August 2, 2016

Summary of Consolidated Financial Results
For the First Quarter Ended June 30, 2016 [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:

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
August 12, 2016
None
None
(Yen in millions, rounded down)

1.

Financial results for the first quarter of the fiscal year ending March 2017 (April 1, 2016 – June 30, 2016)(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%
Million yen(65.7)First quarter ended June 2016
52,221(10.5)
765 (52.1)
608
1,396
73.3
First quarter ended June 2015
58,349
2.6
1,598
89.6
1,773
1,147
Note: Comprehensive income: 1Q FY3/2017: -422 million yen [-132.8%], 1Q FY3/2016: 1,289 million yen [377.1%]
Earnings per share

Earnings per share fully diluted
Yen
-

Yen
49.41
40.60

First quarter ended June 2016
First quarter ended June 2015

%
21.7
153.9

(2) Financial Position (Consolidated)
Total assets
As of June 30, 2016

Equity ratio

Million yen
115,489

Million yen
60,396%52.3

124,281

61,80849.7

As of March 31, 2016
Reference: Shareholders’ equity
As of June 30, 2016:
60,348 million yen
2.

Net assets

As of March 31, 2016

61,764 million yen

Dividends
End of 1Q
Yen-

End of 2Q
Yen
20.00

Dividend per share
End of 3Q
Yen-

Fiscal year ended March 2016
Fiscal year ending March 2017
Fiscal year ending March 2017 (est.)
20.00
Note: Change in the estimation of dividend from the latest announcement: None

End of FY
Yen
35.00

Full year
Yen
55.00

20.00

40.00

-

Yearend dividend of FY3/16 includes ordinary dividend of 20.00 yen and special dividend of 15.00 yen

3.

Forecast for the fiscal year ending March 2017 (Consolidated, April 1, 2016 to March 31, 2017)(Percentage figures represent year on year changes)
Profit attributable
Earnings per
Net sales
Operating income
Ordinary income
to owners of parent
shareMillion yen%

Million yen%

Million yen%

Million yen%

Yen

First Half
108,000(12.2)
1,500(64.2)
1,500(66.1)
1,800(38.8)
63.71
230,000(6.3)
5,700(26.8)
6,400(19.1)
4,700(13.6)
166.34
Full year
Note: Change in the forecast from the latest announcement: Yes
Please refer “Notice of Revision in Forecast for First Half of the Fiscal Year Ending March 2017” announced on 2 August,2016.

* Notes(1) Changes in significant subsidiaries (Changes in specific subsidiaries accompanied by changes in the scope of
consolidation): None
Note: There was a change in a specified subsidiary that did not alter the scope of consolidation. For more information,please see “2. Other Information (1) Changes in significant subsidiaries” on page 3 of Supplementary Information.
(2) Use of of accounting methods specifically for the preparation of the quarterly consolidated financial statements: None
(3) Changes in accounting principles and estimates, and retrospective restatement(a) Changes due to revision of accounting standards: Yes(b) Changes other than in (a): None(c) Changes in accounting estimates: None(d) Retrospective restatement: None
Note: For more information, please see “2. Other Information (3) Changes in accounting principles and estimates, andretrospective restatement” on page 3 of Supplementary Information.
(4) Number of shares outstanding (common stock)(a) Shares outstanding (including treasury shares)
As of June 30, 2016:

28,702,118

As of March 31, 2016:

28,702,118

As of June 30, 2016:

446,980

As of March 31, 2016:

446,824

Period ended June 30, 2015:

28,256,017(b) Treasury shares(c) Average number of shares (quarterly consolidated cumulative period)
Period ended June 30, 2016:

28,255,197* 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 Financial Results. The financial statements for the first quarter were under review at the time this Summary of
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 thisreport was prepared and assumptions that management believes are reasonable. Actual results may differ significantly
from these statements for a number of reasons. For information about the forecasts, please see “1. Results ofOperations (3) Forecast for fiscal year ending in March 2017” on page 3 of Supplementary Information.

Index for Supplementary Information
1.

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

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

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

Forecast for fiscal year ending in March 2017 .........................................................................................................................3

2.

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

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

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

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

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

3.

Quarterly Consolidated Financial Statements ...............................................................................................................................4(1)

Quarterly consolidated balance sheet .......................................................................................................................................4(2)

Quarterly consolidated statements of income and consolidated statements of comprehensive income ...................................6
For the first quarter (April 1, 2016 – June 30, 2016).....................................................................................................................6(3)

Notes to quarterly consolidated financial statement.................................................................................................................7(Notes to going concern assumptions) ..........................................................................................................................................7(Significant change in shareholders’ equity) .................................................................................................................................7(Segment information, etc.)...........................................................................................................................................................71

1.

Results of Operations(1)

Overview on consolidated business performance
In the first quarter of the fiscal year, there was an improvement in employment in Japan because of actions by the Japanese
government and Bank of Japan. However, the Japanese economy remained sluggish as capital expenditures and consumer
spending were weak. In addition, the economic outlook is uncertain due mainly to slowing economic growth in China andother emerging countries and concerns about the impact on corporate earnings in Japan of the yen’s strength resulting fromBritain’s decision to leave the EU.
In the electronics industry, the principal area of operations for the KAGA ELECTRONICS Group, market conditions werechallenging because of slow sales of PCs, smartphones and other mobile wireless devices, and amusement products. But
the markets for automotive electronics and the IoT (*1) continued to grow.
Based on the management philosophy of “Everything we do is for our customers,” the KAGA ELECTRONICS Group
integrated and reorganized business operations to improve efficiency and directed substantial resources to expanding
market sectors to aim for growth. There were also measures for increasing sales to current major customers in Japan andexpanding activities outside Japan. However, first quarter performance was impacted to cuts in production by major
customers and changes in distribution channels.
First quarter consolidated net sales decreased 10.5% from one year earlier to 52,221 million yen, operating income
decreased 52.1% to 765 million yen, ordinary income decreased 65.7% to 608 million yen, and profit attributable toowners of parent decreased 21.7% to 1,396 million yen because of a declese in income taxes – deferred due to tax effectaccounting.
*1

Internet of Things is a generic name given to new services and business models based on connecting all things through the Internet
or underlying technologies that enable it.

Business segment performance was as follows.
(a) Electronic components (Development, manufacture and sale of semiconductors, general electronic components andother products, electronics manufacturing service (EMS) (*2), and other activities)
Sales of EMS for electronic products were down because major customers in Japan and overseas reduced production.
In addition, a shift in the policy of semiconductor manufacturers concerning the use of sales agents caused the volumeof semiconductors in Japan to decline. First quarter performance was also affected by lower sales of some electronicparts and products because of the April 2016 earthquake in Kumamoto. The result was a 13.9% decrease in segment
sales to 39,237 million yen and a 57.7% decrease in operating income to 623 million yen.
*2 EMS: Electronics Manufacturing Service is a term used for the provision of product development and manufacturing services onan outsourcing basis.

(b) Information equipment (Sales of PCs, PC peripherals, home electric appliances, photograph and imaging products,
original-brand products, and other products)
Although sales of housing-related products and digital cameras were slow, the volume of PCs and other consumer
products increased due to sales campaigns and other steps to strengthen sales activities. During the first quarter,
subsidiaries were realigned in this segment to improve efficiency. The result was a 4.7% increase in sales to 10,116
million yen and a 12.8% increase in operating income to 105 million yen.
(c) Software (Production of computer graphics, planning and development of amusement products, and other activities)
Orders for the production of computer graphics for animation and the development of software were weak. Segment
sales increased 1.2% to 477 million yen and operating income decreased 47.6% to 75 million yen.
(d) Others (Electronic device repairs and support, manufacture and sale of amusement products, sales of sporting goods,
and other activities)
Sales of arcade amusement machines and golf products in Japan were soft because of a downturn in consumer
spending. Segment sales decreased 8.7% to 2,391 million yen and the operating loss was 70 million yen compared withan 88 million yen loss one year earlier.
(2)

Overview of financial condition
Assets, liabilities and net assets
Assets decreased 8,791 million yen from the end of the previous fiscal year to 115,489 million yen at the end of the firstquarter mainly because of a decrease in notes and accounts receivable-trade. Liabilities decreased 7,379 million yen to 55,093
million yen mainly because of a decrease in notes and accounts payable-trade.
Net assets decreased 1,411 million yen to 60,396 million yen mainly because of a decrease in the foreign currency translation
adjustment due to fluctuation of exchange rate.

2

(3)

Forecast for fiscal year ending in March 2017(a) Revision of the consolidated forecast for first half of the fiscal year ending March 2017 (April 1, 2016 – September 30,
2016)
ProfitOperatingEarnings per
Net sales
Ordinary income
attributable toincomeshareowners of parent
Million yen
Million yen
Million yen
Million yen
Yen
Previous forecast (A)103,000

1,100

1,200

1,100

38.93

Revised forecast (B)108,000

1,500

1,500

1,800

63.71

5,000

400

300

700

-

4.9

36.4

25.0

63.6

-

122,975

4,195

4,427

2,943

104.17

Change (B-A)
Percent change (%)(Ref.) Previous fiscal year
(First half FY3/16)(b)2.

Reasons for revision of forecast
Sales in the EMS business in Japan and overseas and sales of PCs and other products for consumers have been higher
than the forecast. Furthermore, efficiency is improving because of the integration and reorganization of group business
operations. As a result, the first half consolidated forecast has been increased.
There are no revisions to the fiscal year forecast because the outlook for the operating environment for the KAGAELECTRONICS Group remains uncertain. An announcement will be made promptly if a revision is needed to reflect
performance in the current fiscal year.

Other Information (Note)(1)

Changes in significant subsidiaries:
None
There was no change in a specified subsidiary that altered the scope of consolidation. However, during the first quarter,
KAGA SOLUTION NETWORK CO., LTD. a consolidated subsidiary and KAGA HIGHTECH CO., LTD. merged with
KAGA SOLUTION NETWORK the remaining company. As a result, KAGA SOLUTION NETWORK has become a
specified subsidiary.

(2)

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

(3)

Changes in accounting principles and estimates, and retrospective restatement:
Changes in accounting policy(Application of Practical Solution on a change in depreciation method due to Tax Reform 2016)
In association with revisions to the Corporation Tax Act, KAGA ELECTRONICS has applied Practical Solution on achange in depreciation method due to Tax Reform 2016 (ASBJ Practical Issues Task Force (PITF) Solution No. 32, June17, 2016) from the first quarter of the current fiscal year. As a result, the depreciation method for building facilities andstructures acquired on or after April 1, 2016 has been changed from the declining-balance method to the straight-line
method.
This revision did not have a material effect on earnings.

(4)

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

3

3.

Quarterly Consolidated Financial Statements(1)

Quarterly consolidated balance sheet(Million yen)
Fiscal year ended March 2016
(As of March 31, 2016)

First quarter ended June 2016
(As of June 30, 2016)

ASSETS
Current assets
Cash and deposits

22,516

22,412

Notes and accounts receivable-trade

54,79546,419166

181

14,89815,409

266

624

4,010

3,566

849

1,553

4,638

3,538

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

(179)

(161)

101,961

93,543

Buildings and structures, net

5,112

5,028

Machinery, equipment and vehicles, net

1,992

1,933

813

760

4,138

4,136

0

0

12,058

11,859Goodwill

495

472

Software

422

410

Other

85

82

1,003

966

Investment securities

6,519

6,213

Deferred tax assets

257

474

Guarantee deposits

739

722

Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment

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

Total intangible assets
Investments and other assets

916

917

Other

1,931

1,792

Allowance for doubtful accounts(1,107)(1,000)Total investments and other assets

9,257

9,119

22,31921,945

124,281

115,489

Insurance funds

Total noncurrent assets
Total assets

4

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

First quarter ended June 2016
(As of June 30, 2016)

Notes and accounts payable-trade36,85832,233

Short-term loans payable

6,295

5,535

Accrued expenses

3,311

2,723

Income taxes payable

995

475

Provision for directors' bonuses

185

46

Other

3,523

3,269

Total current liabilities

51,16944,284Long-term loans payable

6,007

5,650

Deferred tax liabilities

1,246

1,160

Provision for directors' retirement benefits

1,211

1,195

Net defined benefit liability

1,774

1,777

Asset retirement obligations

142

138

LIABILITIESCurrent liabilities

Noncurrent liabilities

Other

919

885

11,303

10,80862,47255,093

Capital stock

12,133

12,133

Capital surplus

13,912

13,912Retained earnings

35,19535,602

Total noncurrent liabilities
Total liabilities
NET ASSETS
Shareholder’s equity

Treasury shares

(539)

(539)

60,702

61,109

681

454

4

(0)

Foreign currency translation adjustment

713

(898)

Remeasurements of defined benefit plans

(338)

(316)

Total accumulated other comprehensive income

1,061

(760)

44

47

61,80860,396124,281

115,489

Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

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

5

(2)

Quarterly consolidated statements of income and consolidated statements of comprehensive income
For the first quarter (April 1, 2016 – June 30, 2016)(Million yen)First quarter ended June 2015
(April 1, 2015 – June 30, 2015)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Commission fee
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of noncurrent assets
Gain on sales of investment securities
Gain on transfer of businessTotal extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Loss on valuation of golf club membership
Other
Total extraordinary loss
Profit before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
ProfitProfit attributable to owners of parent
Profit (loss) attributable to non-controlling interests
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

6

First quarter ended June 2016
(April 1, 2016 – June 30, 2016)

58,34950,334
8,014
6,416
1,598

52,22145,426
6,795
6,030
765

26
63
53
78
221

12
65
36
67
181

27
3
15
46
1,773

33
293
11
337
608

0
1
1

0
0
35
35

0
2
0
2
1,772
347
281
629
1,143
1,147
(3)

3
10
0
13
630
212
(983)
(771)
1,401
1,396
5

136

(227)

(19)
79

(5)
(1,613)

(50)

21

146
1,289

(1,824)
(422)

1,293

(426)

(3)

3

(3)

Notes to quarterly consolidated financial statement(Notes to going concern assumptions)
None(Significant change in shareholders’ equity)
None(Segment information, etc.)
Segment information
I For the first quarter ended June 2015 (Apr. 1, 2015 – June 30, 2015)
1. Information about sales and income (loss) by reportable segments
Reporting segments

Adjustment(Note 1)

(Million yen)Amount on thequarterly
consolidated
statements ofincome andconsolidated
statements ofcomprehensive
income(Note 2)

Electronic
components

Informationequipment

Software

Others45,592

9,666

471

2,618

58,349-58,349

187

170

684

238

1,281

(1,281)-45,779

9,837

1,156

2,857

59,631(1,281)

58,349Total

Net salesof which tooutside customersof which intersegment
Total

Segment
1,472
93
144
(88)
1,622
(24)
1,598
income (loss)
Notes: 1. The adjustment -24 million yen includes amounts for intersegment cancellation of 14 million yen andamortization of goodwill of -38 million yen.
2. Segment income (loss) is adjusted for operating income (loss) on the quarterly consolidated statements of income
and consolidated statements of comprehensive income.
2. Information on impairment losses on fixed assets or goodwill, etc. for reporting segment(Significant impairment losses on fixed assets)
None(Significant changes in the amount of goodwill)
None(Significant gain on bargain purchase)
None

7

II For the first quarter ended June 2016 (Apr. 1, 2016 – June 30, 2016)
Information about sales and income (loss) by reportable segments

Reporting segments

Adjustment(Note 1)

(Million yen)Amount on thequarterly
consolidated
statements ofincome andconsolidated
statements ofcomprehensive
income(Note 2)

Electronic
components

Informationequipment

Software

Others39,237

10,116477

2,391

52,221-

52,221

214

133

354

514

1,217

(1,217)-39,452

10,249831

2,905

53,439(1,217)52,221Total

Net salesof which tooutside customersof which intersegment
Total

Segment
623
105
75
(70)
734
30
765
income (loss)
Notes: 1. The adjustment 30 million yen includes amounts for intersegment cancellation of 30 million yen.
2. Segment income (loss) is adjusted for operating income (loss) on the quarterly consolidated statements of income
and consolidated statements of comprehensive income.
2. Information on impairment losses on fixed assets or goodwill, etc. for reporting segment(Significant impairment losses on fixed assets)
None(Significant changes in the amount of goodwill)
None(Significant gain on bargain purchase)None8