November 1, 2016

Summary of Consolidated Financial Results
For the First Half Ended September 30, 2016 [Japan GAAP]
Name of Company:
Stock Code:
Stock Exchange Listing:
URL:
Representative
Title:
Name:
Contact Person
Title:Name:
Phone:
Date of quarterly securities report (tentative):
Date of commencement of dividend payment (tentative):
Quarterly earnings supplementary explanatory documents:
Quarterly earnings presentation:

KAGA ELECTRONICS CO., LTD.
8154
Tokyo Stock Exchange, First Section
http://www.taxan.co.jp/
President & COO
Ryoichi Kado
Managing Director, Administration Headquarters
Eiji Kawamura+81-(0)3-5657-0111
November 14, 2016
December 2, 2016
Yes
Yes (for institutional investors)(Yen in millions, rounded down)

1.

Financial results for the first half of the fiscal year ending March 2017 (April 1, 2016 – September 30, 2016)(1) Result of operations (Consolidated, year-to-date)(Percentage figures represent year on year changes)
Net sales

Operating income

Ordinary income

Profit attributable toowners of parent

Million yen%

Million yen%

Million yen%

Million yen%

First half ended September 2016

109,659(10.8)

3,212(23.4)

3,045(31.2)

3,111

5.7

First half ended September 2015

122,975

2.2

4,195

36.8

4,427

21.7

2,943

36.4

Note: Comprehensive income: First half of FY3/2017: 656 million yen [-67.5%], First half of FY3/2016: 2,017million yen [-34.4%]
Earnings per share

Earnings per share fully diluted
Yen

Yen

First half ended September 2016110.11-First half ended September 2015

104.17-(2) Financial Position (Consolidated)
Total assets

Equity ratio

Million yen%

As of September 30, 2016

120,167

61,47551.1

As of March 31, 2016

124,281

61,80849.7

Reference: Shareholders’ equity
As of September 30, 2016: 61,424 million yen
2.

Net assets

Million yen

As of March 31, 2016

61,764 million yen

Dividends
End of 1Q
Yen

End of 2Q
Yen

Fiscal year ended March 2016

-

20.00

Fiscal year ending March 2017

-

25.00

Dividend per share
End of 3Q
Yen-

End of FY
YenFull year
Yen

35.00

55.00

Fiscal year ending March 2017 (est.)
25.00
50.00
Note: Change in the estimation of dividend from the latest announcement: None
Yearend dividend of FY3/16 includes ordinary dividend of 20.00 yen and commemorative dividend of 15.00 yen
Interim dividend of FY3/17 includes ordinary dividend of 20.00 yen and commemorative dividend of 5.00 yen
Yearend dividend of FY3/17 includes ordinary dividend of 20.00 yen and commemorative dividend of 5.00 yen

3.

Forecast for the fiscal year ending March 2017 (Consolidated, April 1, 2016 to March 31, 2017)(Percentage figures represent year on year changes)
Profit attributable
Earnings per
Net sales
Operating income
Ordinary income
to owners of parent
shareMillion yen%

Million yen%

Million yen%

Million yen%

Yen

230,000

(6.3)

5,700

(26.8)

6,400(19.1)

5,800

6.7

205.27Full year

Note: Change in the forecast from the latest announcement: None

* Notes(1) Changes in significant subsidiaries (Changes in specific subsidiaries accompanied by changes in the scope of
consolidation): None
Note: There was a change in a specified subsidiary that did not alter the scope of consolidation. For more information, please see “2.
Other Information (1) Changes in significant subsidiaries” on page 3 of Supplementary Information.

(2) Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements: None
(3) Changes in accounting principles and estimates, and retrospective restatement(a) Changes due to revision of accounting standards: Yes(b) Changes other than in (a): None(c) Changes in accounting estimates: None(d) Retrospective restatement: None
Note: For more information, please see 2. Other Information (3) Changes in accounting principles and estimates, and retrospective
restatement on page 3 of Supplementary Information.

(4) Number of shares outstanding (common stock)(a) Shares outstanding (including treasury shares)
As of September 30, 2016:

28,702,118

As of March 31, 2016:

28,702,118

447,079

As of March 31, 2016:

446,824

Period ended September 30, 2015:

28,255,854(b) Treasury shares
As of September 30, 2016:(c) Average number of shares (quarterly consolidated cumulative period)
Period ended September 30, 2016:

28,255,145* Information concerning quarterly review procedure
The rule mandating a review of quarterly financial statements (under the Financial Instruments and Exchange Act) does not apply
to this Summary of Financial Results. The financial statements for the first half were under review at the time this Summary of
Financial Results was released.
* Cautionary statement regarding forecasts of operating results and special notes
Forward-looking statements in these materials are based on information available to management at the time this report was
prepared and assumptions that management believes are reasonable. Actual results may differ significantly from these statements
for a number of reasons.

Index for Supplementary Information
1.

Results of Operations.................................................................................................................................................................2

2.

(1)
Overview on consolidated business performance ...........................................................................................................2(2)
Overview of financial condition .....................................................................................................................................2(3)
Forecast for fiscal year ending March 2017 ....................................................................................................................3
Other Information ......................................................................................................................................................................3

3.

(1)
Changes in significant subsidiaries: ................................................................................................................................3(2)
Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements: ...........3(3)
Changes in accounting principles and estimates, and retrospective restatements: ..........................................................3(4)
Supplementary information ............................................................................................................................................3
Quarterly Consolidated Financial Statements ............................................................................................................................4(1)
Quarterly consolidated balance sheet ..............................................................................................................................4(2)
Quarterly consolidated statements of income and consolidated statements of comprehensive income ..........................6(3)
Quarterly consolidated statements of cash flows ............................................................................................................8(4)
Notes to quarterly consolidated financial statement .......................................................................................................9(Notes to going concern assumptions) .....................................................................................................................................9(Significant change in shareholders’ equity) ............................................................................................................................9(Segment information) .............................................................................................................................................................9

1

1.
(1)

Results of Operations
Overview on consolidated business performance
In the first half of the fiscal year, consumer spending recovered and there was a slow improvement in jobs in Japan due to thegovernment’s economic stimulus measures and the monetary policies of the Bank of Japan. However, the yen became
stronger because of overseas events such as slowing economic growth in China and other emerging countries and Britain’s
departure from the EU. The resulting concerns about effects on corporate earnings and capital expenditures in Japan andother factors caused the Japanese economy to remain flat during the first half.
In the electronics industry, the principal area of operations for the KAGA ELECTRONICS Group, market conditions werechallenging mainly because of soft demand for PCs, smartphones and other wireless products, and amusement products. At
the same time, there is growing demand associated with the increasing use of electronics in automobiles and growth in the
IoT (Note 1), big data, artificial intelligence and other relatively new categories of the electronics industry.
Based on the management philosophy of “Everything we do is for our customers,” the KAGA ELECTRONICS Group
combined and reorganized business activities to become more efficient and channeled substantial resources to growing
market sectors in order to strengthen and expand business operations. There were also initiatives aimed at increasing sales tomajor current customers in Japan and growing in other countries. However, first half performance was impacted by lower
production volume at major customers, a change in distribution channels and other events.
First half consolidated net sales decreased 10.8% from one year earlier to 109,659 million yen, operating income was down
23.4% to 3,212 million yen, and ordinary income fell 31.2% to 3,045 million yen. Profit attributable to owners of parent
increased 5.7% to 3,111 million yen mainly because of a decrease in income taxes caused by tax effect accounting.
(Note 1): IoT is the abbreviation for Internet of Things. It is a concept that supports or enables the creation of new services and businessmodels by connecting all objects through the Internet.

Business segment performance was as follows.
(a) Electronic components (Development, manufacture and sale of semiconductors, general electronic components andother products, EMS (Note 2), and other activities)
The volume of semiconductors in Japan decreased because of reduced production at major customers in Japan andoverseas, lower sales to amusement product manufacturers, and a change in the policies of semiconductor sales agents.
The result was a 13.6% decrease in sales to 82,784 million yen and a 37.0% decrease in operating income to 2,366
million yen.
(Note 2)(b)Electronics manufacturing service is a term used for the provision of product development and manufacturing services onan outsourcing basis.

Information equipment (Sales of PCs, PC peripherals, home electric appliances, photograph and imaging products,
original-brand products, and other products)
The volume of PCs and other consumer products increased because of sales campaigns and other activities for raisingsales. First half performance also benefited from a recovery in demand for housing-related products. In addition, therealignment of subsidiaries improved efficiency in this segment. Sales increased 2.0% to 20,524 million yen andoperating income was up 135.5% to 539 million yen.

(c) Software (Production of computer graphics, planning and development of amusement products, and other activities)
This segment is focusing on production of computer graphics for animation and development of software. Segment
sales increased 26.8% to 1,442 million yen and operating income was up 6.6% to 307 million yen.
(d)

(2)

Others (Electronic device repairs and support, manufacture and sale of amusement products, sales of sporting goods,
and other activities)
Sales of arcade amusement machines and golf products in Japan were soft because of a downturn in consumer
spending. Segment sales decreased 16.8% to 4,909 million yen and there was an operating loss of 57 million yen
compared with operating loss of 102 million yen in the first half of the previous fiscal year.

Overview of financial condition(a) Assets, liabilities and net assets
Assets decreased 4,113 million yen from the end of the previous fiscal year to 120,167 million yen at the end of the firsthalf mainly because of a decrease in notes and accounts receivable-trade.
Liabilities decreased 3,780 million yen to 58,692 million yen mainly because of a decrease in notes and accounts payabletrade and loans payable.
Net assets decreased 332 million yen to 61,475 million yen mainly because of a decrease in the foreign currency translation
adjustment due to fluctuation of exchange rate.

2

(b) Cash flows
Cash and cash equivalents were 25,683 million yen at the end of the first half, 3,804 million yen more than at the end of theprevious fiscal year.
(Operating activities)
Net cash provided by operating activities was 7,723 million yen compared with 4,344 million yen one year earlier. A
decrease in accounts receivable-trade was the main reason for the increase.
(Investing activities)
Net cash used in investing activities was 246 million yen. One year earlier, investing activities provided net cash of 385
million yen. The purchase of property, plant and equipment was the primary use of cash.
(Financing activities)
Net cash used in financing activities was 2,253 million yen compared with 1,614 million yen one year earlier. Cashdividends and repayments of long-term loans payable were the primary uses of cash.
(3)

Forecast for fiscal year ending March 2017
There are no revisions to the forecast for the fiscal year ending March 31, 2017 that was announced on October 24, 2016 in“Notice of Revision in Forecast and Dividends for Fiscal Year Ending March 2017”

2.
(1)

Other Information(2)

Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements:
None

(3)

Changes in accounting principles and estimates, and retrospective restatements:
Changes in accounting policy(Application of Practical Solution on a change in depreciation method due to Tax Reform 2016)
In association with revisions to the Corporation Tax Act, KAGA ELECTRONICS has applied Practical Solution on achange in depreciation method due to Tax Reform 2016 (ASBJ Practical Issues Task Force (PITF) Solution No. 32, June17, 2016) from the first quarter of the current fiscal year. As a result, the depreciation method for building facilities andstructures acquired on or after April 1, 2016 has been changed from the declining-balance method to the straight-line
method.
This revision did not have a material effect on earnings.

(4)

Supplementary information(Application of Revised Implementation Guidance on Recoverability of Deferred Tax Assets)
Beginning with the first quarter of the current fiscal year, KAGA ELECTRONICS is using Revised Implementation
Guidance on Recoverability of Deferred Tax Assets (ASBJ Implementation Guidance No. 26, March 28, 2016).

Changes in significant subsidiaries:
None
There was no change in a specified subsidiary that altered the scope of consolidation. However, during the first quarter,
KAGA SOLUTION NETWORK CO., LTD., a consolidated subsidiary and KAGA HIGHTECH CO., LTD. merged with
KAGA SOLUTION NETWORK the remaining company. As a result, KAGA SOLUTION NETWORK has become a
specified subsidiary.

3

3.
(1)

Quarterly Consolidated Financial Statements
Quarterly consolidated balance sheet(Million yen)
Fiscal year ended March 2016
(As of March 31, 2016)

First half ended September 2016
(As of September 30, 2016)

ASSETS
Current assets
Cash and deposits

22,516

26,055

Notes and accounts receivable-trade

54,79547,835166

165

14,89814,767

Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other

266

426

4,010

4,121

849

1,235

4,638

3,999

(179)

(166)

101,961

98,439Buildings and structures, net

5,112

4,928

Machinery, equipment and vehicles, net

1,992

1,810

813

717

4,138

4,127

0

-

12,058

11,584

Goodwill

495

450

Software

422

401

Other

85

79

1,003

931

Investment securities

6,519

6,318

Deferred tax assets

257

480

Guarantee deposits

739

716

Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment

Tools, furniture and fixtures, net
LandConstruction in progress
Total property, plant and equipment
Intangible assets

Total intangible assets
Investments and other assets

916

922

Other

1,931

1,758

Allowance for doubtful accounts(1,107)(985)

Insurance funds

Total investments and other assets
Total noncurrent assets
Total assets

4

9,257

9,211

22,31921,727124,281

120,167(Million yen)
Fiscal year ended March 2016
(As of March 31, 2016)

First half ended September 2016
(As of September 30, 2016)

Notes and accounts payable-trade36,85835,994

Short-term loans payable

6,295

5,527

Accrued expenses

LIABILITIESCurrent liabilities

3,311

3,149

Income taxes payable

995

796

Provision for directors' bonuses

185

102

Other

3,523

2,698

Total current liabilities

51,16948,268Long-term loans payable

6,007

5,293

Deferred tax liabilities

1,246

1,162

Provision for directors' retirement benefits

1,211

1,193

Net defined benefit liability

1,774

1,780

Asset retirement obligations

142

139

Other

919

854

11,303

10,42362,472

58,692

Capital stock

12,133

12,133

Capital surplus

13,912

13,912Retained earnings

35,19537,317

Treasury shares

(539)

(539)

60,70262,824681

546

Noncurrent liabilities

Total noncurrent liabilities
Total liabilities
NET ASSETS
Shareholder’s equity

Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment

4

(6)

713

(1,645)Remeasurements of defined benefit plans

(338)

(294)

Total accumulated other comprehensive income

1,061(1,399)44

50

Non-controlling interests
Total net assets
Total liabilities and net assets

561,80861,475

124,281

120,167

Quarterly consolidated statements of income and consolidated statements of comprehensive income(2)

For the first half (April 1, 2016 – September 30, 2016)(Million yen)First half ended September 2015
(April 1, 2015 – September 30, 2015)

First half ended September 2016
(April 1, 2016 – September 30, 2016)

Net sales

122,975

109,659

Cost of sales

105,983

94,486Gross profit

16,991

15,172

Selling, general and administrative expenses

12,796

11,959Operating income

4,195

3,212

Interest income

38

24

Dividends income

7071Commission fee

113

114

Other

160

124

Total non-operating income

382

335

Interest expenses

58

66

Foreign exchange losses

44

415

Other

47

20

Total non-operating expenses

150

502

4,427

3,045

Gain on sales of noncurrent assets

2

13Gain on sales of investment securities

12

Non-operating income

Non-operating expenses

Ordinary income
Extraordinary income

Gain on transfer of business-89

Total extraordinary income

3105

Extraordinary loss
Loss on retirement of noncurrent assets

4

6Loss on sales of investment securities-

31

Loss on valuation of investment securities

4-

Business structure improvement expenses

13

11

Loss on valuation of golf club membership-

11

Special retirement expenses

15

-

Other

0

0

Total extraordinary loss

39

60

Profit before income taxes

4,392

3,090

Income taxes - current

1,100

688

Income taxes - deferred

355

(717)

Total income taxes

1,455

(29)

Profit

2,936

3,119

Profit attributable to owners of parent

2,943

3,111

(6)

7

Profit (loss) attributable to non-controlling interests

6

(Million yen)First half ended September 2015
(April 1, 2015 – September 30, 2015)

First half ended September 2016
(April 1, 2016 – September 30, 2016)

(154)

(134)

(29)
(703)

(11)
(2,360)

(31)

43

(919)

(2,462)

2,017

656

2,024

649

(7)

6

Other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net oftax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests

7

(3)

Quarterly consolidated statements of cash flows(Million yen)First half ended Sept. 2015
First half ended Sept. 2016
(Apr. 1, 2015 – Sept. 30, 2015) (Apr. 1, 2016 – Sept. 30, 2016)

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Increase (decrease) in provision for directors' retirement benefits
Increase (decrease) in allowance for doubtful accounts
Interest and dividends income
Interest expenses
Loss (gain) on valuation of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Decrease (increase) in accounts receivable-other
Decrease (increase) in advance payments
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accrued expenses
Decrease (increase) in consumption taxes refund receivable
Decrease (increase) in other current assets
Increase (decrease) in other current liabilities
Other, net
Sub-totalInterest and dividends income received
Interest expenses paid
Income taxes paid
Other, net
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from purchase of shares of subsidiaries resulting inchange in scope of consolidation
Payments of short-term loans receivable
Proceeds from cancellation of insurance funds
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Other payments
Other proceeds
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

8

4,392
764
106
(326)
23
(109)
58
4
2,766
1,178
237
(514)
(3,430)
(149)
367
(26)
303
(66)
5,580
112
(57)
(1,283)
(7)
4,344

3,090
743
44
(13)
(0)
(96)
66
5,320
(1,108)
(33)
115
759
(44)
173
67
(442)
(89)
8,552
96
(65)
(852)
(6)
7,723

(701)
320
(144)
(160)
61

(535)
93
(71)
(149)
175

8

-

(3)
375
(4)
71
(32)
595
385

(1)
2
(5)
15
(343)
571
(246)

(145)
(714)
(705)
(49)
(1,614)(325)
2,790
17,56920,360

(476)
(714)
(987)
(74)
(2,253)(1,419)3,804
21,87925,683(4)Notes to quarterly consolidated financial statement(Notes to going concern assumptions)
None(Significant change in shareholders’ equity)
None(Segment information)
I. For the first half ended September 2015 (April 1, 2015 – September 30, 2015)
1. Information about sales and income (loss) by reporting segments
Reporting segments

Net salesof which to outside
customersof which intersegment
Total
Segment income(loss)
Notes:

Adjustments(Note 1)

(Million yen)Amount on thequarterly
consolidated
statements of income
and consolidated
statements ofcomprehensive
income(Note 2)

Electronic
components

Informationequipment

Software

OthersTotal

95,815

20,120

1,136

5,901

122,975-

122,975

422

310

1,705

920

3,358

(3,358)-96,23820,431

2,842

6,822

126,333(3,358)122,975

3,755

229

288

(102)

4,170

24

4,195

1. Adjustment in segment income of 24 million yen includes 63 million yen for elimination of intersegment trade and -38 million yen for amortization of goodwill.
2. Segment income (loss) is adjusted for operating income (loss) on the quarterly consolidated statements
of income and consolidated statements of comprehensive income.

2. Reportable segment information concerning impairment losses for noncurrent assets or goodwill amortization(Significant impairment losses for noncurrent assets)
None(Significant changes in goodwill)
None(Significant gain on bargain purchase)None

9II. For the first half ended September 2016 (April 1, 2016 – September 30, 2016)
1. Information about sales and income (loss) by reporting segments
Reporting segments

Net salesof which to outside
customersof which intersegment
Total
Segment income(loss)
Notes:

Adjustments(Note 1)

(Million yen)Amount on thequarterly
consolidated
statements of income
and consolidated
statements ofcomprehensive
income(Note 2)

Electronic
components

Informationequipment

Software

OthersTotal

82,784

20,524

1,442

4,909

109,659-

109,659

511

261

1,041

1,584

3,399

(3,399)-83,29520,786

2,483

6,493

113,059(3,399)109,659

2,366

539

307

(57)

3,156

56

3,212

1. Adjustment in segment income of 56 million yen includes 56 million yen for elimination of intersegment trade.
2. Segment income (loss) is adjusted for operating income (loss) on the quarterly consolidated statements
of income and consolidated statements of comprehensive income.

2. Reportable segment information concerning impairment losses for noncurrent assets or goodwill amortization(Significant impairment losses for noncurrent assets)
None(Significant changes in goodwill)
None(Significant changes in gain on bargain purchase)None10