February 2, 2017

Summary of Consolidated Financial Results
for the Third Quarter Ended December 31, 2016 [Japan GAAP]
Name of Company:
Stock Code:
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Date of filing of quarterly securities report (tentative):
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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
February 14, 2017

No
No

(Yen in millions, rounded down)
1. Financial results for the third quarter of the fiscal year ending March 2017 (April 1, 2016 – December 31, 2016)(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%

Third quarter ended December 2016

167,486

(8.1)

5,178

(15.7)

5,500(14.6)

4,863

11.2

Third quarter ended December 2015

182,205

(2.9)

6,145

23.0

6,442

7.0

4,372

18.4

Note: Comprehensive income: 3Q of FY3/2017: 5,017 million yen (30.0 %)3Q of FY3/2016: 3,858 million yen (-39.2 %)Earnings per share(diluted)

Earnings per share
Yen

Yen

Third quarter ended December 2016172.92-

Third quarter ended December 2015

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

Net assets

Equity ratio

Million yen

Million yen%

As of December 31, 2016

127,550

63,62949.8

As of March 31, 2016

124,281

61,80849.7

Reference: Shareholders’ equity
As of December 31, 2016: 63,572 million yen

As of March 31, 2016: 61,764 million yen

2. Dividends
Dividend per share

1Q

2Q

3Q

Year- end

Full year

Yen

Yen

Yen

Yen

Yen

Fiscal year ended March 2016
Fiscal year ending March 2017
Fiscal year ending March 2017 (Forecast)

-

20.00
25.00

-

35.00

55.00

25.00

50.00

Notes: Change in the dividend forecast from the latest announcement: None
Breakdown of year-end dividend for FY3/16: Ordinary dividend: 20.00 yen; Extraordinary dividend: 15.00 yen
Breakdown of interim dividend for FY3/17: Ordinary dividend: 20.00 yen; Extraordinary dividend: 5.00 yen
Breakdown of year-end dividend for FY3/17: Ordinary dividend: 20.00 yen; Extraordinary dividend: 5.00 yen

3. Forecast for the fiscal year ending March 2017 (Consolidated, April 1, 2016 – March 31, 2017)(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

230,000

(6.3)

5,700

(26.8)

6,400(19.1)

5,800

6.7

207.38

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

* Notes(1) Changes in significant subsidiaries (Changes in specified subsidiaries accompanied by changes in the scope of consolidation ):None(Note) There was a change in a specified subsidiary not accompanied by a change in the scope of consolidation. For more information,please see “2. Summary 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 policies, estimates, and retrospective restatement(a) Changes due to revision of accounting standards: Yes(b) Changes other than (a): None(c) Changes in accounting estimates: None(d) Retrospective restatement: None
Note: For more information, please refer “2. Summary Information (3) Changes in accounting policies, estimates, and retrospective
restatement” on page 3.

(4) Number of shares outstanding (common stock)(a) Shares outstanding (including treasury shares)
As of December 31, 2016:(b) Treasury shares
As of December 31, 2016:

28,702,118

As of March 31, 2016:

28,702,118

1,266,358

As of March 31, 2016:

446,824(c) Average number of shares (quarterly consolidated during the period)
Period ended December 31, 2016:

28,126,870

Period ended December 31, 2015:

28,255,740* 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 Consolidated Financial Results. The financial statements for the third quarter were under review at
the time this Summary of Consolidated 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 thesestatements for a number of reasons.

Index for Supplementary Information
1. Results of Operations ....................................................................................................................................................................2(1) Overview of consolidated business performance ..................................................................................................................2(2) Overview of financial condition............................................................................................................................................2(3) Qualitative information on consolidated earnings forecast ...................................................................................................3
2. Summary Information ...................................................................................................................................................................3(1) Changes in significant subsidiaries .......................................................................................................................................3(2) Use of specific accounting treatments for the preparation of the quarterly consolidated financial statements......................3(3) Changes in accounting policies, estimates, and retrospective restatement ............................................................................3(4) Additional information..........................................................................................................................................................3
3. Quarterly Consolidated Financial Statements...............................................................................................................................4(1) Quarterly consolidated balance sheet....................................................................................................................................4(2) Quarterly consolidated statements of income and comprehensive income ...........................................................................6
For the third quarter (April 1, 2016 - December 31, 2016)...............................................................................................6(3) Notes to quarterly consolidated financial statements ............................................................................................................8(Notes to going concern assumptions) ..................................................................................................................................8(Significant change in shareholders’ equity) .........................................................................................................................8(Segment information, etc.) ..................................................................................................................................................81

1. Results of Operations(1) Overview of consolidated business performance
In the third quarter of the fiscal year ending March 31, 2017, the Japanese economy showed a gradual recovery due toimprovement in employment and income environment, supported by the government’s economic stimulus measures andthe monetary policies of the Bank of Japan. However, economic uncertainty lingered as there were concerns over potential
impact on corporate earnings of fluctuations in stock and foreign exchange markets due to overseas situations including
economic slowdown in China and other emerging countries, the presidential election in the U.S., and the U.K.’s exit fromthe EU.
In the electronics industry, the principal sector of operations of the KAGA ELECTRONICS Group (“the Group”), market
conditions were challenging mainly due to continuing soft demands in the mobile device market for PCs and smartphones
and amusement machines market. On the other hand, there were growing demands in automotive devices markets with anincreasing use of electronics in automobiles and new markets for IoT (Note 1), big data, and artificial intelligence.
Under such environment, based on our corporate philosophy of “Everything we do is for our customers,” the Group has
improved management efficiency through business integration and reorganization, and proactively invested resources ingrowing sectors, as well as focused on increasing sales to existing customers in Japan and expanding overseas businesses.
However, performance was impacted by production adjustments by major customers and changes in commercial
distribution of products.
Consolidated net sales decreased 8.1% year on year to 167,486 million yen, operating income decreased 15.7% to 5,178
million yen, and ordinary income fell 14.6% to 5,500 million yen. Profit attributable to owners of parent increased 11.2% to
4,863 million yen mainly due to a decrease in income taxes caused by tax effect accounting.
(Note 1) Internet of Things: New services and business models, or technologies that connect all things through the Internet.
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 (Note 2) ), and other activities)
The volume of semiconductors decreased due to production adjustments by major customers in Japan and overseas,stagnant amusement machines business, and a change in the agency policy by semiconductor manufacturers. As aresult, net sales decreased 10.4% to 127,268 million yen, and segment income decreased 25.9% to 4,061 million yen.
(Note 2) Electronics Manufacturing Service: Provision of product development and manufacturing services on an outsourcing basis(b) Information equipment (Sales of PCs, PC peripherals, home electric appliances, photograph and imaging products,
original brand products, and other products)
The volume of information equipment increased due to reinforced marketing campaigns for PCs and other consumer
products as well as favorable growth in sales of housing-related products. We also strived to improve management
efficiency through reorganization of subsidiaries. As a result, net sales increased 3.5% to 30,647 million yen, andsegment income rose 160.8% to 844 million yen.
(c) Software (Production of computer graphics, planning and development of amusement products, and other activities)
The segment focused on production of computer graphics for animation and development of various kinds of software.
As a result, net sales increased 15.2% to 1,992 million yen, but segment income decreased 32.1% to 300 million yen.
(d) Others (Repair and supports for electronics equipment, and sales of amusement equipment and sports goods, and others)
Sales of arcade amusement machines and golf products in Japan were sluggish due to a downturn in consumer
spending. As a result, net sales decreased 14.9% to 7,577 million yen, and operating loss was 144 million yen(operating loss of 166 million yen one year earlier).
(2) Overview of financial condition
Assets, liabilities and net assets
Total assets as of December 31, 2016 increased 3,269 million yen to 127,550 million yen mainly due to increase in cash
and deposits.
Liabilities increased 1,448 million yen to 63,921 million yen mainly due to increase in notes and accounts payable trade.
Net assets increased 1,821 million yen to 63,629 million yen as a result of recording profit attributable to owners ofparent.

2

(3) Qualitative information on consolidated earnings forecast
There are no revisions to the forecast for the fiscal year ending March 31, 2017 that was announced on November 1, 2016
in “Summary of Consolidated Financial Results for the First Half Ended September 30, 2016 [Japan GAAP].”

2. Summary Information(1) Changes in significant subsidiaries
Not applicable
Although not falling under a change in a specified subsidiary accompanied by changes in the scope of consolidation, during
the first quarter of the fiscal year ended March 31, 2017, our consolidated subsidiaries KAGA SOLUTION NETWORK
CO., LTD. and KAGA HIGHTECH CO., LTD. merged, with KAGA SOLUTION NETWORK as the surviving company.
As a result, KAGA SOLUTION NETWORK has become a specific subsidiary of the Company.
(2) Use of specific accounting treatments for the preparation of the quarterly consolidated financial statements
Not applicable(3) Changes in accounting policies, estimates, and retrospective restatement
Changes in accounting policies(Application of Practical Solution on a change in depreciation method due to Tax Reform 2016)
Following the revisions to the Corporate Tax Law, the Company has applied Practical Solution on a change indepreciation method due to Tax Reform 2016 (Practical Issues Task Force No. 32, June 17, 2016) effective April 1, 2016.
As a result, the depreciation method for leasehold improvements and structures acquired on or after April 1, 2016 waschanged from the declining-balance method to the straight-line method.
The impact of the revision on earnings was insignificant.

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

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3. Quarterly Consolidated Financial Statements(1) Quarterly consolidated balance sheet(Million yen)
Fiscal year ended March 2016
(As of March 31, 2016)

Third quarter ended December 2016
(As of December 31, 2016)

ASSETS
Current assets
Cash and deposits

22,51625,143

Notes and accounts receivable - trade

54,79552,530166

178

14,89816,391

266

798

4,010

4,885

849

1,042

Other

4,638

4,538

Allowance for doubtful accounts

(179)

(188)

101,961

105,319

Buildings and structures, net

5,112

4,932

Machinery, equipment and vehicles, net

1,992

1,971

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

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

Tools, furniture and fixtures, net
Land

813

719

4,138

4,127

0

-

12,05811,751

Goodwill

495

428

Software

422

356

Other

85

76

1,003

862

Investment securities

6,519

6,764

Deferred tax assets

257

411

Guarantee deposits

739

728

Construction in progress
Total property, plant and equipment
Intangible assets

Total intangible assets
Investments and other assets

916

926

Other

1,931

1,514

Allowance for doubtful accounts(1,107)(728)

Insurance funds

Total investments and other assets

9,257

9,617

Total non-current assets

22,31922,231

124,281

127,550

Total assets

4

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

Third quarter ended December 2016
(As of December 31, 2016)

LIABILITIESCurrent liabilities
Notes and accounts payable - trade36,85841,194

Short-term loans payable

6,295

5,675

Accrued expenses

3,311

2,788

995

555

Income taxes payable

185

175

Other

3,523

3,268

Total current liabilities

51,16953,658Long-term loans payable

6,007

4,870

Deferred tax liabilities

1,246

1,448

Provision for directors’ retirement benefits

1,211

1,205

Net defined benefit liability

1,774

1,770

Asset retirement obligations

142

144

Other

919

824

11,303

10,26262,472

63,921

Capital stock

12,133

12,133

Capital surplus

13,912

13,912Retained earnings

35,19538,363

Treasury shares(539)(2,039)Total shareholders’ equity

60,70262,369Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges

681

1,105

4

32

Foreign currency translation adjustment

713

337

Remeasurements of defined benefit plans

(338)

(273)

Total accumulated other comprehensive
incomeNon-controlling interests

1,061

1,202

44

56

Total net assets

61,80863,629124,281

127,550

Provision for directors’ bonuses

Non-current liabilities

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

Accumulated other comprehensive income

Total liabilities and net assets5(2) Quarterly consolidated statements of income and comprehensive income
For the third quarter (April 1, 2016 – December 31, 2016)(Million yen)
Third quarter ended December 2015
(April 1, 2015 – December 31, 2015)

Third quarter ended December 2016
(April 1, 2016 – December 31, 2016)

Net sales

182,205

167,486

Cost of sales

156,974

144,409

Gross profit

25,231

23,076

Selling, general and administrative expenses

19,085

17,898Operating income

6,145

5,178

53

43

Non-operating income
Interest income
Dividend income

9699Commission fee

156

140

Other

254

201

Total non-operating income

560

484

Interest expenses

93

99

Foreign exchange losses

114

25

Non-operating expenses

Other

54

36

Total non-operating expenses

263

161

6,442

5,500

Gain on sales of non-current assets

322Gain on sales of investment securities

1

41

Gain on bargain purchase-

28

Gain on transfer of business-89

Total extraordinary income

4

181

Loss on retirement of non-current assets

5

7Loss on sales of investment securities

631

Loss on valuation of investment securities

2-

Merger expenses

67-

Impairment loss-

10

Business structure improvement expenses

910

Loss on valuation of golf club memberships

39

11

Special retirement expenses

20

-

Other

8

0

160

73

Profit before income taxes

6,287

5,608

Income taxes - current

1,492

1,073

Ordinary income
Extraordinary income

Extraordinary losses

Total extraordinary losses

427

(339)

Total income taxes

1,920

734

Profit interests

4,366

4,874

Profit attributable to owners of parent
Profit (loss) attributable to non-controlling interests
ssssinininteinterestsinterests

4,372

4,863

(5)

11

Income taxes - deferred6

(Million yen)
Third quarter ended December 2015
(April 1, 2015 – December 31, 2015)

Third quarter ended December 2016
(April 1, 2016 – December 31, 2016)

238

425

Deferred gains or losses on hedges

(23)

28

Foreign currency translation adjustment
Remeasurements of defined benefit plans,
net of tax

(711)

(376)

(12)

64

Total other comprehensive income

(508)

142

3,858

5,017

3,863

5,004

(5)

12

Other comprehensive income
Valuation difference on available-for-salesecurities

Comprehensive income
Comprehensive income attributable to ownersof parent
Comprehensive income attributable to noncontrolling interests7(3) Notes to quarterly consolidated financial statements(Notes to going concern assumptions)Not applicable(Significant change in shareholders’ equity)
Pursuant to the resolution at the Board of Directors held on November 1, 2016, the Company acquired 818,900 shares oftreasury shares. As a result, the Company’s treasury shares increased by ¥1,499 million during the nine months ended
December 31, 2016 to ¥2,039 million as of December 31, 2016.

(Segment information, etc.)
Segment information
I. For the third quarter ended December 2015 (April 1, 2015 – December 31, 2015)
1. Information about net sales and income (loss) by reportable segments(Million yen)
Reportable segments
Adjustment(Note 1)

Consolidated(Note 2)

Electronic
components

Informationequipment

Software141,964

29,611

1,730

8,899

182,205-

182,205

713

424

2,495

1,437

5,070

(5,070)-142,677

30,036

4,225

10,336

187,276(5,070)182,205

5,480

323

442

(166)

6,081

64

6,145

OthersTotal

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

1.

Adjustment in segment income of 64 million yen includes 102 million yen for elimination of inter-segment 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 andcomprehensive income.

2. Information on impairment losses for non-current assets or goodwill, etc. for reportable segment(Significant impairment losses for non-current assets)
Not applicable(Significant changes in goodwill)
Not applicable(Significant gain on bargain purchase)
Not applicable8II. For the third quarter ended December 2016 (April 1, 2016 – December 31, 2016)
1. Information about net sales and income (loss) by reportable segments(Million yen)
Reportable segments
Adjustment(Note 1)

Consolidated(Note 2)

Electronic
components

Informationequipment

Software127,268

30,647

1,992

7,577

167,486-

167,486

611

368

1,249

1,975

4,204

(4,204)-

127,879

31,015

3,242

9,552

171,690(4,204)

167,486

4,061

844

300

(144)

5,061

116

5,178

OthersTotal

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

1. Adjustment in segment income of 116 million yen includes 116 million yen for elimination of inter-segment trade.
2. Segment income (loss) is adjusted for operating income (loss) on the quarterly consolidated statements of income andcomprehensive income.

2. Information on impairment losses for non-current assets or goodwill, etc. for reportable segment(Significant impairment losses for non-current assets)
Omitted as it is immaterial.
(Significant changes in goodwill)
Not applicable(Significant gain on bargain purchase)
Omitted as it is immaterial.

9