Ricoh Company, Ltd. and Consolidated Subsidiaries Financial Highlights (1st Quarter Ended June 30, 2001) –Translation– 1. Results for the period from April 1, 2001 to June 30, 2001 (1) Operating Results (Millions of yen) 1st quarter ended June 30, 2001 Net sales............................................................................................................. (% change from previous period)............................................................. Operating income.............................................................................................. (% change from previous period)............................................................. Income before income taxes ............................................................................ (% change from previous period)............................................................. Net income ......................................................................................................... (% change from previous period)............................................................. Net income per share-basic (yen)................................................................... Net income per share-diluted (yen)................................................................ Note: 1st quarter ended June 30, 2000 411,963 12.2 31,612 20.6 27,181 17.3 14,879 17.9 21.47 19.84 367,244 26,223 23,177 12,623 18.23 16.76 i. Equity in earnings of affiliates: ¥ 382 million (¥ 517 million in previous period) ii. Changes in accounting method, etc.: no change iii. Average number of shares outstanding: 693,073,668 share (692,345,854 shares in previous period) (2)Financial Position (Millions of yen) June 30, 2001 Total assets ....................................................................................................... Shareholders’ equity........................................................................................ March 31, 2001 1,728,588 570,326 (3)Cash Flows 1,704,791 556,728 (Millions of yen) 1st quarter ended June 30, 2001 Cash flows from operating activities ............................................................. Cash flows from investing activities.............................................................. Cash flows from financing activities.............................................................. Cash and cash equivalents at End of Year................................................... Year ended March 31, 2000 16,548 -5,358 -3,123 72,886 102,728 -62,728 -88,382 64,457 (4) Items relating to the scale of consolidation and the application of the equity method: Number of consolidated subsidiaries: 318; nonconsolidated subsidiaries: 44; affiliated companies: 27 (5) Changes in the scale of consolidation and the application of equity method: Companies accounted for by the equity method: 1 removal 2. Forecast of operating results from April 1, 2001 to March 31, 2002 (Millions of yen) Half year ended September 30, 2001 Net sales............................................................................................................. Operating income.............................................................................................. Income before income taxes ............................................................................ Net income ......................................................................................................... 830,000 61,000 54,500 29,500 Year ended March 31, 2002 1,705,000 130,000 117,000 64,000 Notes: Net income per share (Consolidated) 92.38 yen The consolidated forecasts made at the end of March 2001(announced on May 9, 2001) remain unchanged. Financial data other than for fiscal 2001, ended March 31, 2001, has not been audited by independent public accountants. -1 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 Performance *Overview - In the first quarter of fiscal 2002, ended June 30, 2001, net sales climbed 12.2%, to ¥ 411.9 billion. For your reference, if the exchange rate had remained the same as the previous year, the growth would have been 7.9%. - Although domestic sales were up just 1.1%, Ricoh did particularly well in its core office equipment area, which sales were up 3.6%. Overseas sales soared 29.9%, reflecting increased revenues from the consolidation of Lanier Worldwide, Inc., and the impact of a lower yen. With foreign exchange changes excluded, overseas sales would have increased 18.8%. Net sales rose primarily because of the dramatically higher popularity of printing systems, especially multifunctional printers (MFPs). Such offerings as digital plain-paper copiers and optical discs also contributed to sales. - Operating income increased 20.6% from the previous corresponding period, owing to increased unit sales of highmargin MFPs and the low yen. Other expenses were up because of higher interest expenses due to the consolidation of Lanier Worldwide, Inc. and increased foreign exchange losses. Nonetheless, income before income taxes was up 17.3%. - As a result of these factors, net income increased 17.9%. (Billions of yen) 1st quarter ended June 30, 2001 Net sales....................................................................... Domestic sales ....................................................... Overseas sales ....................................................... Gross profit .................................................................. Operating income........................................................ Income before income taxes ...................................... Net income ................................................................... Net income per share-basic (yen)............................. Net income per share-diluted (yen).......................... Exchange rate (US$) ................................................... Exchange rate (EURO)................................................ Expenditure for plant and equipment (billions of yen) Depreciation for tangible fixed assets (billions of yen) R&D Expenditure (billions of yen)........................... 411.9 228.7 183.2 174.0 31.6 27.1 14.8 21.47 19.84 122.60 107.25 17.9 15.1 17.8 -2 - 1st quarter ended June 30, 2000 367.2 226.1 141.0 148.3 26.2 23.1 12.6 18.23 16.76 106.82 99.72 15.2 13.9 16.5 Change 12.2% 1.1% 29.9% 17.3% 20.6% 17.3% 17.9% 3.24 3.08 15.78 7.53 2.7 1.2 1.3 Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 *Consolidated Sales by Category (excluding foreign currency exchange effect) Imaging Solutions Digital Imaging Solutions Sales of digital plain-paper copiers rose 5.6%, reflecting solid demand for mid-volume models domestically and abroad, especially the imagio Neo 350/450 series (Aficio 1045/1035 series overseas). Overseas sales climbed 12.9%. Other Imaging Solutions Sales of analog plain-paper copiers dropped 4.6%, because of a demand shift to digital models and MFPs. Network Input/Output Systems Printing Systems The Ricoh Group has proactively expanded its printing equipment lineup domestically and abroad while strengthening its printing solutions capabilities. Sales in this area jumped 55.6%, owing to booming demand for MFPs and such models as the IPSiO Color 8000 high-speed, high-resolution color printer. Other Input/Output Systems Sales of this segment advanced 15.2% due to its favorable optical disc business. Network System Solutions Sales of this segment improved 3.0%. This was due mainly to domestic demand for our reinforced solutions business, which encompasses personal computers, useware, document solutions, and other network areas. Other Businesses Sales of this segment declined 8.8%. This was because of a downturn in demand for mobile communications equipment large-scale integrated circuits, which caused semiconductor sales to drop. Another factor was that demand declined owing to lower sales of analog cameras and metering equipment. Consolidated Sales by Category (billions of yen) 450 Imaging solutions Networking I/O systems Network System solutions Other Businesses 43.9 47.7 43.5 48.7 48.7 300 47.3 87.6 83.1 55.7 150 216.4 231.6 220.8 1st Quarter ended June 30, 2000 1st Quarter ended June 30, 2001 1st Quarter ended June 30, 2001 *Sales amount excluding exchange effect 0 -3 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 * Consolidated Sales by Geographic Area Japan During the period under review, Ricoh strengthened its printing systems and network solutions businesses, centered on MFPs. Sales rose just 1.1%, however, as a downturn in semiconductor demand partially offset a 3.6% increase in imaging equipment sales. The Americas Demand for digital plain-paper copiers and MFPs was in progress mainly in North America. As a result, sales soared on growth in demand for printing solutions. Lanier Worldwide, Inc. also contributed significantly to performance. Thus, sales in this region jumped 25.6%. Europe Ricoh benefited from its top market shares in digital plain-paper copiers and MFPs. As a result, European sales increased 18.6%. Others Demand for mainline imaging equipment and optical discs was solid in China and the Asia-Pacific, with overall sales rising 3.9%. Sales by Geographic Area (billions of yen) 450 Other Europe The Americas Japan 27.1 25.7 24.7 76.1 72.1 60.8 300 79.8 69.6 55.4 150 226.1 228.7 228.7 1st Quarter ended June 30, 2000 1st Quarter ended June 30, 2001 1st Quarter ended June 30, 2001 *Sales amount excluding exchange effect 0 -4 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 1. Consolidated Sales by Product Line For the 1st Quarter Ended June 30, 2001 and 2000 (Millions of yen) 1st quarter ended 1st quarter ended Change(%) Change excluding June 30, 2001 June 30, 2000 exchange rate e ffect(%) Copiers and Related Supplies: Domestic ............................................................ Overseas ............................................................ Total ............................................................ Percentage of net sales (%) ........................... 120,737 140,319 261,056 63.3 118,942 103,298 222,240 60.5 +1,795 (1.5) +37,021 (35.8) +38,816 (17.5) +1,795 (1.5) +24,223 (23.4) +26,018 (11.7) Communications and Information Systems : Domestic ............................................................ Overseas ................................................................ Total ............................................................ Percentage of net sales (%) ........................... 72,281 34,711 106,992 26.0 67,285 29,951 97,236 26.5 +4,996 (7.4) +4,760 (15.9) +9,756 (10.0) +4,996 (7.4) +2,253 (7.5) +7,249 (7.5) Other Businesses: Domestic ............................................................ Overseas ............................................................ Total ............................................................ Percentage of net sales (%) ............................... 35,723 8,192 43,915 10.7 39,930 7,838 47,768 13.0 -4,207(-10.5) +354 (4.5) -3,853 (-8.1) -4,207(-10.5) +14 (0.2) -4,193 (-8.8) Total: Domestic ............................................................ 228,741 Percentage of net sales (%) ........................... 55.5 Overseas ................................................................ 183,222 Percentage of net sales (%) .......................... 44.5 The Americas............................................... 79,890 Percentage of net sales (%) ............. 19.4 Europe........................................................... 76,169 Percentage of net sales (%) ............. 18.5 Other ............................................................. 27,163 Percentage of net sales (%) ............. 6.6 Total.............................................................................. 411,963 Reference: Exchange rate (average rate for the corresponding periods) 226,157 61.6 141,087 38.4 55,462 15.1 60,866 16.6 24,759 6.7 367,244 +2,584 (1.1) +2,584 (1.1) +42,135 (29.9) +26,490 (18.8) +24,428 (44.0) +14,191 (25.6) +15,303 (25.1) +11,327 (18.6) +2,404 (9.7) +972 (3.9) +44,719 (12.2) +29,074 (7.9) 1st quarter ended 1st quarter ended June 30, 2001 June 30, 2000 US$1................................. EURO 1............................ ¥ 122.60 ¥107.25 ¥ 106.82 ¥ 99.72 -5 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 2. Consolidated Sales by Category For the 1st Quarter Ended June 30, 2001 and 2000 (Millions of yen) 1st quarter ended 1st quarter ended Change(%) Change excluding June 30, 2001 June 30, 2000 exchange rate e ffect(%) <Office Equipment> Imaging Solutions: Digital Imaging Systems ...................................... Percentage of net sales (%) ........................... Domestic ............................................................ Overseas ............................................................ 155,181 37.7 81,244 73,937 140,686 38.3 81,077 59,609 +14,495 (10.3) +7,841 (5.6) +167 (0.2) +14,328 (24.0) +167 (0.2) +7,674 (12.9) Other Imaging Systems .............................................. Percentage of net sales (%) ........................... Domestic ............................................................ Overseas ............................................................ 76,483 18.5 27,937 48,546 75,751 20.6 33,398 42,353 +732 (1.0) -3,478 (-4.6) -5,461(-16.4) +6,193 (14.6) -5,461(-16.4) +1,983 (4.7) Total Imaging Solutions ............................................ Percentage of net sales (%) ........................... Domestic ............................................................ Overseas ............................................................ 231,664 56.2 109,181 122,483 216,437 58.9 114,475 101,962 +15,227 (7.0) +4,363 (2.0) -5,294 (-4.6) +20,521 (20.1) -5,294 (-4.6) +9,657 (9.5) Networking input/output systems: Printing Systems ................................................... Percentage of net sales (%) ............................ Domestic ............................................................ Overseas ............................................................ 77,451 18.8 31,483 45,968 47,067 12.8 21,981 25,086 +30,384 (64.6) +26,168 (55.6) +9,502 (43.2) +20,882 (83.2) +9,502 (43.2) +16,666 (66.4) Other Input/Output Systems .................................... Percentage of net sales (%) ............................ Domestic ............................................................ Overseas ............................................................ 10,167 2.5 3,989 6,178 8,634 2.4 3,443 5,191 +1,533 (17.8) +1,313 (15.2) +546 (15.9) +987 (19.0) +546 (15.9) +767 (14.8) Total Networking input/output systems ................. Percentage of net sales (%) ........................... Domestic ............................................................ Overseas ............................................................ 87,618 21.3 35,472 52,146 55,701 15.2 25,424 30,277 +31,917 (57.3) +27,481 (49.3) +10,048 (39.5) +21,869 (72.2) +10,048 (39.5) +17,433 (57.6) Network system solutions......................................... Percentage of net sales (%) ........................... Domestic ............................................................ Overseas ............................................................ Office Equipment Total.............................................. Percentage of net sales (%) ............................ Domestic ............................................................ Overseas ............................................................ 48,766 11.8 48,365 401 368,048 89.3 193,018 175,030 47,338 12.9 46,328 1,010 319,476 87.0 186,227 133,249 +1,428 (3.0) +1,423 (3.0) +2,037 (4.4) -609(-60.3) +48,572 (15.2) +2,037 (4.4) -614(-60.8) +33,267 (10.4) +6,791 (3.6) +41,781 (31.4) +6,791 (3.6) +26,476 (19.9) -6 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 2. Consolidated Sales by Category (Continued) For the 1st Quarter Ended June 30, 2001 and 2000 (Millions of yen) 1st quarter ended 1st quarter ended Change(%) Change excluding June 30, 2001 June 30, 2000 exchange rate e ffect(%) < Other Businesses > Other Businesses........................................................ 43,915 47,768 -3,853 (-8.1) -4,193 (-8.8) Percentage of net sales (%) ........................... 10.7 13.0 Domestic ............................................................ 35,723 39,930 -4,207(-10.5) -4,207(-10.5) Overseas ............................................................ 8,192 7,838 +354 (4.5) +14 (0.2) Grand Total ............................................................ 411,963 367,244 +44,719 (12.2) +29,074 (7.9) Percentage of net sales (%) ............................ 100.0 100.0 Domestic ............................................................ 228,741 226,157 +2,584 (1.1) +2,584 (1.1) Percentage of net sales (%) ........................... 55.5 61.6 Overseas ............................................................ 183,222 141,087 +42,135 (29.9) +26,490 (18.8) Percentage of net sales (%) ........................... 44.5 38.4 The Americas ................................... 79,890 55,462 +24,428 (44.0) +14,191 (25.6) Percentage of net sales (%) .......... 19.4 15.1 Europe ............................................... 76,169 60,866 +15,303 (25.1) +11,327 (18.6) Percentage of net sales (%) .......... 18.5 16.6 Other.................................................. 27,163 24,759 +2,404 (9.7) +972 (3.9) Percentage of net sales (%) .......... 6.6 6.7 Each category includes the following products: Digital Imaging Systems .................. Digital PPCs, color PPCs, digital duplicators, facsimile machines, related supplies and services Other Imaging Systems .................... Analog PPCs, diazo copiers, and related supplies including thermal paper, and services Printing Systems ............................... Multifunctional printers (MFPs), laser printers, related supplies, services and software Other Input/Output Systems .......... Optical discs and system scanners Network System Solutions.............. Personal computers, PC servers, network systems, network related software, and service/support Other Businesses.............................. Digital cameras, analog cameras, semiconductors Reference: Exchange rate (average rate for the corresponding periods) 1st quarter ended 1st quarter ended June 30, 2001 June 30, 2000 US$1................................. EURO 1............................ ¥ 122.60 ¥107.25 ¥ 106.82 ¥ 99.72 -7 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 3. Consolidated Statements of Income For the 1st Quarter Ended June 30, 2001 and 2000 (Millions of yen) 1st quarter ended 1st quarter ended June 30, 2001 June 30, 2000 Net sales ..................................................................................... Cost of sales .............................................................................. Percentage of net sales (%) ................................................. Gross profit ................................................................................... Percentage of net sales (%) ................................................. Selling, general and administrative expenses ........................... Percentage of net sales (%) ................................................. Operating income.......................................................................... Percentage of net sales (%) ................................................. Other (income) expenses Interest and dividend income ............................................... Percentage of net sales (%) ............................................ Interest expense...................................................................... Percentage of net sales (%) ............................................ Other, net................................................................................. Percentage of net sales (%) ............................................ Income before income taxes, minority interests and equity in earnings of affiliates.............................................. ...... Percentage of net sales (%) ................................................. Provision for income taxes .......................................................... Percentage of net sales (%) ............................................ Minority interests ......................................................................... Percentage of net sales (%) ......................................... Equity in earnings of affiliates ......................................... Percentage of net sales (%) ......................................... Net income ......................................... Percentage of net sales (%) ......................................... Change (%) 411,963 237,946 57.8 174,017 42.2 142,405 34.5 31,612 7.7 367,244 218,862 59.6 148,382 40.4 122,159 33.3 26,223 7.1 +44,719 (12.2) +19,084 (8.7) 1,138 0.3 2,415 0.6 3,154 0.8 1,774 0.5 1,273 0.3 3,547 1.0 -636 (-35.9) 27,181 6.6 12,109 2.9 575 0.1 382 0.0 14,879 3.6 23,177 6.3 9,874 2.7 1,197 0.3 517 0.1 12,623 3.4 +25,635 (17.3) +20,246 (16.6) +5,389 (20.6) +1,142 (89.7) -396 (-11.1) +4,004 (17.3) +2,235 (22.6) -622 (-52.0) -135 (-26.1) +2,256 (17.9) Reference: Exchange rate (average rate for the corresponding periods) 1st quarter ended 1st quarter ended June 30, 2001 June 30, 2000 US$1................................. EURO 1............................ ¥ 122.60 ¥107.25 ¥ 106.82 ¥ 99.72 -8 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 4. Consolidated Balance Sheets June 30, 2001 and March 31, 2001 Assets (Millions of yen) June 30, 2001March 31, 2001Change Current Assets Cash and deposits..................................................................... 84,171 75,644 Trade receivables ...................................................................... 417,490 410,861 Marketable securities................................................................ 57,444 62,213 Inventories ................................................................................. 175,434 176,383 Other current assets ................................................................. 55,654 54,306 Total Current Assets....................................................................... 790,193 779,407 +8,527 +6,629 -4,769 -949 +1,348 +10,786 Fixed Assets Tangible fixed assets .................................................................. Finance receivable ...................................................................... Other Investments and other assets ........................................ Total Fixed Assets........................................................................... Total Assets ..................................................................................... 266,735 440,550 231,110 938,395 267,249 428,790 229,345 925,384 -514 +11,760 +1,765 +13,011 1,728,588 1,704,791 +23,797 Liabilities and Minority Interest (Millions of yen) June 30, 2001March 31, 2001Change Current Liabilities Trade payable ............................................................................ 288,283 291,791 Short-term borrowings.............................................................. 305,386 321,185 Other current liabilities ............................................................. 172,833 166,460 Total Current Liabilities .................................................................. 766,502 779,436 -3,508 -15,799 +6,373 -12,934 Fixed Liabilities Long-term indebtedness .......................................................... Retirement benefit obligation .................................................. Other fixed liabilities.................................................................. Total Fixed Liabilities ...................................................................... 233,441 85,476 24,780 343,697 217,743 82,828 20,625 321,196 +15,698 +2,648 +4,155 +22,501 Total Liabilities................................................................................. 1,110,199 1,100,632 +9,567 Minority Interest.............................................................................. 48,063 47,431 +632 Shareholders’ Investment (Millions of yen) June 30, 2001 March 31, 2001 Shareholders’ Investment Common stock........................................................................... Additional paid-in capital......................................................... Retained earnings...................................................................... Accumulated other comprehensive income .......................... Total Shareholders’ Investment.................................................... Change 103,842 155,042 343,170 -31,728 570,326 103,434 154,635 332,447 -33,788 556,728 +408 +407 +10,723 +2,060 +13,598 1,728,588 1,704,791 +23,797 Contents of cash and deposits Cash and cash equivalents ...................................................... Time deposits............................................................................. 72,886 11,285 64,457 11,187 Accumulated other comprehensive income; Net unrealized holding gains on available-for-sale securities ..................................................... Minimum pension liability adjustments ................................. Net unrealized gains (losses) on derivative instruments .... Cumulative translation adjustments ....................................... 11,331 -23,583 -97 -19,379 11,332 -23,579 -21,541 Total Liabilities and Shareholders’ Investment ......................... Notes: Exchange rate (end of year) US$ 1................................ EURO 1............................ March 31, 2001 ¥ 124.60 ¥ 105.20 -1 -4 +2,162 March 31, 2000 ¥ 123.90 ¥109.33 -9 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 5. Statements of Cash Flow (Consolidated) For the 1st Quarter Ended June 30, 2001, and the Year Ended March 31, 2001 (Millions of yen) 1st quarter ended June 30, 2001 I. Cash Flows from Operating Activities: 1. Net income................................................................................................ 2. Adjustments to reconcile net income to net cash provided by operating activities— Depreciation and amortization........................................................... Equity in earnings of affiliates, net of dividends received............ Deferred income taxes......................................................................... Loss on disposal and sales of plant and equipment...................... Changes in assets and liabilities, net of effects from acquisition— Decrease (increase) in trade receivables.................................. Decrease (increase) in inventories............................................ Decrease (increase) in finance receivables.............................. (Decrease) increase in trade payables...................................... (Decrease) increase in accrued income taxes and accrued expenses and other ...................................................... (Decrease) increase in retirement benefit obligation.............. Other, net...................................................................................... Net cash provided by operating activities................................................. II. Cash Flows from Investing Activities: 1. Proceeds from sales of plant and equipment ...................................... 2. Expenditures for plant and equipment ................................................. 3. Payments for purchases of available-for-sale securities ................... 4. Proceeds from sales of available-for-sale securities .......................... 5. Decrease (increase) in time deposits .................................................... 6. Acquisition amount of Lanier Worldwide, Inc ................................... 7. Other, net.................................................................................................. Net cash used in investing activities.......................................................... III. Cash Flows from Financing Activities: 1. Proceeds from long-term indebtedness ............................................... 2. Repayment of long-term indebtedness................................................ 3. (Decrease) increase in short-term borrowings, net ............................ 4. Proceeds from issuance of long-term debt securities ........................ 5. Repayment of long-term debt securities .............................................. 6. Cash dividends paid ............................................................................... 7. Other, net.................................................................................................. Net cash provided by (used in) financing activities ................................ IV. Effect of Exchange Rate Changes on Cash and Cash Equivalents ..... V. Net Increase (Decrease) in Cash and Cash Equivalents ........................ VI. Cash and Cash Equivalents at Beginning of Year................................. VII. Cash and Cash Equivalents at End of Year........................................... - 10 - Year ended March 31, 2001 14,879 53,228 15,149 143 (3,586) 114 62,142 (1,056) (9,994) 2,223 (7,017) 941 (11,379) (4,111) (32,476) (7,167) (15,127) 16,235 6,364 2,625 2,426 16,548 27,310 1,667 5,743 102,728 273 (17,954) (7,595) 21,043 (144) (981) (5,358) 1,120 (73,040) (52,853) 93,705 6,797 (28,103) (10,354) (62,728) 7,805 (8,758) (7,789) 10,000 (4,154) (227) (3,123) 362 8,429 64,457 72,886 33,183 (114,701) 5,565 (2,990) (7,964) (1,475) (88,382) 1,001 (47,381) 111,838 64,457 Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 6. Segment Information (1) Business Segment Information For the 1st Quarter Ended June 30, 2001 (Millions of yen) Office equipment Other Businesses Corporate and Total eliminations Net sales: Segment sales .................................. Intersegment transaction ............... Total ........................................................ Operating expenses: Segment operating expenses ......... Intersegment transaction ............... Unallocated operating expense..... Total ........................................................ Operating income: Segment operating income............. Intersegment transaction ............... Unallocated operating income....... Consolidated operating income........... Other income(expenses)....................... Consolidated pretax profit .................... 368,048 368,048 45,066 45,066 -1,151 -1,151 413,114 -1,151 411,963 326,030 326,030 44,445 44,445 -1,151 11,027 9,876 370,475 -1,151 11,027 380,351 42,018 42,018 - 621 621 - 0 -11,027 -11,027 - 42,639 0 -11,027 31,612 -4,431 27,181 (2) Geographic Segment Information For the 1st Quarter Ended June 30, 2001 (Millions of yen) Japan The Americas Europe Other Corporate and Total eliminations Net sales: External customers .......................... Intersegment .................................... Total ........................................................ Operating expenses:.............................. Operating income:.................................. Other income(expenses)....................... Consolidated pretax profit .................... 235,115 78,923 314,038 280,952 33,086 - 79,527 1,492 81,019 81,869 -850 - - 11 - 76,206 936 77,142 74,602 2,540 - 21,115 14,513 35,628 34,419 1,209 - -95,864 -95,864 -91,491 -4,373 - 411,963 411,963 380,351 31,612 -4,431 27,181 Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001 7. Significant Accounting Policies (Consolidated) 1. Items relating to the scale of consolidation and the application of the equity method Companies accounted for by the equity method: 1 removal: Sakura Technos Ltd..(liquidation) 2. Consolidated Accounting Policies (1) Principles of Consolidation The consolidated financial statements include the accounts of Ricoh. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in affiliated companies are accounted for on the equity basis. (2) Securities Ricoh conforms with SFAS No.115, "Accounting for Certain Investments in Debt and Equity Securities," which requires certain investments in debt and equity securities to be classified as either held-to-maturity, trading, or available-for-sale securities. Available-for-sale are reported at fair value with unrealized gains and losses, net of related taxes, excluded from earnings and reported in accumulated other comprehensive income (loss). The cost of the securities sold was computed based on the average cost of each security held at the time of sale. (3) Inventories Inventories are stated at the lower of average cost or market. Inventory costs include raw materials, labor and manufacturing overheads. (4) Plant and Equipment Depreciation of plant and equipment is computed principally by using the declining-balance method over the estimated useful lives. Most of the foreign subsidiaries have adopted the straight-line method for computing depreciation. Certain leased buildings, machinery and equipment are accounted for as capital leases in conformity with SFAS No. 13, "Accounting for Leases." (5) Goodwill Ricoh has classified as goodwill the cost in excess of fair value of the net assets of major companies acquired in purchase transactions. Goodwill is being amortized on a straight-line method over the estimated periods benefited, not to exceed 20 years. (6) Use of Estimates Management of the Company has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities, to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. 3. Notes From fiscal 2002, Ricoh has adopted 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. These standards require all that every derivative instrument be measured at its fair value and be recorded in the consolidated balance sheets as an asset or liability. Under the new standards, the unrealized gains of ¥ 1,864 million net of the income tax effect are deducted from other comprehensive income in the consolidated balance sheets, and a decrease to net income of ¥ 66 million are recorded in the consolidated statements of income. - 12 - Ricoh Co., Ltd. Quarterly Report 1st Quarter ended June 30, 2001