November 6, 2018

Summary of Consolidated Financial Results
for the First Half Ended September 30, 2018 [Japan GAAP]
Name of Company:
Stock Code:
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Representative
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Date of filing 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
https://www.taxan.co.jp/
President & COO
Ryoichi Kado
Managing Director, Administration Headquarters
Eiji Kawamura+81-(0)3-5657-0111
November 14, 2018
December 7, 2018
Yes
Yes (For institutional investors and analysts)(Yen in millions, rounded down)
1. Financial results for the first half of the fiscal year ending March 2018 (April 1, 2018 – September 30, 2018)(1) Result of operations (Consolidated, year-to-date)(Percentage figures represent year on year changes)
Profit attributable
Net sales
Operating income
Ordinary income
to owners of parent
Million yen%

Million yen%

Million yen%

Million yen%

First half ended September 2018

115,383

(1.0)

3,772

(14.2)

4,049

-13.9

2,750

(21.8)First half ended September 2017

116,582

6.3

4,394

36.8

4,703

54.4

3,516

13.0

First half of FY3/2018: 4,095 million yen (524.0%)

Note: Comprehensive income: First half of FY3/2019: 3,467 million yen (15.3%)

Earnings per share(diluted)

Earnings per share
Yen

Yen

First half ended September 2018

100.25-First half ended September 2017

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

Net assets

Equity ratio

Million yen

Million yen%

As of September 30, 2018

130,811

73,247

55.9

As of March 31, 2018

128,755

70,631

54.8

Reference: Shareholders’ equity As of September 30, 2017: 68,935 million yen As of March 31, 2017: 65,872 million yen

2. Dividends
Dividend per share

Fiscal year ended March 2018
Fiscal year ending March 2019
Fiscal year ending March 2019 (Forecast)

1Q

2Q

3Q

Year-end

Full year

Yen

Yen

Yen

Yen

Yen

-

30.00
35.00

-

40.00

70.00

-

40.00

75.00

Notes: Change in the dividend forecast from the latest announcement: Yes
Breakdown of interim dividend for FY3/18: Ordinary dividend: 25.00 yen; Extraordinary dividend: 5.00 yen
Breakdown of year-end dividend for FY3/18: Ordinary dividend: 35.00 yen; Extraordinary dividend: 5.00 yen
Breakdown of interim dividend for FY3/19: Ordinary dividend 30.00 yen; 50th anniversary commemorative dividend 5.00 yen
With respect to the revision of dividend forecast, please refer to “KAGA ELECTRONICS Announces Revision of Consolidated
Performance Forecast and Interim Dividend Payout from Retained Earnings” announced today (November 6, 2018).

3. Forecast for the fiscal year ending March 2019 (Consolidated, April 1, 2018 – March 31, 2019)(Percentage figures represent year on year changes)
Profit attributable toEarnings per
Net sales
Operating income
Ordinary income
owners of parent
share
Full year

Million yen%

Million yen%

Million yen%

Million yen%

Yen

290,000

22.9

7,700

(5.2)

8,000

(8.5)

7,300

12.5

266.04

Note: Change in the forecast from the latest announcement: Yes
With respect to the revision of consolidated performance forecast, please refer to “KAGA ELECTRONICS Announces Revision of Consolidated
Performance Forecast and Interim Dividend Payout from Retained Earnings” announced today (November 6, 2018).

* Notes(1) Changes in significant subsidiaries (Changes in specified subsidiaries accompanied by changes in the scope of consolidation): None
(2) Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements: None
(3) Changes in accounting policies, estimates, and retrospective restatement(a) Changes due to revision of accounting standards: None(b) Changes other than (a): None(c) Changes in accounting estimates: None(d) Retrospective restatement: None
(4) Number of shares outstanding (common stock)(a) Shares outstanding (including treasury shares)
As of September 30, 2018:(b) Treasury shares
As of September 30, 2018:

28,702,118

As of March 31, 2018:

28,702,118

1,269,617

As of March 31, 2018:

1,267,393

Period ended September 30, 2017:27,435,430(c) Average number of shares (quarterly consolidated during the period)
Period ended September 30, 2018:27,432,859* The quarterly audit procedures by a certified public accountant or auditing firm are not applicable to this Quarterly Financial
Results report.

* Cautionary statement regarding forecasts of operating results and special notes(Caution regarding forward-looking statements)
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 thesestatements for a number of reasons. For conditions as assumption for earnings forecast and cautionary statement regarding
use of the forecast, please see “1. Results of Operations, (3) Qualitative information on consolidated earnings forecast”.

(Supplementary materials for financial results and how to obtain details of the financial results meeting)
The Company plans to hold a financial results meeting for institutional investors and analysts on Thursday, Nobember
29, 2018.
The Company plans to post a streaming video of the meeting on its website promptly after the meeting.The Company
also plans to post the details of the presentation material use at the meeting, on its website promptly after announcing
financial results.

Index for Supplementary Information
1. Results of Operations ......................................................................................................................................................................2(1) Overview of consolidated business performance ...................................................................................................................2(2) Overview of financial conditions............................................................................................................................................2(3) Qualitative information on consolidated earnings forecast ....................................................................................................3
2. Quarterly Consolidated Financial Statements and Major Notes ....................................................................................................4(1) Quarterly consolidated balance sheet .....................................................................................................................................4(2) Quarterly consolidated statements of income and comprehensive income ............................................................................6
For the first half (April 1, 2018 - September 30, 2018) .....................................................................................................6(3) Consolidated statement of cash flows.....................................................................................................................................7(4) Notes to quarterly consolidated financial statements .............................................................................................................8(Notes to going concern assumptions) ...............................................................................................................................8(Significant change in shareholders’ equity)......................................................................................................................8(Additional information) ....................................................................................................................................................8(Segment information, etc.)................................................................................................................................................91

1. Results of Operations(1) Overview of consolidated business performance
In the global economy in the second quarter of the fiscal year ending March 31, 2019, despite looming concerns that theimposition of tariffs by the United States could trigger trade friction with China and the European Union, businessconditions in Japan as well as in the key markets such as the United States, Europe and China continued on a gradual
recovery trend.
In such conditions, based on our corporate philosophy of “Everything we do is for our customers,” the Group further
expanded its overseas production bases in response to calls from existing customers, while in Japan, the Group focused its
efforts on expansion of EMS (Note) business by pushing forward with enhancement of domestic production facilities andfunctions, and other measures. Furthermore, in the face of a tight supply situation, which has become tangible since thelatter half of the previous fiscal year, in certain electronic components such as power semiconductors and condensers,
utmost efforts were made to curtail its effect on the Group’s business activities, such as by leveraging the Group’s
comprehensive capabilities as an independent general trading company for procuring parts and making proposals on
alternative products.
As a result of the foregoing, consolidated net sales of the Group decreased by 1% year on year to 115,383 million yen. In
terms of income, operating income decreased by 14.2% to 3,772 million yen, ordinary income decreased by 13.9% to
4,049 million yen, and profit attributable to owners of parent decreased by 21.8% to 2,750 million yen.
Net sales were affected particularly by a temporary decline in unit sales due to production adjustments and model
switching at major customers. The decline in unit sales had negative effects also on profits, as did upfront expenses of new
overseas sites that were at their start-up phase. In comparison with the same period of the previous fiscal year, therefore,
net sales and profits both recorded decreases. Still, the progress of operations was in line with the Company’s assumptions
formed at the beginning of the period, on the back notably of the EMS business, which in general enjoyed robust orders.
(Note) Electronics Manufacturing Service: Provision of product development and manufacturing services on an outsourcing basis.

Business segment performance was as follows.
(a) Electronic components (Development, manufacture and sale of semiconductors, general electronic components andother products, the electronics manufacturing service [EMS], and other activities)
In the electronic components business, the EMS business for automotive and air conditioning devices maintained steady
performance while business for medical equipment was slow due to model switching and the resulting production
adjustments at major customers. Components sales business remained sluggish notably for home electric appliances fromthe effect of production adjustments at major customers. As a result, consolidated net sales decreased by 2.9% to 83,455
million yen and segment income declined by 14.5% to 2,474 million yen.
(b) Information equipment (Sales of PCs, PC peripherals, home electric appliances, photograph and imaging products,
original brand products, and other products)
In the information equipment segment, sales of housing-related home electric appliances and commercial facilitiesrelated LED installation business continued the robust trend. On the other hand, sales of PCs and PC peripherals were slow
due to sluggish market conditions. As a result, consolidated net sales decreased by 9.8% to 21,143 million yen and segment
income declined by 22.6% to 864 million yen.
(c) Software (Computer graphics video production, planning and development of amusement products, and otheractivities)
In the software business, orders for production of computer graphics animation and development of game software wererobust. As a result, consolidated net sales increased by 23.0% to 1,404 million yen and segment income increased by
28.1% to 143 million yen.
(d) Others (Repair and support for electronics equipment, manufacture and sales of amusement equipment, sales ofsports goods, and other activities)
In others, recycling of PC products and PC peripherals, and sales of arcade amusement machines continued strong, whilesales of golf products remained sluggish. As a result, consolidated net sales increased by 54.4% to 9,379 million yen andsegment income increased by 9.2% to 216 million yen.
(2) Overview of financial conditions(a) Assets, liabilities and net assets
Total assets as of September 30, 2018 increased by 2,056 million yen from March 31, 2018 to 130,811 million yen.
Current assets increased by 194 million yen to 104,264 million yen. This is primarily attributed to an increase of 1,493
million yen in raw materials and supplies, offsetting a decrease of 1,448 million yen in notes and accounts receivable–trade.

2Non-current assets increased by 1,861 million yen to 26,547 million yen. This is largely a result of an increase of 1,607
million yen in investment securities.
Liabilities decreased by 559 million yen to 57,564 million yen. This is primarily attributed to a decrease of 1,011 million
yen in notes and accounts payable–trade, despite an increase of 1,345 million yen in short-term loans payable.
Net assets increased by 2,615 million yen to 73,247 million yen. This is largely a result of recording 2,750 million yen in
profit attributable to owners of parent.
(b) Cash flows
Cash and cash equivalents as of September 30, 2018 decreased by 3,370 million yen from March 31, 2018 to 25,509
million yen.
(Operating activities)
Net cash and cash equivalents provided by operating activities was 1,898 million yen, mainly due to recording profit
before income taxes.
(Investing activities)
Net cash and cash equivalents used in investing activities was 4,938 million yen, mainly due to payment into time
deposits.
(Financing activities)
Net cash and cash equivalents used in financing activities was 685 million yen, mainly due to cash dividends paid andrepayments of long-term loans payable.

(3) Qualitative information on consolidated earnings forecast
In the electronics industry, the principal sector of operations of the KAGA ELECTRONICS Group (“the Group”),
demand for electronic parts continues to grow, notably with expansion of the market for automotive devices where digitaland cyber trends are making headway, as well as increase in the demand for storage in response to the needs of the era of
big data against the backdrop of the IoT . On the other hand, the supply side’s efforts to increase production tend to fallbehind and, since the latter half of the previous consolidated fiscal year, a tight supply-demand situation has become
tangible in certain components and materials.
Given significant uncertainties for the future as described above, the Company refrained from presenting, at the
beginning of the fiscal year, the full year performance forecast for the fiscal year ending March 31, 2019. However, at thistime, the consolidated performance forecast for the full fiscal year ending March 31, 2019 has been calculated as presented
below, based on consolidated financial results for the six month period ended September 31, 2018, as well as the recent
market trends. The forecast also incorporates the September 10, 2018 announcement “Notice Regarding Acquisition of
Shares in Fujitsu Electronics Inc. (and Making It a Subsidiary)” and its effects on net sales and profits.
 Revision of Consolidated Performance Forecast
Revised consolidated performance forecast for the full fiscal year ending March 31, 2019
(From April 1, 2018 to March 31, 2019)
OperatingincomeNet sales

Profitattributable toowners ofparentOrdinary
incomeEarnings per
share

Million yen

Million yen

Million yen

Million yen

Yen

Previous Forecast (A)

-

-

-

-

-

Revised Forecast (B)290,000

7,700

8,000

7,300

266.04

Difference (B)-(A)

-

-

-

-

-

Difference (%)

-

-

-

-

-

235,921

8,119

8,740

6,490

236.58(Reference) Results for the fiscal
year ended March 31, 20183

2. Quarterly Consolidated Financial Statements and Major Notes(1) Quarterly consolidated balance sheet(Million yen)
Fiscal year ended March 2018
(As of March 31, 2018)

First half ended
September 2018
(As of September 30, 2018)ASSETS
Current assets
Cash and deposits

30,80330,412

Notes and accounts receivable - trade45,80944,361

Electronically recorded monetary claims - operating

4,032

3,992

295

231

15,06016,038575

724

Raw materials and supplies

3,818

5,312

Other

3,807

3,340

Allowance for doubtful accounts

(133)

(149)

104,069

104,264

Buildings and structures, net

4,870

4,707

Machinery, equipment and vehicles, net

2,583

2,797

709

741

4,036

4,036

10

172

12,21012,456

Goodwill

317

272

Software

515

648

Other

46

42

Total intangible assets

878

964

Investment securities

8,688

10,295

Deferred tax assets

530

473

Guarantee deposits

657

662

Insurance funds

943

943

1,363

1,285

Securities
Merchandise and finished goods
Work in process

Total current assets
Non-current assets
Property, plant and equipment

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

Investments and other assets

Other
Allowance for doubtful accounts

(587)

(533)

Total investments and other assets

11,595

13,126

Total non-current assets
Total assets

4

24,68526,547

128,755

130,811(Million yen)
Fiscal year ended March 2018
(As of March 31, 2018)

First half ended
September 2018
(As of September 30, 2018)

LIABILITIESCurrent liabilities
Notes and accounts payable - trade

36,39235,381

Short-term loans payable

5,385

6,731

Accrued expenses

3,711

3,533

Income taxes payable

901

1,042

Provision for directors’ bonuses

247

1

Other

3,068

2,637

Total current liabilities

49,70749,328Long-term loans payable

3,161

2,540

Deferred tax liabilities

1,276

1,517

Provision for directors’ retirement benefits

1,264

72

Net defined benefit liability

1,737

1,693

Asset retirement obligations

175

179

Other

800

2,232

8,416

8,235

58,12357,564

Capital stock

12,133

12,133

Capital surplus

13,853

13,853Retained earnings

45,183

46,969Treasury shares(2,042)(2,047)

Total shareholders’ equity

69,12770,909Valuation difference on available-for-sale securities

1,504

1,467

Deferred gains or losses on hedges

(16)

10

Non-current liabilities

Total non-current liabilities
Total liabilities
NET ASSETS
Shareholders’ equity

Accumulated other comprehensive income

Foreign currency translation adjustment

148

969

Remeasurements of defined benefit plans

(208)

(194)

Total accumulated other comprehensive income

1,428

2,252

75

85

70,631

73,247

128,755

130,811

Non-controlling interests
Total net assets
Total liabilities and net assets5(2) Quarterly consolidated statements of income and comprehensive income
For the first half (April 1, 2018 – September 30, 2018)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Commission fee
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity
methodForeign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Gain on transfer of businessTotal extraordinary income
Extraordinary loss
Loss on retirement of non-current assets
Loss on sales of investment securities
Loss on valuation of investment securities
Loss on valuation of golf club membership
Impairment loss
Other
Total extraordinary loss
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent
Profit attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income ofassociatesaccounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

6

First half ended
September 2017
(April 1, 2017 –September 30, 2017)
116,582
100,363
16,218
11,824
4,394(Million yen)First half ended
September 2018
(April 1, 2018 –September 30, 2018
115,383
99,36016,023
12,251
3,772

49
82
100
21
146
401

57
111
102
－
177
448

60

83

－

34

－
32
92
4,703

36
17
171
4,049

21
518
12
552

3
214
7
225

8
－
111
3
219
0
343
4,913
756
628
1,385
3,527
3,516
11

3
2
110
5
9
1
132
4,142
1,069
314
1,384
2,758
2,750
7

307
(0)
220
40

(45)
26
744
13

－

(29)

568
4,095
4,083
12

709
3,467
3,457
9

(3) Consolidated statement of cash flows(Million yen)First half ended
September 2018
(April 1, 2018 –September 30, 2018)

First half ended
September 2017
(April 1, 2017 –September 30, 2017)
Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Increase (decrease) in provision for directors’
retirement benefits
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Share of (profit) loss of entities accounted for using
equity method
Loss (gain) on sales of investment securities
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
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Other, net
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
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 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
Increase (decrease) in short-term loans payable
Repayments 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 (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

7

4,913
694
219
44

4,142
750
9
44

19

(1,191)

(61)
(132)
60

25
(168)
83

－

34

(518)
111

(211)
110

2,061

1,904

289
1,105
(300)

(2,248)338(15)(2,205)(1,459)

(20)

(241)

171

(46)

(26)
107
(39)
6,493
130
(59)
(688)
(0)
5,875

(52)
(425)
1,263
2,643
170
(78)
(838)
1
1,898

(1,057)
463
(835)
86
(76)
(1,000)
1,058
－
(41)
95
(42)
2
(1,345)(3,092)
340
(775)
84
(78)
(1,941)
546
11
(15)
14
(41)
8
(4,938)

665
(896)
(958)
(76)
(1,265)

1,116
(623)
(1,095)
(82)
(685)

101

354

3,365
26,021
29,387(3,370)28,87925,509(4) Notes to quarterly consolidated financial statements(Notes to going concern assumptions)Not applicable(Significant change in shareholders’ equity)
Not applicable(Additional information)(Application of Partial Amendments to Accounting Standard for Tax Effect Accounting, etc.)“Partial Amendments to Accounting Standard for Tax Effect Accounting” etc. (Accounting Standards Board of Japan(ASBJ) Statement No. 28, February 16, 2018) have been adopted from the beginning of the first quarter of the fiscal year
ending March 31, 2019. Accordingly, deferred tax assets are presented under investments and other assets, while deferred
tax liabilities are presented under non-current liabilities section.
(Acquisition of shares in Fujitsu Electronics Inc.)At the board of directors meeting held on September 10, 2018, the Company resolved to acquire shares in FujitsuElectronics Inc. and, on the same day, entered into a share purchase agreement with its shareholder.
1. Reason behind the share acquisition
For details, please refer to “1. Results of Operations, (3) Qualitative information on consolidated earnings
forecast” on page 3 of this Supplementary Information.
2. Name, details and size of business operations of the company whose shares are to be acquired(1) Name:
Fujitsu Electronics Inc.
(2) Business operations
Design, development and sale of electronic devices(3) Size of operations (consolidated figures for the fiscal year ended March 2018)
Net assets
35,379 million yen
Total assets
92,516 million yen
Net sales
258,703 million yen
Operating income
2,631 million yen
Ordinary income
2,232 million yen
Profit attributable to owners of parent
1,547 million yen
3. Name of the selling shareholder
Fujitsu Semiconductor Limited
4. Timeline of the share acquisition (scheduled)
January 1, 2019
Phase 1
December 28, 2020
Phase 2
December 28, 2021
Phase 3
5. Number of shares to be acquired, acquisition price and ownership ratio after acquisition (scheduled)(1) Number of shares to be acquired
18,641,972 shares
Phase 1
3,995,000 shares
Phase 2
3,995,000 shares
Phase 3
(2) Acquisition price(3) Ownership ratio after acquisition(Note)

20,543 million yen (Note)

Phase 1
Phase 2Phase 3

70.0%
85.0%
100.0%In accordance with the agreement of the Share Acquisition, the acquisition price for each phase is scheduled to be theprice after making adjustments such as for changes in the amount of consolidated net assets of Fujitsu Electronics Inc.
It is noted that Fujitsu Electronics Inc. plans to pay a cash dividend of 10 billion yen prior to the Phase 1. (2)Acquisition Price stated above is the estimate of the total acquisition price as of September 10, 2018.

8

(Segment information, etc.)
Segment information
I. For the first half ended September 2017 (April 1, 2017 – September 30, 2017)
Information about net sales and income (loss) by reportable segments(Million yen)
Reportable segments
Adjustment(Note 1)

Consolidated(Note 2)

Electronic
components

Informationequipment

Software85,91823,446

1,142

6,075

116,582－

116,582

593

503

463

336

1,896

(1,896)－

Total

86,511

23,949

1,605

6,412

118,479(1,896)

116,582

Segment income

2,893

1,116

111

198

4,319

74

4,394

OthersTotal

Net sales:
Sales to externalcustomers
Inter-segment sales
or transfers

Notes:

1.
2.

Adjustment in segment income of 74 million yen includes 74 million yen for elimination of inter-segment trade.
Segment income is adjusted for operating income on the quarterly consolidated statements of income and comprehensive income.

II. For the first half ended September 2018 (April 1, 2018 – September 30, 2018)
Information about net sales and income (loss) by reportable segments(Million yen)
Reportable segments
Adjustment(Note 1)

Consolidated(Note 2)

Electronic
components

Informationequipment

Software

83,455

21,143

1,404

9,379

115,383

1,348

460

361

2,060

4,231

(4,231)84,803

21,604

1,766

11,440

119,615(4,231)

115,383

2,474

864

143

216

3,698

73

3,772

OthersTotal

Net sales:
Sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income
Notes:

1.
2.

115,383

Adjustment in segment income of 73 million yen includes 73 million yen for elimination of inter-segment trade.
Segment income is adjusted for operating income on the quarterly consolidated statements of income and comprehensive income.

9