February 2, 2016

Summary of Consolidated Financial Results
For the Third Quarter Ended December 31, 2015 [Japan GAAP]
Name of Company:
Stock Code:
Stock Exchange Listing:
URL:
Representative
Title:
Name:
Contact Person
Title:Name:
Phone:
Date of quarterly securities report (tentative):
Date of commencement of dividend payment (tentative):
Quarterly earnings supplementary explanatory documents:
Quarterly earnings presentation:

1.

KAGA ELECTRONICS CO., LTD.
8154
Tokyo Stock Exchange, First Section
http://www.taxan.co.jp/
President & COO
Ryoichi Kado
Director, Administration Headquarters
Eiji Kawamura+81-(0)3-5657-0111
February 12, 2016
None
None

(Yen in millions, rounded down)
Financial results for the first three quarters of the fiscal year ending March 2016 (April 1, 2015 – December 31, 2015)(1) Result of operations (Consolidated, year-to-date)(Percentage figures represent year on year changes)
Profit attributable to
Net sales
Operating income
Ordinary income
owners of parent

Million yen% Million yen% Million yen
First three quarters of FY3/2016
182,205
(2.9)
6,145
23.0
6,442
First three quarters of FY3/2015
187,556
(0.5)
4,998
21.6
6,018
Note: Comprehensive income: First three quarters of FY3/2016: 3,858 million yen (-39.2%)
First three quarters of FY3/2015: 6,341 million yen (43.8%)
Earnings per share

%
18.4
31.4

Earnings per share fully diluted
Yen
-

Yen
154.73130.65First three quarters of FY3/2016
First three quarters of FY3/2015% Million yen
7.0
4,372
33.6
3,691

(2) Financial Position (Consolidated)
Total assets
As of December 31, 2015

Million yen
129,991
127,948

As of March 31, 2015
Reference: Shareholders’ equity
As of December 31, 2015:
62,156 million yen
2.

Net assets

Equity ratio

Million yen
62,20059,603As of March 31, 2015:

%
47.8
46.6
59,564 million yen

Dividends
End of 1Q
Yen-

End of 2Q
Yen
15.00
20.00

Dividend per share
End of 3Q
Yen-

End of FY
Yen
25.00

Full year
Yen
40.00

Fiscal year ended March 2015
Fiscal year ending March 2016
Fiscal year ending March 2016 (est.)
35.00
55.00
Note: Change in the estimation of dividend from the latest announcement: Yes
FY3/2015:
Yearend dividend includes ordinary dividend of 15.00 yen and special dividend of 10 yen
FY3/2016:
Yearend dividend includes ordinary dividend of 20.00 yen and special dividend of 15 yen
Please refer the press release “Announcement of Revision to Dividend Forecast” announced on February 2, 2016.

3.

Forecast for the fiscal year ending March 2016 (Consolidated, April 1, 2015 to March 31, 2016)(Percentage figures represent year on year changes)
Net income
Net sales
Operating income
Ordinary income
Net income
per share
Million yen% Million yen% Million yen% Million yen%
Yen
252,000
(1.2)
7,200
13.2
7,700
0.5
5,000
13.2
176.96
Full year
Note: Change in the forecast from the latest announcement: None*

Notes
(1) Changes in significant subsidiaries (Changes in specific subsidiaries accompanied by changes in the scope of
consolidation): None
(2) Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements: None
(3) Changes in accounting principles and estimates, and retrospective restatements(a) Changes due to revision of accounting standards: Yes(b) Changes other than in (a): None(c) Changes in accounting estimates: None(d) Retrospective restatements: None
Note: Please refer (3) Changes in accounting principles and estimates, and retrospective restatement in 2. Other
Information on page 3 of Supplementary Information.
For more information, please see 2. Other Information (3) Changes in accounting principles and estimates, andretrospective restatement on page 3.
(4) Number of shares outstanding (common stock)(a) Shares outstanding (including treasury shares)
As of December 31, 2015:
28,702,118

As of March 31, 2015:

28,702,118

As of March 31, 2015:

446,040(c) Average number of shares (quarterly consolidated cumulative period)
Period ended December 31, 2015:
28,255,740
Period ended December 31, 2014:

28,256,838(b) Treasury shares
As of December 31, 2015:

446,681* 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 time of disclosureof this report.
* Cautionary statement regarding forecasts of operating results and special notes
Forward-looking statements in these materials are based on information available to management at the time this report was
prepared and assumptions that management believes are reasonable. Actual results may differ significantly from these statements
for a number of reasons.

Index for Supplementary Information
1.

2.

3.

Results of Operations .........................................................................................................................................................2(1)

Overview on consolidated business performance .....................................................................................................2(2)

Overview of financial condition ...............................................................................................................................2(3)

Forecast ....................................................................................................................................................................3

Other Information...............................................................................................................................................................3(1)

Changes in significant subsidiaries:..........................................................................................................................3(2)

Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements: .....3(3)

Changes in accounting principles and estimates, and retrospective restatements: ....................................................3(4)

Supplementary information: .....................................................................................................................................3

Quarterly Consolidated Financial Statements.....................................................................................................................6(1)

Quarterly consolidated balance sheet........................................................................................................................6(2)

Quarterly consolidated statements of income and consolidated statements of comprehensive income ....................8(3)

Notes to quarterly consolidated financial statement ...............................................................................................10(Notes to ongoing concern assumptions) .................................................................................................... 10(Significant change in shareholders’ equity) ............................................................................................... 10(Segment information, etc.) ...................................................................................................................... 10

1

1. Results of Operations(1)

Overview on consolidated business performance
In the first three quarters of the fiscal year, the Japanese economy recovered slowly due to a continuation of improvements
in corporate earnings and employment because of economic measures by the Japanese government and the Bank of Japan’s
monetary easing. However, the outlook for the global economy remained uncertain due to slowing economic growth inChina and other Asian emerging countries, the drop in the price of crude oil, and other events.
In the electronics industry, the principal area of operations for the KAGA ELECTRONICS Group, demand for PCs andconsumer electronics remained weak and sales of mobile devices are slowing down. But demand for automotive devices
and medical and healthcare products increased. In addition, there was growth in new market sectors, such as environmental
and energy products and the IoT (Note 1).
Based on the management philosophy of “Everything we do, we do for our customers,” the KAGA ELECTRONICS
Group established the GR Management Headquarters to reinforce collaboration among group companies, worked onincreasing sales to major current customers, strengthened its overseas network and implemented cost-cutting measures.
Consolidated net sales in the first three quarters decreased 2.9% from one year earlier to 182,205 million yen, operating
income increased 23.0% to 6,145 million yen, ordinary income increased 7.0% to 6,442 million yen, and profit attributableto owners of parent increased 18.4% to 4,372 million yen.
(Note 1)

IoT is the abbreviation for Internet of Things. It is a concept that supports or enables the creation of new services and businessmodels by connecting all objects through the Internet

Business segment performance was as follows.
(a) Electronic components (Development, manufacture and sale of semiconductors, general electronic components andother products, EMS (Note 2), and other activities)
Sales in the first three quarters were higher in Japan for electronic components and semiconductors used incommunications equipment. Overseas, there was growth in EMS operations for electronic devices. The result was a
3.2% decrease in segment sales to 141,964 million yen and a 31.4% increase in operating income to 5,480 million yen.
(Note 2)Abbreviation for Electronics Manufacturing Service which is a term used for the provision of product development andmanufacturing services on an outsourcing basis.

(b) Information equipment (Sales of PCs, PC peripherals, home electric appliances, photographic and imaging products,
original-brand products, and other products)
Due to a reexamination of the sales strategy for the consumer market, the main goals were adding new products andincreasing sales of current products. But the volume of digital cameras decreased and sales of housing-related products
and other products were weak. As a result, segment sales decreased 1.9% to 29,611 million yen and operating income
was down 20.2% to 323 million yen.
(c) Software (Production of computer graphics, planning and development of amusement products, and other activities)
There was a decline in orders for the development of electronic toys. The segment focused on development and sales ofcomputer graphics and game software while cutting costs. Segment sales decreased 2.1% to 1,730 million yen andoperating income was up 124.2% to 442 million yen.
(d)

(2)

Others (Electronic device repairs and support, manufacture and sale of amusement products, sales of sporting goods,
and other activities)
Sales of arcade amusement machines in Japan and sales of used PCs and communications equipment in the recycling
business were weak. As a result, segment sales decreased 0.2% to 8,899 million yen and there was an operating loss of
166 million yen compared with operating income of 105 million yen in the first three quarters of the previous fiscal
year.

Overview of financial condition
Assets, liabilities and net assets
Assets increased 2,042 million yen from the end of the previous fiscal year to 129,991 million yen at the end of the third
quarter mainly because of an increase in cash and deposits.
Liabilities decreased 554 million yen to 67,791million yen mainly because of a decrease in long-term loans payable.
Net assets increased 2,596 million yen to 62,200 million yen mainly because of profit attributable to owners of parent.

2

(3)

Forecast
There is no change in the forecast for consolidated results of operations in the current fiscal year that was announced in“Summary of Consolidated Financial Results For the First Half Ended September 30, 2015 [Japan GAAP]” on November
4, 2015.

2. Other Information(1)

Changes in significant subsidiaries:
None

(2)

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

(3)

Changes in accounting principles and estimates, and retrospective restatements:
Changes in accounting policy(Application of accounting standard for concerning business combinations and other accounting standards)
Beginning with the first quarter of the fiscal year ending on March 31, 2016,KAGA ELECTRONICS is using AccountingStandard for Business Combinations (ASBJ Statement No. 21, September 13, 2013), Accounting Standard forConsolidated Financial Statements (ASBJ Standard No. 22, September 13, 2013) and Accounting Standard for Business
Divestitures (ASBJ Statement No. 7, September 13, 2013). As a result, when ownership changes at a subsidiary where
KAGA ELECTRONICS retains control, this difference is included in the capital surplus. In addition, the recognition of
expenses associated with acquisitions has been changed to the consolidated fiscal year in which the corresponding expense
occurred. Furthermore, there is a revision in the allocation of acquisition expenses for business combinations occurring on
or after the beginning of the first quarter of the fiscal year ending on March 31, 2016. The revised method reflects in the
consolidated financial statements of the quarter in which the business combination occurred any changes to the amountallocated to acquisition cost resulting from the confirmation of provisional accounting methods. There are also revisions to
the presentation of quarterly net income and other items and minority interests is now called non-controlling interests. To
reflect these changes in the presentation of the financial statements, third quarter and fiscal year consolidated financial
statements for the previous fiscal year have been revised. For the application of these three accounting standards, thetransitional measures specified in Accounting Standard for Business Combinations No. 58-2 (4), Accounting Standard forConsolidated Financial Statements No. 44-5 (4) and Accounting Standard for Business Divestitures No. 57-4 (4) were used.
These three accounting standards will continue to be applied starting with the beginning of the first quarter of the fiscal
year ending on March 31, 2016. The application of these accounting standards had no effect on the consolidated financial
statements of the current fiscal year.

(4)

Supplementary information:(Memorandum of understanding concerning management integration)
The directors of KAGA ELECTRONICS and UKC Holdings Corporation approved resolutions on November 18, 2015
concerning a memorandum of understanding for a management integration with the spirit of equal partnership. The
memorandum was signed on the same day.
As equal partners, the two companies will perform further examinations concerning specific actions in order to complete
this integration.
1. Objectives of the management integration
KAGA ELECTRONICS and UKC Holdings plan to accomplish the following goals in order to become one of theindustry leaders in Japan in terms of size and quality. In addition, the two companies plan to increase their corporate
value by becoming one of the premier electronics trading companies in the world and meeting a broad spectrum ofcustomers’ needs.
(1) Reinforce the ability to meet customers’ needs
The two companies will use the management integration to enlarge their business activities and product line-ups. A
business platform will be constructed for the one-stop provision of solutions that target a diverse array of
requirements at new and current customers.
(2) Implement global growth strategies faster
The two companies will use their overseas bases to increase cooperation among group companies with the goal of
improving the ability to support the overseas operations of Japanese customers and to meet the needs of overseas
customers.
(3) Reduce costs by improving efficiency
The two companies will improve the efficiency of the group and lower costs. Operations performed by bothcompanies will be conducted more efficiently, logistics and other infrastructure components in Japan and othercountries will be shared and streamlined, core IT systems will be integrated in the future, and other actions will be
used for greater efficiency.
(4) Build a sound foundation for business operations
The two companies will establish a sound financial position capable of funding new investments and mergers andacquisitions and will strengthen fund procurement capabilities. Furthermore, the organization will be invigorated
by utilizing the people and knowledge of the two companies in a mutually beneficial manner. All these activities
will be aimed at building an even more powerful foundation for business operations.
32. Outline of the management integration
KAGA ELECTRONICS and UKC Holdings plan to complete the management integration as described below. This
plan assumes that the shareholders of the two companies will approve the integration and that all required regulatory
approvals will be received. Items not contained in this outline will be determined in the management integration
contract that will be finalized afterward by the two companies.
(1) Method
A holding company structure has been selected for the two companies following the management integration forthe purpose of utilizing the strengths of the two companies while preserving the distinct characteristics of each one.
To accomplish this integration, the two companies plan to use the following measures to complete the integration.
(a) Exchange of stock
An exchange of stock will take place that makes UKC Holdings a wholly owning parent company and KAGAELECTRONICS a wholly owned subsidiary. After this exchange of stock, KAGA ELECTRONICS will be awholly owned subsidiary of UKC Holdings. As a result, the Tokyo Stock Exchange listing of KAGAELECTRONICS common stock will be terminated prior to the date of the exchange of stock in accordancewith the delisting standard of the Tokyo Stock Exchange.
(b) Divestiture
Once the exchange of stock has been completed, UKC Holdings will divest all of its business operations(excluding some functions that will be required for UKC Holdings, after the exchange of stock, to become aholding company, same hereafter) The divested business operations will be transferred to either a newly
established company or a succeeding company that is wholly owned by UKC Holdings. UKC Holdings willthen be a holding company.
(2) Schedule (Planned)
November 18, 2015
Signing of the memorandum of understanding
By May 2016 (planned)
Signing of final contract for the management integration (including a contract for
the exchange of stock and either preparation of the plan for a divestiture using a
new company or signing of an absorption-type demerger contract)
Late June 2016 (planned)

Approval of the contract for the exchange of stock at the KAGA ELECTRONICS
shareholders meeting
Late June 2016 (planned)
Approval of the contract for the exchange of stock and either a plan for adivestiture using a new company or an absorption-type demerger contract contract
at the UKC Holdings shareholders meeting
October 1, 2016 (planned)
Effective date of the exchange of stock and divestiture
By May 2016, the two companies plan to sign a final agreement regarding the management integration, sign acontract for the exchange of stock and either prepare a plan for a divestiture using a new company or sign anabsorption-type demerger contract. Proposals for the exchange of stock and the divestiture are to be submitted at
the annual meetings of KAGA ELECTRONICS and UKC Holdings (the divestiture proposal will be submitted
only to UKC Holdings shareholders) that are to be held in late June 2016.
However, if the two companies agree, this schedule may be revised as necessary to perform procedures or for otherreasons. In addition, as procedures and discussions concerning the management integration take place, the twocompanies will promptly announce any events that may delay or impede this progress. These events include
documents submitted to the Japan Fair Trade Commission and other regulatory agencies (including documents
required by laws of other countries), the receipt of approvals and other activities.
(3) Holding company profile(a) Name (planned)
UKC Kaga Holdings Corporation(b) Head office location (planned)
20 Kanda-Matsunaga-cho, Chiyoda-ku, Tokyo
Note: The head office location is the registered location of the head office. KAGA ELECTRONICS and UKC
Holdings will hold discussions about the location of the holding company’s main office and make adecision later.
(c) Executives (planned)
UKC Kaga Holdings is expected to have six directors including the following four.
Chairman:Isao Tsukamoto (currently Chairman & CEO of KAGAELECTRONICS)
Representative Director and President: Yukio Fukuju (currently Representative Director and President of UKC
Holdings)
Representative Director and Executive Ryoichi Kado (currently President & COO of KAGA ELECTRONICS)
Vice President:
Director and Executive Vice President: Masaaki Taguchi (currently Executive Vice President of UKC Holdings)

4

(d) Other items
Other items concerning the management integration will be determined in the management integration contractthat will be finalized afterward by KAGA ELECTRONICS and UKC Holdings.
(4) Ratio for the exchange of stockThis ratio will be determined by KAGA ELECTRONICS and UKC Holdings prior to the signing of the final
contract for the management integration.
(5) Establishment of Integration Preparation Committee
An Integration Preparation Committee will be established for discussions and studies by KAGA ELECTRONICS
and UKC Holdings concerning matters involving the management integration.

5

3. Quarterly Consolidated Financial Statements(1)

Quarterly consolidated balance sheet(Million yen)
Fiscal year ended March 2015
(As of March 31, 2015)

Third quarter ended December 2015
(As of December 31, 2015)

Cash and deposits

18,13022,791

Notes and accounts receivable-trade58,16755,183ASSETS
Current assets

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

127

146

17,276

17,852

401

940

5,024

5,156

929

512

Other

4,497

4,860

Allowance for doubtful accounts

(131)

(150)

Total current assets

104,424

107,294

Buildings and structures, net

5,455

5,189

Machinery, equipment and vehicles, net

2,285

2,079

936

854

4,041

4,041

Noncurrent assets
Property, plant and equipment

Tools, furniture and fixtures, net
LandConstruction in progress

6

11

12,725

12,177

Goodwill

607

517

Software479

449

Total property, plant and equipment
Intangible assets

Other

44

89

1,131

1,055

Investment securities

6,351

6,790

Deferred tax assets

274

272

Total intangible assets
Investments and other assets

Other

4,210

3,565

Allowance for doubtful accounts(1,169)(1,165)

Total investments and other assets
Total noncurrent assets
Total assets

6

9,667

9,464

23,524

22,697

127,948

129,991(Million yen)
Fiscal year ended March 2015
(As of March 31, 2015)

Third quarter ended December 2015
(As of December 31, 2015)

Notes and accounts payable-trade40,54340,810

Short-term loans payable

5,925

7,619

Income taxes payable

1,286

903

Other

6,856

6,895

Total current liabilities

54,61256,228Long-term loans payable

8,253

6,270

Provision for directors' retirement benefits

1,501

1,195

Net defined benefit liability

1,643

1,684

Other

2,335

2,412

Total noncurrent liabilities

13,733

11,562

68,34567,791

Capital stock

12,133

12,133

Capital surplus

13,912

13,912Retained earnings

31,02934,130

LIABILITIESCurrent liabilities

Noncurrent liabilities

Total liabilities
NET ASSETS
Shareholder’s equity(537)

Treasury shares
Total shareholders' equity(538)

56,53859,637

Valuation difference on available-for-sale securities

790

1,029

Deferred gains or losses on hedges

230Foreign currency translation adjustment

2,462

1,750

Remeasurements of defined benefit plans

(250)

(262)

Accumulated other comprehensive income

Total accumulated other comprehensive income

3,026

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

7

2,518

38

44

59,60362,200127,948

129,991

(2)Quarterly consolidated statements of income and consolidated statements of comprehensive income
For the first three quarters (April 1, 2015 – December 31, 2015)(Million yen)
Third quarter ended December 2014
(April 1, 2014 - December 31, 2014)

Third quarter ended December 2015
(April 1, 2015 - December 31, 2015)

Net sales
Cost of sales

187,556
163,352

182,205
156,974

Gross profit

24,20425,231

Selling, general and administrative expenses

19,20519,085

Operating income

4,998

6,145

114
89
250
455
263

53
96
156
254

1,172

560

88
63

93
114
54

Non-operating income
Interest income
Dividend income
Commission fee
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expense
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of noncurrent assets
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Management integration expenses
Impairment loss
Business structure improvement expenses
Loss on valuation of golf club membership
Special retirement expenses
Office transfer expenses
Settlement package
Other

152

263

6,018

6,442

7
24
1

3
1
-

33

4

5
166
20
0
4
64
6

5
2
67
9
39
20
15

Total extraordinary losses
Income before income taxes and minority interests

268

160

5,783

6,287

Income taxes - current
Income taxes - deferred

1,339
742

1,492
427

Total income taxes
Profit

2,082
3,701

1,920
4,366

Profit attributable to owners of parent

3,691

4,372

9

(5)

Profit (loss) attributable to non-controlling interests

8

(Million yen)
Third quarter ended December 2014
(April 1, 2014 - December 31, 2014)

Third quarter ended December 2015
(April 1, 2015 - December 31, 2015)

424

238

92
2,072

(23)
(711)

50

(12)

2,640

(508)

6,341

3,858

6,330

3,863

10

(5)

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

9

(3)

Notes to quarterly consolidated financial statement(Notes to ongoing concern assumptions)
None(Significant change in shareholders’ equity)
None(Segment information, etc.)
Segment information
I. For the first three quarters ended December 2014 (April 1, 2014 – December 31, 2014)
1. Information about sales and income (loss) by reportable segments
Reporting segments(Million yen)Amount on the quarterly
consolidated statements
of income andAdjustments
consolidated statements(Note 1)of comprehensive
income(Note 2)

Electronic
components

Informationequipment

Software

OthersTotal

146,698

30,173

1,767

8,917

187,556-

187,556

806

457

3,160

1,617

6,041

(6,041)-

Total

147,504

30,630

4,928

10,534

193,598(6,041)

187,556

Segment income

4,169

406

197

105

4,878

119

4,998

Net salesof which to outside
customersof which intersegment

Note: 1. Adjustment of segment income of 119 million yen includes 119 million yen of elimination of inter-segment
trade.
2. Segment income includes adjustments to match operating income as presented in the consolidated statementof income and statement of comprehensive income.
2. Information about impairment losses on fixed assets and goodwill by reportable segments(Significant impairment losses on fixed assets)
Omitted because insufficiently significant(Major changes in goodwill)
Omitted because insufficiently significant(Significant gain on bargain purchase)
Omitted because insufficiently significant

10II. For the first three quarters ended December 2015 (April 1, 2015 – December 31, 2015)
1. Information about sales and income (loss) by reportable segments
Reporting segments(Million yen)Amount on the quarterly
consolidated statements
of income andAdjustments
consolidated statements(Note 1)of comprehensive
income(Note 2)

Electronic
components

Informationequipment

Software

OthersTotal

141,964

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

Net salesof which to outside
customersof which intersegment
Total

Segment income
5,480
323
442
(166)
6,081
64
6,145
(loss)
Note: 1. Adjustment of segment income of 64 million yen includes 102 million yen of elimination of inter-segment
trade and -38 million yen of amortization of goodwill
2. Segment income includes adjustments to match operating income as presented in the consolidated statementof income and statement of comprehensive income.
2. Information about impairment losses on fixed assets and goodwill by reportable segments(Significant impairment losses on fixed assets)
Omitted because insufficiently significant(Major changes in goodwill)
Omitted because insufficiently significant(Significant gain on bargain purchase)
Omitted because insufficiently significant

11