Form 6-K
Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR

15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2017

Commission File Number: 001-31221

Total number of pages: 18

 

 

NTT DOCOMO, INC.

(Translation of registrant’s name into English)

 

 

Sanno Park Tower 11-1, Nagata-cho 2-chome

Chiyoda-ku, Tokyo 100-6150

Japan

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F                  Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    NTT DOCOMO, INC.

Date: August 2, 2017

    By:  

/S/ KEISUKE YOSHIZAWA

      Keisuke Yoshizawa
      Managing Director, Investor Relations Department

Information furnished in this form:

 

1. Report filed on August 2, 2017 with the Director of the Kanto Local Finance Bureau of Japan pursuant to the Financial Instruments and Exchange Act of Japan


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

MARCH 31, 2017 and JUNE 30, 2017

 

                                                 
     Millions of yen  
     March 31, 2017     June 30, 2017  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   ¥ 289,610     ¥ 326,346  

Short-term investments

     301,070       200,731  

Accounts receivable

     239,137       158,813  

Receivables held for sale

     936,748       905,845  

Credit card receivables

     347,557       368,910  

Other receivables

     398,842       407,112  

Allowance for doubtful accounts

     (19,517     (20,607

Inventories

     153,388       179,951  

Deferred tax assets

     81,025       —    

Prepaid expenses and other current assets

     108,412       141,797  
  

 

 

   

 

 

 

Total current assets

     2,836,272       2,668,898  
  

 

 

   

 

 

 

Property, plant and equipment:

    

Wireless telecommunications equipment

     5,084,923       5,098,419  

Buildings and structures

     906,177       909,530  

Tools, furniture and fixtures

     441,513       444,249  

Land

     198,980       199,004  

Construction in progress

     204,413       216,982  

Accumulated depreciation and amortization

     (4,295,111     (4,328,252
  

 

 

   

 

 

 

Total property, plant and equipment, net

     2,540,895       2,539,932  
  

 

 

   

 

 

 

Non-current investments and other assets:

    

Investments in affiliates

     373,758       375,556  

Marketable securities and other investments

     198,650       200,350  

Intangible assets, net

     608,776       602,700  

Goodwill

     230,971       229,905  

Other assets

     434,312       421,404  

Deferred tax assets

     229,440       307,506  
  

 

 

   

 

 

 

Total non-current investments and other assets

     2,075,907       2,137,421  
  

 

 

   

 

 

 

Total assets

   ¥            7,453,074     ¥            7,346,251  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Current portion of long-term debt

   ¥ 60,217     ¥ 140,170  

Short-term borrowings

     1,623       1,689  

Accounts payable, trade

     853,538       698,444  

Accrued payroll

     59,187       47,376  

Accrued income taxes

     105,997       79,380  

Other current liabilities

     194,494       240,272  
  

 

 

   

 

 

 

Total current liabilities

     1,275,056       1,207,331  
  

 

 

   

 

 

 

Long-term liabilities:

    

Long-term debt (exclusive of current portion)

     160,040       80,000  

Accrued liabilities for point programs

     94,639       81,944  

Liability for employees’ retirement benefits

     193,985       195,357  

Other long-term liabilities

     145,266       153,443  
  

 

 

   

 

 

 

Total long-term liabilities

     593,930       510,744  
  

 

 

   

 

 

 

Total liabilities

     1,868,986       1,718,075  
  

 

 

   

 

 

 

Redeemable noncontrolling interests

     22,942       23,145  
  

 

 

   

 

 

 

Equity:

    

NTT DOCOMO, INC. shareholders’ equity

    

Common stock

     949,680       949,680  

Additional paid-in capital

     326,621       326,621  

Retained earnings

     4,656,139       4,697,895  

Accumulated other comprehensive income (loss)

     24,631       26,609  

Treasury stock

     (426,442     (426,442

Total NTT DOCOMO, INC. shareholders’ equity

     5,530,629       5,574,363  

Noncontrolling interests

     30,517       30,668  
  

 

 

   

 

 

 

Total equity

     5,561,146       5,605,031  
  

 

 

   

 

 

 

Commitments and contingencies

    
  

 

 

   

 

 

 

Total liabilities and equity

   ¥ 7,453,074     ¥ 7,346,251  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

1


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 2016 and 2017

Consolidated Statements of Income

 

                                                 
       Millions of yen  
       Three Months Ended
June 30, 2016
     Three Months Ended
June 30, 2017
 

Operating revenues:

       

Telecommunications services

     ¥ 729,708      ¥ 774,912  

Equipment sales

       165,753        150,600  

Other operating revenues

       213,209        211,184  
    

 

 

    

 

 

 

Total operating revenues

       1,108,670        1,136,696  
    

 

 

    

 

 

 

Operating expenses:

       

Cost of services (exclusive of items shown separately below)

       304,479        321,220  

Cost of equipment sold (exclusive of items shown separately below)

       154,977        162,543  

Depreciation and amortization

       109,715        119,029  

Selling, general and administrative

       240,208        255,605  
    

 

 

    

 

 

 

Total operating expenses

       809,379        858,397  
    

 

 

    

 

 

 

Operating income

       299,291        278,299  
    

 

 

    

 

 

 

Other income (expense):

       

Interest expense

       (240      (98

Interest income

       155        193  

Other, net

       (3,914      3,452  
    

 

 

    

 

 

 

Total other income (expense)

       (3,999      3,547  
    

 

 

    

 

 

 

Income before income taxes and equity in net income (losses) of affiliates

       295,292        281,846  
    

 

 

    

 

 

 

Income taxes:

       

Current

       69,256        85,579  

Deferred

       20,392        (937
    

 

 

    

 

 

 

Total income taxes

       89,648        84,642  
    

 

 

    

 

 

 

Income before equity in net income (losses) of affiliates

       205,644        197,204  
    

 

 

    

 

 

 

Equity in net income (losses) of affiliates (including impairment charges of investments in affiliates)

       992        (6,662
    

 

 

    

 

 

 

Net income

       206,636        190,542  
    

 

 

    

 

 

 

Less: Net (income) loss attributable to noncontrolling interests

       218        (603
    

 

 

    

 

 

 

Net income attributable to NTT DOCOMO, INC.

     ¥ 206,854      ¥ 189,939  
    

 

 

    

 

 

 

Per share data

       

Weighted average common shares outstanding — Basic and Diluted

           3,754,094,845            3,704,585,533  
    

 

 

    

 

 

 

Basic and Diluted earnings per share attributable to NTT DOCOMO, INC.

     ¥ 55.10      ¥ 51.27  
    

 

 

    

 

 

 
Consolidated Statements of Comprehensive Income         
       Millions of yen  
       Three Months Ended
June 30, 2016
     Three Months Ended
June 30, 2017
 

Net income

     ¥ 206,636      ¥ 190,542  

Other comprehensive income (loss):

       

Unrealized holding gains (losses) on available-for-sale securities, net of applicable taxes

       (11,821      2,794  

Unrealized gains (losses) on cash flow hedges, net of applicable taxes

       (72      (25

Foreign currency translation adjustment, net of applicable taxes

       (8,105      (1,258

Pension liability adjustment, net of applicable taxes

       141        436  
    

 

 

    

 

 

 

Total other comprehensive income (loss)

       (19,857      1,947  
    

 

 

    

 

 

 

Comprehensive income

       186,779        192,489  
    

 

 

    

 

 

 

Less: Comprehensive (income) loss attributable to noncontrolling interests

       423        (572
    

 

 

    

 

 

 

Comprehensive income attributable to NTT DOCOMO, INC.

     ¥ 187,202      ¥ 191,917  
    

 

 

    

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

2


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 2016 and 2017

 

                                                 
       Millions of yen  
       Three Months Ended
June 30, 2016
     Three Months Ended
June 30, 2017
 

Cash flows from operating activities:

       

Net income

     ¥ 206,636      ¥ 190,542  

Adjustments to reconcile net income to net cash provided by operating activities–

       

Depreciation and amortization

                     109,715                      119,029  

Deferred taxes

       20,392        (937

Loss on sale or disposal of property, plant and equipment

       3,963        7,609  

Inventory write-downs

       4,076        1,877  

Impairment loss on marketable securities and other investments

       853        238  

Equity in net (income) losses of affiliates (including impairment charges of investments in affiliates)

       (992      6,662  

Dividends from affiliates

       4,837        6,318  

Changes in assets and liabilities:

       

(Increase) / decrease in accounts receivable

       78,707        80,089  

(Increase) / decrease in receivables held for sale

       15,988        30,903  

(Increase) / decrease in credit card receivables

       (10,778      (10,638

(Increase) / decrease in other receivables

       (3,384      (8,308

Increase / (decrease) in allowance for doubtful accounts

       1,756        1,003  

(Increase) / decrease in inventories

       (21,333      (28,488

(Increase) / decrease in prepaid expenses and other current assets

       (17,549      (33,683

(Increase) / decrease in non-current receivables held for sale

       21,618        18,263  

Increase / (decrease) in accounts payable, trade

       (90,114      (88,143

Increase / (decrease) in accrued income taxes

       (98,738      (26,608

Increase / (decrease) in other current liabilities

       32,519        48,888  

Increase / (decrease) in accrued liabilities for point programs

       (7,527      (12,695

Increase / (decrease) in liability for employees’ retirement benefits

       1,905        1,375  

Increase / (decrease) in other long-term liabilities

       3,782        9,719  

Other, net

       (12,538      (11,828
    

 

 

    

 

 

 

Net cash provided by operating activities

       243,794        301,187  
    

 

 

    

 

 

 

Cash flows from investing activities:

       

Purchases of property, plant and equipment

       (125,769      (128,136

Purchases of intangible and other assets

       (78,535      (67,142

Purchases of non-current investments

       (743      (9,705

Proceeds from sale of non-current investments

       1,611        550  

Purchases of short-term investments

       (5,428      (60,344

Redemption of short-term investments

       5,546        40,509  

Short-term bailment for consumption to a related party

       —          (140,000

Proceeds from redemption of short-term bailment for consumption to a related party

       —          260,000  

Other, net

       (5,480      (10,783
    

 

 

    

 

 

 

Net cash used in investing activities

       (208,798      (115,051
    

 

 

    

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

       5,754        6,691  

Repayment of short-term borrowings

       (5,754      (6,621

Principal payments under capital lease obligations

       (311      (282

Payments to acquire treasury stock

       (54,641      —    

Dividends paid

       (130,524      (146,607

Cash distributions to noncontrolling interests

       (3,500      (18

Other, net

       (990      (2,340
    

 

 

    

 

 

 

Net cash provided by (used in) financing activities

       (189,966      (149,177
    

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

       (884      (223
    

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents

       (155,854      36,736  

Cash and cash equivalents as of beginning of period

       354,437        289,610  
    

 

 

    

 

 

 

Cash and cash equivalents as of end of period

     ¥ 198,583      ¥ 326,346  
    

 

 

    

 

 

 

Supplemental disclosures of cash flow information:

       

Cash received during the period for:

       

Income tax refunds

     ¥ 3      ¥ 14  

Cash paid during the period for:

       

Interest, net of amount capitalized

       213        311  

Income taxes

       167,075        109,244  
    

 

 

    

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

3


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of presentation:

The accompanying quarterly consolidated financial statements of NTT DOCOMO, INC. and its subsidiaries (“DOCOMO”) were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain disclosures required by U.S. GAAP have been omitted. Since DOCOMO’s American Depositary Shares were listed on the New York Stock Exchange in March 2002, DOCOMO has prepared its consolidated financial statements pursuant to the terminology, forms and preparation methods required in order to issue American Depositary Shares, which are registered with the Securities and Exchange Commission of the United States of America.

2. Summary of significant accounting and reporting policies:

(a) Adoption of new accounting standards

Balance sheet classification of deferred taxes —

Effective April 1, 2017, DOCOMO adopted prospectively Accounting Standards Update (“ASU”) 2015-17 “Balance Sheet Classification of Deferred Taxes.” This ASU requires that all deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet.

(b) Recently issued accounting standards

Revenue from Contracts with Customers —

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” which requires an entity to recognize the amount to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.

The FASB also issued ASU 2016-08 “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU 2016-10 “Identifying Performance Obligations and Licensing,” ASU 2016-12 “Narrow-Scope Improvements and Practical Expedients,” ASU 2016-20 “Technical Corrections and Improvements to Topic 606,” and ASU 2017-05 “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” in March, April, May and December 2016, and February 2017, respectively, to partially amend ASU 2014-09.

On August 12, 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” and deferred the effective date of the ASU by one year. Consequently, the standard is expected to take effect for DOCOMO on April 1, 2018 and early adoption with original effective date for periods beginning April 1, 2017 is permitted.

 

4


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

The two permitted transition methods under the new standard are the full retrospective method, or the modified retrospective method. Under the full retrospective method, all periods presented will be updated upon adoption to conform to the new standard and a cumulative adjustment for effects on periods prior to the reporting period will be recorded to retained earnings at the beginning of the initial reporting period. Under the modified retrospective approach, the current reporting period will be updated to conform to the new standard and a cumulative adjustment for effects of applying the new standard to periods prior to the reporting period that includes the date of initial application is recorded to retained earnings as of the date of initial application, and also incremental disclosures related to the amount affected by the application of this new standard are required. DOCOMO has not decided on a transition method and are currently evaluating the impact of the new standard on DOCOMO’s consolidated financial statements and related disclosures. The impact on revenue resulting from the application of the new standard will be subject to assessments that are dependent on many variables, including, but not limited to, the terms, the transaction prices including discounts and the mixture of the goods and services of DOCOMO’s contractual arrangements. While DOCOMO is continuing to assess all potential impacts resulting from the application of the new standard, DOCOMO believes that the most significant impacts may include the following items:

 

   

The standard requires the recognition of incremental costs of obtaining and direct costs of fulfilling contracts with customers as assets. Accordingly, DOCOMO expects that part of the sales commissions and other charges that have previously been treated as expenses will be recognized as additional assets, which will be amortized over the estimated average period of the subscription for each service.

 

   

The standard requires that if customers are granted by an entity the option to acquire additional goods or services at a discount by a contract agreed between the customer and the entity, the entity shall identify this option as a separate performance obligation upon granting such option as a part of the consideration of the transaction being recognized as contract liabilities, and recognize revenue when the additional good or service is transferred at a discount to the customer or when such option expires. Accordingly, DOCOMO expects that in relation to “docomo POINTs” and “d POINTs” which have traditionally been recorded as accrued liabilities, DOCOMO will recognize a part of the considerations for the transaction of mobile communications and other services as contract liabilities at the time when the points are granted, and recognize revenue when the points are used for the additional good or service at a discount or when the points expire.

DOCOMO has established a team to implement the introduction of the new standard. DOCOMO is in the process of implementing changes to DOCOMO’s systems and setting up reporting processes and internal controls for the adoption of the new revenue recognition standard.

 

5


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

Recognition and Measurement of Financial Assets and Financial Liabilities —

On January 5, 2016, the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which makes targeted improvements to the accounting for, and presentation and disclosure of, financial instruments. ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. ASU 2016-01 does not affect the accounting for investments that would otherwise be consolidated or accounted for under the equity method. The new standard also affects the recognition of changes in fair value of financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The new standard is effective for DOCOMO on April 1, 2018. DOCOMO is currently evaluating the effect of adopting the ASU.

Lease —

On February 25, 2016, the FASB issued ASU 2016-02 “Lease,” which requires all lessees to recognize the right-of-use asset and lease liability, principally. The new standard is effective for DOCOMO on April 1, 2019. DOCOMO is currently evaluating the effect of adopting the ASU.

Simplifying the Test for Goodwill Impairment —

On January 26, 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test. Instead, the amendments in this update require that an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The amendments in this update are effective for DOCOMO on April 1, 2020. Early adoption of the standard for goodwill impairment tests with measurement dates after January 1, 2017 would also be permitted. DOCOMO is currently evaluating the effect of adopting the ASU.

 

6


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

3. Equity:

(a) Dividends

The Companies Act of Japan (the “Companies Act”) provides that (i) dividends of earnings require approval at a general meeting of shareholders, (ii) interim cash dividends can be distributed upon the approval of the Board of Directors, if the articles of incorporation provide for such interim cash dividends and (iii) an amount equal to 10% of the decrease in retained earnings, as a result of a dividend payment, shall be contributed to a legal reserve that can be funded up to an amount equal to 25% of capital stock. The legal reserve is available for distribution upon approval of the shareholders.

In the general meeting of shareholders held on June 20, 2017, the shareholders approved cash dividends of ¥148,183 million or ¥40 per share, payable to shareholders of record as of March 31, 2017, which were declared by the Board of Directors on April 27, 2017. The source of such dividends was “Retained earnings.” NTT DOCOMO, INC. started paying the dividends on June 21, 2017.

(b) Issued shares and treasury stock

With regard to the acquisition of treasury stock, the Companies Act provides that (i) it can be executed according to a resolution of the general meeting of shareholders, and (ii) the acquisition of treasury stock through open market transactions can be done according to a resolution of the Board of Directors, if the articles of incorporation contain such a provision. In accordance with (ii) above, a provision in NTT DOCOMO, INC.’s articles of incorporation stipulates that NTT DOCOMO, INC. may repurchase treasury stock through open market transactions, by a resolution of the Board of Directors, for the purpose of improving capital efficiency and implementing flexible capital policies in accordance with the business environment.

 

7


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

The changes in the number of issued shares and treasury stock were as follows. NTT DOCOMO, INC. has not issued shares other than shares of its common stock.

 

       Number of
issued shares
     Number of
treasury stock
 

As of March 31, 2016

       3,958,543,000        197,926,250  
    

 

 

    

 

 

 

Acquisition of treasury stock based on the resolution of the Board of Directors

       —          20,088,600  

As of June 30, 2016

       3,958,543,000        218,014,850  
    

 

 

    

 

 

 

Acquisition of treasury stock based on the resolution of the Board of Directors

       —          35,942,400  

Acquisition of treasury stock through purchase of less-than-one-unit shares

       —          217  

Retirement of treasury stock

       (58,980,000      (58,980,000
    

 

 

    

 

 

 

As of March 31, 2017

       3,899,563,000        194,977,467  
    

 

 

    

 

 

 

As of June 30, 2017

              3,899,563,000                194,977,467  
    

 

 

    

 

 

 

On April 28, 2016, the Board of Directors resolved that NTT DOCOMO, INC. may acquire up to 99,132,938 outstanding shares of its common stock by way of the Tokyo Stock Exchange Trading Network Off-Auction Own Share Repurchase Trading System (“ToSTNeT-3”) and market purchases in accordance with the discretionary dealing contract, at an amount in total not exceeding ¥192,514 million from May 2, 2016 through December 31, 2016.

Based on this resolution, NTT DOCOMO, INC. repurchased 9,021,000 shares of its common stock at ¥24,433 million using the ToSTNeT-3 on May 18, 2016, and also repurchased 47,010,000 shares of its common stock for a total purchase price of ¥125,174 million by way of market purchases in accordance with the discretionary dealing contract as of December 31, 2016.

NTT DOCOMO, INC. also carried out compulsory acquisition of less-than-one-unit shares upon request for the fiscal year ended March 31, 2017.

On March 24, 2017, the Board of Directors resolved that NTT DOCOMO, INC. would retire 58,980,000 shares held as treasury stock on March 31, 2017 and the share retirement on March 31, 2017 resulted in decreases of “Retained earnings” by ¥128,997 million.

The aggregate number and price of shares repurchased for the three months ended June 30, 2016 and 2017 were as follows:

 

       Share/Millions of yen  
       Three months ended
June  30, 2016
       Three months ended
June  30, 2017
 

Aggregate number of shares repurchased

                  20,088,600          —    

Aggregate price of shares repurchased

     ¥ 54,641        ¥                       —    

 

8


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

(c) Accumulated other comprehensive income (loss)

Changes in accumulated other comprehensive income (loss) —

Changes in accumulated other comprehensive income (loss), net of applicable taxes, for the three months ended June 30, 2016 and 2017 were as follows:

 

                                                                                                                            
       Millions of yen  
     Three months ended June 30, 2016  
       Unrealized holding
gains (losses) on
available-for-sale
securities
     Unrealized gains
(losses) on cash
flow hedges
     Foreign currency
translation
adjustment
     Pension liability
adjustment
     Total  

Balance as of March 31, 2016

     ¥ 61,624      ¥ (218    ¥ 6,281      ¥ (52,799    ¥ 14,888  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss) before reclassifications

       (10,839      (84      (8,105      (443      (19,471

Amounts reclassified from accumulated other comprehensive income (loss)

       (982      12        —          584        (386
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss)

       (11,821      (72      (8,105      141        (19,857
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Less: other comprehensive (income) loss attributable to noncontrolling interests

       3        —          202        —          205  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of June 30, 2016

     ¥ 49,806      ¥ (290    ¥ (1,622    ¥ (52,658    ¥ (4,764
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
       Millions of yen  
     Three months ended June 30, 2017  
       Unrealized holding
gains (losses) on
available-for-sale
securities
     Unrealized gains
(losses) on cash
flow hedges
     Foreign currency
translation
adjustment
     Pension liability
adjustment
     Total  

Balance as of March 31, 2017

     ¥ 73,363      ¥ (133    ¥ (6,509    ¥ (42,090    ¥ 24,631  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss) before reclassifications

       2,628        (37      (8,522      (37      (5,968

Amounts reclassified from accumulated other comprehensive income (loss)

       166        12        7,264        473        7,915  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss)

       2,794        (25      (1,258      436        1,947  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Less: other comprehensive (income) loss attributable to noncontrolling interests

       (0      —          31        —          31  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of June 30, 2017

     ¥ 76,157      ¥ (158    ¥ (7,736    ¥ (41,654    ¥ 26,609  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

9


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

Reclassifications out of accumulated other comprehensive income (loss) to net income —

Amounts reclassified out of accumulated other comprehensive income (loss) to net income and affected line items in the consolidated statements of income for the three months ended June 30, 2016 and 2017 were as follows:

 

                                                                          
       Millions of yen
       Amounts reclassified out of accumulated other comprehensive income (loss) (*1)
       Three months
ended June 30,
2016
     Three months
ended June 30,
2017
    

            Affected line items in the  consolidated            

statements of income

Unrealized holding gains (losses) on available-for-sale securities

     ¥  1,373      ¥ (237    “Other, net” of “Other income
(expense)”
       60        —        “Equity in net income (losses) of affiliates”
    

 

 

    

 

 

    
       1,433        (237    Pre-tax amount
       (451      71      Tax benefit (expense)
    

 

 

    

 

 

    
       982        (166    Net-of-tax amount
    

 

 

    

 

 

    

Unrealized gains (losses) on cash flow hedges

       (17      (17    “Equity in net income (losses) of affiliates”
    

 

 

    

 

 

    
       (17      (17    Pre-tax amount
       5        5      Tax benefit (expense)
    

 

 

    

 

 

    
       (12      (12    Net-of-tax amount
    

 

 

    

 

 

    

Foreign currency translation adjustment

       —          (10,926    “Equity in net income (losses) of affiliates”
    

 

 

    

 

 

    
       —          (10,926    Pre-tax amount
    

 

 

    

 

 

    
       —          3,662      Tax benefit (expense)
    

 

 

    

 

 

    
       —          (7,264    Net-of-tax amount
    

 

 

    

 

 

    

Pension liability adjustment

       (852      (690    (*2)
    

 

 

    

 

 

    
       (852      (690    Pre-tax amount
       268        217      Tax benefit (expense)
    

 

 

    

 

 

    
       (584      (473    Net-of-tax amount
    

 

 

    

 

 

    

Total reclassified amounts

     ¥ 386      ¥ (7,915    Net-of-tax amount
    

 

 

    

 

 

    

 

(*1) Amounts in parentheses indicate decreased effects on net income.
(*2) Amounts reclassified out of pension liability adjustment are included in the computation of net periodic pension cost.

 

10


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

4. Segment information:

DOCOMO’s chief operating decision maker (the “CODM”) is its Board of Directors. The CODM evaluates the performance and makes resource allocations of its segments based on the information provided by DOCOMO’s internal management reports.

DOCOMO has three operating segments, which consist of telecommunications business, smart life business and other businesses.

The telecommunications business includes mobile phone services (LTE(Xi) services and FOMA services), optical-fiber broadband services, satellite mobile communications services, international services and the equipment sales related to these services. The smart life business includes video and music distribution, electronic books and other services offered through DOCOMO’s “dmarket” portal, as well as finance/payment services, shopping services and various other services to support our customers’ daily lives. The other businesses primarily include “Mobile Device Protection Service,” as well as the development, sales and maintenance of IT systems.

Accounting policies used to determine segment operating revenues and operating income (loss) are consistent with those used to prepare the consolidated financial statements in accordance with U.S. GAAP.

 

11


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

Segment operating revenues:

 

                                                 
       Millions of yen  
       Three months ended
June  30, 2016
     Three months ended
June  30, 2017
 

Telecommunications business-

       

External customers

     ¥ 894,659      ¥ 924,034  

Intersegment

       265        282  
    

 

 

    

 

 

 

Subtotal

       894,924        924,316  

Smart life business-

       

External customers

       122,161        109,360  

Intersegment

       3,088        4,179  
    

 

 

    

 

 

 

Subtotal

       125,249        113,539  

Other businesses-

       

External customers

       91,850        103,302  

Intersegment

       2,961        3,259  
    

 

 

    

 

 

 

Subtotal

       94,811        106,561  
    

 

 

    

 

 

 

Segment total

       1,114,984        1,144,416  

Elimination

       (6,314      (7,720
    

 

 

    

 

 

 

Consolidated

     ¥ 1,108,670      ¥ 1,136,696  
    

 

 

    

 

 

 

 

Segment operating income (loss):

 

    
       Millions of yen  
       Three months ended
June 30, 2016
     Three months ended
June 30, 2017
 

Telecommunications business

     ¥ 270,410      ¥ 241,418  

Smart life business

       17,203        16,666  

Other businesses

       11,678        20,215  
    

 

 

    

 

 

 

Consolidated

     ¥ 299,291      ¥ 278,299  
    

 

 

    

 

 

 

Segment operating income (loss) is segment operating revenues less segment operating expenses.

DOCOMO does not disclose geographical information because the amounts of operating revenues generated outside Japan are immaterial.

 

12


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

5. Contingencies:

(a) Litigation

DOCOMO is involved in litigation and claims arising in the ordinary course of business. DOCOMO believes that none of the litigation or claims outstanding, pending or threatened against DOCOMO would have a materially adverse effect on DOCOMO’s results of operations, financial position or cash flows.

(b) Guarantees

DOCOMO enters into agreements in the normal course of business that provide guarantees for counterparties. These counterparties include subscribers, related parties, foreign wireless telecommunications service providers and other business partners.

DOCOMO provides subscribers with guarantees for product defects of cellular phone handsets sold by DOCOMO, but DOCOMO is provided with similar guarantees by the handset vendors and no liabilities were recognized for these guarantees.

Though the guarantees or indemnifications provided in transactions other than those with the subscribers are different in each contract, the likelihood of almost all of the performance of these guarantees or indemnifications are remote and amount of payments DOCOMO could be claimed for is not specified in almost all of the contracts. Historically, DOCOMO has not made any significant guarantee or indemnification payments under such agreements. DOCOMO estimates the fair value of the obligations related to these agreements is not significant. Accordingly, no liabilities were recognized for these obligations.

 

13


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

6. Fair value measurements:

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value according to observability. The inputs are described as follows:

Level 1—quoted prices in active markets for identical assets or liabilities

Level 2—inputs other than quoted prices included within Level 1 that are observable for the asset or liability

Level 3—unobservable inputs for the asset or liability

DOCOMO also distinguishes assets and liabilities measured at fair value every period on a recurring basis from those measured on a nonrecurring basis in certain circumstances.

(a) Assets and liabilities measured at fair value on a recurring basis

DOCOMO’s assets and liabilities measured at fair value on a recurring basis include available-for-sale securities and derivatives.

DOCOMO’s assets and liabilities that were measured at fair value on a recurring basis at March 31, 2017 and June 30, 2017 were as follows:

 

                                                                                                   
       Millions of yen  
       March 31, 2017  
       Total        Level 1        Level 2        Level 3  

Assets:

                   

Available-for-sale securities

                   

Equity securities (domestic)

     ¥ 83,974        ¥ 83,974        ¥ —          ¥ —    

Equity securities (foreign)

       95,680          95,680          —            —    

Debt securities (foreign)

       5          5          —            —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total available-for-sale securities

       179,659          179,659          —            —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Derivatives

                   

Foreign exchange forward contracts

       0          —            0          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total derivatives

       0          —            0          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

     ¥ 179,659        ¥ 179,659        ¥ 0        ¥ —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Liabilities:

                   

Derivatives

                   

Foreign currency option contracts

     ¥ 1,336        ¥ —          ¥ 1,336        ¥ —    

Foreign exchange forward contracts

       11          —            11          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total derivatives

       1,347          —            1,347          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

     ¥ 1,347        ¥ —          ¥ 1,347        ¥ —    
    

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between Level 1 and Level 2.

 

14


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

                                                                                                   
       Millions of yen  
       June 30, 2017  
       Total        Level 1        Level 2        Level 3  

Assets:

                   

Available-for-sale securities

                   

Equity securities (domestic)

     ¥ 84,045        ¥ 84,045        ¥ —          ¥ —    

Equity securities (foreign)

       96,737          96,737          —            —    

Debt securities (foreign)

       5          5          —            —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total available-for-sale securities

       180,787          180,787          —            —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Derivatives

                   

Foreign exchange forward contracts

       0          —            0          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total derivatives

       0          —            0          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

     ¥ 180,787        ¥ 180,787        ¥ 0        ¥ —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Liabilities:

                   

Derivatives

                   

Foreign currency option contracts

     ¥ 1,074        ¥ —          ¥  1,074        ¥ —    

Foreign exchange forward contracts

       0          —            0          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total derivatives

       1,074          —            1,074          —    
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

     ¥ 1,074        ¥ —          ¥ 1,074        ¥ —    
    

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between Level 1 and Level 2.

Available-for-sale securities

Available-for-sale securities include marketable equity securities and debt securities, which are valued using quoted prices in active markets for identical assets. Therefore, these securities are classified as Level 1.

Derivatives

Derivative instruments are foreign currency option contracts and foreign exchange forward contracts, which are valued based on observable market data. Therefore, these derivatives are classified as Level 2.

 

15


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

(b) Assets and liabilities measured at fair value on a nonrecurring basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in certain circumstances.

DOCOMO may be required to measure fair value of receivables held for sale, long-lived assets, equity securities whose fair values are not readily determinable, and other assets or liabilities on a nonrecurring basis.

DOCOMO’s assets that were measured at fair value on a nonrecurring basis for the three months ended June 30, 2016 and 2017 were as follows:

 

                                                                                                                            
       Millions of yen  
       Three months ended June 30, 2016  
       Total        Level 1        Level 2        Level 3        Gains (losses)
(before  taxes)
 

Assets:

                        

Receivables held for sale

     ¥ 461,912        ¥ —          ¥ 461,912        ¥ —          ¥ (6,297
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
       Millions of yen  
       Three months ended June 30, 2017  
       Total        Level 1        Level 2        Level 3        Gains (losses)
(before taxes)
 

Assets:

                        

Receivables held for sale

     ¥ 459,274        ¥ —          ¥ 459,274        ¥ —          ¥ (5,526
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Receivables held for sale

Receivables held for sale are measured at the lower of cost or fair value.

Receivables held for sale are classified as Level 2. DOCOMO measures the fair value of the receivables held for sale by discounting, at LIBOR-based discount rates, estimated future cash flows while taking into account factors such as default probabilities and loss severity of similar trade receivables.

 

16


Table of Contents

NTT DOCOMO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

 

7. Subsequent event:

There were no significant subsequent events to be disclosed.

 

17