Report on Financial Result
Third Quarter of Fiscal Year 2010
April to December 2010

February 4, 2011
KAGA ELECTRONICS CO., LTD. (TSE 1st section, 8154)
3-12-8 Sotokanda, Chiyoda-ku, Tokyo
Tel: (03) 4455-3131 Fax: (03) 3815-7133
http://www.taxan.co.jp

Financial Highlights
Third Quarter of Fiscal Year 2010

April to December 2010
(Consolidated Third Quarter)2© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Financial Highlights of Third Quarter Ended December 2010

Comparative Consolidated Income Statement
Nine months endedDecember 2009
Net sales
Cost of sales

平成18年3月期

Gross profit
Selling, general andadministrative expenses
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary losses
Income before income taxes
and minority interests
Income, residential andenterprise taxes
Income tax adjustment
Minority interest in income/lossof consolidated subsidiaries

Net income

Nine months ended
December 2010

（millions of yen）
Year over year
Change174,926

100.0%

177,535

100.0%

2,609

1.5%

154,235

88.2%

154,293

86.9%

58

0.0%

20,69011.8%

23,241

13.1%

2,551

12.3%

19,807

11.3%20,033

11.3%

226

1.1%

883

0.5%

3,208

1.8%

2,325

263.3%

528

0.3%

557

0.3%

29

5.5%

620

0.4%

635

0.4%

15

2.4%

791

0.5%

3,130

1.8%

2,339

295.7%

-206

-0.1%

-225

-0.1%

-19

584

0.3%

2,905

1.6%

2,321

397.4%

915

0.5%

1,192

0.7%

277

30.3%

514

0.29%

244

0.14%

-270

-52.5%-53-0.03%

37

0.02%

90

--792

-0.5%

1,431

0.8%

2,223

-

平成19年3月期（予）-3© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Comparison of Consolidated Sales by Business Category（millions of yen）
Nine months ended December
2009(before consolidation)

Net sales
IncomeNine months ended December
2010(before consolidation)

Net sales

Pct.

IncomePct.

Year over year Change
ChangeElectronic
components

127,299

66.6%

162,061

74.6%

34,762-219-31.6%

2,123

71.9%

2,342

Informationequipment

50,71426.5%

39,484

18.2%

381

54.9%

304

2,884

1.5%

247

Software
Others
Total

Nine months ended 2010
(after consolidation)
Net sales

Pct.

Income

27.3%

Pct.

127,64271.9%－2,52578.7%-11,230-22.1%

38,724

21.8%

10.3%

-77

-20.2%

256

8.0%

5,547

2.6%

2,663

92.3%

3,661

2.1%

35.6%

264

8.9%

17

6.9%

274

8.5%

10,132

5.3%

10,263

4.7%

131

1.3%

7,506

4.2%

285

41.1%

258

8.7%

-27

-9.5%

275

8.6%

191,030

100.0%

217,356

100.0%

26,326

13.8%

177,535

100.0%

694

100.0%

2,951

100.0%

2,257

325.2%

3,208

100.0%

Major changes■Electronic component (Development, manufacture and sales of semiconductors, general electric components and otherproducts, electronics manufacturing service (EMS), and other activities)
Sales of semiconductors and electronic components used in flat-panel TVs and other digital consumer electronics, cellphones, PCs and other products increased along with a slow economic recovery.In the environmental products category,there were higher sales of electronic components for LED lamps. In addition, there was a recovery in EMS orders for airconditioners to overseas. The result was segment sales of JPY127,642 million.
■Information equipment (Sales of PCs, PC peripherals, photograph and imaging products, original-brand products, and otherproducts)
A shift in the distribution channels of major PC manufacturers caused segment sales to decline. However, there wereactions aimed at adding new products like SD memory cards for portable devices and at increasing sales of existingproducts. Segment sales totaled JPY38,724 million.
© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

4

【Reference】Comparison of Consolidated Sales by Business Category（ millions of yen ）200,000（millions of yen）
Nine months ended
December 2009

Nine months ended
December 2010

Year over year
ChangeInformation equipment

45,65426.1%

35,87720.2%-9,777-21.4%

EMS
Semiconductors

43,91031.1%

50,158

28.3%

6,248

14.2%

38,28621.9%

44,017

24.8%

5,731

15.0%

22,95813.1%

20,55211.6%-2,406-10.5%

General electronic
components

Others24,11613.8%

26,930

15.2%

2,814

11.7%

174,926

177,535

160,000

24,116

26,930140,000

22,95820,55238,28644,017

General electronic
components
Semiconductors

50,158EMS

180,000

120,000
100,000
80,00060,00043,91040,00020,000

OthersInformation equipment
45,65435,8770
3Q FY 2009

3Q FY 2010

Major changes■EMS sales : Increase 6,248 million yen (+14.2%)
Along with a slow economic recovery, 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 salesof JPY50,158 million (increase JPY6,248 million).
■Semiconductor sales : Decrease 9,777 million yen （-21.4%）
A shift in the distribution channels of major PC manufacturers to large electronics retailers and specialty stores caused
segment sales to decline. Sales totaled JPY35,877 million (decrease JPY9,777 million).

5© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Selling, General and Administrative Expenses of Nine Months Ended December 2010
（millions of yen）
Nine months ended Nine months ended
YoY
December 2009
December 2010
ChangeAmountPct.
AmountPct.
Packing and freight
1,699
8.6%
1,766
8.8%
67
R&D
563
2.8%
395
2.0%
-168
Others
892
4.5%
938
4.7%
46
Total selling expenses
3,154
15.9%
3,099
15.5%
-55
Depreciation expenses
466
2.4%
586
2.9%
120Rent
1,793
9.1%
1,578
7.9%
-215
Personnel expenses
10,36752.3%
10,724
53.5%
357
Others
4,026
20.3%
4,045
20.2%
19
Total administrative
16,652
84.1%
16,93384.5%
281
expenses
Total SG&A expenses
19,807100.0%
20,033100.0%
226

Pct.
3.9%
-29.8%
5.2%
-1.7%
25.8%
-12.0%
3.4%
0.5%

25,000（millions of yen）

19,80720,0004,026

4,0 45

Others ofadministrative expenses
Personnel expenses
Rent

15,000Depreciation expenses

10,00010,3 67

10,7 24

Others ofselling expenses
R&DPacking and freight

5,000

1.7%
1.1%

20,0330

1,793

1,5 78

466
892
563

586
938
395

1,699

1,7 663Q FY2009

3Q FY2010

Major changes■Administrative expenses ： Personnel expenses increased 357 million yen. Headcount Increases 136. (5,210 to 5,346)a) Factor of cost increase : Increase of headcount by 136 (5,210 to 5,346) due to Cyber Front’ entry to KAGA group
Increase of headcounts by 227 in overseas EMS factories and KAGA (Shenzhen) and 275 in
KAGA Taxan (Suzhou) electronics.
b) Factor of cost decrease : Decrease of headcounts by 476 in KAGA Component’s operation in China

6© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Financial Highlights Nine Months Ended December 2010

Consolidated Balance Sheets（millions of yen）

Nine months
ended Dec.
2010

（ASSETS）
Current assets
Cash and cash equivalents
Notes and account receiv able-trade

Merchandize and finished goods

Goods in progress
Raw materials and other supplies

OthersFixed assets
Property, plant and equipment

Intangible assets
Investments and other assets

YOYFY2009
Change113,962 117,318
3,356 （LIABILITIES）
96,83895,886-952 Current liabilities
平成18年3月期
平成19年3月期（予）Notes and accounts payable-trade
11,917
13,835
1,918
Short-term bank loans
59,21453,669-5,545
14,483
16,676
2,193
Others647
786
139 Long-term liabilities
Long-term bank loans
3,011
3,837
826
Others
7,566
7,083
-483
（NET ASSETS）
Shareholders' equity
Paid-in capital
17,123
21,432
4,309
Capital surplus
6,434
9,788
3,354
Retained earnings
1,901
2,496
595
Treasury stock
8,786
9,148
362
Valuation and translation adjustment

Minority interests

Total assets

113,962

117,318

3,356

Total liabilities and net assets

FY2009Nine months
ended Dec.
2010

65,40858,77943,535
8,935
6,309
6,629
2,500
4,129
48,553
48,726
12,133
13,91224,012-1,332-1,884
1,711
113,962

69,32559,71742,276
10,314
7,127
9,608
5,094
4,514
47,99349,32812,133
13,912
24,615-1,332-3,046
1,710
117,318

YOY
Change3,917
938-1,259
1,379
818
2,979
2,594
385-560602
00603
0-1,162-1
3,356* FY2009 means fiscal year ended March 2010. FY2010 means fiscal year ending March 20117© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Consolidated Cash Flow for Nine Months Ended December 2010
（millions of yen）
Nine months ended Nine months ended
December 2009
December 2010

Year over year
ChangeOperating activities

2,669

5,000

2,331

Investing activities-2,669-5,711-3,042Financing activities

605

3,003

2,398

-4

-463

-459

Increase (decrease) in cash and cash equivalents

600

1,828

1,228

Cash and cash equivalents, beginning of period

11,368

11,797429Cash and cash equivalents, end of period

11,96913,625-525

Effect of exchange rate changes on cash and cash equivalents

Major changes■Operating activities ：Net cash provided by operating activities was JPY5,000 million primarily due to a decreasein notes and accounts receivable-trade.
■ Investment activities ：Net cash used in investment activities was JPY5,711 million primarily due to payments for thepurchase of property, plant and equipment.
■Financing activities Net cash provided by financing activities was JPY3,003 million yen primarily due to alarger net increase in long-term bank loans.

8© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Forecast for the Fiscal Year Ending March 2011
Consolidated Income Statement (FY2009 and forecast FY2010 ) （millions of yen）
FY2009(actual)
Amount
平成18年3月期

FY2010(forecast)

Pct.
Amount
平成19年3月期（予）Pct.

YOY Change
ChangePct.change

239,391

100.0%

230,000

100.0%-9,391-3.9%

211,15488.2%

199,200

86.6%-11,954-5.7%

28,23711.8%

30,800

13.4%

2,563

9.1%

26,655

11.1%

27,500

12.0%

845

3.2%

1,582

0.7%

3,3001.4%

1,718

108.6%-302-0.13%-100-0.04%

202-

Ordinary income

1,280

0.5%

3,200

1.4%

1,920

150.0%Net income

-318

-0.2%

1,800

0.8%

2,118

-Net sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Non-operating income* FY2009 means fiscal year ended March 2010. FY2010 means fiscal year ending March 20119© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Comparison of Consolidated Sales by Business Category (FY 2009 and FY2010)（millions of yen）
FY2009(before consolidation)

FY2010(forecast)(before consolidation)

Net sales

Net sales

IncomePct.

IncomeYear over year ChangeYear overYear Change

Pct.

FY2010(forecast)(after consolidation)
Net sales

Pct.

IncomePct.

Electronic
components

158,92164.4%

178,133

72.3%

19,21212.1%

166,000

72.2%

895

50.7%

2,643

69.0%

1,748

195.3%

2,270

68.8%

Informationequipment

69,76928.3%

52,39521.3%-17,374-24.9%

49,000

21.3%

93

5.3%

290

7.6%

197

211.8%

250

7.6%

4,321

1.8%

5,829

2.4%

1,508

34.9%

5,500

2.4%

466

26.4%

550

14.4%

84

18.0%

480

14.5%

13,627

5.5%

10,1804.1%-3,447-25.3%

9,500

4.1%

311

17.6%

343

9.0%

32

10.3%

300

9.1%

246,640

100.0%

246,539100.0%-101

0.0%

230,000

100.0%

1,766

100.0%

3,828

100.0%

2,062

116.8%

3,300

100.0%

Software
Others
Total

Major changes* FY2009 means fiscal year ended March 2010. FY2010 means fiscal year ending March 2011

■Electronic component (Development, manufacture and sales of semiconductors, general electric components and other products,
electronics manufacturing service (EMS), and other activities)
Sales of semiconductors and electronic components for flat-panel TVs and other digital consumer electronics, PCs andother products increased along with a slow economic recovery. In addition, there was a recovery in EMS orders inoverseas. The outlook for the operating environment is expected to remain uncertain due to the impact of the strong yen
on earnings of Japanese companies.
■Information equipment (Sales of PCs, PC peripherals, photograph and imaging products, original-brand products, and otherproducts)
A shift in the distribution channels of major PC manufacturers caused segment sales to decline. However, there wereactions aimed at adding new products like SD memory cards for portable devices and at increasing sales of existingproducts.

10© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Consolidated Sales Forecast by Business Category (FY2009 and FY2010)（millions of yen）

FY2009Net sales

Informationequipment
EMS

Pct.

FY2010(forecast)
Net sales

Pct.

300,000

YOY Change
Change Pct.change

250,000（millions of yen）

239,391

230,000

32,85764,16926.8%

46,40020.2% -17,769-27.7%

200,000

60,91025.4%

73,60032.0%

12,69020.8%

Semiconductors

51,861

21.7%

54,200

23.6%

2,339

4.5%

General electronic
components

29,592

12.4%

23,300

10.1%-6,292-21.3%

100,000

Others32,85713.7%

32,500

14.1%

-357

-1.1%

50,000

Total

239,391

100.0% 230,000

100.0%-9,391-3.9%

150,000

32,50029,592

23,30051,861

54,200

OthersGeneral electronic
components
Semiconductors
EMS* FY2009 means fiscal year ended March 2010. FY2010 means fiscal year ending March 2011

60,91073,60064,169

Informationequipment

46,400

0FY2009

FY2010(est.)

Summary■「 Information equipment」：Sales decrease 17,769 million yen because of a shift in the distribution channels ofmajor PC manufacturers.
■「EMS」： Sales increase 12,690 million yen because of a recovery in EMS orders in Japan from manufacturers ofamusement equipment and overseas from manufacturers of office equipment and climate control equipment.
■「 Semiconductors」：Sales increase 2,339 million yen because of increase of semiconductors used in digitalconsumer electronics.
■「 General electronic components」：Sales decrease 6,292 million yen because of specifications change of customers.
■「Others」：Sales decrease 357 million yen due to lower sales of golf products.

11© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■Selling, General and Administrative Expense (FY2009 and FY2010)（millions of yen）

（millions of yen）

FY2009Amount
2,283
736
1,490
4,509
700
2,332
13,8065,306

FY2010(forecast) YOY
Chang 30,000
Pct.
Amount
Pct.
8.6%
2,349
8.5%
66
2.8%
578
2.1%
-158 25,000
5.6%
1,548
5.6%
58
16.9%
4,475
16.3%
-34 20,000
2.6%
761
2.8%
61
8.7%
2,200
8.0%
-132 15,000
51.8% 14,598
53.1%
79210,000
19.9%
5,465
19.9%
159

Total administrative
expenses

22,144

83.1%

23,02483.7%

880

Total SG&A expenses

26,655100.0%

27,500100.0%

845

Packing and freight
R&D
OthersTotal selling expenses
Depreciation expenses

Rent
Personnel expenses
Others* FY2009 means fiscal year ended March 2010. FY2010 means fiscal year ending March 2011

5,000

0

26,655
5,306

27,5005,465

Others ofadministrative expenses
Personnel expenses
Rent
Depreciation expenses

13,806

14,598Others ofselling expenses
R&D
Packing and freight2,332700
1,490736
2,283

2,200761
1,548578
2,349

FY2009FY2010(forecast)

Summary■Administrative expenses ： Personnel expenses increased 792 million yen. Increase 464 person. (4,885→5,349)a) increase : Cyberfront Group joined KAGA group (increased 145 headcount).
EMS factories in overseas increased 386 headcounts (KAGA Thailand, KAGA Shenzehen,
KAGA Taxan Suzhou, KAGA Component Malaysia)b) decrease : Factries in China of KAGA Component group decrease 76 headcount12© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Topics of October - December 2010
1. Strategic Business Unit Management
2. Annual Reorganization of KAGA Group13© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

1. Strategic Business Unit Management

Primary Business Units (BU)
Entertainment
BU
Offering one-stop services toa entertainment industry

Components
BU
Sales of electronic
components to customers
around the world

Kaga Electronics& Group companies

Manufacturing
BU
EMS business of flexible
production system utilising
our worldwide network

Information
Equipment BU
Supplying PCs and peripherals
to volume retailers andoffering a system-building
serviceCreating Synergy

Promotion BU
Developing new businessand offering technicalsupports and sales
promotion

14© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

２．Annual Reorganization of KAGA Group Businesses■Reorganization of KAGA Group■ To face a rapidly changing electronics industry●Promote global scale competition●Active and efficient management●Leveraging quick-decision making process and synergy effect with strategic
business unit management system■ Recent reorganization of KAGA Group● Apr. 2010

KAGA IMPEX LLC liquidated● Jan. 2010

KAGA (Shenzhen) electronics technology development co., ltd.
liquidated● Sep. 2010 KAGA IMPEX CO., LTD. liquidated● 2011Liquidation planned for GUANZHOU KEIDENKI LTD
15© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

２． Reorganization of KAGA Group■Integration of group companies with similar business categories① KAGA TECH to absorb OTSUKA ELECTRIC
Pursuing business scale and efficient management
Remaining

MergedCorporate NameKAGA TECH CO.,LTD.

OTSUKA ELECTRIC CO.,LTD.

Activities

Design,development and salesof electronic device,sales ofelectronic components

Sale,import and export of electronicdevices

EstablishedJune,1988

May,1981

Headquarters

Chiyoda-ku,Tokyo

Kawasaki City,Kanagawa

Paid-in CapitalYen 60 million (100% owned byKaga)

Yen 30 million (100% owned by Kaga)

Employees

1532

End of Fiscal Year

March 31March 3116© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

２． Reorganization of KAGA Group■Integration of subsidiaries in Hong Kong and Shenzhen② Merger of KAGA DEVICES and NUMATA (HK)
Pursuing business scale and efficient management for Chinese market
KAGA DEVICES CO.,LTD. merged with NUMATA (H.K.) CO.,LTD, formerly a dedicated distributor for NEC Electronics, on October 1,2010.
Then KAGA DEVICES (HK), a subsidiary of KAGA DEVICES CO., LTD., is going to acquire NUMATA (H.K.) as of April 1, 2011

Corporate Profile after merger
Corporate NameKAGA DEVICES(H.K.) LTD.

Main business

Development, design and sales of semiconductors anddata communications equipment

EstablishedFebruary 2003

Headquarters

29th FL, Manhattan Place, 23 Wang Tai Road, Kowloon
Bay, Hong Kong

Paid-in Capital

HK$42.6 million （KAGA DEVICES 51％・KAGA 49％）

End of Fiscal Year

March 3117
© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

KAGA ELECTRONICS CO., LTD.
3-12-8 Sotokanda, Chiyoda-ku, Tokyo 101-8629 JapanTel: (03) 4455-3131
Fax: (03) 3815-7133
E-mail：webmaster@taxan.co.jp

http://www.taxan.co.jp
18© 2011 KAGA ELECTRONICS CO.,LTD All Rights Reserved.