ARRK CORPORATION. Supplementary Material of Financial Results From April 1st, 2007 to March 31, 2008

Transcription

1 ARRK CORPORATION Supplementary Material of Financial Results From April 1st, 2007 to March 31, Supplementary Notes of Consolidated Results Highlights of Consolidated Results Summary of Results Accumulated Quarterly Summary of Quarterly Results Comparison Highlights of Results by Region Highlights of Results by Product Consolidated Results by Region and Product Changes in Major Financial Ratios Number of Employees Information of Shareholders Distribution Top Ten Shareholders Quote & Chart Price Percent Standard on 9/18/1996, Listing Date on OTC Market 1-2 page

2 Supplementary Notes of Consolidated Results Consolidated Sales Profits Prospects The consolidated sales revenue of the year ended March 31, 2008 increased to 383,324 million yen, by 20.4% compared to the previous year. Aithough capital expenditures and exports slowed down, Japanese economy continued to expand owing to a steady consumer consumption during the first half of the period. In the latter haif of the year, Japanese business confidence deteriorated owing to a sharp appreciation of Yen. In North America, American consumer spending and capital expenditures, two wheels of one cart of American economic growth, have become sluggish, because of mainly "Subprime Mortgage" issue. In Europe, business confidence was seesaw, although exports were steady. In China, expenditures for fixed assets and consumer spending remained strong, althogh exports slowed down. Southeast Asian economy mostly remained strong. Under such a situation, we have enlarged our size and enhanced our strength by business combinations, which enabled us to provide our customers with full line services ranging from design, prototype, tooling, molding, PCB and etc. The consolidated operating and ordinary income has decreased to 6,792 millin yen and 2,613 million yen, by 39.1% and 74.1% compared to the previous year, respectively. This is mainly due to the increasing cost of raw materials and wages in addition to profit deterioraton. We have begun to reorganize our operations and focus on improving our profit structure. Meanwhile, impairment loss on fixed assets and goodwill has been recognized. Furthermore, business reconstruction costs have occured in exsiting subsidiaries. In cosequence, net loss amounted to 26,073 million yen, compared with the previous year's net loss 11,698 million yen. We are continuing to reform our profit structure and improve our financial strength. We estimate our consolidated sales revenue, operating income, ordinary income and net income for the year ended March 31, 2009 to be 350,000 million yen, 8,000 million yen, 6,500 million yen, and 1,400 million yen, respectively. There is concern that soaring crude oil prices and raw materials, and elevated labor cost have a negative impact on our business activities. Under such a situation, we intend to improve our business performance by consolidating our tooling and molding drastically, specifying our core business and concentrating management resources in low cost areas. Overview Our full line networks have been enhanced by new business combinations. In April 2007, we acquired Kashiyama-Kanagata Industry Corp, which holds sophisticated technology in plastic molding with totally integrated production sysytem based on the latest technology and the know how they have acquired over many years. In addition, we acquired 3D AUTO PROTECH Co.,Ltd. which specializes in manufacturing and assembly of prototype panels for development of automobiles and panel parts for small volume automomobile productions. Japan Sales Profits Prospects The domestic sales volume has decreased to 153,857million yen, by 0.5% compared to the previous year. Although demands for development of consumer digital products such as flat TV set have kept strong., orders received decreased in the auto related tooling area because demands for development of auto related market took a round. As for cell phone and game machine, demands for development slowed down because it was in a period of change. Operating income has decreased to 5,309million yen, by 49.1% compared to the previous year. This is caused by a sharp decrease of orders from some industries falling in the gap between product life cycles, as well as price hikes of oil and material and increased management cost due to increased size of our group. We are working on differentiating our services through full line networks, providing our customers with higher value added products backed up by credible technology, reducing cost by group-wide streamlining activities and group purchase negotiations. We foresee further growth in the year ended March Our major customers in auto industry are re-optimizing their production locations and our customers in consumer electronic industry are shortening their product life cycles, accelerating development. While working on meeting these market needs, we are expanding our full line networks from traditional design through molding to new areas such as PCB, utilizing the power of all the group companies to provide higher value added services supporting product development. North America Overview Sales Profits In North America, we are building an effective system of allowing all members of the Arrk group to fully benefit from the variation of our customer sources and the combined power of our business, to meet changing global needs, overcoming the severe business environment composed of the slowing down of housing investment and personal consumption caused by mainly "Subprime Mortgage" issue, escalating plastic material price, reconstruction of the US big 3 auto makers caused by slump, and record-setting Canadian dollar appreciation since the Oil Shock. Sales amount of our North American members has increased to 29,238million yen, by 28.5% compared to the previous year. The contribution from digital consumer electronics sales surpassed the order sagging mainly from the automotive industries caused by slowing down in these manufacturing areas. The operating income of our North American members has increased to 1,102million yen, by 349.8% compared to the previous year, despite the trend of slowing down of North American economy. This is due to our proactive management rationalization and our pursuit of synergy effect in order intake and manufacture. Prospects We foresee growth in North America. We are further strengthening our sales and technology development forces through full line networks, pursuing rationalization, and improving our profitability, to be prepared for the possible changes in US economy represented by its automotive industry

3 Overview We have obtained and stabilized more customers from automotive related suppliers. This is due to the continuous economic recovery represented by booming exporting and capital investment, which enabled us to enhance our full line networks mainly in heavy tooling and engineering. Meanwhile, the continuous economic recovery has been slowing down due to mainly "Subprime Mortgage" issue. Europe Sales Profits Sales amount of our European subsidiaries has increased to 39,772 million yen, by 12.4% compared to the previous year. This is due to exchange currency impact despite the sales volume in local currency has remained unchanged. Our European sub-group has incurred an operating loss of 2,109million yen, a drop from a 461million yen operating loss of the previous year. This is due to the delays of some auto related tooling projects and the price competitions caused by the market entry of some low cost countries, and the rising exchange rate. Prospects We foresee a tough environment caused by the market entry of low cost countries mainly in tooling area, among the continuous recovery trend of the European economy. We are pursuing management rationalization, enhancing cooperation between group members inside and outside of Europe, to support the global development of our customers and improve our own performance. Overview Our heavy tooling subsidiary in China is growing steadily along with the Chinese economy, providing products to our members in Europe and North America. In the automotive related area, cooperation between Chinese and other sub groups has also commenced. Asia (excl. Japan) Sales Profits Prospects Sales amount by our Asian sub-group has increased to 160,456 million yen, by 51.9% compared to the previous year. This is due to the steady growth in product development represented by digital consumer electronic products and the strong demand in low fuel consumption vehicles in China, Taiwan and ASEAN nations. Recent business combinations have also contributed to the increase in sales. Operating income of our Asian sub-group has increased to 3,201million yen, by 118.0% compared to the previous year. The rapid appreciation of South Korean won has tremendously damaged the export centered South Korean economy. And the negative effect of this damage to our group was not fully covered by the increasing order intake and the improving productivity and profitability of our Asian members contributed by synergy effects. We foresee our growth in Asia under the expansion of AFTA, the concentration of production locations and the specialization of labor division. We are building a system to further benefit from synergy effect. Exchange Rate U.S. Dollar Euro Pound stg. Thailand Baht Malaysian Dollar Korean Won New Taiwanese Dollar Australian Dollar China Renminbi Singapore Dollar Canadian Dollar Indonesia Rupiah Hong Kong Dollar Hungary Forint Mexican Peso Romanian Lei US$ EUR GBP THB MY$ KRW NT$ AU$ RMB SG$ CA$ IDR HK$ HUF MXN RON Budget Actual *Actual exchange rate is the average rate from Jan to Dec. 2007, which is applied to consolidation procedures for subsidiaries whose fiscal year is ended December

4 Year Ended Mar. 31, 2007 Year Ended Mar. 31, st Q Interim 3rd Q Yearly 1st Q Interim 3rd Q Yearly 1 Sales / Cost of Goods Sold / Operating Income Highlights of Consolidated Results ( Accumulated Quarterly ) million yen 400, , , , , , , , , , , ,784 75,376 90,413 76,955 63,209 10,848 11,149 3,022 6,990 2,889 3,434 Sales Cost of Goods Sold Operating Income 383, , , ,762 6,842 6,792 40,000 30,000 20,000 10, Ordinary Income / Net Income / Minority Interests Ordinary Income Net Income million yen Minority Interest 20,000 10, ,000 20,000 10,033 10,102 6,102 2, ,506 2, ,952 2,811 2,103 11,698 2, ,610 1,453 4,375 4,802 2,023 4,354 2,613 1,137 30,000 million yen 120, ,000 80,000 60,000 40,000 20, ,376 75,763 63,209 62,574 3,022 3,968 ( Comparison of Quarterly Results ) Year Ended Mar. 31, 2007 Year Ended Mar. 31, st Q 2nd Q 3rd Q 4th Q 1st Q 2nd Q 3rd Q 4th Q 1 Sales / Cost of Goods Sold / Operating Income 81,506 67,559 3,858 85,859 90,413 94,478 97, ,943 74,410 76,955 82,098 82,709 88, , , Sales 26,073 Cost of Goods Sold Operating Income 10,000 8,000 6,000 4,000 2, ,000 2 Ordinary Income / Net Income / Minority Interest Ordinary Income Net Income million yen Minority Interest 10,000 5, ,000 10,000 2,474 3,627 3, , , , , ,416 2,189 3,160 15,000 20,000 25,000 14,403 21,

5 Summary of Results Accumulated Quarterly (unit: million yen) Year Ended March 31, 2007 Year Ended March 31, st Quarter Interim 3rd Quarter Yearly 1st Quarter Interim 3rd Quarter Yearly Compared to the Prior Year Main Reasons of Changes (Compared to the Prior year) Raito to Sales Raito to Sales Raito to Sales Raito to Sales Raito to Sales Raito to Sales Raito to Sales Raito to Sales Ratio of Change Sales 75, % 151, % 232, % 318, % 90, % 184, % 282, % 383, % 64, % Cost of Goods Sold 63, % 125, % 193, % 267, % 76, % 159, % 241, % 330, % 62, % Gross Profit 12, % 25, % 39, % 50, % 13, % 25, % 40, % 53, % 2, % Molding for Automotive products in Asia and molding for Consumer products in North America contributed. Mainly due to increase in subcontract processing cost and material cost. Selling, General & Admin. Exp. 9, % 18, % 28, % 39, % 10, % 22, % 33, % 46, % 6, % Mainly due to increase in salaries in Asia and Japan. Operating Income 3, % 6, % 10, % 11, % 2, % 3, % 6, % 6, % 4, % Other Gain % 1, % 2, % 4, % 1, % 2, % 2, % 3, % % Other Loss 1, % 2, % 3, % 5, % 1, % 3, % 5, % 7, % 2, % Ordinary Income 2, % 6, % 10, % 10, % 2, % 2, % 4, % 2, % 7, % Increase in interest expense by 973, loss on revaluation of derivative trannsaction for 914, exchange loss for 628,etc. Extraordinary Gain % % % 1, % % % % 1, % % Gain on sales of fixed asset for 906 Extraordinary Loss % % 1, % 15, % % 4, % 4, % 27, % 12, % Recognition of impairment loss for 23,864 Net Income Before Income Taxes 2, % 5, % 9, % 3, % 1, % 1, % % 23, % 19,329 - Tax Expense 1, % 2, % 4, % 5, % 1, % 1, % 3, % 4, % 1,712 - Minority Interests % 1, % 2, % 2, % % 1, % 2, % 1, % 3,241 - Net Income % 1, % 2, % 11, % % 4, % 4, % 26, % 14,375 - Depreciation Expense - - 6, , , ,678-1,770 - Capital Investment , , , ,485-3,597 - Goodwill , , , ,290-3,711 - Amortization of Goodwill , ,

6 Summary of Quarterly Results Comparison (unit: million yen) Year Ended March 31, 2007 Year Ended March 31, st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Compared to 3rd Q Main Reasons of Change (Compared to 3rd Quarter, FY2007) Ratio to Sales Ratio to Sales Ratio to Sales Ratio to Sales Ratio to Sales Ratio to Sales Raito to Sales Raito to Sales Ratio of Change Sales 75, % 75, % 81, % 85, % 90, % 94, % 97, % 100, % 3, % Cost of Goods Sold 63, % 62, % 67, % 74, % 76, % 82, % 82, % 88, % 5, % Gross Profit 12, % 13, % 13, % 11, % 13, % 12, % 14, % 12, % 2, % Selling, General & Admin. Exp. 9, % 9, % 10, % 11, % 10, % 11, % 11, % 12, % 1, % Operating Income 3, % 3, % 3, % % 2, % % 3, % % 3, % Other Gain % % 1, % 1, % 1, % 1, % % % % Other Loss 1, % 1, % % 1, % 1, % 1, % 1, % 2, % 1, % Ordinary Income 2, % 3, % 3, % % 2, % % 2, % 2, % 4, % Extraordinary Gain % % % % % % % 1, % % Change of inventory estimation in any subsidiaries etc. Extraordinary Loss % % % 13, % % 3, % % 22, % 22, % Recognition of impairment loss for 23,864 Net Income Before Income Taxes 2, % 3, % 3, % 13, % 1, % 3, % 2, % 23, % 25,953 1,256.8% Tax Expense 1, % 1, % 1, % 1, % 1, % % 1, % % % Minority Interests % 1, % % % % % % 3, % 3, % Net Income % % 1, % 14, % % 4, % % 21, % 21, ,523.8% Depreciation Expense - - 6, , , , Capital Investment , , , , Goodwill , , , , Amortization of Goodwill , ,

7 地 Highlights 域別業 of Results 績ハ by イ Region ライト 1 Sales Japan N. America Europe Asia From Apr to Mar From Apr to Mar , , , , , ,504 unit: million yen 35,394 22,758 39,772 29,238 2 Operating Income Japan N. America Europe Asia ,468 3,201 11,693 7,503 5,309 unit: million yen 10,440 2,109 1,102 before canceling internal transactions Highlights of Results by Product 1 Sales Design Prototype Tooling Molding PCB Others 20,241 29,306 20,908 18,292 23,897 27,140 31,531 21, ,504 76, ,324 79, , ,231 unit: million yen 2 Balance of Orders Design Prototype Tooling Molding Others 23,876 6,037 12,914 3,169 70,205 24,208 23,986 12,970 14,502 1,948 79,238 25,830 unit: million yen - 6 -

8 Consolidated Results by Region and Product 1. Number of Subsidiaries and Equity Method Affiliates Financial Year 2007 Financial Year 2008 Design Prototype Tooling Molding PCB Others Total Design Prototype Tooling Molding PCB Others Total Japan Japan N. America N. America Europe Europe Asia (excl. Asia (excl. Japan) Japan) Total Total Major newly acquired subsidiaries: Domestically-Kashiyama Kanagata (Production /Sales of tooling/molding), Kyushu Nanbu Plastic, Aipha Holdings (Production /Sales of CAD/CAM systems), Computor Engineering (Production /Sales of CAD/CAM systems), 3D AUTO PROTECH (Production /Sales of Prototype/Dispath of 3D CAD), Arrk Service, DAINAC, In Europe-SPG (Automotive Injection Moulded Prototypes), Sermo Brasil (Molding), PLAST CONCEPT (Design Office in plastic for Automotive and Aerospase), In Asia Ch h B h (P i i T li /M ldi ) t Financial Year 2007 Financial Year Sales (by Product) (unit: million yen) (unit: million yen) Design Prototype Tooling Molding Others Total Design Prototype Tooling Molding Others Total Japan 13,100 12,351 35,642 63,241 30, ,700 Japan 13,853 13,548 35,018 58,254 33, ,857 N. America 41 1,219 11,202 9,255 1,039 22,758 N. America 631 1,480 10,455 15,204 1,466 29,238 Europe 14,905 3,409 13,392 3, ,394 Europe 15,401 4,453 15,012 4, ,772 Asia (excl. Asia (excl. Japan) 1,258 1,312 16,331 77,173 9, ,650 Japan) 1,644 1,595 18, ,090 16, ,456 Total 29,306 18,292 76, ,187 41, ,504 Total 31,531 21,078 79, ,231 51, ,324 Summary: Sales volume has increased as a whole mainly due to increase in size of the group by new business combinations. Remarkable areas and segements are Asia's molding. Financial Year 2007 Financial Year Balance of Orders (by Product) (unit: million yen) (unit: million yen) Design Prototype Tooling Molding Others Total Design Prototype Tooling Molding Others Total Japan 3,654 1,634 7,375 3,048 5,394 21,107 Japan 7,922 1,433 8,459 3,414 11,843 33,072 N. America ,188 2,545-5,921 N. America ,434 2,152-6,655 Europe 9,082 1,079 4,749 1, ,435 Europe 5, ,674 3, ,861 Asia (excl. Asia (excl. Japan) ,894 16, ,741 Japan) ,262 14,456 1,082 21,649 Total 12,914 3,169 24,208 23,876 6,037 70,205 Total 14,502 1,948 25,830 23,986 12,970 79,238 Summary:Balance of orders increased mainly due to an increase in the segments except Prototype in Japan. In North America, Molding and Prototype decreased, but Tooling increased. In Europe, Design and Prototype decreased, but Tooling and Molding increased. In Asia, Tooling and Molding decreased. 4. Sales (by Application) (unit: million yen) (unit: million yen) Consumer Industrial Financial Year 2007 Financial Year 2008 Precision Automotive Medical Housing Others Japan 82,328 9,481 6,470 42,431 2,536 4,338 7,112 Japan 79,011 10,445 4,764 45,762 2,663 3,655 7,554 N. America 6,031 2, , N. America 12,678 2, , ,098 Europe 1,973 4, , Europe 1,825 4, , Asia (excl. Asia (excl. Japan) 51,359 1, ,912 1,942 3,680 1,341 Japan) 54,481 3, ,239 2,143 3,989 4,091 Total 141,693 18,447 7, ,036 5,114 8,963 8,954 Total 147,997 20,865 5, ,640 5,702 8,565 12,824 Summary:In Asia, sales of automotive products substantially increased. Sales of automotive products increased in Japan and Europe. In North America, sales of consumer products increased. Consumer Industrial Precision Automotive Medical Housing Others - 7 -

9 Changes in Major Financial Ratios Total Market Value (million yen) PBR Price Book Value Ratio (time) ,836 (million yen) 400, , ,625 96, , ,520 Apr. 05-Mar. 06 Apr Sep. 06 Apr. 06-Mar. 07 Apr Sep. 07 Apr. 07-Mar , ,000 0 Debt Redemption Period (year) Interest Coverage Ratio Debt Redemption Period = Interest-bearing Debt / Cashflow from Operating Activities Interest Coverage Ratio = Cashflow from Operating Activities / Interest Paid Apr. 05-Mar. 06 Apr Sep. 06 Apr. 06-Mar. 07 Apr Sep. 07 Apr. 07-Mar. 08 Apr. 05-Mar. 06 Apr Sep. 06 Apr. 06-Mar. 07 Apr Sep. 07 Apr. 07-Mar. 08 Operating Margin (%) Ordinary Margin (%) Ratio of Ordinary Income to Total Capital ( EPS Earnings per Share (yen) PER Price Earnings Ratio BPS Book Value per Share (%) 2, , , , PBR Price Book Value Ratio ROE Return on Equity (%) Current Ratio (%) Fixed Ratio (%) Equity to Asset Ratio (%) Debt Redemption Period (year) Interest Coverage Ratio Number of Shares Issued 34,050,796 68,101,592 68,101,592 68,101,592 68,101,592 Total Market Value (million yen) 292, ,625 96,898 52,370 21,

10 1 Arrk Corporation Number of Employees (As of March 31, 2008) Independent Contractors Regular Employees Part-time Employees Mar Sep Mar Sep Mar Production Sales Administration Total Consolidated (Exclusive of Temporary Contractors ) Mar Sep Mar Sep Mar Japan North America Europe Asia All Subsidiaries & Affiliates Total (incl. Arrk Corp.) 4,303 4,528 5,046 5,098 5,263 1,781 2,045 1,980 2,621 2,035 2,068 2,205 2,340 2,246 2,382 10,520 10,133 11,292 11,474 11,460 18,672 18,911 20,658 21,439 21,140 18,996 18,911 21,218 22,024 21, Shareholders Information of Shareholders (As of March 31, 2008) Ratio of Shareholding (%) Mar Sep Mar Sep Mar Number of Shareholders Number of Shares Held Financial Institution Commercial Bank ,000 Trust Bank ,166,671 Life Insurance ,800 Non-Life Insurance ,000 Others ,605,300 Securities Broker ,052,225 Other Domestic Corp ,149,700 Foreign Corp ,348,764 Individual and Others ,798 30,654,800 Treasury Stock ,332 Total ,257 68,101,

11 2. Distribution Share Distribution (%) Floating Stock By Overseas Investors By Investment Trust Funds By Pension Trust Funds Mar Sep Mar Sep Mar Ratio of Holding (%) Mar Sep Mar Sep Mar By Overseas Investors ,348,764 By Investment Trust Funds ,707,700 By Pension Trust Funds ,821,100 By Directors ,413,700 1 By Special Shareholders ,722,214 2 Floating Stock ,977 17,622,037 1 Shares held by top ten shareholders or directors, plus treasury stock 2 Aggregated # of Shares held by shareholders each of who holds no more than 50 units Number of Shareholders Number of Shares Held 3. Top Ten Shareholders Rank Shareholder Name (As of March 31, 2008) Number of Shares Held Ratio of Holding 1 The Nomura Trust and Banking Co., Ltd. 9,054, % 2 The Master Trust Bank of Japan, Ltd. 2,123, % 3 Japan Trustee Services Bank, Ltd. 2,097, % 4 Sajap 1,551, % 5 Japan Securities Finance Co., Ltd. 1,441, % 6 Bank of New York Europe Limited ,416, % 7 UBS AG London Account 1,154, % 8 Northen Trust Company AVFC 1,122, % 9 Trust and Custody Services Bank, Ltd. 933, % 10 Deutsche Bank AG London/PB/Non-Treaty Clients , %

12 Quote & Chart 7873 Arrk Corporation (Monthly) Price 6 months 12 months Turnover Turnover (Share) (Weekly) Price 13 weeks 26 weeks Turnover Turnover (Share)

13 Price Percent standard on 9/18/1996, listing date on OTC Market ARRK Nikkei Average Nikkei JASDAQ Average Year Month

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16 ARRK CORPORATION