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Transcript
1 Financial Highlights
2 Anritsu at a Glance
4 To Our Shareholders
6 Interview with President Akira Shiomi
10 Corporate Governance
11 Directors, Corporate Auditors andExecutive Officers
12 Feature: Positioning Anritsu forthe Future
15 Financial Section
38 Directory
39 Investor Information
To contribute to the development of the ubiquitous network
society, Anritsu will provide solutions in the fields of electronics,
information networks and measurement to the mobile & Internet,
industrial electronics, security and environmental measurement
markets by utilizing "Original & High Level" technologies.
Anritsu will work to become an “Intelligent Solutions Creator”
that contributes to the development of the ubiquitous network
society by creating better solutions in cooperation with its
customers and partners. These efforts will, in turn, lead to improved
customer value and new demand.
COMPANY PHILOSOPHYAnritsu, with sincerity, harmony, and enthusiasm, will contribute to creatingan affluent Ubiquitous network society by providing “Original & High level”products and services.
COMPANY VISIONTo be a shining light by contributing to the development of the global networksociety.A company, who can always create customer value, by providing solutions in the fields of electronics,information network and measurement.
COMPANY COMMITMENT■ High return for shareholders■ Win-win relationship with customers■ Employee, who are proud of Anritsu■ Contribution to society as a good citizen
All information contained in this annual report which pertains to the current plans, estimates, strate-gies and beliefs of Anritsu Corporation (hereafter “Anritsu”) that is not historical fact shall be consideredforward-looking statements of future business results or other forward-looking projections pertinent tothe business of Anritsu. Implicit in reliance on these and all future projections is the unavoidable risk,caused by the existence of uncertainties about future events, that any and all suggested projections maynot come to pass. Forward-looking statements include but are not limited to those using words such as“believe”, “expect”, “plans”, “strategy”, “prospects”, “estimate”, “project”, “anticipate”, “may” or“might” and words of similar meaning in connection with a discussion of future operations or financialperformance. Actual business results are the outcome of a number of unknown variables and may sub-stantially differ from the figures projected herein.
Factors which may affect the actual business results include but are not limited to the economic situa-tion in the geographic areas in which Anritsu conducts business, including but not limited to, Japan, theAmericas. Europe and Asia, downward pressure on prices due to increasing competition or changes inactual demand for Anritsu products and services, Anritsu’s ability to provide products and services thatcontinue to be accepted by customers in competitive markets, and exchange rates.
Readers also should not place reliance on any obligation of Anritsu to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Anritsu dis-claims any such obligation.
NET SALES(Millions of Yen)
OPERATING INCOME (LOSS)/NET INCOME (LOSS)(Millions of Yen)
ACE/ROE(Millions of Yen/%)
1999 2000 2001 2002 20030
40,000
80,000
120,000
160,000
200,000
0
-6,000
6,000
12,000
18,000
(10,749)(32,761)
24,000
■ Operating Income (Loss)■ Net Income (Loss)
1999 2000 2001 2002 2003 1999 2000 2001 2002 2003
0
4
8
12
16
0
-4,000
4,000
8,000
12,000
16,000
■ ACE
Anritsu Capital–cost Evaluation(Operating Income After Tax)–(Capital Cost)
Note: ROE is not calculated for 1999 and 2003due to net loss.
ROE
(15,562)
■ R&D ExpensesPercentage of Net Sales
1999 2000 2001 2002 20030
4,000
8,000
12,000
16,000
20,000
0
4
8
12
16
20
R&D EXPENSES/PERCENTAGE OF NET SALES(Millions of Yen/%)
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31
Thousands of U.S. dollars
Millions of yen (Note 1)
2003 2002 2001 2003
For the year:Net sales ¥ 78,554 ¥131,578 ¥159,056 $ 653,527Operating income (loss) (10,749) 7,586 23,834 (89,426)Net income (loss) (32,761) 2,567 9,635 (272,554)
Depreciation and amortization 6,018 6,741 5,497 50,067Capital expenditures 2,867 9,677 8,308 23,852R&D expenses 13,222 15,222 15,385 110,000
At year-end:Total assets ¥144,130 ¥198,780 ¥207,544 $1,199,085Total shareholders’ equity 59,617 94,171 93,743 495,982
Yen U.S. dollars (Note 1)Per share: Net income (loss)
Basic ¥ (256.90) ¥ 20.10 ¥ 75.70 $ (2.14)Diluted (Note 2) — 18.81 68.02 —
Cash dividends — 9.00 12.00 —Notes: 1. The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥120.20 to U.S. $1.00, the approximate exchange
rate on March 31, 2003.2. The computations of basic net income (loss) per share are based on the weighted average number of shares outstanding during the relevant year. Diluted net income per
share for 2000 is not presented since the result of the computation was anti-dilutive, and that for 2003 and 1999 is not presented due to net loss. Diluted net income per share is computed based on the average number of shares of common stock and contingent issuances of common stock from convertible bonds or warrants.
Information and Communications: 13.5%
Test and Measurement: 65.5%
Industrial Automation: 14.7%
Components and Devices: 1.6%
Services and Others: 4.7%
Japan: 59.1%
Americas: 14.6%
Europe: 13.9%
Asia and Others: 12.4%
NET SALES BY INDUSTRY SEGMENT NET SALES BY MARKET
The Anritsu Group operates five main businesses: Information and Communications, Test andMeasurement, Components and Devices, Industrial Automation, and Services and Others. As part ofAnritsu’s structural reforms, the internal companies were reorganized into business divisions.
DATA QUALITY ANALYZER MD1230AThe MD1230A handles Multi Protocol Label Switching(MPLS) and the next-generation IPv6, which are essential forefficient transmission of Internet traffic. The MD1230Aintegrates an IP router performance testing function with anetwork monitoring function, so it can be used from net-work performance evaluation to network monitoring.
1 During the past fiscal year, Anritsu reorganized Measurement Solutions, the internal company that previously handled the Test and Measurement business, into two internal companies, Photonic Measurement Solutions and Wireless Measurement Solutions. As of April 1, 2003, this business is conducted by the IP Network Division, the Wireless Measurement Division and the Precision Measurement Business Promotion Division.
RADIO COMMUNICATION ANALYZERMT8820AWhen dedicated measurement hardware and softwareare installed, the MT8820A supports high-speed testing of RFtransmission/reception characteristics and call processing ofW-CDMA and other 3G mobile terminals.
BROADBAND VECTOR NETWORKANALYZER ME7808AThe ME7808A can cover a wide frequency range from 40MHz to 110 GHz in a singlefast sweep. It is an ideal systemfor accurate measurement ofS-parameters of componentsand devices up to 110GHz.
TEST AND MEASUREMENT1
OPTICAL GIGA ACCESS ROUTER EC2032AThe EC2032A is an access router that performs IP conversion of picture and con-trol signals of equipment such as road information signs, closed circuit TVcameras and telemeters in road and river monitoring systems, thus enabling con-nection to IP networks.
INFORMATION AND COMMUNICATIONS2
2 During the past fiscal year, Anritsu reorganized Network Solutions, the internal company that previously handled the Information and Communications business, as the Systems Solutions Division, which assumed responsibility for this business as of April 1, 2003.
Performance in the Past Fiscal YearIn the year ended March 31, 2003, sales were firm for test andmeasurement equipment for W-CDMA, a next-generation mobilecommunication system, supported by demand for use in R&Dapplications and mass production of mobile phones. However,sales of test and measurement equipment for optical and digital com-munications fell sharply despite growing demand for Internet protocol(IP) related measurement equipment, due to restrained invest-ment in high-speed and broadband optical communications marketsin Japan and overseas, particularly in North America. As a result, thissegment posted an overall year-on-year decrease in net sales.
Business DescriptionDevelopment, manufacturing and sale of test and measurementequipment and systems for a variety of communications applications,including digital, optical and mobile communications and RFmicrowave and millimeter wave communications, to telecommuni-cations companies, manufacturers of related equipment, andmaintenance and construction companies in Japan and aroundthe world.
Performance in the Past Fiscal YearConsolidated net sales decreased compared to the previous fiscalyear. Demand for public information systems was firm, but sales ofdigital transmission systems and payphones to Nippon Telegraph andTelephone Corporation (NTT) declined.
Business DescriptionDevelopment, manufacturing and sale of picture video transmissionsystems, road & river management systems and telemeters fordelivery to government and municipal offices such as the Ministry ofLand, Infrastructure and Transport.
LASER DIODE FOR OPTICAL TRANSMISSION AF4A 1406A75L The AF4A 1406A75L is a laser diode that is optimal as a pumping light source forRaman amplifiers and EDFA, which are promising as core components of next-gen-eration optical communications.
COMPONENTS AND DEVICES3
3 The Components and Devices business, which was previously handled by the Advanced Components internal company, is handled by the Optical Device Business Promotion Division as of April 1, 2003.
4 Industrial Solutions, the internal company that previously handled the Industrial Automation business, was separated from the Company and transferred to subsidiary Anritsu Industrial Solutions Co., Ltd. in July 2002.
5 HACCP: Hazard Analysis and Critical Control Point
6 GMP: Good Manufacturing PracticeX-RAY INSPECTION SYSTEM KD7305AWThe KD7305AW uses Anritsu’s proprietary image pro-cessing technology to detect substances such as ironand stainless steel, even in minute sizes.
Performance in the Past Fiscal YearConsolidated net sales decreased compared to the previous fiscalyear. Anritsu developed products for the new markets of high-speed and optical devices, but reduced infrastructure investment inwave division multiplexing (WDM) transmission systems and opticalsubmarine cable transmission systems, the main markets of this seg-ment, exerted a pronounced impact on sales.
Business DescriptionDevelopment, manufacturing and sale of optical devices such as laserdiodes for optical communications systems manufacturers andresearch laboratories globally.
Performance in the Past Fiscal YearFor the fiscal year ended March 31, 2003, continued strong concernabout food safety in Japan resulted in firm demand for metaldetectors and X-ray inspection systems.
Business DescriptionDevelopment, manufacturing and sale of precise, high-speedindustrial machinery, including automatic checkweighers, auto-matic combination weighers and contaminant inspection equip-ment that comply with international standards such as HACCP5 andGMP6, for production management and quality management systemsin the food and pharmaceutical industries.
INDUSTRIAL AUTOMATION4
Business DescriptionLogistics, employee welfare services, property rental and otherbusinesses
SERVICES AND OTHERS
In the year ended March 31, 2003 Anritsu
faced a difficult business environment,
but the Company is working in unison to
restructure its operations for a return to
operating profitability. By implementing
the new Long-Term Management Plan
started in April 2003, we will reform our
management and business structures and
position the Company to grow in high
potential fields by generating new
customer value.
PRESIDENTAKIRA SHIOMI
The environment in which Anritsu operates is expected to remain challenging. To deal with and to recover from these difficult con-ditions, in April 2003 Anritsu unveiled its Long-Term Management Plan and initiated various business restructuring measures. Under itsnewly streamlined divisions, Anritsu will focus on investing resources in growth areas such as IP networks and mobile communications,and maintain orders and sales by providing the solutions customers need in a timely manner. In addition, the Company is expanding therange of solutions it offers through alliances and cooperative agreements with other companies, and generating new businesses throughinternal ventures. Furthermore, Anritsu will work to move from operating loss to operating income by continuing management structurereform, while improving profitability and generating cash flow through such measures as inventory reduction, cost cutting, retrenchmentand more efficient capital investment.
Anritsu considers returns to shareholders to be one of its highest management priorities. The Company is moving towards profitabilityby ensuring the success of management structure reforms, while improving corporate value with the steady progress of the Long-TermManagement Plan.
MEASURES IMPLEMENTED DURING THE FISCAL YEAR1. Business Structure Reforms● Concentrated management resources in the field of IP networks● Established the China Business Center to plan business strategies for the Chinese market● Implemented business restructuring measures affecting the entire Group (restructuring of internal companies,
spin-off of Industrial Automation business, etc.)2. Management Structure Reforms● Implemented downsizing measures such as early retirement and special outplacement programs to reduce the
number of employees by approximately 1,500● Consolidated corporate departments and other departments with common functions to reduce fixed costs and
increase efficiency● Carried out employment structure reforms (introduction of work-sharing, wage cuts for managers and higher
positions, etc.)● Transferred and integrated head office functions into the Atsugi Plant
THE CHALLENGES AHEAD
In the year ended March 31, 2003, the challenging conditions of the previous year continued for Anritsu. The global slowdown in theinformation technology (IT) industry resulted in a significant decline in demand, creating a difficult business environment. Inresponse, Anritsu has actively worked to reform its business and management structure to ensure the Company’s success and revital-ization. While we still have challenges ahead, we have made measurable progress in ensuring future growth. However, the IT downturnhad a particularly severe effect on the Test and Measurement business and the Components and Devices business. As a result, consolidatednet sales decreased 40.3 percent compared with the previous fiscal year, to ¥78.5 billion, and the Company posted an operating lossof ¥10.7 billion due to poor sales and declining profitability, compared to operating income of ¥7.5 billion in the previous fiscal year. Anritsuposted extraordinary income of ¥6.2 billion with the return to the government of the portion of the welfare pension obligation it holdsin trust in connection with the enforcement of the Defined Benefit Corporate Pension Law during the first half of the fiscal year. However,special severance payments totaling ¥11.3 billion due to the implementation of such measures as the early retirement program and aninventory valuation and disposal loss of ¥14.9 billion were recorded as extraordinary losses. Consequently, I regret to report that Anritsurecorded a net loss of ¥32.7 billion, compared to net income of ¥2.5 billion in the previous fiscal year. As a result of the above factors,Anritsu decided not to pay the year-end dividend of ¥9.00 per share that was paid in the previous fiscal year.
PERFORMANCE
Akira Shiomi, PresidentJuly 2003
You proposed the concept of “becoming an Intelligent Solutions Creator” as a basicprinciple of the Long-Term Management Plan. What changes will be made to Anritsu’smanagement policies?
The slowdown in the telecommunications industry that Anritsu is currently facing is more severe than ever
before. All companies are frantically developing business models for survival. Every aspect of the market is undergoing
great changes, and companies that are unable to accurately respond to the quality, quantity and speed of these changes
will eventually cease to exist.
The Long-Term Management Plan transforms Anritsu’s operating structure and creates a new business model for
the age of the ubiquitous* network that is now coming into being with the creation of high-level information network
environments.
Previously, customers decided which of our products they needed and all we had to do was supply them.
However, with the increasingly fierce competition in today’s rapidly changing market, customers want to buy
products as part of a comprehensive solution that not only resolves their current problems but also contributes to future
growth. When launching a new product, we must accurately determine what its advantages are for our cus-
tomers, how competitive it will be for them, and how much of a return on their investment they will see, in order to
be able to provide products that increase customer value. It will be crucial to consider how we can offer comprehensive
solutions encompassing all areas, such as hardware, software and after-sales services, to respond flexibly to
advances in customers’ systems.
We are also working to quickly grasp what the market demands of our customers, seize potential business oppor-
Q
Anritsu is restructuring its businesses and working to become anIntelligent Solutions Creator in order to generate value for customers.
tunities for them, propose new business ideas to them, and generate new demand.
For over a century, Anritsu’s superior technological capabilities have been the bedrock of our operations, symbolized
by our slogan, “Original & High Level”. Technology will remain an important part of our operations, but we can no
longer rely on technology alone. In the future, we will offer customers optimal solutions imbued with insight, and pro-
vide services that will directly contribute to the success of their businesses.
We aim to move away from the conventional wisdom, propose ideas that generate productivity, convenience and
other value for all customers who use our products, and contribute as a company to the creation of the ubiquitous
network society. While offering solutions with high customer value to a broad range of customers, we will also devel-
op into a company capable of generating new demand among customers. This is what I mean by becoming an
Intelligent Solutions Creator.
What business strategies will you implement in order to achieve net sales of 100 bil-lion yen and operating income of 10 billion yen, which are the management targets forthe fiscal year ending March 31, 2006?
Our immediate target is achieving operating profitability in the current fiscal year. To do so, we are steadily imple-
menting the following three measures: 1) expanding orders by further developing existing products and services as
an Intelligent Solutions Creator; 2) reducing material costs by pursuing further cost reductions; and 3) lowering oper-
ating expenses by taking stock of our activities and determining what our true needs are, instead of simply
going along with what has always been done.
After establishing a solid footing in the current fiscal year, it will be critical to implement a business strategy that
will create a solid growth trajectory toward the year ending March 2006.
Our business strategy consists of three major objectives. To promote the ubiquitous network society, first, we will
strengthen our core Mobile & Internet business. Second, we will build up the peripheral business areas of industrial
electronics and security-related businesses. Third, we will establish new businesses, focusing particularly on the envi-
ronment-related business.
Q
2002 2003 2004 20052001
Broadband mobile communication
Digital broadcasting
Broadband Internet
Information home electronics (networking)
Computer chip on all items(Radio IC chip, TRON)
Mobile terminal + digital broadcasting
(W-CDMA, CDMA2000 1x/1xEVDO, HSDPA)
(ADSL, WLL, CATV, FTTH)
HSDPA: High Speed Downlink Packet Access (High-speed transmission technology for packet data)TRON: The Real-time Operating System Nucleus (The computer architecture of the near future)
Beginning of the Ubiquitous Era
* Ubiquitous: Being or seeming to be everywhere at the same time; omnipresent. From the Latin word ubique, “everywhere.”Ubiquitous networks aim to supply needed information anywhere at any time.
In the field of measurement for mobile communications, measuring instruments for third-generation (3G)
mobile communications have become a dynamic business. As mobile communications become broadband-compatible,
demand for high-speed transmission of data and images is forecast to increase through the end of 2003. In Europe,
we are seeing signs that the use of W-CDMA1 and CDMA20002 is spreading, and will be fully established during this
year. On the other hand, China has just begun to shift toward W-CDMA and CDMA2000, and this market holds great
future potential. The number of PHS customers in China is growing rapidly with a shift towards communications serv-
ices that utilize both PHS and GSM3, as well as services that utilize both GSM and W-CDMA. Anritsu is one of the
first companies in the industry to begin developing measuring technology for 3.5G (HSDPA) mobile communications
together with a leading telecommunications carrier. We pride ourselves on being the world’s leading company in
this field, and hope to remain a global front-runner.
We are focusing most intently on measuring instruments for IP communications, as the shift toward IP networks
is expected to continue. Anritsu possesses both communication protocol analysis technology and LAN switch tech-
nology, and we want to make the most of this advantage. Though Anritsu is late in entering this field, we have
become a recognized name in Japan. We are focusing on video transmission, including in the international market,
and building strengths in specialized fields with multicast functions.
The RF and microwave measurement business, the backbone of our industrial electronics-related business, is han-
dled primarily by our U.S. subsidiary, and our high-frequency measuring technology (microwave and millimeter wave)
is world-class. Demand for this technology exists in a variety of fields, including defense, aviation and aerospace,
as well as digital cameras, DVDs and terrestrial digital broadcasting. Anritsu will use its world-class core technol-
ogy to expand its operations.
In the security-related business, safety and security solutions are a field of growing interest. In the video moni-
toring business, Anritsu has earned strong support for its technology enabling real-time, high-speed transmission
of images of roads, rivers and dams. Now more than ever, society is concerned about security issues, and
demand for video monitoring systems is increasing each year. In addition, food safety and security have become the
focus of attention in the food, pharmaceutical and chemical industries, and Anritsu is working to further develop this
business area using technology such as inspection systems, used for quality inspection and image processing of food
and pharmaceuticals.
Regarding the environment-related business, which we are developing as a new business area, Anritsu is virtually
the only manufacturer to supply DFB-LD4 gas detection units. By the end of March 2004, Anritsu will establish a foun-
dation for the environment-related business, which will have as its mission protecting life and the environment, and
focus on the commercialization of gas detection and analysis systems using DFB-LD.
In carrying out this strategy, the most important qualities will be speed and flexibility. In today’s network society,
changes are occurring at an increasingly rapid rate, and Anritsu must keep up with this pace. To do so, we must cre-
ate a corporate culture capable of agile responses to these rapid changes. As an experiment in doing so, in April 2003
we established project teams led by younger employees for new businesses that have the freedom of venture busi-
nesses. With their youthful energy, the project teams will develop these businesses using Anritsu’s core technologies.
1 W-CDMA (Wideband Code Division Multiple Access): Part of the IMT-2000 (International Mobile Telecommunications 2000), which is one of the global standards for next-generation mobile communications systems.
2 CDMA2000: A standard that makes the transition to broadband based on cdmaOne, a second-generationmobile communications standard.
3 GSM (Global System for Mobile Communications): A second-generation mobile communications standard that is the standard digital mobile communications system used throughout Europe.
4 DFB-LD: Distributed Feed-Back Laser Diode
What is your strategy in overseas markets?
Anritsu has sales bases in seventeen countries and development bases in three countries around the world. As
a result, systems that meet the needs of customers in these regions can be developed and manufactured at local facil-
ities and shipped directly. As shown by our motto, “Think Global, Act Local”, Anritsu aims to conduct business from
a global perspective, while promoting localization of operations by entrusting the management of overseas subsidiaries
to local employees.
In China, where growth is expected, we have already established eleven customer support bases covering almost
the entire country. Anritsu also established the China Business Center in April 2002 to be responsible for planning
and executing Anritsu Group business strategies in China. The China Business Center will promote speedy decision-
making and effective resource allocation for the entire Group in this rapidly expanding market, and will also solid-
ify Anritsu’s competitive advantage in our core business domains, namely mobile and IP/optical communica-
tions. In addition to the China Business Center, we established the New Business Development Center in April 2003,
which is responsible for regions with high growth potential such as Eastern Europe, Russia, India and Africa. Anritsu
plans to strategically cultivate these undeveloped and underdeveloped markets.
Do you have a final message for shareholders?
Due to the rapid spread of the Internet, the year 2000 marked the transformation of the world into a network soci-
ety. We have entered the age of the ubiquitous network, in which information and communications spread
throughout society in real time, and from now on, customers’ needs will be constantly changing. Anritsu hopes to
be able to quickly respond and contribute to these developments. Drawing on our original & high level technolo-
gy, we will strengthen our ability to provide solutions, improve our marketing capabilities, and provide cutting-edge
products and high-value-added services, in order to develop our operations as outlined in the Long-Term
Management Plan.
Q
Q
technology
transmission exchangedata processing
microwavemeasurement mechatronics
circuit technology
high speed optical devicetechnologysignaling optical
measurementmobile communicationmeasurement
communicationsprotocol
MEMS
DSP
RF microwavemillimeter wave routingsoftware QoS technology
food aliensubstance detection
DNA analysis
IP measurement
image processing
gas sensingsignal analysis
wirelesswire telegraph
direct current voltage
measurement technology
Original & High Level Core Technologies
Mobile & Internet
Ubiquitous networkrelated businessIndustrial
ElectronicsSecurity
Environment
Business Domains and Core TechnologiesFor the development of the ubiquitous network society, Anritsuprovides electronics/telecommunication/measurement solutionswith “Original & High Level” technology to the mobile & Internet,industrial electronics, security and environmental markets.
Shareholders’ Meeting
Board of Directors(5 Directors)
Advisory Board(3 outside Advisors and
5 Directors)
President
Board of Corporate Auditors(4 Corporate Auditors including
2 outside Auditors)
Vice Presidents
Management Strategy Conference(Directors, Vice Presidents, etc.)
Basic Policy on Corporate GovernanceAnritsu aims to continually increase corporate value by strengthening corporate governance and pursuing com-
pliance in all of its global business activities, while creating a management system that can adapt flexibly and
quickly to changes in the operating environment, and working to improve the quality and transparency of man-
agement. These efforts have laid the framework to make the Company more competitive in the future. Anritsu
will also work to create a responsive enforcement system capable of carrying out this basic strategy.
Status of Implementation of Corporate GovernanceAnritsu employs a corporate auditor system, with two outside auditors out of a total of four corporate auditors.
Each of the outside auditors offers valuable insight, expertise and experience. One is also a General Manager of
the Affiliated Company Division of NEC Corporation, of which Anritsu is an affiliate, and the other is a certified
attorney. In addition, the Internal Auditing Department was established to conduct internal audits in order to
strengthen checks and balances.
Anritsu has introduced an executive officer system to clearly separate the functions and responsibilities of direc-
tors and executive officers. With the introduction of this system, the Company has also substantially reduced the
number of directors. In addition, deliberations and decisions on important issues regarding day-to-day manage-
ment are made by the Management Strategy Conference in order to contribute to speedier decision-making by
the Board of Directors and enhance the oversight functions of management.
In addition, Anritsu has established an advisory board to make recommendations to the Board of Directors. The
advisory board consists of three professionals from outside the Company who offer opinions on the Company’s
operations, management strategies, business environment and management indicators from a broad, internation-
al perspective. During the year ended March 31, 2003, the advisory board met twice.
Regarding performance evaluations for directors, Anritsu has established an Evaluation and Compensation
Committee composed of outside consultants and Company directors to provide a third-party point of view.
Other organizational changes include the establishment of the Risk Management Center in April 2001 under
the direct management of the President to perform risk management activities for the entire Anritsu Group.
To promote compliance, in January 2002 the Risk Management Center and the Administration Department for-
mulated the third version of the Anritsu Code of Conduct. In addition, the Company is working to promote sound
corporate activities in compliance with ethics and laws, such as the establishment of a helpline and an in-house
training program.
Anritsu Corporate Governance System
DIRECTORS AND CORPORATE AUDITORS
Directors Akira ShiomiTatsuo IshiguroTakao OokaHirokazu HashimotoShigehisa Yamaguchi
Corporate Auditors Seiki OhmiHideo SekineYasuyuki ShibataKenji Seo
EXECUTIVE OFFICERS
President Akira ShiomiSenior ExecutiveVice President Tatsuo IshiguroSenior Vice President Takao OokaVice Presidents Eiji Sugimoto
Mark EvansGoro SaitoKoji ShojiHiromichi TodaYoshio NakamuraHirokazu HashimotoTetsuji KofujiShoichi ShimamuraShigehisa Yamaguchi
(as of June 25, 2003)
From left: Shigehisa Yamaguchi, Tatsuo Ishiguro, Akira Shiomi, Takao Ooka, Hirokazu Hashimoto
Wireless Measurement Business
HIROMICHI TODAGeneral Manager, Wireless Measurement Division
“The Wireless Measurement Division draws on its abilityto provide test solutions for both wireless measurementand signaling (protocol) testing. We aim to become aworld-leading company by offering measurement solu-tions for ubiquitous networks such as 3G mobile com-munications, wireless LAN, and terrestrial digital broad-casting.“
Anritsu’s strength in the field of electronic measuring instruments for mobilecommunications is supported by its wireless measurement technology devel-oped over many years and protocol analysis technology that is practically theindustry standard. Using its technological expertise, Anritsu provides optimalmeasuring instruments and systems for the mobile communications networks ofcountries around the world to service providers and equipment manufacturers.
Anritsu leads its competitors in providing measurement solutions for third-generation (3G)mobile communications, and enjoys strong support from customers. In particular, theMD8480B Signaling Tester, which is essential in the development of 3G mobile communi-cations, commands a large share of its market. Anritsu not only offers products, but also par-ticipates in global standardization activities designed to ensure compatibility and promote thespread of 3G mobile communications systems. For example, Anritsu’s ME7873A W-CDMATRX/Performance Test System is the first in the industry to receive GCF1 approval for 3GPP RFtesting as defined by 3GPP2 specifications. Furthermore, the MX785201A W-CDMAProtocol Test System has gained GCF approval for 3GPP protocol testing, which plays a keyrole in software development.
With the rise in the number of subscribers for 3G mobile communications, Anritsu plans toexpand its range of measurement solutions for production lines, which are expected to be ingreat demand. At the same time, Anritsu is getting an early start on the development of meas-uring instruments for 3.5G mobile communications (such as HSDPA and CDMA20001xEVDO) in order to further solidify its position in the market.
In the field of measuring instruments for ubiquitous networks, Anritsu currently offers sig-nal generators and signal analyzers based on software wireless technology. In the future,Anritsu will work to expand its market share by providing measuring instruments andapplication software with higher carrier frequency and wideband baseband functions.
1 GCF (Global Certification Forum): An organization that decides on measuring equipment, measurement items and the version of 3GPP specifications used in areas where W-CDMA third-generation mobile communications systems are being introduced.
2 3GPP (The Third-Generation Partnership Project): A collaborative development project to produce globally applicable technical specifications for third-generation mobile communications systems.
Protocol testing
RF testing
IOT
Support for upgrade3.5G to 4G
World-Class3G Measurement
Technology
Multiple-system support
BWA support
RF and MicrowaveSolutions
Basic R & DComponentManufacturing
Defense andAerospace
Wireless Installation andMaintenance
Broadcast
High Speed DigitalCommunications
RF and Microwave Business
MARK EVANSPresident, Anritsu Company
“During the past year, we at Anritsu have focused onour core competencies and developed solutions thataddress specific market needs. That focus has led us tomeet today’s challenges while keeping an eye on thefuture. Our people and our core technologies have madethis possible and are the reason we are confident head-ing forward.”
Anritsu’s strong reputation and market position in the RF and Microwave indus-try have enabled us to stem the tide better than much of our competition. Wehave continued to develop unique solutions that stretch from the laboratory tothe field, as well as from the commercial sector to the defense/aerospace mar-ket. This strategy has allowed us to withstand the current market conditionswhile also positioning us for long-term growth.
Our success can be measured in many ways. One is through industry recognition. Frost &Sullivan, one of the world’s most respected consulting firms, bestowed two product innovationawards on our ME7808A Broadband Vector Analyzer (VNA). In announcing the awards, Frost& Sullivan stated that “Anritsu has successfully challenged the market leader in this space andbeen a winner with this innovative product”. The ME7842B Tower Mounted AmplifierTest System (TMATS) earned accolades as well. Test & Measurement World magazinenamed TMATS one of 2002’s 12 most important and innovative entries in the test and meas-urement industry.
Another measure of success is market share. We strengthened our position as theleader in handheld field test solutions with the introduction of Cell Master, developed for thedeployment, maintenance, troubleshooting and optimization of 2.5G and 3G base sta-tions and networks. With the present market conditions dictating that providers get the mostout of their existing wireless network infrastructure, the introduction of Cell Master – and con-tinued success of Site MasterTM – place us in a strong position.
In addition to our commercial applications, many of our existing products represent out-standing solutions for defense/aerospace applications, and our marketing effort willensure our growth in this critical segment.
As we enter a new year, Anritsu’s RF and Microwave group will continue to strive to intro-duce new and innovative solutions while providing unmatched customer satisfaction. This pres-ents the best strategy for us to achieve success.
Ultra-High-Speed, Optical,Jitter Measurement Technologies
Metro ADM Testing
Network Monitoring
Sales forecast for the year ending March 2004
Sales forecast for the year ending March 2006Physical Layer TestingIP/ProtocolTechnologies
Router Testing
MobileTesting
YOSHIO NAKAMURAGeneral Manager, IP Network Division
“The IP Network Division is contributing to the creationof a ubiquitous network society by providing optimalsolutions in a timely manner.“
IP Network Business
Anritsu has received strong support for its measuring instruments for the corenetwork market, due to the use of such developments as optical signal analysistechnology, including ultra-high-speed signal processing technology, and proto-col analysis technology. In the field of measuring instruments for the accessnetwork market, Anritsu aims to advance the technology developed for meas-uring instruments for the core network market, and expand the router and IP1
measuring instruments businesses, with a primary focus on QoS2.
Since submitting a proposal to ITU-T3 SG4 regarding a new method for jitter measure-ment, an essential factor in evaluating the quality of ultra-high-speed digital signals, Anritsu hasbeen contributing to the future development of ultra-high-speed digital communications.Measuring instruments employing this method are used in a wide variety of applications,from research and development to manufacturing and maintenance of ultra-high-speed digitalcommunications equipment.
The access network market is increasingly shifting toward broadband (cable, ADSL, opticalaccess) and IP networks. In response to this trend, the IP Network Division developed andlaunched the MD1230A Data Quality Analyzer in September 2001. It has won an excellent rep-utation among customers for its superior cost performance compared to competitors’ products,and its market share has steadily increased. In November 2002, the MD1230A received the “TollyTested” certification from the Tolly Group, the leading independent test laboratory in thenetwork industry, guaranteeing connectivity with IP network equipment.
In addition, Anritsu is working to expand the router business by developing a product lineup spe-cializing in video signal processors, such as video transmission and video monitoring, based on tech-nology capable of high-speed transmission of data, video and sound to multiple recipients.
The IP Network Division is expanding its share of the five testing markets in the diagram belowby working to position itself ahead of competitors, providing measurement solutions from the phys-ical layer to higher-order layers using its core high-speed, optical and jitter measurement tech-nologies. The division is also pushing forward with a strategy to emphasize the field of video trans-mission through routers, which offer synergy with measuring instruments.
1 IP (Internet Protocol): A protocol for routing communication pathways between devices toconnect networks.
2 QoS (Quality of Service): A technology that ensures that networks run at a constant transmission speed.
3 ITU-T: The International Telecommunication Union Telecommunication Standardization Sector Study Group 4, the Lead Group for the Telecommunication Management Network (TMN)
SIX-YEAR SUMMARY
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31
Thousands of U.S. dollars
Millions of yen (Note 1)
2003 2002 2001 2000 1999 1998 2003For the year:
Net sales ¥ 78,554 ¥131,578 ¥159,056 ¥115,068 ¥113,268 ¥128,946 $ 653,527Operating income (loss) (10,749) 7,586 23,834 5,276 3,185 6,918 (89,426)Net income (loss) (32,761) 2,567 9,635 399 (725) 5,144 (272,554)Capital expenditures 2,867 9,677 8,308 5,320 6,944 7,615 23,852R&D expenses 13,222 15,222 15,385 12,532 10,949 10,779 110,000
At year–end:Total assets ¥144,130 ¥198,780 ¥207,544 ¥170,601 ¥170,127 ¥168,288 $1,199,085Total shareholders’ equity 59,617 94,171 93,743 85,678 85,904 85,789 495,982
U.S. dollarsYen (Note 1)
Per share:Net income (loss)
Basic ¥(256.90) ¥ 20.10 ¥ 75.70 ¥ 3.15 ¥ (5.73) ¥ 40.67 $(2.14)Diluted (Note 2) — 18.81 68.02 — — 36.74 —
Cash dividends — 9.00 12.00 4.50 9.00 9.00 —Total shareholders’ equity 467.21 737.78 732.94 676.71 678.49 677.59 3.89
Key financial ratios:Operating income margin (%) (13.7) 5.8 15.0 4.6 2.8 5.4Return on equity (%) — 2.7 10.7 0.5 — 6.1Return on assets (%) — 1.3 5.1 0.2 — 3.1Interest coverage ratio (times) — 6.5 23.8 4.7 3.1 6.5Dividend payout ratio (%) — 44.8 15.9 142.7 — 22.1Dividends on equity (%) — 1.2 1.7 0.7 1.3 1.4
Notes: 1. The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥120.20 to U.S. $1.00, the approximate exchangerate on March 31, 2003.
2. The computations of basic net income (loss) per share are based on the weighted average number of shares outstanding during the relevant year. Diluted net income per share for 2000 is not presented since the result of the computation was anti-dilutive, and that for 2003 and 1999 is not presented due to net loss. Diluted net income per share is computed based on the average number of shares of common stock and contingent issuances of common stock from convertible bonds or warrants.
Sales and Operating IncomeFor the year ended March 31, 2003, consolidated net sales
decreased 40.3 percent year-on-year to ¥78.6 billion, due primarily to
challenging conditions in global information technology (IT) markets.
Sales in Japan decreased 28.3 percent year-on-year to ¥46.4 billion.
Overseas sales declined 52.0 percent year-on-year to ¥32.1 billion, due
largely to the weak IT market in the United States. The ratio of overseas
sales to net sales was 40.9 percent, compared to 50.8 percent for the
previous fiscal year. Cost of sales decreased 32.3 percent year-on-year
to ¥58.0 billion, although the ratio of cost of sales to net sales
increased to 73.9 percent from 65.1 percent for the previous fiscal year.
Gross profit therefore decreased 55.3 percent to ¥20.5 billion, and the
ratio of gross profit to net sales decreased to 26.1 percent from 34.9
percent for the previous fiscal year. Selling, general and administrative
(SG&A) expenses decreased 18.4 percent year-on-year. As part of its
management structure reforms, Anritsu reduced personnel expenses
through a restructuring of the Company’s personnel system, including
workforce reductions. Operating loss totaled ¥10.7 billion, compared to
operating income of ¥7.6 billion for the previous fiscal year.
Performance by Industry Segment
Information and CommunicationsConsolidated net sales in this segment for the fiscal year ended
March 31, 2003 decreased compared to the previous fiscal year.
Demand for public information systems was firm, but sales of digital
transmission systems and payphones to Nippon Telegraph and
Telephone Corporation (NTT) declined year-on-year.
As a result, consolidated segment net sales decreased 42.1 percent from
the previous fiscal year to ¥10.6 billion. Segment operating loss was
¥2.5 billion, an improvement over the segment operating loss of ¥5.9 bil-
lion in the previous fiscal year.
During the past fiscal year, Anritsu reorganized Network Solutions,
the internal company that previously handled the Information and
Communications business, as the Systems Solutions Division, which
assumed responsibility for the business development as of April 1, 2003.
Test and MeasurementConsolidated net sales in this segment for the fiscal year ended March 31,
2003 decreased compared to the previous fiscal year. Demand was firm for
test and measurement equipment related to W-CDMA, which is one of the
next-generation mobile communication systems, supported by demand for
use in research and development applications and mass production of
mobile telephones. In the market for test and measurement equipment for
1999 2000 2001 2002 20030
30
60
90
120
150
0
20
40
60
80
100NET SALES BY MARKET/OVERSEAS SALES RATIO(Billions of Yen/%)
■ Japan■ Americas■ Europe■ Asia and Others
1999 2000 2001 2002 20030
30
60
90
120
150NET SALES BY INDUSTRY SEGMENT(Billions of Yen)
■ Information and Communications■ Test and Measurement■ Components and Devices■ Industrial Automation■ Services and Others
1999 2000 2001 2002 20030
10
20
30
40
50INFORMATION AND COMMUNICATIONS(Billions of Yen)
1999 2000
0
5
10
15
20
25
0
3
6
9
12
15
2001 2002 2003
OPERATING INCOME ANDOPERATING INCOME MARGIN(Billions of Yen/%)
■ Operating Income— Operating Income Margin
■ Net Sales
— Overseas Sales Ratio
Note: All graphs are for years ended March 31.
optical and digital communications, demand for Internet protocol (IP)
related measurement equipment continued to expand. However,
restrained investment in high-speed and broadband optical communications
markets in Japan and abroad, particularly in North America, resulted in a sig-
nificant year-on-year decrease in segment net sales.
As a result, consolidated segment net sales decreased 41.9 percent from
the previous fiscal year to ¥51.4 billion. Segment operating loss was
¥6.9 billion, compared to segment operating income of ¥11.4 billion in the
previous fiscal year.
During the past fiscal year, Anritsu reorganized Measurement
Solutions, the internal company that previously handled the Test and
Measurement business, into two internal companies, Photonic
Measurement Solutions and Wireless Measurement Solutions. As of
April 1, 2003, this business is conducted by the IP Network Division, the
Wireless Measurement Division and the Precision Measurement
Business Promotion Division.
Components and DevicesConsolidated net sales in this segment for the fiscal year ended
March 31, 2003 decreased compared to the previous fiscal year. Anritsu
developed products for new markets for high-speed and optical devices, the
core products of this business. However, reduced infrastructure investment
in the major markets of wave division multiplexing (WDM) transmission sys-
tems and optical submarine cable transmission systems exerted a pro-
nounced impact on sales.
As a result, consolidated segment net sales decreased 85.8 percent from
the previous fiscal year to ¥1.2 billion. Segment operating loss was ¥2.8 bil-
lion, compared to segment operating income of ¥0.7 billion in the previous
fiscal year.
The Components and Devices business, which was previously handled by
the Advanced Components internal company, conducts business as the
Optical Device Business Promotion Division as of April 1, 2003.
Industrial AutomationConsolidated net sales in this segment for the fiscal year ended March 31,
2003 decreased 6.1 percent compared to the previous fiscal year to
¥11.6 billion. Segment operating income increased 50.0 percent to ¥0.4 bil-
lion. Continued strong concern about food safety in Japan resulted in
firm demand for metal detectors and X-ray inspection systems.
Industrial Solutions, the internal company that previously handled the
Industrial Automation business, was separated from the Company and trans-
ferred to subsidiary Anritsu Industrial Solutions Co., Ltd. in July 2002.
Services and OthersThis business encompasses logistics, welfare services, real estate leasing
and other businesses. Consolidated net sales in this segment for the fiscal
year ended March 31, 2003 decreased 1.2 percent compared to the pre-
vious fiscal year to ¥3.7 billion. Segment operating income decreased
8.8 percent to ¥1.9 billion.
Performance by Geographic Area
JapanDomestic demand for measuring equipment related to mobile phones
was firm. Sales of SDH/SONET analyzers, optical spectrum analyzers and
other equipment for the North American WDM transmission system,
however, remained weak. Demand also decreased for transmitters used in
information and communications equipment, payphones and other
1999 2000 2001 2002 20030
20
40
60
80
100TEST AND MEASUREMENT(Billions of Yen)
1999 2000 2001 2002 20030
3
6
9
12
15COMPONENTS AND DEVICES(Billions of Yen)
1999 2000 2001 2002 2003
20
16
12
8
4
0
INDUSTRIAL AUTOMATION(Billions of Yen)
■ Net Sales
■ Net Sales
■ Net Sales
products. Consequently, sales in Japan decreased 32.3 percent to ¥49.4 bil-
lion. Operating loss totaled ¥10.4 billion, compared to operating
income of ¥7.7 billion for the previous fiscal year.
AmericasThe slowdown in the IT industry caused North American communications
industry participants and manufacturers of communications equipment to
reduce, suspend or postpone capital investment. Challenging market
conditions continued as a result. Sales of measuring equipment for optical
and digital communications therefore weakened year-on-year, leading to
an operating loss for the fiscal year. Sales in the Americas decreased
54.7 percent to ¥12.8 billion. Operating loss totaled ¥1.3 billion, 5.1
percent less than the operating loss for the previous fiscal year.
EuropeThe unfavorable conditions of the North American IT market caused
European communications industry participants and manufacturers of
communications equipment to reduce or suspend capital investment.
Consequently, sales of measuring equipment for optical and digital
communications, high-speed devices, optical devices and other products
weakened year-on-year, leading to an operating loss for the fiscal year.
Sales in Europe decreased 54.9 percent to ¥10.9 billion. Operating loss
totaled ¥1.1 billion, 158.4 percent larger than the operating loss for the pre-
vious fiscal year.
OthersIn the Chinese market, overall capital investment in communications-
related infrastructure decreased year-on-year. Rapid growth in PHS sub-
scribers resulted in solid expansion in sales of measuring equipment for
mobile communications, but sales of measuring equipment for optical and
digital communications weakened year-on-year, leading to a decrease in
operating income compared with the previous fiscal year. Sales in other
regions decreased 10.7 percent to ¥5.4 billion. Operating income
decreased 92.4 percent to ¥10 million.
Other Income (Expenses) and Net LossOther expenses, net totaled ¥24.5 billion, compared to other expens-
es, net of ¥1.3 billion in the previous fiscal year. Anritsu incurred an
extraordinary loss consisting of a special severance allowance of ¥11.3
billion in connection with its efforts to reduce the number of employees
and a loss of ¥14.9 billion on the revaluation and disposal of inventory
assets. These losses were offset by an extraordinary gain of ¥6.2 billion
due to the Company’s exemption from the future benefit obligation
with respect to the portion of the employee pension fund the Company
operates on behalf of the government, in accordance with the enforce-
ment of the Welfare Pension Insurance Law.
Loss before income taxes totaled ¥35.2 billion, compared to income
before income taxes of ¥6.3 billion for the previous fiscal year. Net loss
totaled ¥32.8 billion, compared to net income of ¥2.6 billion for the
previous fiscal year. Anritsu determines dividends on the basis of prof-
itability and internal capital requirements. Accordingly, the Company did
not pay cash dividends per share for the year ended March 31, 2003.
Costs, Expenses and Income as Percentages of Net Sales
2003 2002 2001
Cost of sales 73.9% 65.1% 61.7%Gross profit 26.1 34.9 38.3Selling, general and
administrative expenses 39.8 29.1 23.3R&D expenses 16.8 11.6 9.7Net income (loss) (41.7) 2.0 6.1
Liquidity and Capital ResourcesOn a consolidated basis, cash and cash equivalents at the end of the
fiscal year decreased ¥22.7 billion from a year earlier to ¥16.8 billion.
Net cash used in operating activities totaled ¥18.0 billion. In the previ-
ous fiscal year, operating activities provided net cash of ¥0.2 billion.
Anritsu accelerated collection of trade receivables and aggressively
reduced inventories to generate cash, but was unable to compensate
for the net loss for the fiscal year and extraordinary expenses including
special severance payments in connection with Anritsu’s efforts to
reform its personnel structure.
Net cash provided by investing activities totaled ¥3.7 billion. In the
previous fiscal year, investing activities used net cash of ¥9.5 billion.
Anritsu substantially reduced capital expenditures for acquisition of
property, plant and equipment. In addition, the Company generated
cash totaling ¥3.4 billion through the sale of investment securities, and
cash totaling ¥3.2 billion through the sale of the remote surveillance
business overseas, which is included under other-net. Anritsu did not
generate free cash flow for the year to March 2003 because of the use
of cash in operating activities.
Net cash used in financing activities totaled ¥8.4 billion. In the previous
fiscal year, financing activities provided net cash of ¥24.4 billion. Anritsu
redeemed unsecured straight bonds totaling ¥10.0 billion and unsecured
convertible bonds totaling ¥4.2 billion. Anritsu also repaid short-term bor-
rowings and other obligations overseas. In addition, Anritsu concluded a
syndicated loan contract for a commitment of up to ¥15.0 billion, and
exercised ¥10.5 billion of the commitment during the fiscal year.
Management projects a return to operating and net profitability for
the year ending March 31, 2004, and expects that programs executed
during the past fiscal year to raise efficiency, lower operating costs and
reduce personnel expenses will contribute to restoring positive cash
flow from operations. The Company maintains adequate cash and cash
equivalents to meet its short-term obligations, and also maintains flexi-
ble access to external financing, if necessary, to fund longer-term capital
requirements.
Financial StructureTotal assets as of March 31, 2003 decreased 27.5 percent from a
year earlier to ¥144.1 billion. A primary factor was the reduction in cur-
rent assets resulting from the use of cash and cash equivalents and the
revaluation and reduction of inventories.
Total liabilities decreased 19.2 percent from a year earlier to ¥84.5
billion. Current liabilities decreased due to redemption of the current
portion of long-term debt during the fiscal year and reduction in notes
and accounts payable, which more than offset an increase in long-term
debt. Shareholders’ equity decreased 36.7 percent from a year earlier to
¥59.6 billion. The ratio of shareholders’ equity to total assets stood at
41.4 percent, compared to 47.4 percent a year earlier. The ratio of debt
to equity, defined as the ratio of interest-bearing liabilities to sharehold-
ers’ equity, stood at 1.06 to 1, compared with 0.78 to 1 a year earlier.
1999 2000 2001 2002 2003
12
9
6
3
0
120
90
60
30
0
SHAREHOLDERS’ EQUITY AND ROE(Billions of Yen/%)
■ Shareholders’ Equity— ROE
1999 2000 2001 2002 2003
8
6
4
2
0
240
180
120
60
0
TOTAL ASSETS AND ROA(Billions of Yen/%)
■ Total Assets— ROA
1999 2000 2001 2002 20030
2
4
6
8
10CAPITAL EXPENDITURES(Billions of Yen)
1999 2000 2001 2002 20030
1.2
1.0
0.8
0.6
0.4
0.2
DEBT/EQUITY RATIO(Times)
Note: ROA is not calculated for 1999 and 2003 due to net loss.
Note: ROE is not calculated for 1999 and 2003 due to net loss.
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2003 and 2002
Thousands ofU.S. dollars
Millions of yen (Note 1)2003 2002 2003
ASSETSCurrent assets:
Cash ¥ 16,327 ¥ 39,552 $ 135,832Marketable securities (Note 5) 508 600 4,226Notes and accounts receivable — trade (Note 4) 22,692 30,595 188,785Allowance for doubtful accounts (544) (476) (4,526)Inventories (Note 6) 35,489 53,815 295,250Deferred tax assets (Note 9) 8,258 4,011 68,702Other current assets 2,772 4,604 23,062
Total current assets 85,502 132,701 711,331
Property, plant and equipment:Land 4,930 5,043 41,015Buildings and structures 46,925 47,583 390,391Machinery and equipment 36,565 44,898 304,201Construction in progress 212 87 1,764
88,632 97,611 737,371Accumulated depreciation (56,290) (59,682) (468,303)
Net property, plant and equipment 32,342 37,929 269,068
Investments and other assets:Investment securities (Note 5) 2,050 5,093 17,055Goodwill, net of amortization 10,026 13,482 83,411Deferred tax assets (Note 9) 2,520 5,163 20,965Long-term prepaid expense 8,007 297 66,614Other assets 3,910 4,362 32,529Allowance for doubtful accounts (226) (247) (1,880)
Total investments and other assets 26,287 28,150 218,694
Total assets ¥144,131 ¥198,780 $1,199,093See accompanying notes.
Thousands ofU.S. dollars
Millions of yen (Note 1)2003 2002 2003
LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term borrowings (Note 7) ¥ 6,632 ¥ 13,792 $ 55,175Long-term debt due within one year (Note 7) 601 14,239 5,000Notes and accounts payable — trade (Note 4) 8,537 12,938 71,023Accrued liabilities 2,049 2,366 17,047Accrued expenses 2,212 3,272 18,403Income taxes payable (Note 9) 572 366 4,759Other current liabilities 5,145 3,428 42,803
Total current liabilities 25,748 50,401 214,210
Long-term liabilities:Long-term debt (Note 7) 55,931 45,148 465,316Retirement benefits (Note 11) 1,166 7,406 9,700Deferred tax liabilities (Note 9) 932 829 7,754Other long-term liabilities 735 824 6,115
Total long-term liabilities 58,764 54,207 488,885
Commitments and contingent liabilities (Note 13)
Minority interests 1 1 8
Shareholders’ equity (Note 12):Common stock, no par value
Authorized — 400,000,000 sharesIssued — 128,016,724 shares in 2002 — 14,042 —
— 128,018,848 shares in 2003 14,043 — 116,830Additional paid-in capital 22,993 22,987 191,290Retained earnings 26,099 59,295 217,130Net unrealized holding gains (losses) on securities 24 (247) 200Foreign currency translation adjustments (2,780) (1,195) (23,128)Treasury stock, at cost (761) (711) (6,332)
Total shareholders’ equity 59,618 94,171 495,990Total liabilities and shareholders’ equity ¥144,131 ¥198,780 $1,199,093
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2003, 2002 and 2001
Thousands ofU.S. dollars
Millions of yen (Note 1)2003 2002 2001 2003
Net sales (Note 15) ¥ 78,554 ¥131,578 ¥159,056 $ 653,527Cost of sales (Note 15) 58,036 85,694 98,112 482,828
Gross profit 20,518 45,884 60,944 170,699Selling, general and administrative expenses (Note 15) 31,267 38,298 37,110 260,125
Operating income (loss) (Note 15) (10,749) 7,586 23,834 (89,426)Other income (expenses):
Interest and dividends income 258 306 374 2,146Interest expenses (1,168) (1,214) (1,018) (9,717)Foreign exchange gain (loss) (82) 1,346 2,552 (682)Gain on sales of marketable securities 13 0 3 108Amortization of bond issue costs (40) (43) (10) (333)Loss on disposal of inventories (170) (2,319) (2,847) (1,414)Loss on devaluation of inventories (15,908) (356) (760) (132,346)Gain on sales of investment securities 1,212 20 80 10,083Loss on devaluation of investment securities (1,927) (37) (26) (16,032)Provision of allowance for doubtful accounts — — (126) —Loss on devaluation of golf membership — (27) (37) —Gains from transfer of assets to retirement benefits trust — — 5,451 —Amortization of net transition obligation due to change in the
accounting standards for retirement benefits — — (11,163) —Amortization of prior services cost for retirement benefits — 1,388 — —Gain on return of the governmental portion of the pension fund 6,229 — — 51,822Gain on the sale of product lines 317 — — 2,637Moving expense of head office (109) — — (907)Reversal of bad debt reserve — 397 — —Special severance allowance (11,342) (186) — (94,359)Loss on disposal of fixed assets (852) (257) — (7,088)Other, net (882) (334) (722) (7,337)
(24,451) (1,316) (8,249) (203,419)Income (loss) before income taxes (35,200) 6,270 15,585 (292,845)Provision for income taxes (Note 9):
Current (660) 973 12,140 (5,491)Deferred (1,779) 2,730 (6,163) (14,800)
(32,761) 2,567 9,608 (272,554)Minority interests 0 0 27 0
Net income (loss) ¥(32,761) ¥ 2,567 ¥ 9,635 $(272,554)
U.S. dollarsYen (Note 1)
2003 2002 2001 2003
Amount per share of common stock:Net income (loss):
Basic ¥(256.90) ¥20.10 ¥75.70 $2.14Diluted — 18.81 68.02 —
Cash dividends applicable to the year — 9.00 12.00 —
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2003, 2002 and 2001
Millions of yen
Net unrealized Foreign currency TreasuryNumber of Common Additional Retained holding gains (losses) translation stock,
shares issued stock paid-in capital earnings on securities adjustments at costBalance at March 31, 2000 126,611,340 ¥13,342 ¥22,283 ¥ 50,053 ¥ — ¥ — ¥ (0)
Net income — — — 9,635 — — —Adoption of new accounting standard
for financial instruments — — — — 977 — —Adjustments from translation of
foreign currency financial statements — — — — — (2,582) —Treasury stock — — — — — — (162)Cash dividends paid — — — (1,142) — — —Bonuses to directors and corporate auditors — — — (30) — — —Conversion of convertible bonds 1,328,738 656 654 — — — —Exercise of warrants 41,438 27 32 — — — —
Balance at March 31, 2001 127,981,516 14,025 22,969 58,516 977 (2,582) (162)Net income — — — 2,567 — — —Net unrealized holding loss on securities — — — — (1,224) — —Adjustments from translation of foreign
currency financial statements — — — — — 1,387 —Treasury stock — — — — — — (549)Cash dividends paid — — — (1,725) — — —Bonuses to directors and corporate auditors — — — (63) — — —Conversion of convertible bonds 30,009 14 14 — — — —Exercise of warrants 5,199 3 4 — — — —
Balance at March 31, 2002 128,016,724 14,042 22,987 59,295 (247) (1,195) (711)Net loss — — — (32,761) — — —Net unrealized holding gain on securities — — — — 271 — —Adjustments from translation of foreign
currency financial statements — — — — — (1,585) —Treasury stock — — — — — — (50)Merger of subsidiary — — 5 (5) — — —Cash dividends paid — — — (383) — — —Bonuses to directors and corporate auditors — — — (47) — — —Conversion of convertible bonds 1,071 0 0 — — — —Exercise of warrants 1,053 1 1 — — — —
Balance at March 31, 2003 128,018,848 ¥14,043 ¥22,993 ¥ 26,099 ¥ 24 ¥(2,780) ¥(761)
Thousands of U.S. dollars (Note 1)
Net unrealized Foreign currency TreasuryNumber of Common Additional Retained holding gains (losses) translation stock,
shares issued stock paid-in capital earnings on securities adjustments at costBalance at March 31, 2002 128,016,724 $116,822 $191,240 $ 493,303 $(2,055) $ (9,942) $(5,915)
Net loss — — — (272,554) — — —Net unrealized holding gain on securities — — — — 2,255 — —Adjustments from translation of
foreign currency financial statements — — — — — (13,186) —Treasury stock — — — — — — (417)Merger of subsidiary — — 42 (42) — — —Cash dividends paid — — — (3,186) — — —Bonuses to directors and corporate auditors — — — (391) — — —Conversion of convertible bonds 1,071 3 3 — — — —Exercise of warrants 1,053 5 5 — — — —
Balance at March 31, 2003 128,018,848 $116,830 $191,290 $ 217,130 $ 200 $(23,128) $(6,332)
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2003, 2002 and 2001
Thousands ofU.S. dollars
Millions of yen (Note 1)2003 2002 2001 2003
Cash flows from operating activities:Net income (loss) ¥(32,761) ¥ 2,567 ¥ 9,635 $(272,554)Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization 6,018 6,741 5,497 50,067Gain on sales of investment securities and land (1,328) (20) (80) (11,048)Loss on disposal of inventories 170 2,319 2,847 1,414Loss on devaluation of investment securities 1,927 37 26 16,032Loss on devaluation of golf membership — 27 37 —Deferred income taxes (1,779) 2,730 (6,163) (14,800)Other — net 952 77 (525) 7,920Changes in assets and liabilities:
Notes and accounts receivable—trade 6,738 29,653 (15,421) 56,057Inventories 16,476 (3,706) (15,284) 137,072Other current assets (160) (236) (1,068) (1,331)Notes and accounts payable—trade (3,320) (21,919) 9,933 (27,621)Income taxes payable 1,670 (12,474) 7,814 13,894Retirement benefits (14,018) (2,250) 4,825 (116,622)Other current liabilities 1,475 (3,414) 3,728 12,270Other — net (82) 40 (695) (683)
Net cash provided by (used in) operating activities (18,022) 172 5,106 (149,933)Cash flows from investing activities:
Acquisition of marketable securities and investment securities (975) (3) (503) (8,111)Proceeds from sales of marketable securities and investment securities 4,393 1,585 1,564 36,547Acquisition of property, plant and equipment (2,733) (8,969) (5,936) (22,737)Proceeds from sales of property, plant and equipment 59 56 37 491Net decrease in long-term loans receivable 9 7 6 75Other — net 2,945 (2,216) (15) 24,500
Net cash provided by (used in) investing activities 3,698 (9,540) (4,847) 30,765Cash flows from financing activities:
Proceeds from long-term debt 12,329 8,069 — 102,571Repayment of long-term debt (38) (108) (113) (316)Proceeds from issue of bonds — 15,000 — —Redemption of bonds (14,197) — — (118,111)Exercise of warrants 1 7 59 8Net increase (decrease) in short-term borrowings (6,080) 3,781 1,429 (50,583)Payments on acquisition of treasury stock (50) (568) (586) (416)Gains on sale of treasury stock — 18 424 —Cash dividends paid (383) (1,725) (1,142) (3,186)Other — (119) — —
Net cash provided by (used in) financing activities (8,418) 24,355 71 (70,033)Net increase (decrease) in cash (22,742) 14,987 330 (189,201)Effect of exchange rate changes on cash and cash equivalents 17 195 (141) 141Cash at beginning of year 39,552 24,370 24,181 329,052Cash and cash equivalents at end of year (Note 3) ¥ 16,827 ¥ 39,552 ¥ 24,370 $ 139,992
Supplemental information of cash flows:Cash paid during the year for:Interest ¥ 1,238 ¥ 1,116 ¥ 1,009 $ 10,300Income taxes (1,082) 13,447 4,326 (9,002)
Non-cash investing and financing activities:Conversion of convertible bonds into common stock and addition paid-in capital 1 28 1,310 8Transfer of investment securities to retirement benefits trust — — 8,667 —
ANRITSU CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2003, 2002 and 2001
1. BASIS OF PRESENTING CONSOLIDATED FINANCIALSTATEMENTSAnritsu Corporation (the “Company”) and its consolidated domestic
subsidiaries maintain their official accounting records in Japaneseyen, and in accordance with the provisions set forth in the JapaneseCommercial Code and accounting principles and practices generallyaccepted in Japan (“Japanese GAAP”). The accounts of overseas sub-sidiaries are based on their accounting records maintained in con-formity with generally accepted accounting principles and practicesprevailing in the respective countries of domicile. Certain accounting prin-ciples and practices generally accepted in Japan are different fromInternational Accounting Standards and standards in other countries incertain respects as to application and disclosure requirements.Accordingly, the accompanying consolidated financial statements areintended for use by those who are informed about Japanese accountingprinciples and practices.
The accompanying consolidated financial statements have beenrestructured and translated into English (with some expanded descriptionsand the inclusion of consolidated statements of shareholders’ equity) fromthe consolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate LocalFinance Bureau of the Ministry of Finance as required by theSecurities and Exchange Law. Some supplementary informationincluded in the statutory Japanese language consolidated financialstatements, but not required for fair presentation, is not presented in theaccompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars areincluded solely for the convenience of readers outside Japan, usingthe prevailing exchange rate at March 31, 2003, which was ¥120.20 toU.S. $1. The convenience translations should not be construed as rep-resentations that the Japanese yen amounts have been, could havebeen, or could in the future be, converted into U.S. dollars at this or anyother rate of exchange.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ConsolidationThe consolidated financial statements include the accounts of the
Company and all its subsidiaries (26 subsidiaries in 2003, 28 sub-sidiaries in 2002 and 30 subsidiaries in 2001. Intercompany account bal-ances and transactions have been eliminated.
Investments in an affiliated company is stated at cost, because theincome or losses of the company is not significant for the Company’sequity.
The fiscal year of the consolidated subsidiaries is the same as theCompany’s except for Anritsu Eletrônica Ltda., whose fiscal year endsDecember 31. Significant transactions between December 31 andMarch 31 are reflected in the consolidated financial statements.
In the elimination of investments in subsidiaries, the assets and lia-bilities of the subsidiaries, including the portion attributable to minori-ty shareholders, are evaluated using the fair value at the time theCompany acquired control of the respective subsidiaries.
The difference between the cost and the underlying net equity at therespective acquisition dates of investments in consolidated sub-sidiaries is amortized over a five-year period. However, such differ-ence, provided that it is not significant, is charged to income asincurred.
Statements of cash flowsIn preparing the consolidated statements of cash flows, cash on
hand, readily available deposits and short-term highly liquid invest-ments with maturities not exceeding three months at the time of pur-chase are considered to be cash and cash equivalents.
SecuritiesPrior to April 1, 2000, the securities of the Company and its consoli-
dated subsidiaries (the “Companies”) are stated at moving-averagecost.
Effective April 1, 2000, the Companies adopted the new Japaneseaccounting standard on accounting for financial instruments(“Opinion Concerning Establishment of Accounting Standard forFinancial Instruments” issued by the Business AccountingDeliberation Council on January 22, 1999).
In accordance with the new accounting standard, at April 1, 2000, theCompanies examined the intent of holding each security and classifiedthose securities as (a) securities held for trading purposes (hereafter,“trading securities”), (b) debt securities intended to be held to maturi-ty (hereafter, “held-to-maturity debt securities”), (c) equity securitiesissued by subsidiaries and affiliated companies, and (d) all other securitiesthat are not classified in any of the above categories (hereafter,“available-for-sale securities”).
No trading securities and held-to-maturity debt securities havebeen owned by the Companies. Equity securities issued by sub-sidiaries have been eliminated upon consolidation. Equity securityissued by an affiliated company is stated at cost as described in“Consolidation”. Available-for-sale securities with fair market valueare stated at fair market value. Unrealized gains and unrealized losses onthese securities are reported, net of applicable income taxes, as a sep-arate component of the shareholders’ equity. Realized gain on sale ofsuch securities is computed using the moving-average cost.
Debt securities with no fair market value are stated at the amortizedcost, net of the amount considered uncollectible. Other securities with nofair market value are stated at the moving-average cost.
If the market value of equity securities issued by an affiliated company,and available-for-sale securities, declines significantly, such securities arestated at fair market value and the difference between fair marketvalue and the carrying amount is recognized as loss in the period of thedecline.
If the fair market value of equity securities issued by an affiliated com-pany is not readily available, such securities should be written down tonet asset value in the event net asset value is significantly declined.Unrealized losses on these securities are reported in the consolidatedstatement of income.
As a result of adopting the new accounting standard for financialinstruments, income before income taxes decreased by ¥268 million. Also,
based on the examination of the intent of holding each security uponapplication of the new accounting standard at April 1, 2000, avail-able-for-sale securities maturing within one year from the balancesheet date are included in current assets, and other securities areincluded in investments and other assets. As a result, at March 31,2001, securities in current assets decreased by ¥5,396 million andinvestment securities increased by the same amount compared with whatwould have been reported under the previous accounting policy.
InventoriesInventories are stated at cost determined principally by the specific
identification method.
Allowance for doubtful accountsAllowance for doubtful accounts is provided principally for amounts
sufficient to cover possible losses on collection. It consists of the esti-mated uncollectible amount with respect to specific items, and possiblelosses on collection by applying a percentage based on collectionexperience to the remaining items.
Property, plant and equipment and depreciationProperty, plant and equipment are stated at cost.Depreciation is computed principally using the declining-balance
method over their estimated useful lives except for buildings acquiredafter March 31, 1998, which are depreciated based on the straight-linemethod.
GoodwillGoodwill, which principally represents the excess of purchase price
over the fair value of Wiltron Company (current Anritsu Company)purchased by Anritsu U.S. Holding, Inc. in February 1990, is assessed forimpairment on fair value in accordance with the provisions of statementof Accounting Standards No. 142.
Software costsSoftware costs, which are included in other assets, are depreciated
based on the straight-line method over their estimated useful lives(five years).
Accounting for leasesFinancial leases, except for those leases under which the ownership of
the leased assets is considered to be transferred to the lessee, areaccounted for in the same manner as operating leases.
Bonuses to directors and corporate auditorsBonuses to directors and corporate auditors, which are subject to
shareholders’ approval at the annual shareholders’ meeting, areaccounted for as an appropriation of retained earnings.
Employees’ severance and retirement benefitsThe Companies provide two post-employment benefit plans, an
unfunded lump-sum payment plan and a funded non-contributorypension plan, under which all eligible employees are entitled to benefitsbased on the level of wages and salaries at the time of retirement or ter-mination, length of service and certain other factors.
At March 31, 2000, the domestic Companies accrued a liability forlump-sum severance payments equal to 40% of the amount required hadall eligible employees voluntary terminated their employment at the bal-ance sheet date. The Companies recognized pension expense when, andto the extent, payments were made to the pension fund.
Effective April 1, 2000, the Companies adopted the new accountingstandard, “Opinion on Setting Accounting Standard for Employees’Severance and Pension Benefits,” issued by the Business AccountingDeliberation Council on June 16, 1998 (the “New AccountingStandard”).
Under the New Accounting Standard, allowance and expenses for sev-erance and pension benefits are determined based on the amountsactuarially calculated using certain assumptions.
The Companies provided allowance for employees’ severance andretirement benefits at March 31, 2001, based on the estimatedamounts of projected benefit obligation and the fair value of the planassets at that date.
The excess of the projected benefit obligation over the fair value ofpension assets as of April 1, 2000, and the liabilities for severanceand pension benefits recorded as of April 1, 2000 (the “net transitionobligation”) amounted to ¥11,163 million, of which ¥8,667 millionwas recognized as expense as a result of the contribution of investmentsecurities worth ¥8,667 million to an employee retirement benefittrust in June, August and September 2000. The remaining net transitionobligation amounting to ¥2,496 million was also recognized asexpense in the year ended March 31, 2001. Actuarial gains and losses arealso recognized as expense using the straight-line method over theestimated average remaining service life commencing from the suc-ceeding period.
As a result of the adoption of the new accounting standard, in the yearended March 31, 2001, severance and pension benefit expenseincreased by ¥10,364 million, operating income increased by ¥799million and income before income taxes decreased by ¥10,364 millioncompared with what would have been recorded under the previousaccounting standard.
Bond issue costsBond issue costs are amortized equally for three years in accor-
dance with the provisions of the Commercial Code of Japan.
Income taxesThe provision for income taxes is computed based on the pretax
income included in the consolidated statements of operations. Theasset and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differ-ences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes.
Derivative transactions and hedge accountingThe new accounting standard for financial instruments requires
companies to state derivative financial instruments at fair value and torecognize changes in the fair value as gains or losses unless derivativefinancial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certainhedging criteria, the Companies defer recognition of gains or losses
resulting from changes in fair value of derivative financial instrumentsuntil the related losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts areused as hedges and meet certain hedging criteria, forward foreignexchange contracts and hedged items are accounted for in the followingmanner:1. If a forward foreign exchange contract is executed to hedge an
existing foreign currency receivable or payable,1-(a) the difference, if any, between the Japanese yen amount of the
hedged foreign currency receivable or payable translated usingthe spot rate at the inception date of the contract and the book value of the receivable or payable is recognized in the consolidat-ed statement of income in the period which includes the inceptiondate, and
1-(b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.
2. If a forward foreign exchange contract is executed to hedge a future transaction denominated in foreign currency, the future transaction will be recorded using the contracted forward rate, andno gains or losses on the forward foreign exchange contract arerecognized.
Translation of foreign currencyPrior to April 1, 2000, short-term receivables and payables denomi-
nated in foreign currencies are translated into Japanese yen at theexchange rate prevailing on the balance sheet date. Long-term receiv-ables and payables denominated in foreign currencies are translatedusing historical rates, with the exception that the exchange rate atthe balance sheet date is used where the exchange rate changes sig-nificantly and the use of the exchange rate at the balance sheet datewould result in an exchange loss.
Foreign currency items with forward exchange contracts are translatedat the contracted rates.
Effective April 1, 2000, the Companies adopted the revised“Standard for Accounting for Transactions by Foreign Currency, etc.” andtranslate receivables and payables denominated in foreign currencyinto Japanese yen at the exchange rate prevailing on the balancesheet date. As the result of this adoption, income before income taxesincreased by ¥26 million compared with what would have beenrecorded under the previous accounting standard. Also theCompanies include foreign currency translation adjustments in share-holders’ equity in the balance sheet for 2001. It was previously includedin assets in the balance sheets.
Translation of foreign currency financial statementsThe assets and liabilities are translated into Japanese yen at the
year-end rate and the revenues and expenses are translated at themonthly average rate of the relevant year. The resulting foreign currencytranslation adjustments are reflected as a separate component of theshareholders’ equity in the consolidated balance sheets.
Accounting standard for treasury stock and reversalof statutory reserves
Effective April 1, 2002, the Company adopted the new accountingstandard for treasury stock and reversal of statutory reserves(Accounting Standards Board Statement No.1, “Accounting Standard forTreasury Stock and Reduction of Statutory Reserves”, issued by theAccounting Standards Board of Japan on February 21, 2002).
The effect on net income of the adoption of the new accountingstandard was not material.
Amounts per share of common stockThe computations of basic net income (loss) per share are based on the
weighted average number of shares outstanding during the relevant year.Diluted net income per share for 2003 is not presented due to net loss.
Diluted net income per share is computed based on the average numberof shares of common stock and contingent issuances of commonstock from convertible bonds or warrants.
Cash dividends per share represent the cash dividends declaredapplicable to the respective year including dividends paid after theend of the year.
Effective April 1, 2002, the Company adopted the new accountingstandard for earnings per share and related guidance (AccountingStandards Board Statement No. 2, "Accounting Standard for Earnings PerShare" and Financial Standards Implementation Guidance No. 4,"Implementation Guidance for Accounting Standard for Earnings PerShare", issued by the Accounting Standards Board of Japan onSeptember 25, 2002).
The effect on earnings per share of the adoption of the newaccounting standard was not material.
ReclassificationsCertain reclassifications of previously reported amounts have been
made to conform to current classifications.
3. CASH AND CASH EQUIVALENTSCash and cash equivalents at March 31, 2003 consisted of the following:
Thousands of Millions of yen U.S. dollars
Cash ¥16,327 $135,832Time deposits with maturities not
exceeding three months 500 4,160¥16,827 $139,992
4. EFFECT OF BANK HOLIDAY ON MARCH 31, 2002As financial institutions in Japan were closed on March 31, 2002, ¥386
million of trade notes receivable and ¥2,123 million of trade notespayable maturing on March 31, 2002, were settled on the following busi-ness day, April 1, 2002, and accounted for accordingly.
5. SECURITIESThe following tables summarize acquisition costs, book values and value of securities with fair value as of March 31, 2003 and 2002:
Millions of yenBook value
Available-for-sale securities:Non-listed equity securities ¥ 791Commercial paper 500
¥1,291
Thousands of U.S. dollarsBook value
Available-for-sale securities:Non-listed equity securities $ 6,580Commercial paper 4,160
$10,740
Maturities of available-for-sale securities at March 31, 2003 are as follows:
Millions of yenOver 1 year but Over 5 years but
Within 1 year within 5 years within 10 years Over 10 years
Available-for-sale securities:Others ¥508 ¥— ¥— ¥—
Thousands of U.S dollarsOver 1 year but Over 5 years but
Within 1 year within 5 years within 10 years Over 10 years
Available-for-sale securities:Others $4,226 $— $— $—
Total sales amounts of available-for-sale securities sold in the year ended March 31, 2003, amounted to ¥4,099 million ($34,101 thousand)and the net gains amounted to ¥1,225 million ($10,191 thousand).
Millions of yenAcquisition
Year ended March 31, 2003 cost Book value Difference
Available-for-sale securities:Securities with fair value exceeding book value:Equity securities ¥1,185 ¥1,230 ¥45Others 8 8 —
¥1,193 ¥1,238 ¥45
Other securities:Equity securities ¥34 ¥28 ¥(6)
¥34 ¥28 ¥(6)
Thousands of U.S. dollarsAcquisition
Year ended March 31, 2003 cost Book value Difference
Available-for-sale securities:Securities with fair value exceeding book value:Equity securities $9,859 $10,233 $374Others 67 67 —
$9,926 $10,300 $374
Other securities:Equity securities $283 $233 $(50)
$283 $233 $(50)
Millions of yenAcquisition
Year ended March 31, 2002 cost Book value Difference
Available-for-sale securities:Securities with fair value exceeding book value:Equity securities ¥1,009 ¥1,206 ¥197Bonds 2,165 2,312 147
¥3,174 ¥3,518 ¥344Other securities:Equity securities ¥1,551 ¥ 916 ¥(635)Bonds 500 382 (118)Others 12 10 (1)
¥2,063 ¥1,309 ¥(754)
Maturities of available-for-sale securities at March 31, 2002 are as follows:
Millions of yenOver 1 year but Over 5 years but
Within 1 year within 5 years within 10 years Over 10 years
Available-for-sale securities:Bonds ¥600 ¥2,094 ¥ — ¥ —Others — 11 — —
Total sales amounts of available-for-sale securities sold in the year ended March 31, 2002, amounted to ¥47 million and the net gains amountedto ¥20 million.
The following table summarizes book values of securities without fairvalue as of March 31, 2002:
Millions of yenBook value
Available-for-sale securities:Non-listed equity securities ¥886
¥886
6. INVENTORIESInventories at March 31, 2003 and 2002, consisted of the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003Finished goods ¥ 8,570 ¥13,080 $ 71,298Raw materials and supplies 11,050 16,939 91,930Work in process 15,869 23,796 132,022
¥35,489 ¥53,815 $295,250
7. SHORT-TERM BORROWINGS AND LONG-TERM DEBTShort-term borrowings consisted principally of bank loans. Short-
term bank loans at March 31, 2003 and 2002, were represented by
overdrafts, generally matured in the period up to six months. Theannual interest rates of short-term bank loans ranged from 0.8% to6.0% at March 31, 2003 and 2002.
Long-term debt at March 31, 2003 and 2002 consisted of the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 20032.4% unsecured bonds due 2002 ¥ — ¥ 10,000 $ —2.9% unsecured bonds due 2004 5,000 5,000 41,5971.85% unsecured bonds due 2008 15,000 15,000 124,7922.2% unsecured convertible bonds convertible into
common stock at ¥933 ($8) per share due 2002 — 4,198 —0.65% unsecured convertible bonds convertible into
common stock at ¥1,476 ($12) per share due 2006 14,793 14,793 123,070Unsecured bank loans due to 2003, 2004 and 2005 at interest rates ranging from 2.2% to 2.5% 11,119 10,327 92,500Unsecured bank loans due to 2004, 2005, 2006 and 2007 at interest rates ranging from 1.3% to 1.8% 10,500 — 87,354Other long-term obligations 120 69 999
Total 56,532 59,387 470,312Less current portion (601) (14,239) (5,000)
¥55,931 ¥ 45,148 $465,312
On April 10, 1998, the Company issued ¥650 million of bonds with5,000 detachable warrants. One warrant entitles the holder to sub-scribe ¥130 thousand ($1 thousand) for shares of common stock ofthe Company at ¥1,261 ($10) per share. Upon issuance of the bonds,Anritsu Company bought all of these bonds with warrants and distributedthe warrants to the then employees of Anritsu Company as part oftheir remuneration at fair market value. At March 31, 2003, 4,774warrants were outstanding and will expire on August 28, 2003.
On August 13, 1999, the Company issued ¥360 million of bondswith 3,000 detachable warrants. One warrant entitles the holder tosubscribe ¥120 thousand ($1 thousand) for shares of common stock ofthe Company at ¥1,138 ($9) per share. Upon issuance of the bonds,Anritsu Company bought all of these bonds with warrants and distributedthe warrants to the then employees of Anritsu Company as part oftheir remuneration at fair market value. At March 31, 2003, 2,934warrants were outstanding and will expire on February 25, 2005.
On May 25, 2001 the Company issued ¥2,160 million of bonds with5,000 detachable warrants. On warrant entitles the holder to sub-scribe ¥400 thousand ($3 thousand) for shares of common stock ofthe Company at ¥2,500 ($19) per share. Upon issuance of the bonds,Anritsu Company bought all of these bonds with warrants and distributedthe warrants to the then employees of Anritsu Company as part oftheir remuneration at fair market value. At March 31, 2003, 5,000warrants were outstanding and will expire on November 30, 2006.
At March 31, 2003, the number of common stock issuable upon fullconversion of outstanding convertible bonds and exercise of out-standing warrants was 11,623 thousand shares.
The annual maturities of long-term debt at March 31, 2003, are as follows:
Thousands of Year ending March 31, Millions of yen U.S. dollars
2004 ¥ 601 $ 5,0002005 15,737 130,9202006 2,001 16,6472007 16,193 134,7172008 22,000 183,028Thereafter — —
8. STOCK OPTION PLAN(1) At the annual meeting of shareholders held on June 29, 2000, the
Company’s directors and certain employees were granted options in the amount of 106,000 shares to purchase a maximum of 10,000 common shares of the Company, per individual. The option exercise price is ¥1,997 per share. The option is exercisable between July 1, 2002 and June 30, 2005.
(2) At the annual meeting of shareholders held on June 26, 2001, the Company’s directors and certain employees were granted options in the amount of 290,000 shares to purchase a maximum of 10,000 common shares of the Company, per individual. The option exercise price is ¥2,131 per share. The option is exercisable between July 1, 2003 and June 30, 2006.
(3) At the annual meeting of shareholders held on June 25, 2002, the Company’s directors, certain employees and subsidiaries’ directors were granted options in the amount of 309,000 shares to purchase a maximum of 20,000 common shares of the Company, per individual. The option exercise price is ¥707 per share. The option is exercisable between July 1, 2004 and June 30, 2007.
The following table summarizes significant differences between the nor-mal effective tax rate and the Company’s effective tax rate forfinancial statement purposes for the years ended March 31, 2002and 2001.
2002 2001
Normal effective tax rate 42% 42%Permanent differences of
the Company and itsconsolidated subsidiaries 4 2
R & D expenses — (5)Tax rate difference between
the Company and itsconsolidated subsidiaries — (2)
Tax deficit of consolidated subsidiaries 13 —Other — 1
The Company’s effective tax rate 59% 38%
Difference between the normal effective tax rate and the Companies’effective tax rate is not shown due to loss before income taxes for the yearended March 31, 2003.
10. DERIVATIVE FINANCIAL INSTRUMENTS ANDHEDGING TRANSACTIONS
The Companies utilize derivative financial instruments such as foreigncurrency forward contracts to reduce market risks of fluctuations inforeign currency exchange rates on assets and liabilities. TheCompanies do not hold or issue derivative financial instruments fortrading purposes.
The Companies are exposed to credit risk in the event of nonperfor-mance by counterparties to derivative financial instruments but such riskis considered minor because of the high credit rating of the counter-parties.
The Companies enter into derivative financial instruments, generallymaturing within one year, as hedges for existing assets and liabilitiesdenominated in foreign currencies (principally U.S. dollar and EURO) aris-ing from operations.
The derivative transactions are executed and managed by theCompany’s Finance Department in accordance with the establishedpolicies and within the specified limit on the amounts of derivativetransactions allowed. The Manager of the Finance Department reportsinformation on derivative transactions to the Officer in charge of theFinance Department on a semi-annual basis.
The Companies evaluate hedge effectiveness semi-annually bycomparing the cumulative changes in cash flows from or the changes infair value of hedged items and the corresponding changes in thehedging derivative instruments.
There are no derivative transactions for which hedge accountinghas not been applied as of March 31, 2003 and 2002.
The Companies did not have any foreign currency option transactionsat the balance sheet date.
9. INCOME TAXESThe Companies are subject to several taxes based on income,
which are corporate tax, inhabitants taxes and enterprise tax. Theaggregate normal effective tax rate on income before income taxes inJapan was approximately 42% for all the years ended March 31,2003, 2002 and 2001.
The statutory income tax rate used for calculation of deferredincome tax assets and liabilities was 42% for the year ended March 31,2002. Effective for years commencing on April 1, 2004 or later,according to the revised local tax law, income tax rates for enterprisetaxes will be reduced as a result of introducing the assessment byestimation on the basis of the size of business. Based on the change ofincome tax rates, for calculation of deferred income tax assets andliabilities, the Company and consolidated domestic subsidiaries used thestatutory income tax rates of 42% and 40% for current items andnon-current items, respectively, for the year ended March 31, 2003.
As a result of the change in the effective tax rates, deferred income taxassets decreased by ¥76 million ($632 thousand), provision fordeferred income taxes and net unrealized holding gains on securities by¥75 million ($627 thousand) and ¥1 million ($5 thousand) compared withwhat would have been recorded under the previous local tax law.
Significant components of deferred tax assets and liabilities as ofMarch 31, 2003 and 2002, were as follows:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003Deferred tax assets:
Net operating loss carried forward ¥ 9,922 ¥ — $ 82,546Inventories 6,956 2,953 57,870Software 1,917 2,108 15,948Retirement benefits — 2,330 —Investment securities 861 — 7,163Accrued expenses 804 673 6,689Other 642 1,290 5,341
Subtotal deferred tax assets 21,102 9,354 175,557Valuation allowance (9,755) (89) (81,156)Total deferred tax assets 11,347 9,265 94,401Deferred tax liabilities:
Retirement benefits 1,484 — 12,346Net unrealized holding gains on securities — 19 —Property, plant and equipment — 738 —Other 16 186 133
Subtotal deferred tax liabilities 1,500 943 12,479Net deferred tax assets ¥ 9,847 ¥8,322 $ 81,922
11. SEVERANCE AND PENSION BENEFITS Retirement benefits on the balance sheets consist of Employees’,
Directors’ and Corporate Auditors’ reserve for severance and pensionbenefits.
As explained in Note 2, effective April 1, 2000, the Companies adopt-ed the new accounting standard for employees’ severance and pensionbenefits, under which allowance and expenses for severance and pensionbenefits are determined based on the amounts obtained by actuarialcalculations.
Allowance for severance and pension benefits included in the liabilitysection of the consolidated balance sheet as of March 31, 2003 and2002 consists of the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Projected benefit obligation ¥ 31,173 ¥ 66,876 $ 259,343Unrecognized actuarial differences (16,133) (14,132) (134,218)Less fair value of pension assets (21,832) (45,516) (181,631)
Allowance for employees’severance and pension benefits (6,792) 7,228 (56,506)
Prepaid pension expense 7,786 — 64,775Allowance for directors’
severance and pension benefits 172 178 1,431¥ 1,166 ¥ 7,406 $ 9,700
Included in the consolidated statement of income for the years endedMarch 31, 2003 and 2002 is severance and pension benefit expensecomprising the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Service costs-benefits earnedduring the year ¥ 2,629 ¥ 2,457 $ 21,872
Interest cost on projectedbenefit obligation 1,702 2,221 14,160
Expected return on plan assets (1,379) (1,663) (11,473)Amortization of actuarial gains or losses 1,006 648 8,370Amortization of prior service cost — (1,388) —Special severance allowance 11,342 186 94,359Gain on return of the governmental
portion of the pension fund (6,229) — (51,822)Severance and pension benefit expense ¥ 9,071 ¥ 2,461 $ 75,466
For the year ended March 31, 2003, the discount rate and the rate ofexpected return on plan assets used by the Company are 2.5% and 4.0%,respectively. For the year ended March 31, 2002, they are 3.0% and4.0%, respectively. The estimated amount of all retirement benefits to bepaid at the future retirement date is allocated equally to each service yearusing the estimated number of total service years. Actuarial gains or lossesare recognized as income or expense using the straight-line method over pri-marily 13 years from the succeeding period.
Employees of Japanese companies are compulsorily included in theWelfare Pension Insurance Scheme operated by the government.Employers are legally required to deduct employees' welfare pension insurancecontributions from their payroll and to pay them to the governmenttogether with employers' own contributions. For companies that have
established their own Employees' Pension Fund which meets certain legalrequirements, it is possible to transfer a part of their welfare pension insurancecontributions (referred to as the "substitutional portion" of the govern-ment's Welfare Pension Insurance Scheme) to their own Employees'Pension Fund under the government's permission and supervision.
Based on the newly enacted Defined Benefit Corporate Pension Law, theCompany and its domestic consolidated subsidiaries decided to restructuretheir Employees' Pension Fund and were permitted by the Minister ofHealth, Labor and Welfare on September 1, 2002 to be released from theirfuture obligation for payments for the substitutional portion of theEmployees' Pension Insurance Scheme. Pension assets for the substitutionalportion maintained by the Employees' Pension Fund are to be transferredback to the government's scheme.
The Company and its domestic consolidated subsidiaries applied thetransitional provisions as prescribed in paragraph 47-2 of the JICPAAccounting Committee Report No. 13, "Practical Guideline forAccounting of Retirement Benefits (Interim Report)", and the effect oftransferring the substitutional portion was recognized on the date per-mission was received from the Ministry of Health, Labor and Welfare. As theresult, in the year ended March 31, 2003, the Company and its consolidat-ed domestic subsidiaries recorded gains on the release from the substitutionalportion of the government's Welfare Pension Insurance Scheme amountingto ¥6,229 million ($51,822 thousand), which was calculated based on theamount of the substitutional portion of the projected benefit obligations asof the permission date, the related pension assets determined pursuant tothe government formula, and the related unrecognized items.
The amount of pension plan assets expected to be transferred back to thegovernment approximated ¥15,841 million ($131,789 thousand) as atMarch 31, 2003.
12. SHAREHOLDERS’ EQUITYThe issuance of shares upon conversion of convertible bonds and
exercise of warrants is accounted for by crediting an amount equal to atleast 50% of the amount of the issue to the common stock account and thebalance to the additional paid-in capital account in accordance withprovisions of the Commercial Code of Japan.
Under the Commercial Code of Japan, the entire amount of the issueprice of shares is required to be accounted for as capital, although acompany may, by resolution of its board of directors, account for anamount not exceeding one-half of the issue price of the new shares as addi-tional paid-in capital.
Effective October 1, 2001, the Japanese Commercial Code provides thatan amount equal to at least 10% of cash dividends and other cashappropriations shall be appropriated and set aside as a legal reserveuntil the total amount of legal reserve and additional paid-in capitalequals 25% of common stock. The legal reserve and additional paid-in cap-ital may be used to eliminate or reduce a deficit by resolution of thestockholders’ meeting or may be capitalized by resolution of the Board ofDirectors. On condition that the total amount of legal reserve and additionalpaid-in capital remains being equal to or exceeding 25% of commonstock, they are available for distribution by the resolution of the share-holders’ meeting. Legal reserve is included in retained earnings in theaccompanying financial statements.
The maximum amount that the Company can distribute as dividends is
15. SEGMENT INFORMATIONChange in the Classification of BusinessesIn the year ended March 31, 2001, the Company introduced an internal company system aimed at reorganizing the operating structure. Along with thisintroduction, the Company has completely revised its method for classifying business categories, switching it from an internal management structurethat comprised the previous business classifications, to a management structure that consists of the internal company system together with a set of stan-dards for evaluating performance.
The Components and Devices Division, which is included in Measurement Solutions under the new internal company system, is disclosed as a sep-arate segment considering its prospects for growth.
This change in the classification of business segment was made in order to disclose business categories more appropriately under the new internalcompany system.
Information by industry segment for the years ended March 31, 2003, 2002 and 2001 is as follows:
Millions of yen
ComponentsInformation and Test and and Industrial Services and Eliminations
Year ended March 31, 2003 Communications Measurement Devices Automation Others Total or corporate ConsolidatedNet sales:
Outside customers ¥10,610 ¥ 51,441 ¥ 1,218 ¥11,584 ¥3,701 ¥ 78,554 ¥ — ¥ 78,554Inter-segment 6 319 8 29 2,492 2,854 (2,854) —
Total 10,616 51,760 1,226 11,613 6,193 81,408 (2,854) 78,554Operating expenses 13,158 58,705 4,018 11,202 4,280 91,363 (2,060) 89,303Operating income (loss) ¥ (2,542) ¥ (6,945) ¥ (2,792) ¥ 411 ¥1,913 ¥ (9,955) ¥ (794) ¥ (10,749)Identifiable assets ¥16,417 ¥ 87,566 ¥ 8,777 ¥11,155 ¥6,655 ¥130,570 ¥13,561 ¥144,131Depreciation and amortization 644 3,480 958 98 267 5,447 382 5,829Capital expenditures 154 1,846 172 37 182 2,391 477 2,868
Year ended March 31, 2002Net sales:
Outside customers ¥18,310 ¥ 88,575 ¥ 8,605 ¥12,343 ¥3,745 ¥131,578 ¥ — ¥131,578Inter-segment 25 751 95 91 3,461 4,423 (4,423) —
Total 18,335 89,326 8,700 12,434 7,206 136,001 (4,423) 131,578Operating expenses 24,249 77,927 8,010 12,160 5,108 127,454 (3,462) 123,992Operating income (loss) ¥ (5,914) ¥ 11,399 ¥ 690 ¥ 274 ¥2,098 ¥ 8,547 ¥ (961) ¥ 7,586Identifiable assets ¥21,285 ¥107,788 ¥14,818 ¥10,978 ¥6,183 ¥161,052 ¥37,728 ¥198,780Depreciation and amortization 833 3,730 1,075 325 277 6,240 282 6,522Capital expenditures 566 5,466 2,979 289 21 9,321 356 9,677
calculated based on the unconsolidated financial statements of theCompany in accordance with the Commercial Code of Japan.
Effective October 2001, the Code no longer required minimum parvalue of shares issued. The par value description on the Company’sconsolidated balance sheet has changed to “no par” accordingly.
13. COMMITMENTS AND CONTINGENT LIABILITIESThe Company and certain of its subsidiaries have commitments
payable under non-capitalized finance leases and future payments ofrental expenses under non-cancellable operating leases at March 31,2003, as follows:
Thousands of Millions of yen U.S. dollars
Within one year ¥ 673 $ 5,599After one year 1,827 15,200
¥2,500 $20,799
Lease expenses under non-capitalized finance leases for the yearsended March 31, 2003, 2002 and 2001 aggregated approximately ¥247million ($2,055 thousand), ¥205 million and ¥102 million, respectively.
Contingent liabilities at March 31, 2003, for guarantees of loansamounted to ¥2,050 million ($17,055 thousand), which included ¥1,983million ($16,498 thousand) in respect of employees’ housing loans.
14. RESEARCH AND DEVELOPMENT EXPENSESResearch and development expenses are charged to income as
incurred. The amount charged to income for the years ended March 31, 2003,
2002 and 2001 are ¥13,222 million ($110,000 thousand), ¥15,222 millionand ¥15,385 million, respectively.
Year ended March 31, 2001Net sales:
Outside customers ¥29,435 ¥100,048 ¥11,774 ¥13,126 ¥4,673 ¥159,056 ¥ — ¥159,056Inter-segment 397 277 31 81 4,239 5,025 (5,025) —
Total 29,832 100,325 11,805 13,207 8,912 164,081 (5,025) 159,056Operating expenses 34,051 75,807 10,102 13,116 6,413 139,489 (4,267) 135,222Operating income (loss) ¥ (4,219) ¥ 24,518 ¥ 1,703 ¥ 91 ¥2,499 ¥ 24,592 ¥ (758) ¥ 23,834Identifiable assets ¥31,857 ¥113,224 ¥14,491 ¥11,569 ¥7,814 ¥178,955 ¥28,589 ¥207,544Depreciation and amortization 1,030 2,792 700 245 307 5,074 254 5,328Capital expenditures 1,357 3,710 2,572 416 40 8,095 213 8,308
Thousands of U.S. dollars
ComponentsInformation and Test and and Industrial Services and Eliminations
Year ended March 31, 2003 Communications Measurement Devices Automation Others Total or corporate Consolidated
Net sales:Outside customers $ 88,270 $427,962 $ 10,133 $96,373 $30,789 $ 653,527 $ — $ 653,527Inter-segment 49 2,654 67 241 20,733 23,744 (23,744) —
Total 88,319 430,616 10,200 96,614 51,522 677,271 (23,744) 653,527Operating expenses 109,467 488,395 33,428 93,195 35,607 760,092 (17,139) 742,953Operating income (loss) $ (21,148) $ (57,779) $(23,228) $ 3,419 $15,915 $ (82,821) $ (6,605) $ (89,426)Identifiable assets $136,581 $728,502 $ 73,020 $92,804 $55,366 $1,086,273 $112,820 $1,199,093Depreciation and amortization 5,358 28,952 7,970 815 2,221 45,316 3,178 48,494Capital expenditures 1,281 15,358 1,431 308 1,514 19,892 3,968 23,860
Information by geographic area for the years ended March 31, 2003, 2002 and 2001 is as follows:
Millions of yen
EliminationsYear ended March 31, 2003 Japan Americas Europe Others Total or corporate Consolidated
Net sales:Outside customers ¥ 49,363 ¥12,821 ¥10,941 ¥5,429 ¥ 78,554 ¥ — ¥ 78,554Inter-segment 7,965 5,083 1,957 456 15,461 (15,461) —
Total 57,328 17,904 12,898 5,885 94,015 (15,461) 78,554Operating expenses 67,681 19,245 13,952 5,874 106,752 (17,449) 89,303Operating income (loss) ¥ (10,353) ¥ (1,341) ¥ (1,054) ¥ 11 ¥ (12,737) ¥ 1,988 ¥ (10,749)Identifiable assets ¥116,860 ¥38,626 ¥ 6,996 ¥2,824 ¥165,306 ¥(21,175) ¥144,131
Year ended March 31, 2002Net sales:
Outside customers ¥ 72,947 ¥28,289 ¥24,259 ¥6,083 ¥131,578 ¥ — ¥131,578Inter-segment 25,126 9,068 1,219 918 36,331 (36,331) —
Total 98,073 37,357 25,478 7,001 167,909 (36,331) 131,578Operating expenses 90,407 38,770 25,886 6,869 161,932 (37,940) 123,992Operating income (loss) ¥ 7,666 ¥ (1,413) ¥ (408) ¥ 132 ¥ 5,977 ¥ 1,609 ¥ 7,586Identifiable assets ¥178,505 ¥52,827 ¥13,670 ¥3,254 ¥248,256 ¥(49,476) ¥198,780
Year ended March 31, 2001Net sales:
Outside customers ¥ 91,776 ¥34,813 ¥28,017 ¥4,450 ¥159,056 ¥ — ¥159,056Inter-segment 38,761 8,702 849 720 49,032 (49,032) —
Total 130,537 43,515 28,866 5,170 208,088 (49,032) 159,056Operating expenses 109,650 39,321 27,026 4,788 180,785 (45,563) 135,222Operating income (loss) ¥ 20,887 ¥ 4,194 ¥ 1,840 ¥ 382 ¥ 27,303 ¥ (3,469) ¥ 23,834Identifiable assets ¥168,145 ¥53,404 ¥20,191 ¥3,221 ¥244,961 ¥(37,417) ¥207,544
Thousands of U.S. dollars
EliminationsYear ended March 31, 2003 Japan Americas Europe Others Total or corporate Consolidated
Net sales:Outside customers $410,674 $106,664 $ 91,023 $45,166 $ 653,527 $ — $ 653,527Inter-segment 66,264 42,288 16,281 3,794 128,627 (128,627) —
Total 476,938 148,952 107,304 48,960 782,154 (128,627) 653,527Operating expenses 563,069 160,108 116,073 48,868 888,118 (145,165) 742,953Operating income (loss) $ (86,131) $ (11,156) $ (8,769) $ 92 $ (105,964) $ 16,538 $ (89,426)Identifiable assets $972,213 $321,348 $ 58,203 $23,494 $1,375,258 $(176,165) $1,199,093
Overseas sales for the years ended March 31, 2003, 2002 and 2001 were as follows:
Millions of yen
Year ended March 31, 2003 Americas Europe Asia and Others Total
Overseas sales ¥11,442 ¥10,938 ¥9,743 ¥32,123Consolidated net sales — — — 78,554Percentage of consolidated net sales 14.6% 13.9% 12.4% 40.9%
Year ended March 31, 2002Overseas sales ¥27,048 ¥24,647 ¥15,165 ¥66,860Consolidated net sales — — — 131,578Percentage of consolidated net sales 20.6% 18.7% 11.5% 50.8%
Year ended March 31, 2001Overseas sales ¥36,085 ¥27,307 ¥15,872 ¥ 79,264Consolidated net sales — — — 159,056Percentage of consolidated net sales 22.7% 17.1% 10.0% 49.8%
Thousands of U.S dollars
Year ended March 31, 2003 Americas Europe Asia and Others Total
Overseas sales $95,191 $90,998 $81,057 $267,246Consolidated net sales — — — 653,527Percentage of consolidated net sales 14.6% 13.9% 12.4% 40.9%
16. SALE OF LAND AND BUILDINGThe Company entered into agreement of sale of the land and building of the headquarters with Morimoto Co., Ltd. on March 18, 2003 to improve
the financial position of the Company. The land and building will be sold on June 30, 2003 and the sales price will be ¥5,144 million ($42,795 thou-sand). The amount of gain on sale of fixed assets from this sales transaction for the year ending March 31, 2004 will be approximately ¥4,600 mil-lion ($38,270 thousand).
17. FINANCIAL INFORMATION OF THE PARENT COMPANYThe following summarizes the financial position of the parent company at March 31, 2003 and 2002, and the results of operations for the
three years ended March 31, 2003.Balance Sheets Thousands of
Millions of yen U.S. dollars
ASSETS 2003 2002 2003Current assets:
Cash ¥ 12,400 ¥ 33,842 $ 103,161Notes and accounts receivable—trade 17,701 29,008 147,263Allowance for doubtful accounts (273) (70) (2,271)Marketable securities 508 600 4,226Inventories 27,443 40,327 228,311Deferred tax assets—current 6,258 1,144 52,063Other current assets 4,220 3,689 35,109
Total current assets 68,257 108,540 567,862
Property, plant and equipment:Land 1,268 1,268 10,549Buildings and structures 26,448 26,334 220,033Machinery and equipment 23,460 29,925 195,175Construction in progress — — —Accumulated depreciation (34,918) (38,389) (290,499)
Net property, plant and equipment 16,258 19,138 135,258
Investments and other assets:Investment securities 29,207 29,486 242,987Long-term loans receivable 13,982 13,240 116,323Deferred tax assets—non-current 1,548 4,566 12,879Other assets 10,091 2,597 83,951Allowance for doubtful accounts (262) (486) (2,180)
Total investments and other assets 54,566 49,403 453,960Total assets ¥139,081 ¥177,081 $1,157,080
Thousands ofMillions of yen U.S. dollars
LIABILITIES AND SHAREHOLDERS’ EQUITY 2003 2002 2003Current liabilities:
Short-term borrowings ¥ 2,280 ¥ 2,280 $ 18,968Long term debt due within one year 650 14,696 5,408Notes and accounts payable—trade 9,453 12,455 78,644Accrued liabilities 2,604 1,174 21,664Accrued expenses 1,396 2,527 11,614Income taxes payable 20 21 166Other current liabilities 6,253 3,788 52,022
Total current liabilities 22,656 36,941 188,486
Long-term liabilities:Long-term debt 47,653 37,803 396,448Retirement benefits 167 6,209 1,389Other long-term liabilities 233 305 1,938
Total long-term liabilities 48,053 44,317 399,775
Shareholders’ equity:Common stock 14,043 14,042 116,830Additional paid-in capital 22,993 22,987 191,290Legal reserve 2,468 2,467 20,532Retained earnings 29,611 57,275 246,348Net unrealized holding gains on securities 18 (237) 150Treasury stock, at cost (761) (711) (6,331)
Total shareholders’ equity 68,372 95,823 568,819Total liabilities and shareholders’ equity ¥139,081 ¥177,081 $1,157,080
Statements of Operations Thousands ofMillions of yen U.S. dollars
2003 2002 2001 2003
Net sales ¥ 44,833 ¥91,026 ¥122,421 $ 372,987Cost of sales 40,656 67,556 86,872 338,237
Gross profit 4,177 23,470 35,549 34,750Selling, general and administrative expenses 16,506 18,518 19,211 137,321
Operating income (loss) (12,329) 4,952 16,338 (102,571)Other income (expenses):
Interest and dividends income 589 822 1,034 4,900Interest expenses (732) (729) (642) (6,090)Foreign exchange gain (loss) 4 797 1,711 33Loss on disposal of inventories (122) (1,969) (2,843) (1,015)Gain on sales of marketable securities 13 — — 108Gain on sales of investment securities 1,212 — 80 10,083Loss on devaluation of investment securities (1,402) (37) (26) (11,664)Provision of allowance for doubtful accounts — (240) (25) —Gains from transfer of assets to retirement benefits trust — — 5,451 —Amortization of net transition obligation due to change
in the accounting standards for retirement benefits — — (9,879) —Revaluation loss of investments in subsidiaries’ securities (551) (42) — (4,584)Loss on release of subsidiaries’ indebtedness — (276) — —Gain on return of the governmental portion of the pension fund 5,562 — — 46,273Reversal of bad debt reserve 240 — — 1,997Gain on expiration of warrants 38 — — 316Loss on devaluation of inventories (11,847) — — (98,561)Special severance allowance (10,004) — — (83,228)Moving expense of head office (109) — — (907)Loss on disposal of fixed assets (646) — — (5,374)Rental fee 841 1,646 1,791 6,997Other, net (415) 1,097 (1,109) (3,452)
(17,329) 1,069 (4,457) (144,168)Income (loss) before income taxes (29,658) 6,021 11,881 (246,739)
Provision for income taxes:Current (73) 905 8,700 (607)Deferred (2,291) 1,574 (3,887) (19,060)
Net income (loss) ¥(27,294) ¥ 3,542 ¥ 7,068 $(227,072)
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF ANRITSU CORPORATION:
We have audited the accompanying consolidated balance sheets of Anritsu Corporation and subsidiaries as of March 31, 2003 and 2002,
and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended
March 31, 2003, expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated finan-
cial position of Anritsu Corporation and subsidiaries as of March 31, 2003 and 2002, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally
accepted in Japan as described in Note 1 to the consolidated financial statements.
Without qualifying our opinion, we draw attention to the following.
(1) As discussed in Note 2 to the consolidated financial statements, effective April 1, 2000, Anritsu Corporation and domestic subsidiaries
prospectively adopted the new Japanese accounting standards for financial instruments and employees' retirement benefits and the
revised Japanese accounting standard for foreign currency translation.
(2) As discussed in Note 15 to the consolidated financial statements, effective from the year ended March 31, 2001, Anritsu
Corporation and domestic subsidiaries changed the method of segmentation.
The consolidated financial statements as of and for the year ended March 31, 2003 have been translated into United States dollars
solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the consolidated financial statements
expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 1 to the consolidated finan-
cial statements.
Tokyo, Japan
June 25, 2003
JAPAN
Anritsu Customer Services Co., Ltd.Calibration, repair and maintenance of measuring instruments
Anritsu Engineering Co., Ltd.Development of software
Anritsu Fudosan Kabushiki KaishaReal estate financing
Anritsu Industrial Solutions Co., Ltd.Manufacture and marketing of industrialautomation equipment
Anritsu Kousan Kabushiki KaishaLogistics, welfare services and production ofcatalogs and other materials
Anritsu Techmac Co., Ltd.Manufacture and marketing of processed products andunit assembly articles
Anritsu Pro Associe Co., Ltd.Accounting and salary related consignment service,calculation business, information service
Anritsu Technics Co., Ltd.Repair and maintenance of communications equipment
Tohoku Anritsu Co., Ltd.Manufacture of information and communications equipmentand measuring instruments
AMERICAS
BRAZILAnritsu Eletrônica Ltda.Marketing of measuring and other instruments
CANADAAnritsu Electronics, Ltd.Marketing of measuring and other instruments
U.S.A.Anritsu U.S. Holding Inc.Holding company for overseas subsidiaries
Anritsu CompanyManufacture and marketing of measuring and other instruments
Anritsu FSCSubsidiary of Anritsu Company
ASIA & PACIFIC
AUSTRALIAAnritsu Proprietary Ltd.Marketing of measuring and other instruments
CHINAAnritsu Electronics (Shanghai) Co., Ltd.Customer support for measuring and other instruments
Anritsu Industrial Solutions (Shanghai) Co., Ltd.Marketing and procurement of industrial machinery
HONG KONGAnritsu Company Ltd.Marketing and procurement of measuring and other instruments
KOREAAnritsu Corporation, Ltd.Marketing of measuring and other instruments
SINGAPOREAnritsu Private Ltd.Marketing and procurement of measuring and other instruments
TAIWANAnritsu Company IncorporatedMarketing of measuring and other instruments
EUROPE
FRANCEAnritsu S.A.Marketing of measuring and other instruments
GERMANYAnritsu GmbHMarketing of measuring and other instruments
ITALYAnritsu S.p.A.Marketing of measuring and other instruments
SPAINAnritsu Electrónica S.A.Marketing of measuring and other instruments
SWEDENAnritsu AktiebolagMarketing of measuring and other instruments
U.K.Anritsu LimitedManufacture and marketing of measuring and other instruments
CORPORATE DATAHead Office:1800 Onna, Atsugi-shi, Kanagawa, 243-8555 JapanTEL: +81 46 223 1111E-mail: [email protected]
Established: March 1931
Paid-in Capital: ¥14.0 billion
Number of Employees: 3,720 (Consolidated)1,333 (Non-consolidated)
STOCK LISTINGTokyo (Ticker Symbol No: 6754)
AUTHORIZED SHARES400,000,000
ISSUED SHARES128,018,848
NUMBER OF SHAREHOLDERS14,739
BREAKDOWN OF SHAREHOLDERS
MAJOR SHAREHOLDERSPercentage of
Number of Shares Total SharesShareholder Name (thousands) Outstanding
Japan Trustee Services Bank, Ltd. 19,200 15.00%(Trust Account from The Sumitomo Trust & Banking Co., Ltd.,NEC Retirement Benefit Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account) 11,155 8.71NEC Corporation 8,312 6.49The Nomura Trust and Banking Co., Ltd. (Mutual Fund Account) 6,967 5.44Japan Trustee Services Bank, Ltd. (Trust Account) 4,315 3.37Mitsui Sumitomo Insurance Co., Ltd. 3,182 2.49Sumitomo Life Insurance Company 2,714 2.12Japan Trustee Services Bank, Ltd. 2,500 1.95(The Sumitomo Trust & Banking Co., Ltd. Retirement Benefits Trust Account)
UFJ Trust Bank Limited (Trust Account) 2,317 1.81Sumitomo Mitsui Banking Corporation 2,173 1.70
(As of March 31, 2003)MONTHLY STOCK PRICE RANGE ON THE TOKYO STOCK EXCHANGE
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000Note: High price=¥3,620 Low price=¥375(Yen)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000(Thousands of Shares)
1998 1999 2000 2001 2002 2003
1998 1999 2000 2001 2002 2003
Common stock price range (¥) Tokyo Price Index Close
MONTHLY TRADING VOLUME
Financial Institutions: 53.35%
Securities Companies: 0.87%
Other Corporations: 8.70%
Foreign Investors: 12.69%
Individuals and others: 24.39%
Printed in Japan with soy ink on recycled paper.
1800 Onna, Atsugi-shi, Kanagawa, 243-8555 JapanTEL: +81 46 223 1111http://www.anritsu.co.jp/E/
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