unrealized gains on securities
Net unrealized gains arising during the
interim period (179) 70 (109)
Less reclassification adjustments for net
gains realized in earnings 123 (51) 72
----------- ------------- -----------
Net unrealized gains (56) 19 (37)
----------- ------------- -----------
Other comprehensive income (loss) (2,733) 19 (2,714)
----------- ------------- -----------
35
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Note 11. Segment Information
(Operating Segment Information)
In accordance with SFAS No. 131, Advantest has two operating and
reportable segments, which are the design, manufacturing, and marketing
of automated test equipment and measuring instruments. These operating
segments are determined based on the nature of the products and the
markets. Automated test equipment is used to confirm that a
semiconductor functions properly during the semiconductor manufacturing
process at sites of manufactures of semiconductor or test houses.
Automated test equipment consists of semiconductor test systems, test
handlers or probers, semiconductor device interfaces and software. Test
handlers or probers, semiconductor device interfaces and software are
always with or incorporated in automated test equipment. Measuring
instruments are used primarily by manufacturers of equipment and
components and service providers of the fiber optic communications
industry, the wireless communications industry and the electronics
industry. Fundamental research and development activities and
headquarters functions are represented by Corporate.
Yen (Millions)
----------------------------------------------------------
Automated test Measuring
equipment instruments Corporate Total
-----------------------------------------------------------
FY2002 Interim
Net sales to unaffiliated customers 35,124 5,989 - 41,113
Operating income (loss) (256) (3,075) (3,624) (6,955)
(Notes) 1. Operating segments are organized by functional category of
products
2. Main products of each segment:
---------------------------------------------------------------------
Operating segment Main products
---------------------------------------------------------------------
Automated test SoC test systems, DFT test systems,
equipment memory test systems, flash memory
test systems, RFIC test systems,
image sensor test systems, LCD
driver test systems, dynamic test
handlers, device interface units,
electronic beam lithography
equipment.
---------------------------------------------------------------------
Digital multimeters, digital
thermometers, voltage/current
generators, electrometers, spectrum
analyzers, network analyzers,
signal generators, wireless
equipment testers, power meters,
Measuring EMC testers, optical power meters,
instruments optical spectrum analyzers,
coherent OTDR, optical wavelength
meters, laser diode test systems,
optical network analyzers, optical
chirp test sets, polarization
scramblers, error rate test
systems, audio/video testers,
measuring instrument peripherals.
---------------------------------------------------------------------
3. Adjustments to operating income (loss) in Corporate
principally represent corporate general and administrative
expenses and research and development expenses related to
fundamental research activities that are not allocated to
operating segments.
36
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
(Geographic Segment Information)
Net sales to unaffiliated customers for the interim period is as follows:
Yen
(Millions)
--------------
FY2002 interim
--------------
Japan 17,485
North America 4,045
Europe 3,870
Asia 15,713
--------------
Total 41,113
--------------
(Notes) 1. Net sales from unaffiliated customers are based on customer's
location.
2. Each of the segments include primarily the following countries or
regions:
(1) North America.........U.S., Canada
(2) Europe................Germany, France, Ireland, etc.
(3) Asia..................South Korea, Taiwan, Singapore, etc.
The following table sets forth the net sales and operating income in FY2002
interim, classified by location of office from which product was shipped. This
information is provided as supplement information in addition to the
requirements of SFAS No. 131 in consideration of the disclosure requirements
under the Securities Exchange Law of Japan.
(In millions of yen)
---------------------------------------------------------------------------------------------------------------------
FY2002 interim
(April 1, 2002 through September 30, 2002)
-------------------------------------------------------------------------------------
Japan North Europe Asia Total Elimination
America and Consolidated
corporate
---------------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 23,669 6,501 4,473 6,470 41,113 - 41,113
customers
(2)Inter-segment 11,177 1,305 203 1,363 14,048 (14,048) -
---------------------------------------------------------------------------------------------------------------------
Total 34,846 7,806 4,676 7,833 55,161 (14,048) 41,113
---------------------------------------------------------------------------------------------------------------------
Operating expenses 39,890 8,206 4,456 6,818 59,370 (11,302) 48,068
---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (5,044) (400) 220 1,015 (4,209) (2,746) (6,955)
---------------------------------------------------------------------------------------------------------------------
(Notes) 1. Geographical segments are organized by physical proximity of
countries or regions.
2. Each of the geographical segments includes primarily the following
countries or regions:
(1) North America.........U.S.
(2) Europe................Germany, France, etc.
(3) Asia..................South Korea, Taiwan, Singapore, etc.
3. General corporate operating expenses included under "Elimination and
corporate" were (Y)3,683 million in FY2002 interim. They consist
primarily of expenses for basic research and costs of the
administrative operations of the headquarters.
37
(All financial information for FY2002 interim was prepared
in accordance with U.S. GAAP; however, financial information for FY2001 interim
and FY2002 was prepared in accordance with Japanese GAAP.)
Note 12. Interim Basic and Diluted Net Income (Loss) per Share
The following table sets forth the computation of interim basic and
diluted net income (loss) per share as of September 30, 2002:
FY2002 interim
--------------
Numerator:
Interim net income (loss) (Y)(3,769) million
------------------------- -------------------
Denominator:
Basic weighted average shares 98,638,828 shares
Dilutive effect of exercise of stock
options and warrants - shares
-------------------
Diluted weighted average shares 98,638,828 shares
===================
Interim basic net income (loss) per share (Y)(38.21)
Interim diluted net income (loss) per share (Y)(38.21)
(3) Other Information
Not applicable.
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