October 29, 2010

Summary of Consolidated Financial Results
For the First Half Ended September 2010
Name of Company:
Stock Code:
Stock Exchange Listing:
URL:
Representative
Title:
Name:
Contact Person
Title:Name:
Phone:
Date of quarterly securities report:
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
Tomohisa Tsukamoto
Senior Managing Director, Finance & Administration Headquarters
Waichiro Shimoyama+81-(0)3-4455-3111
November 9, 2010
December 3, 2010
Yes
Yes (For institutional investors)(Yen in millions, rounded down)

1. Financial results for the first half ended September 2010 (April 1, 2010 – September 30, 2010)(1) Result of operations (Consolidated, year-to-date)(Percentage figures represent year on year changes)

First half ended September 2010
First half ended September 2009

Net sales
MillionYoY
yen Change %120,470
5.7
113,926(19.3)

Operating income
MillionYoY
yen Change %
2,594
605.9
367
(88.6)Net income per share

Net income
MillionYoY
yen Change %
1,412
(931)
-

Net income per share fully diluted
Yen
-

Yen
51.18
(33.77)First half ended September 2010
First half ended September 2009

Ordinary income
MillionYoY
yen Change %
2,644
201
(94.1)(2) Financial Position (Consolidated)
Total assets

Net assets

Million yen
111,629
113,962First half ended September 2010
Fiscal year ended March 2010
Note: Shareholders’ equity
As of September 30, 2010 46,702 million yen
As of March 31, 2010
46,841 million yen

2.

Equity ratio

Million yen
48,39848,553

Yen
1,692.26
1,697.27

Dividends
End of 1Q
Yen-

End of 2Q
Yen
15.00
15.00

Dividend per share
End of 3Q
Yen-

Fiscal year ended March 2010
Fiscal year ending March 2011
Fiscal year ending March 2011 (est.)
Notes: Change in the estimation of dividend for the fiscal year in this period: Yes

3.

Net assets per share
%
41.8
41.1

End of FY
Yen
15.00

Full year
Yen
30.00

15.00

30.00

-

Forecast for the fiscal year ending March 2011 (Consolidated, April 1, 2010 to March 31, 2011)
Net sales

Operating income

Million yen% Million yen
Full year
230,000(3.9)
2,900
Note: Change in the forecast made in this period: Yes

Ordinary income% Million yen
83.2
3,000

Net income% Million yen
134.3
1,800

%
-

Net income
per share
Yen
65.22

4. Others (Please refer to page 2 “Others” for details)(1) Changes in significant subsidiaries: None
Note: This section shows whether or not there is a change in Specified Subsidiaries that led to the change of theconsolidation scope during the current quarter.
(2) Use of simple method in accounting procedures and application of accounting procedures specific to the quarterly
consolidated financial statements: None
Note: This section shows the use of any simplified accounting method, or the use of any peculiar accounting
method for consolidated financial statements.
(3) Changes in accounting principles and procedures, presentation methods and other items in the preparation of thequarterly consolidated financial statements(a) Changes due to revision of accounting standards: Yes(b) Changes other than in (a): None
Note: Items to be disclosed in “Significant Changes in the Basis of Presenting Quarterly Consolidated Financial
Statement”(4) Number of shares outstanding (common stock)(a) Shares outstanding (including treasury stock)
As of September 30, 2010: 28,702,118
As of March 31, 2010: 28,702,118(b) Treasury stock
As of March 31, 2010: 1,103,943
As of September 30, 2010: 1,104,194(c) Average number of shares (consolidated half cumulative)
Period ended September 30, 2009: 27,596,910
Period ended September 30, 2010: 27,598,119*Description of quarterly review procedure implementation status
It is under the quarterly review procedure process based upon the Financial Instruments and Exchange Act at the timeof disclosure of this report.
*Cautionary statement regarding forecasts of operating results and special notes
1. Forward-looking statements in these materials are based on information available to management at the time thisreport was prepared and assumptions that management believes are reasonable. Actual results may differ
significantly from these statements for a number of reasons.
2. For information about the dividend for the fiscal year ending on March 31, 2011, please refer to today’s news
release titled “Notice Concerning Dividend and Revision to Dividend Forecast.”Index for Supplementary Information
1. Business Results·······················································································································································1(1) Overview on consolidated business performance·······························································································1(2) Overview of financial condition ·························································································································2(3) Forecast for fiscal year ending March 2011 ·······································································································2
2. Others·······································································································································································2(1) Outline of changes in Significant Accounting Policies, Procedures and Presentation ·······································2
3. Quarterly Consolidated Financial Statements ·········································································································3(1) Quarterly consolidated balance sheets················································································································3(2) Quarterly consolidated statements of income·····································································································5(April 1, 2010 - September 30, 2010)·················································································································5(July 1, 2010 - September 30, 2010) ··················································································································6(3) Quarterly consolidated statement of cash flow···································································································7(4) Notes to ongoing concern assumptions ··············································································································8(5) Segment information ··········································································································································8(6) Notes on significant change in shareholders’ equity ··························································································9

1. Business Results(1) Overview on consolidated business performance
In the first half of the fiscal year, the global economy moved from a recovery phase to a state where the outlook
has become unclear. One reason is economic conditions in emerging countries in Eastern Asia and other regions,where the pace of growth is slowing, and in the United States and Europe, where there were hopes for a recovery.
Currency problems are also responsible for the uncertain outlook.
The Japanese economy began to show signs of a recovery early in the fiscal year due to growing exports andgovernment economic stimulus programs. However, the economic picture went beyond uncertainty toindications of a downturn in the fiscal year’s second quarter because of the yen’s rapid appreciation, fallingstock prices and the absence of any improvement in unemployment.
The electronics industry benefited from growth in consumer spending that was backed by rising demand in
emerging countries and government economic stimulus programs. There were strong sales of flat-panel TVs,
Blu-ray recorders, PCs and netbooks, smartphones with new functions, and other digital products. In addition,
there was a rush to buy cars in Japan leading up to the end of an eco-car subsidy program. Higher sales of theseproducts generated solid demand for semiconductors, electronic components and other parts used in theseproducts. But the rapid increase in the yen’s value is beginning to have a negative impact on orders.
In response to these challenges, the KAGA ELECTRONICS Group further deepened ties among groupcompanies to conduct effective sales activities. In addition, group companies focused on activities to increase
sales of environmental products such as LED lamps and photovoltaic panels, which are two new products at thegroup. As a result, first half consolidated net sales increased 5.7% from one year earlier to 120,470 million yen.
Operating income increased 605.9% to 2,594 million yen, ordinary income increased 2,442 million yen to 2,644
million yen, and net income was 1,412 million yen compared with a loss of 931 million yen one year earlier.
Business segment performance was as follows.
(a) Electronic components (Development, manufacture and sale of semiconductors, general electronic
components and other products, electronics manufacturing service (EMS)*, and other activities)
Sales of semiconductors and electronic components used in flat-panel TVs and other digital consumer
electronics, cell phones, PCs and other products increased along with a slow economic recovery. In theenvironmental products category, there were higher sales of electronic components for LED lamps and otherproducts. In addition, there was a recovery in EMS orders in Japan from manufacturers of amusement
equipment and overseas from manufacturers of office equipment and climate control equipment. The result
was segment sales of 88,528 million yen and operating income of 2,042 million yen.
*Electronics manufacturing service is a term used for the provision of product development and manufacturing services onan outsourcing basis.

(b) Information equipment (Sales of PCs, PC peripherals, photograph and imaging products, original-brandproducts, and other products)
A shift in the distribution channels of major PC manufacturers to large electronics retailers and specialty storescaused segment sales to decline. However, there were actions aimed at adding new products like SD memory
cards for portable devices and at increasing sales of existing products. Segment sales totaled 24,384 million
yen and operating income was 139 million yen.
(c) Software (Production of computer graphics, planning and development of amusement products, and otheractivities)
Performance in this segment benefited from the addition of new products like image processing ICs foramusement devices and from the delivery of software developed for anime. In addition, this segment includes
the sales of CYBERFRONT Corporation, a company that develops PC game software and that joined the
KAGA ELECTRONICS Group in the first quarter of the current fiscal year. The result was segment sales of
2,715 million yen and operating income of 298 million yen.
(d) Others (Electronic device repairs and support, sales of sporting goods, and other activities)
In the golf product sales business, there was a review and reorganization of stores and sales of new products
like a golf simulation device and speed measuring product were strong. In addition, there was steady growth insales of electronic devices in the education market and in the planning and production of novelty goods. The
result was segment sales of 4,841 million yen and operating income of 209 million yen.
*No prior-year comparisons are shown because this is the first fiscal year in which these business segments are used.

1(2) Overview of financial condition(a) Assets and net assets
Total assets were 111,629 million yen at the end of the first half, 2,332 million yen less than at the end of theprevious fiscal year. A decline in notes and accounts receivable-trade was mainly responsible for this decrease.
Net assets decreased 155 million yen to 48,398 million yen and the equity ratio improved 0.7 percentage point
to 41.8%.
(b) Cash flows
There was a net decrease of 42 million yen in cash and cash equivalents from one year earlier to 11,449
million yen at the end of the first half.
Net cash provided by operating activities was 4,591 million yen primarily because of a decrease in notes andaccounts receivable-trade.
Net cash used in investing activities was 1,563 million yen primarily because of payments for the purchase ofproperty, plant and equipment.
Net cash used in financing activities was 3,024 million yen primarily because of a larger net decrease in shortterm bank loans.
(3) Forecast for fiscal year ending in March 2011(a) Revisions to consolidated forecast for fiscal year ending March 2011 (April 1, 2010 – March 31, 2011)
Operating
Ordinary
Net income
Net Sales
Net income
incomeincomeper sharePrevious forecast (A)Revised forecast (B)Difference (B-A)
Pct. change (%)(Ref.) Previous fiscal year

Million yen

Million yen

Million yen

Million yen

Yen

225,000
230,000

1,700
2,900

2,100
3,000

1,300
1,800

47.10
65.22

5,000
2.2

1,200
70.6

900
42.9

500
38.5

-

239,391

1,582

1,280

(318)

(11.55)(b) Reason for revisions
The outlook for the operating environment is expected to remain uncertain for a number of reasons. Amongthem are slowing exports from Japan, the end of Japan’s subsidy for eco-car purchases, slowing economic
growth overseas, and worries about the impact of the strong yen on earnings of Japanese companies.
In response to this uncertain outlook, the KAGA ELECTRONICS Group is aiming to capture synergies by
having group companies in Japan and overseas work even more closely together. Another goal is expanding
the range of products handled by adding new products and more trading rights. The group is also working on
improving operating efficiency. The above revisions reflect the expected benefits of these activities.
2. Others(1) Outline of changes in Significant Accounting Policies, Procedures and Presentation
・ Changes in accounting standard
From the first quarter of the fiscal year ending March 31, 2011, KAGA ELECTRONICS Group applies the”
Accounting Standard for Asset Removal Obligations”(ASBJ Statement No.18 of March 31, 2008) and the“Guidance on Accounting Standard for Asset Retirement Obligations”(ASBJ Guidance No.21 of March 31,2008).
As a result, the operating income and the ordinary income have decreased for 22 million yen, and the income
before income tax and minority interests has decreased for 60 million yen.

2

3. Quarterly Consolidated Financial Statements(1) Quarterly consolidated balance sheet(million yen)First half ended September 2010 Fiscal year ended March 2010
(As of September 30, 2010)(As of March 31, 2010)ASSETS
Current assets
Cash and cash equivalents
Notes and accounts receivable-tradeMarketable securities
Merchandize and finished goods
Work in process
Raw materials and other supplies
Deferred tax assets
OthersAllowance for doubtful receivables
Total current assets

11,65956,30367
14,624
753
3,442
879
5,726
(185)

11,91759,21469
14,483
647
3,011
866
6,813
(184)

93,27096,838Fixed assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
LandConstruction in progress

2,584
1,427
1,104
1,296
471

2,584
1,489
944
1,297
119

Total property, plant and equipment

6,885

6,434

407
857
1,057

484
686
731

2,323

1,901

4,172
273
6,365
(1,661)

4,607
249
5,490
(1,559)Intangible assets
Goodwill
Software
OthersTotal intangible assets
Investments and other assets
Investment securities
Deferred tax assets
OthersAllowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

3

9,149

8,786

18,35817,123

111,629

113,962(million yen)First half ended September 2010 Fiscal year ended March 2010
(As of September 30, 2010)(As of March 31, 2010)
LIABILITIESCurrent liabilities
Notes and accounts payable-trade
Short-term bank loans
Income taxes payable
Allowance for directors’ and corporate auditors’ bonuses
Others42,982
7,035
1,082
140
5,603

43,535
8,935
1,049
20
5,237

56,844

58,779

2,120
1,469

2,500
1,432

1,236
225
1,335

1,222
1,474

6,386

6,629

Total liabilities

63,231

65,408NET ASSETS
Shareholder’s equity
Paid-in capital
Capital surplus
Retained earnings
Treasury stock

12,133
13,91225,010(1,332)

12,133
13,91224,012(1,332)

49,724

48,726(399)(21)(2,599)(195)
8(1,697)(3,021)(1,884)

1
1,693

1,711

Total current liabilities
Long-term liabilities
Long-term bank loans
Allowance for retirement benefits for employees
Allowance for retirement benefits for directors andcorporate auditors
Asset removal obligations
OthersTotal long-term liabilities

Total shareholder’s equity
Valuation and translation adjustments
Valuation differences on available-for-sales securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Total valuation and translation adjustments
Subscription rights to shares
Minority interests
Total net assets
Total liabilities and net assets

448,39848,553

111,629

113,962(2) Quarterly consolidated statements of income
For the first half (April 1, 2010 - September 30, 2010)(million yen)First half ended September 2009First half ended September 2010
(April 1, 2009 – September 30, 2009) (April 1, 2010 – September 30, 2010)
Net sales
Cost of sales

113,926
100,265

120,470
104,410Gross profit

13,661

16,060

Selling, general and administrative expenses

13,293

13,465

Operating income

367

2,594

Non-operating income
Interest income
Dividend income
Commission income
Others

33
41
288

31
35
113
208

363

388

67
324
136

50
219
69

529

338

201

2,644

51
40

140

16

101
1

107

243

4
182
106

10
164
-

8

38
53

Total non-operating income
Non-operating expenses
Interest expense
Foreign exchange losses
OthersTotal non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Compensation income
Gain on foreign currency translation adjustments
for liquidation of subsidiaries
OthersTotal extraordinary income
Extraordinary losses
Loss on retirement of fixed assets
Loss on revaluation of investment securities
Loss on impairment of fixed assets
Loss on adjustment for change of accounting
standard for asset removal obligations
OthersTotal extraordinary losses

301

266

8

2,621

Income, inhabitants and enterprise taxes
Income tax adjustment

620
370

1,084
104

Total taxes
Income (loss) before minority interests
Minority interests in income (loss) of consolidated
subsidiaries
Net income (loss)

990
-

1,188
1,432

Income before income taxes and minority interests

5

(50)

20

(931)

1,412

For the second quarter (July 1, 2010 - September 30, 2010)(million yen)
Second quarter ended September 2009
(July 1, 2009 – September 30, 2009)

Second quarter ended September 2010
(July 1, 2010 – September 30, 2010)

59,86452,65060,77852,510Gross profit

7,213

8,267

Selling, general and administrative expenses

6,593

6,589

Operating income

620

1,678

Non-operating income
Interest income
Dividend income
Commission income
Others

18
9
191

16
4
62
108

219

192

34
249
73

24
163
30

357

219

Ordinary income

483

1,650

Extraordinary income
Gain on sales of fixed assets
Others

15
(21)

0
(7)

Total extraordinary income

(6)

(7)

3
94
106
6

0
73
23
8

Total extraordinary losses
Income before income taxes and minority
interests

211

105

265

1,537

Income, inhabitants and enterprise taxes
Income tax adjustment

356
208

697
(23)

Total taxes
Income (loss) before minority interests
Minority interests in income (loss) ofconsolidated subsidiaries
Net income (loss)

565
-

674
863

(8)

3

(291)

859

Net sales
Cost of sales

Total non-operating income
Non-operating expenses
Interest expense
Foreign exchange losses
OthersTotal non-operating expenses

Extraordinary losses
Loss on retirement of fixed assets
Loss on revaluation of investment securities
Loss on impairment of fixed assets
Loss on closing of stores
Others6

(3) Quarterly consolidated statements of cash flows(million yen)First half ended September 2009First half ended September 2010

(April 1, 2009 – September 30, 2009) (April 1, 2010 – September 30, 2010)

Operating activities
Income before income taxes and minority interest
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivable
Interest and dividend income
Interest expenses
Loss (gain) on revaluation of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Decrease (increase) in accounts receivable-other
Increase (decrease) in notes and accounts payable-trade
Others

8
965
119
0
(74)
67
182
7,317
1,679
1,566
(6,933)
169

2,621
1,110
114
181
(67)
50
164
2,263
(852)
198
(75)
(47)

Sub-total

5,068

5,663

Decrease (increase) in advance payments
Interest and dividends received
Interests paid
Income taxes-paid
Others

(197)
76
(69)
(919)
(22)

101
77
(57)
(1,015)(178)

Net cash provided by (used in) operating activities

3,936

4,591

(1,735)
56
(252)
(441)
205

(899)
6
(523)
(190)
96

164
(388)
239
(483)
692
(212)
62

64
(90)
113
(6)
42
(207)
31

Investing activities
Payment for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payment for purchase of intangible assets
Payment for purchase of investment securities
Proceeds from sales of investment securities
Proceeds from acquisition of securities of subsidiaries,
which changed the scope of consolidation
Short-term loans provided
Short-term loans collected
Security deposits provided
Security deposits collected
Other payments
Other proceeds(2,093)(1,563)Financing activities
Increase (decrease) in short-term bank loans
Payment of dividends
OthersNet cash provided by (used in) investing activities(1,205)(414)(35)(1,891)
(413)
(718)

Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents(1,655)(64)(3,024)(351)

Increase (decrease) in cash and cash equivalents

122

(348)

Cash and cash equivalents, beginning of period

11,368

11,797

Cash and cash equivalents, end of period

11,491

11,4497

(4) Notes to ongoing concern assumptions
None(5) Segment Information
Operating segment information
For the second quarter ended September 2009 (July 1, 2009 – September 30, 2009) and the first half ended
September 2009 (April 1, 2009 – September 30, 2009)
Operating segment information is not presented since the KAGA ELECTRONICS Group has been engaged in asingle sector generally described as the manufacturing and sale of electronics merchandise and products.
Geographical segment information
For the second quarter ended September 2009 (July 1, 2009 – September 30, 2009)
Japan
Net sales(1) of which to outside customers(2) of which inter-segment
Total
Operating income (loss)

48,5293,878
52,408431

North
America

Europe

32
41
73
(35)

578
8
586
(51)

(million yen)
Eliminations
orConsolidated
Corporate

East
Asia

Total

10,723
2,016
12,739186

59,864
5,944
65,808531(5,944)(5,944)89

For the first half ended September 2009 (April 1, 2009 – September 30, 2009)
Japan

North
America

EuropeEast
Asia(million yen)
Eliminations
orConsolidated
Corporate

Total

Net sales(1) of which to outside customers
93,542129
1,202
19,051
113,926(2) of which inter-segment
6,370
101
9
3,739
10,221
Total
99,913231
1,212
22,791
124,148
Operating income (loss)
128
(56)
(91)
223
203
Notes:
1. Countries and regions are classified according to geographical proximity.
2. Countries and regions outside Japan are broken down into the following geographical areas:(1) North America: United States(2) Europe: United Kingdom, Czech Republic, and Russia(3) East Asia: Hong Kong, Singapore, Taiwan, Korea, China, Malaysia, and Thailand(10,221)(10,221)
164

Overseas sales
For the second quarter ended September 2009 (July 1, 2009 – September 30, 2009)
I Overseas sales
II Consolidated sales
III Share of overseas sales in total sales (%)

North America
610
1.0Europe663
1.1

I Overseas sales
II Consolidated sales
III Share of overseas sales in total sales (%)

1,231
1.1

Europe1,370
1.2

113,926
113,926
367(million yen)
East Asia
13,95523.3

For the first half ended September 2009 (April 1, 2009 – September 30, 2009)
North America

59,864
59,864620

Total
15,22959,86425.4(million yen)
East Asia
26,17423.0

Total
28,775
113,926
25.3

Notes:
1. Countries and regions are classified according to geographical proximity.
2. Countries and regions outside Japan are broken down into the following geographical areas:(1) North America: United States(2) Europe: United Kingdom, Czech Republic, and Russia(3) East Asia: Hong Kong, Singapore, Taiwan, Korea, China, Malaysia, and Thailand
3. Overseas sales refer to sales posted by the Company and its consolidated subsidiaries in countries andregions outside Japan.
8

Segment information
1. Summary of reporting segments
Segments used for financial reporting are the constituent units of KAGA ELECTRONICS for which separate
financial information is available and for which the board of directors performs regular reviews for the
purposes of determining the distribution of resources and evaluating results of operations.
KAGA ELECTRONICS conducts business activities by grouping affiliated companies based on products
and services and based on comprehensive strategies for operations in Japan and overseas for products andservices handled.
Consequently, KAGA ELECTRONICS and its affiliated companies have three reporting segments that are
made up of different categories of products and services: electronic components, information equipment andsoftware.
The electronic components segment includes the development, manufacture and sale of semiconductors,
general electronic components and other products, the electronics manufacturing service (EMS), and otheractivities. The information equipment segment includes sales of PCs, PC peripherals, photograph andimaging products, original brand products, and other products. The software segment includes the productionof computer graphics, planning and development of amusement products, and other activities.
2. Information concerning sales, profit (loss) by reporting segment
For the first half ended September 2010 (April 1, 2010 – September 30, 2010)
Reporting segments

Net sales(of which to outside
customers)(of which intersegment)
Total
Segment income

Electronic
components

Informationequipment

Software88,52824,384

2,715

697
89,2262,042

384
24,769
139

1,217
3,933
298

(million yen)Amount in the
consolidated statementof income *3

OthersTotal*1

115,629

4,841

120,470-

2,299
117,929
2,480

1,833
6,675
209

4,133
124,604
2,689(4,133)(4,133)
(95)

Total

Adjustments*2

For the second quarter ended September 2010 (July 1, 2010 – September 30, 2010)
Reporting segments

Net sales(of which to outside
customers)(of which intersegment)
Total
Segment income

Electronic
components

Informationequipment

Software43,717

12,6672,146

375
44,092994

224
12,892
130

955
3,101
528

120,470
2,594(million yen)
Adjustments*2

Amount in the
consolidated statementof income *3

60,778-60,7782,563
63,341
1,718(2,563)(2,563)(40)

60,778
1,678

OthersTotal*158,531

2,246

1,555
60,086
1,653

1,008
3,255
65

Total

120,470-

Notes:
1. Others is a business segment for activities that are not included in the reporting segments, but
included sporting goods business etc.
2. The adjustment for segment operating income is as follows(million yen)
For the first half
ended September 2010
Elimination of inter-segment trade
Amortization of goodwill
Total

For the second quarter
ended September 2010
6
(101)
(95)

9
(50)
(40)

3. Segment operating income includes adjustments to the operating income shown in the consolidated
statement of income.
Supplementary Information
Beginning with the first quarter of the fiscal year ending March 31, 2011, “Accounting Standard for Disclosuresabout Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, March 27, 2009) and“Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information”(ASBJ Guidance No. 20, March 21, 2008) have been applied.
(6) Notes on significant change in shareholders’ equity: None9