Consolidated Results for the Three Months Ended June 30, 2018 (April 1, 2018 June 30, 2018)

Transcription

1 TRANSLATION -FOR REFERENCE ONLY- August 6, 2018 Company name: TAIYO YUDEN CO., LTD. URL: Representative: Shoichi Tosaka, President and Chief Executive Officer Contact: Accounting Department, Management Planning Headquarters Telephone number: Listing exchange: Tokyo Stock Exchange (Code Number: 6976) Consolidated Results for the Three Months Ended June 30, 2018 (April 1, 2018 June 30, 2018) Overview of Operating Results Period Three months ended June 30, 2017 Unit: Millions of yen (Millions of yen rounded down unless otherwise stated) Three months ended June 30, 2018 Increase/(Decrease) Item Amount Share [%] Amount Share [%] Amount [%] Net sales 54, , , Operating income 3, , , Ordinary income 4, , , Income before income taxes and minority interests Net income attributable to owners of parent company 4, , ,134 5, , , Comprehensive income 3,791-7,236-3, Net income per share [Yen] Diluted net income per share [Yen] R&D expenses 2,794 3,246 Capital investment 4,895 5,038 Depreciation and amortization 6,193 6,065 Notes: Share data is computed as a ratio of net sales (128) (2.1) Total assets Net assets Equity ratio Net assets per share [Yen] As of March 31, 2018 As of June 30, , , , , % 54.5% 1, , Increase/(Decrease) Amount [%] 35, , (4.6) pt Net Sales by Product Classification Product classification Capacitors Ferrite and applied products Integrated modules & devices Others Three months ended June 30, 2017 Amount Share [%] 29,747 14, Increase/(Decrease) Amount [%] 6, (1,502) (10.2) Total 54, , , Amount 8, , Three months ended June 30, 2018 Share [%] 36, ,

2 Consolidated Results for the three months ended June 30, 2018 August 6, 2018 Preparation of supplementarymaterials for the quarterly financial results: Holding of presentation ofquarterly financial results: Yes Yes (For institutional investors and investment analysts) 1. Consolidated financial results for the period from April 1, 2018 to June 30, 2018 (1) Operating results (Percentages represent changes from the same period in the previous fiscal year.) Net income attributable Net sales Operating income Ordinary income to owners of the parent company Millions of yen % Millions of yen % Millions of yen % Millions of yen % June 30, 2018 June 30, 2017 Note: Comprehensive income 59,576 54, ,981 3, ,896 4, ,645 3, ended on June 30, ,236 million yen ; 90.8% ended on June 30, ,791 million yen ; - % June 30, 2018 June 30, 2017 Net income Diluted net income per share per share Yen Yen (2) Financial position Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen % Yen As of June 30, 2018 As of March 31, , , , , , , (Reference) Shareholder's equity As of June 30, ,852 million yen As of March 31, ,776 million yen 2. Dividend information 1Q Cash dividends per share 2Q 3Q Year End Total Yen Yen Yen Yen Yen Year ended - March 31, 2018 Year ending - March 31, 2019 Year ending March 31, 2019 (forecast) Note: No changes in the forecasted dividend during the first quarter ended June 30,

3 3. Forecasts of operating results for the period from April 1, 2018 to March 31, 2019 (Percentages represent changes from same period in the previous fiscal year.) Net income Net sales Operating income Ordinary income attributable to Net income owners of the per share parent company Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen Six months ending September 30, 2018 Year ending March 31, , , ,000 24, ,500 24, ,000 17, Note: 1) There are changes in the forecasted results during the first quarter ended June 30, ) The above forecast does not include operating result of ELNA CO., LTD ("ELNA") which we acquired on April 2018 as ELNA, a company registered on Tokyo Stock Exchange, has not released forecast of operating result. 4. Note (1) Changes in principal subsidiaries during the three months ended June 30, 2018: Yes Number of subsidiaries/company Name Inclusion: 1 / ELNA CO., LTD. ; Exclusion; - (2) Adoption of specific accounting procedures for quarterly consolidated reporting: No (3) Changes in accounting policies and accounting estimates, and restatements a. Changes in accounting policies due to the revision of accounting standards: No b. Changes in accounting policies by the reasons other than "a.": No c. Changes in accounting estimates: No d. Restatement: No (4) Number of common shares outstanding : a. Number of common shares outstanding (including treasury stock): As of June 30, ,481,395 shares As of March 31, 2018 b. Number of treasury stock: As of June 30, ,632,328 shares As of March 31, 2018 c. Average number of common shares outstanding: 117,839,344 shares June 30, 2018 June 30, ,481,395 shares 2,645,260 shares 117,830,549 shares Others : 1. This financial press release is out of scope of the audit procedure. 2. Forecasts of operating results include a number of assumptions based on information currently available and certain premises which were judged to be rational. Please note that these forecasts may significantly differ from actual results with various factors. 3. TAIYO YUDEN will post the financial supplementary data on its web-site

4 Table of contents 1. Analysis of Operating Results and Financial Condition... 1 (1) Analysis of Operating Results... 1 (2) Consolidated Financial Conditions... 3 (3) Forecasts of Consolidated Operating Results Consolidated Financial Statements... 5 (1) Consolidated Balance Sheets... 5 (2) Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income... 7 Consolidated Statements of Operations ( June 30, 2018 and 2017)... 7 Consolidated Statements of Comprehensive Income ( June 30, 2018 and 2017)... 8 (3) Notes on Consolidated Financial Statements... 9 (Notes on Premise of Going Concern)... 9 (Notes in Case of Significant Changes to Shareholders Equity)... 9 (Significant Changes in Subsidiaries During the Quarter)... 9 (Changes in Scope of Consolidation and Equity Method Accounting)... 9 (Additional Information)... 9 (Business Combination)... 9 (Significant Subsequent Events) Supplementary Information (1) Net Sales by Product Classification... 13

5 1. Analysis of Operating Results and Financial Condition (1) Analysis of Operating Results 1. Operating Results for the Year Ended March 31, 2018 Economy and Market Conditions During the three-month period ended June 30, 2018 (April 1, 2018 June 30, 2018), the business environment surrounding the TAIYO YUDEN Group maintained a tone of moderate recovery for the global economy as a whole despite some weaknesses. Although the recovery trend is expected to continue going forward, it will be necessary to monitor economic volatility in China and emerging countries in Asia, the impact of monetary policy in each country, exchange rate trends, and other factors. Company Actions Planned to Offset These Conditions TAIYO YUDEN Group aims to achieve its medium-term targets and management vision by focusing on growth markets such as communication equipment and automotive and industrial equipment centered on the solution business that leverages the Group s core technologies, in addition to cutting-edge products and high reliability products that draw on the Group s strengths of research and development and production technology. Moreover, the Group is strengthening its manufacturing capabilities in order to build a structure that can enhance profitability and meet the future increase in demand for components. In addition to enhancing production capacity, the Group is accelerating improvements in production efficiency by promoting advances in underlying technologies and transforming production methods. In the communication device market, advances in smartphone functionality and performance have continued, and demand for capacitors increased. Demand for large, high voltage resistant, high reliability components also increased in the automotive and industrial equipment markets along with the increased use of electric vehicles and the further advances of electronic components in industrial equipment. As a result, sales of capacitors expanded significantly, leading to growth in sales and profit. 1

6 Overview of Business Performance Consolidated net sales for the three-month period ended June 30, 2018 totaled 59,576 million, which is an increase of 10.2% compared to the corresponding period of the previous fiscal year. Operating income was 5,981 million, an increase of 75.3%, and ordinary income was 6,896 million, an increase of 56.0% compared to the corresponding period of the previous fiscal year. As a result, net income attributable to owners of parent company amounted to 5,645 million, up by 81.3% from the same period of the previous fiscal year. Exchange Rate The average foreign currency exchange rate for the three-month period ended June 30, 2018 was US$1: This is a appreciation of 4.05 as compared to the average realized in the corresponding period of the previous fiscal year of US$1: Net Sales by Product Classification Capacitors The capacitor product classification is comprised of multilayer ceramic capacitors. Net sales for the three-month period ended June 30, 2018 totaled 36,184 million, which is an increase of 21.6% compared to the corresponding period of the previous fiscal year. This was due to a year-on-year increase in sales for use in all applications. Ferrite and Applied Products This product classification is comprised of various inductors including wire-wound inductors and multilayer chip inductors. In the three-month period ended June 30, 2018, sales increased by 4.3% to 9,228 million as compared to the same period of the previous fiscal year. Product sales for information equipment and communication equipment decreased year over year, but this was offset by an increase year over year in sales for consumer products and automobiles/industrial equipment. 2

7 Integrated Modules & Devices This product classification is comprised of FBAR/SAW devices for mobile communications, a wide range of power supply and high frequency modules, embedded-parts multilayer wiring substrates EOMIN TM and product mounting business done by a subsidiary company. For the three-month period ended June 30, 2018, sales of power supply modules and other products decreased year over year. This resulted in a 10.2% decrease in sales for this product classification year over year to 13,208 million. Others For this product classification, the Group manufactures and sells energy devices. For the three-month period ended June 30, 2018, sales in this classification increased to 954 million, up 24.6% year over year. (2) Consolidated Financial Conditions Assets Total assets as of June 30, 2018 increased 35,581 million to 322,752 million compared with the end of the previous fiscal year. Current assets increased 17,978 million. This increase in current assets was mainly due to the increase in cash and cash equivalents of 7,242 million, trade notes and accounts receivable of 4,366 million, merchandise and finished products of 2,847 million and work in process of 1,996 million. Fixed assets increased 17,603 million owing largely to the upswing in property, plant and equipment of 8,564 million and in intangible fixed assets of 6,294 million. Liabilities Total liabilities as of June 30, 2018 were 146,525 million, an increase of 29,473 million as compared to the balance at March 31, 2018.This was mainly due to an increase of 21,101 million in short-term borrowings and 4,059 million in trade notes and accounts payable of 4,059 million. Net Assets Net assets as of June 30, 2018 increased 6,108 million to 176,226 million compared with the end of the previous fiscal year. 3

8 (3) Forecasts of Consolidated Operating Results Taking into account the financial results for the first quarter, the results forecasts for the second quarter (six months) and the results forecasts for the full year which were previously announced on May 10, 2018 have been revised. Please see the press release entitled TAIYO YUDEN Revises Forecasts of Results published on August 6, 2018 for the revisions to the forecast figures. In addition, as ELNA CO., LTD., which became a consolidated subsidiary of TAIYO YUDEN in April 2018, has not published forecast financial results, figures relating to ELNA have not been included in the above results forecasts. 4

9 2. Consolidated Financial Statements (1) Consolidated Balance Sheets (Millions of yen) As of March 31, 2018 As of June 30, 2018 ASSETS Current assets: Cash and deposits 49,700 56,942 Trade notes and accounts receivable 56,933 61,300 Merchandise and finished products 19,310 22,158 Work in process 21,118 23,115 Raw materials and supplies 11,666 13,637 Other 5,875 5,413 Allowance for doubtful receivables (278) (262) Total current assets 164, ,304 Fixed assets: Property, plant and equipment: Buildings and structures 81,602 85,921 Machinery and equipment 245, ,148 Tools, furniture and fixtures 22,661 24,623 Land 9,422 10,753 Construction in progress 6,501 11,696 Accumulated depreciation (254,749) (270,133) Net property, plant and equipment 110, ,011 Intangible fixed assets: Goodwill - 6,310 Other 1,309 1,293 Total intangible fixed assets 1,309 7,604 Investments and other assets: Investment securities 7,169 10,129 Other 4,237 4,033 Allowance for doubtful receivables (318) (331) Total investments and other assets 11,087 13,832 Total fixed assets 122, ,447 Total assets 287, ,752 5

10 (Millions of yen) As of March 31, 2018 As of June 30, 2018 LIABILITIES Current liabilities: Trade notes and accounts payable 25,389 29,449 Short-term borrowings 20,737 41,839 Current portion of long-term borrowings 5,160 4,704 Income taxes payable 1,684 1,707 Accrued bonuses for employees 3,663 1,704 Accrued bonuses for directors and corporate auditors Other 20,600 26,744 Total current liabilities 77, ,195 Long-term liabilities: Convertible bonds with stock acquisition rights 20,039 20,035 Long-term borrowings 8,882 7,657 Accrued retirement benefits for directors and corporate auditors Net defined benefit liability 2,865 3,463 Other 7,664 9,036 Total long-term liabilities 39,584 40,330 Total liabilities 117, ,525 NET ASSETS Shareholders equity: Common stock 23,557 23,557 Capital surplus 41,518 41,519 Retained earnings 113, ,451 Treasury stock (3,302) (3,286) Total shareholders equity 175, ,241 Accumulated other comprehensive income Net unrealized holding gains on securities 2,896 4,768 Deferred gains (losses) on hedges (15) (24) Foreign currency translation adjustments (9,028) (9,298) Remeasurements of defined benefit plans Total accumulated other comprehensive income (5,980) (4,389) Stock acquisition rights Total net assets 170, ,226 Total liabilities and net assets 287, ,752 6

11 (2) Consolidated Statements of Operations and Conslidated Statements of Comprehensive Income (Consolidated Statements of Operations) ( June 30, 2018 and 2017) (Millions of yen) June 30, 2017 June 30, 2018 Net sales 54,072 59,576 Cost of sales 40,598 42,759 Gross profit 13,474 16,816 Selling, general and administrative expenses 10,061 10,834 Operating income 3,412 5,981 Non-operating income: Interest income Dividend income Gain on foreign exchange Subsidy income 1, Other Total non-operating income 1,278 1,098 Non-operating expenses: Interest expense Equity in losses of affiliate Loss on foreign exchange Depreciation of inactive noncurrent assets Other 7 14 Total non-operating expenses Ordinary income 4,421 6,896 Extraordinary gains: Gain on sales of property, plant and equipment 3 7 Gain on step acquisition Total extraordinary gains Extraordinary losses: Loss on disposal and sales of property, plant and equipment Head office relocation cost 83 - Other 0 - Total extraordinary losses Income before income taxes 4,307 7,134 Income taxes - current 880 1,154 Income taxes - deferred Total income taxes 1,194 1,489 Net income 3,113 5,645 Net income attributable to owners of parent company 3,113 5,645 7

12 (Consolidated Statements of Comprehensive Income) ( June 30, 2018 and 2017) (Millions of yen) June 30, 2017 June 30, 2018 Net income 3,113 5,645 Other comprehensive income Net unrealized holding gains (losses) on securities 458 1,872 Deferred gains (losses) on hedges (71) (9) Foreign currency translation adjustments 282 (269) Remeasurements of defined benefit plans 9 (2) Total other comprehensive income (loss) 678 1,591 Comprehensive income 3,791 7,236 (Breakdown) Comprehensive income (loss) attributable to shareholders 3,791 7,236 Comprehensive income (loss) attributable to non-controlling - - interest 8

13 (3) Notes on Consolidated Financial Statements (Notes on Premise of Going Concern) No relevant items to report. (Notes in Case of Significant Changes to Shareholders Equity) No relevant items to report. (Significant Changes in Subsidiaries During the Quarter) ELNA CO., LTD. ( ELNA ) was included in the scope of consolidation from the first quarter of the current fiscal year as TAIYO YUDEN made ELNA into its subsidiary through the acquisition of shares during the first quarter of the current fiscal year. Also, ELNA is qualified as a specified subsidiary of TAIYO YUDEN. (Changes in Scope of Consolidation and Equity Method Accounting) 1. Significant changes in the scope of consolidation As ELNA became a subsidiary of TAIYO YUDEN due to the additional acquisition of shares, ELNA and eight of its subsidiaries qre included in the scope of consolidation from the first quarter of the current fiscal year. 2. Significant changes in the scope of equity-method accounting As ELNA changed from being an affiliated company to being a subsidiary of TAIYO YUDEN due to the additional acquisition of shares, ELNA was excluded from the scope of equity-method accounting from the first quarter of the current fiscal year. In addition, one equity-method affiliated company of ELNA is included in the scope of equity-method accounting. (Additional Information) (Application of Partial Amendments to Accounting Standard for Tax Effect Accounting) The Company applied Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No. 28, February 16, 2018) from the beginning of the first quarter of the fiscal year ending March 31, Deferred tax assets are presented under Investment and other assets, and deferred tax liabilities are presented under Long-term liabilities. (Business Combination) Business Combination through Acquisition 1. Overview of the Business Combination (1) Name of the Acquired Company and Description of the Acquired Business Name of the Acquired Company:ELNA CO., LTD. Main operations: Manufacturing and sales of electronic parts (capacitors) 9

14 (2) Reason for Implementing the Business Combination The Company is engaged in businesses primarily centered on multilayer ceramic capacitors, inductors, FBAR/SAW devices for mobile communications and functional modules. Most of these products are primarily used in various IT and electronic devices, such as smartphones and PCs. In particular, in recent years we have focused our business expansion efforts on the further adoption of our products in the automotive, industrial, healthcare equipment, and environmental energy markets, all of which are expected to see further market expansion and growth going forward. ELNA s business operations have focused on capacitors for some 80 years since its founding. In particular, ELNA has concentrated on developing products that can demonstrate their high quality and high performance even in environments that require vibration resistance, humidity resistance, voltage resistance, and high and low temperature resistance. ELNA has been promoting product development that can fulfill the needs of its many customers in the automotive and industrial equipment markets. Given this, in accelerating the global expansion of its business in the automotive, industrial equipment, and environmental energy markets, the Company concluded a capital and business alliance agreement in November 2014 with ELNA, with which it has complementary strengths in products and sales channels. Under this agreement, the Company acquired 15,000,000 Class A preferred shares in ELNA from Japan Industrial Partners II Investment Limited Partnership and Japan Industrial Partners II Parallel Investment Limited Partnership through a share transfer (as of December 16, 2015, the Company exercised its right to request conversion to ordinary shares, thus all of the said Class A preferred shares were converted into 15,000,000 ordinary shares, and the Company has continued to hold the said ordinary shares). In addition, to enhance market competitiveness, and to expand their business, the two companies have worked to cooperate in terms of producing, jointly procuring materials, sharing technological and production expertise, and expanding sales through mutual cooperation, for electric double layered capacitors ( EDLCs ) and lithium ion capacitors for automotive, industrial equipment, and environmental energy markets where growth is expected going forward. The Company has now concluded the Capital and Business Alliance Agreement with ELNA and decided to underwrite the Third-Party Allotment in order to strengthen the collaboration between the two companies even more going forward and to further expand profitability and enhance the associated 10

15 corporate value by promoting operations based on a medium-to-long term and company-wide common strategy, which resulted to be the Company s subsidiary. (3) Date of the Business Combination April 3, 2018 (4) Legal Form of the Business Combination Acquisition of shares through the underwriting of a capital increase by way of third-party allotment (5) Name of Company after Combination No change (6) Percentage of Voting Rights Acquired Percentage of voting rights owned before the business combination: 22.32% Percentage of voting rights acquired on the date of the business combination: 41.46% Percentage of voting rights after the acquisition: 63.78% (7) Main Grounds to Determine Acquiring Company TAIYO YUDEN acquired 63.78% of voting rights of ELNA through the acquisition of shares for a cash consideration. 2. Period of operation result of the acquired company included on the quarterly Consolidated Statements of Operations relating to the first quarter period The operation result of the acquired company is not included in the Consolidated Statements of Operations for the first quarter because only the balance sheets have been consolidated. 3. Acquisition Cost of the Acquired Company and Breakdown by Type of Consideration Market value of shares owned immediately before the business combination on the date of the business combination: 975 million Market value of additional shares acquired on the date of the business combination: 5,000 million Acquisition cost: 5,975 million 4. Difference between acquisition cost of acquired company and total acquisition cost for each transaction until acquisition Gain on step acquisitions 249 million 11

16 5. Goodwill Arising from the Business Combination, Reason for the Goodwill, and Method and Period of Amortization (1) Goodwill arising from the business combination 6,310 million (2) Reason for the Goodwill As the acquisition cost exceeded the equity share in the market value of net assets at the time of the business combination, the difference is recognized as goodwill. (3) Method and period of amortization Straight-line method over ten years (Significant Subsequent Events) (Early redemption of zero coupon convertible bonds) With regard to the Euro Yen Zero Coupon Convertible Bonds due 2021 (the Bonds ) issued on January 27, 2014, as the 120% call option stipulated in the terms and conditions of the Bonds was satisfied on June 28, 2018, early redemption option on all of the outstanding Bonds at the principal amount arose on the same date. TAIYO YUDEN decided to exercise its early redemption option and redeem all of the outstanding Bonds. (1) Securities for early redemption TAIYO YUDEN CO., LTD. Euro Yen Zero Coupon Convertible Bonds due 2021 (2) Redemption price All the Bonds outstanding were redeemed Outstanding value as of June 30, 2018: 20,000 million (the principal amount) (3) Redemption Date 6 August 2018 (4) Redemption Price 100% of the principal amount of each Bond (5) Expected annual decreased amount of interest expense due to redemption There is no forecast decrease as there is no interest on the Bonds. (Exercise of stock acquisition rights connected to the Zero Coupon Convertible Bonds) After the end of the first quarter of the current fiscal year, all of the stock acquisition rights connected to the Zero Coupon Convertible Bonds due 2021 were exercised. The details are as follows. (1) Increase in common stock: 10,017 million 12

17 (2) Increase in capital reserve: 10,017 million (3) Type and number of shares increased: 9,737 thousands ordinary shares 3. Supplementary Information (1) Net Sales by Product Classification Product classification June 30, 2017 Share Amount [%] June 30, 2018 Share Amount [%] (Millions of yen) Increase/ (Decrease) Amount % Capacitors 29, , , Ferrite and applied products 8, , Integrated modules & devices 14, , (1,502) (10.2) Others Total 54, , , Note: The aforementioned amounts are exclusive of consumption and related taxes. 13