[Disclaimer Regarding Forecast and Projections]

Transcription

1 [Disclaimer Regarding Forecast and Projections] This Consolidated Financial Results includes forecasts, projections and other predictive statements that represent Fullcast s assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving clients and other factors, and they involve risks, variables and uncertainties. The Group s actual performance results may differ from those projected in this Consolidated Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein

2 February 9, 2004 Consolidated First Quarter Financial Results for the Year Ending September 2004 Company name: Stock code: 4848 Stock Exchange listing: Second Section of the Tokyo Stock Exchange Address: Tokyo URL: President and CEO: Takehito Hirano Contact: Telephone: (Interpreter) Board meeting for approving: February 9, 2004 Accounting Principle: Japanese GAAP Yutaka Kubo, Corporate Executive Officer in charge of management strategy 1. Consolidated Financial Results for the First Quarter Ended December 2003 (October 1, 2003 December 31, 2003) (1) Consolidated business results Millions of yen Net sales Operating income Ordinary income YoY change (%) Millions of yen YoY change (%) Millions of yen YoY change (%) First quarter ended December , First quarter ended December , Year ended September , , , Quarterly net income Quarterly net income per share Quarterly diluted net income per share Millions of yen % Yen Yen First quarter ended December , , First quarter ended December , Year ended September , , , Notes: 1. Investment profit and loss on equity method First quarter ended December 2003: 1 First quarter ended December 2002: 2 Year ended September 2003: 6 2. Average number of shares outstanding (consolidated) First quarter ended December 2003: 132,643 shares First quarter ended December 2002: 43,446 shares Year ended September 2003: 43,715 shares 3. Changes in accounting principles applied: None 4. Each year-on-year (YoY) change represents its relevant change in percentage compared to the same period of the previous year. 5. Net income per share for the first quarter of the September 2003 fiscal year is calculated based on the average number of shares outstanding after common stocks were split on a three-for-one-stock-split basis

3 (2) Consolidated financial condition Total assets Shareholders equity Shareholders equity ratio Shareholders equity per share Millions of yen Millions of yen % Yen First quarter ended December ,689 9, , First quarter ended December ,766 7, , Year ended September ,493 8, , Notes: 1. Number of shares outstanding As of December 31, 2003: 136,761 shares As of December 31, 2002: 43,446 shares As of September 30, 2003: 44,829 shares 2. Shareholders equity per share for the first quarter of the September 2003 fiscal year is calculated based on the end-of-period number of shares outstanding after common stocks were split on a three-for-one-stock-split basis. (3) Consolidated cash flows position First quarter ended December 2003 First quarter ended December 2002 Net cash provided by (used in) Operating activities Investing activities Financing activities Cash and cash equivalents at end of period Millions of yen Millions of yen Millions of yen Millions of yen (1,384) (187) (1,158) (4,737) (478) (196) (584) (3,650) Year ended September ,545 1,604 (1,741) 5,150 (4) Scope of consolidation and application of equity method Consolidated subsidiaries: 5 Unconsolidated subsidiaries under equity method application: None Affiliates under equity method application: 1 (5) Changes in the scope of consolidation and affiliates under the equity method Consolidated subsidiaries Newly added: None Excluded: None Affiliates accounted for under the equity method Newly added: None Excluded: None 2. Forecast for Consolidated Financial Results for the Year Ending September 2004 (October 1, 2003 September 30, 2004) Net sales Ordinary income Net income Millions of yen Millions of yen Millions of yen First half 20,800 1, Full year 43,600 2,920 1,590 Reference: Estimated net income per common share for the full year: 11, yen Notes: Figures stated above are rounded down to the nearest million yen. Estimated earnings per share for the fiscal year ending September 30, 2004 is calculated based on the average number of shares outstanding during the fiscal year after common stocks were split on a three-for-one-stock-split basis. The above-mentioned forecast is based on the assumptions and other relevant factors discussed in the Outlook for the September 2004 Fiscal Year section on page

4 Attached Material to Consolidated First Quarter Financial Results for the Year Ending September 2004 Table of contents 1. Results of Operations... 4 (1) Operating Highlights in the First Quarter...4 1) Consolidated operating highlights in the first quarter...4 2) Operating highlights in the first quarter by business segment...4 (2) Outlook for the September 2004 Fiscal Year...6 Reference: Quarterly results of operations (consolidated)...8 Reference: Changes in quarterly business results by business segment for the fiscal year ending September 30, (3) Changes in Consolidated Financial Condition Consolidated Financial Statements for the First Quarter (1) Consolidated Balance Sheet for the First Quarter...12 (2) Consolidated Profit and Loss Statement for First Quarter...14 (3) Consolidated Retained Surplus Statement for First Quarter...16 (4) Consolidated Cash Flows Statement for First Quarter...17 Significant Accounting Policies in the Preparation of the First Quarter Financial Statements...19 Reclassifications...25 Notes on Financial Statements...26 Notes on consolidated balance sheet for the first quarter...26 Notes on consolidated profit and loss statement for first quarter...27 Notes on consolidated cash flows statement for first quarter...28 Securities...29 Derivatives...31 Segment Information...32 Per Share Information...35 *Due to large volume of data, please refer to the page indicated by contents

5 1. Results of Operations Consolidated net sales and operating income increased 24.1% and 27.6% from a year earlier, respectively in the first quarter of the September 2004 fiscal year as growth continued in all the business segments. (1) Operating Highlights in the First Quarter First quarter ended December 31, 2003 First quarter ended December 31, ) Consolidated operating highlights in the first quarter (Millions of yen) Three months ended December YoY change Net sales 11,249 9, % Operating income % Ordinary income % Current net income % Current net income per share * 3, , *As of November 20, 2003 we split common shares on a three-for-one-stock-split basis. Current net income per share was calculated on the assumption that the stock split was carried out at the beginning of the period. Summary In the first quarter production activities picked up centered on export and investment in plant and equipment increased as stagnation in the Japanese economy hit bottom and signs of economic recovery began to appear. Despite such recovery trend, Japan s employment outsourcing market continued to be strong and demand for outsourcing grew as companies promoted efforts to reduce expenses and to boost operating efficiency further. Under such circumstances, the Fullcast Group (the Group ) accurately targeted the temporary staffing needs of clients and expanded upon outlets rapidly, thereby increasing net sales and operating income steadily. By segment, business performances by all the Spot, Factory and Technology segments grew steadily. Meanwhile, selling, general and administrative expenses, centered on personnel expenses, increased as the Group opened outlets aggressively. The ratio of SG & A expenses to net sales declined, however. As a result, net sales increased 24.1% from a year earlier to 11,249 million, operating income increased 27.6% to 813 million and net income increased 25.2% to 415 million in the reporting quarter. 2) Operating highlights in the first quarter by business segment Spot (Millions of yen) Three months ended December YoY change Sales to external customers 7,009 5, % Inter-segment (57.7%) Total sales 7,064 5, % Operating income % Operating income margin 11.2% 12.3% In the Spot orders in West Japan, which had not grown as much as those in East Japan, began picking up and are on the rise. Demand from its primary customers in the physical distribution and warehouse industries continued to be strong, while demand from the advertising, event management and food industries grew as well, which served as the driving force. From a perspective of streamlining business transactions, some of our main client companies narrowed down the sources from which they procure workers under outsourcing contract. Given these trends, the employment outsourcing market is required to meet customer needs comprehensively. In response to these demands, the Group made use of its collective strength to ensure orders

6 Moreover, the number of clients rose steadily as well, which adopted the high-quality solution unique to the Group aimed at promoting qualitative improvements, thereby helping them streamline business activities. On top of these, we opened a total of 13 outlets as part of effort to set up outlets and staff to meet each individual order in this quarter. Though we strove to reduce SG & A expenses by staffing more efficiently than before, it increased, centered on personnel expenses, with the new outlets added. At the end of the first quarter there were a total of 93 sales offices nationwide, 88 operated by Full Cast Co., Ltd. and 5 by Fullcast Office Support Co., Ltd. As a result, segment sales increased 24.6% from a year earlier to 7,009 million and operating income increased 12.1% to 794 million. Note: The high-quality solution can be defined as a new style of outsourcing aimed at improving productivity of a company by involving ourselves into improving work efficiency as well. Factory (Millions of yen) Three months ended December YoY change Sales to external customers 2,898 2, % Inter-segment % Total sales 2,914 2, % Operating income % Operating income margin 4.8% 4.0% Particularly noted is that business performance by Fullcast Factory Co., Ltd. a specialist company that provides production line work for industries other than the automotive industry improved steadily as demand for high-performance cellular phones with camera functionality, digital cameras and others grew. Furthermore, we disposed of loss-making projects, thereby striving to improve profit margin. Orders also increased at Fullcast Central Co., Ltd. a specialist company that provides production line work for the automobile industry as well. In addition, we opened 4 outlets to increase orders and step up staffing. Though we strove to reduce SG & A expenses by staffing efficiently, expenses for opening outlets, personnel expenses and the cost of recruiting rose at Fullcast Central. As of the end of this quarter, the number of outlets totaled 41 nationwide, 24 operated by Fullcast Factory (including 4 outlets added in this quarter) and 17 operated by Fullcast Central (including 4 outlets added in this quarter). As a result, segment sales increased 17.9% to 2,898 million and operating income grew 39.4% to 138 million. Technology (Millions of yen) Three months ended December YoY change Sales to external customers 1, % Inter-segment 24 Total sales 1, % Operating income 11 (30) Operating income margin 0.9% (3.4%) In the first quarter, development of digital consumer electronics, such as cellular phones with camera functionality, DVD recorders with HDD, or thin-model television, was active. As a result, the segment s results continued to be supported by strong demand for dispatching technical experts to develop/design and test them. In consequence, while unit prices of new orders remained level, the quarterly average utilization rate remained high at 97.5%. Segment sales increased 39.0% from a year earlier to 1,233 million and operating income was 11 million yen (compared to a deficit of 30 million yen in the previous year). Note: Net sales represent sales to external customers

7 (2) Outlook for the September 2004 Fiscal Year Projected consolidated business results for the fiscal year ending September 2004 and current status (October 1, 2003 September 30, 2004) (Millions of yen) First quarter Projection for Projection for Rate of progress interim full year Rate of progress Net sales 11,249 20, % 43, % Ordinary income 821 1, % 2, % Current net income % 1, % Reference: Estimated current net income per share (full year) 11, Reference Consolidated business results for the September 2003 fiscal year (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Full year Net sales 9,066 9,650 9,173 10,054 37,945 Ordinary income ,558 Current net income ,196 Full-year sales contributing rate 23.9% 25.4% 24.2% 26.5% For the fiscal year ending in September 2004, Fullcast is forecasting net sales of 43,600 million yen, up 14.9% from the same time last year, ordinary income of 2,920 million, up 14.1%, and current net income of 1,590 million, up 32.9%, as originally estimated. Reason With the economic recovery trend as the backdrop, demand not only from the manufacturing sector, such as electronics and automobiles and the physical distribution and warehouse industries incidental to it, but from the service sector, such as advertising, event management and food, can be expected to continue to grow. Despite signs of gradual economic recovery, however, companies in Japan will continue to slash personnel and sales, general and administrative expenses, while personnel outsourcing services, which help them promote efficient business management, will take root increasingly. Under such circumstances, the Group will continue to strive to take advantage of its collective strength in providing highly value-added services, thereby improving its business performance. In addition, it will also be united in implementing various measures aimed at promoting cost-slashing efforts and improving its profit-earning ability step by step to deliver its plans. The outlook by business segment is as follows: 1) Spot In recent years, besides responsiveness, the level of customers requirements has been rising as they expect us not only to provide services under contract, but also to provide services which specifically lead to improving operating efficiency. The Group intends to step up our original high-quality solutions, which will directly be translated into operating efficiency for clients, in a bid to offer highly value-added services. Furthermore, we will also put a great deal of effort in opening outlets to step up staffing in an effort to respond to client companies needs readily. On top of these, we will focus on sales activities by proposing ways to promote efficiency to improve the quality of services. Thereby, we will set us apart from competition to grow further. 2) Factory As the economy picks up, orders can be expected to increase as clients increase production. Moreover, with the revised Worker Dispatch Law due to take effect on March 1, 2004, the demand for personnel outsourcing services can be expected to grow in the manufacturing sector the main source of our clients

8 The Group has made available the system, which allows clients to choose both personnel dispatching and work under contract, to step up efforts to meet their needs readily and carefully, thereby growing further. 3) Technology Because the consumer digital electronics industry remains robust, demand for dispatching technical experts from the semiconductor and electronics industries, the main source of our clients, has been on the rise. The Technology intends to focus on these industries our forte in providing services to set us apart from competition, improve the usage capacity ratio of engineers dispatched and maintain unit prices of new orders. Thereby, it will continue to boost business results. Meanwhile, in terms of recruiting of technical experts, which can lead to growth of business, though employing experienced engineers has become increasingly difficult as the nation s economy recovers, employing new graduates slated for this spring has been going smoothly. In addition, we will present engineers a career/training plan of their own, to set the Company apart from competition, thereby increasing employment of engineers and holding the turnover rate down. Notes: 1. Comparisons with previous-year figures and planned figures are computed as follows: Previous-year comparisons = (This fiscal year figure prior fiscal year figure)/prior fiscal year figure x Estimated current net income per share = Forecast for current net income applicable to common stock/ Number of common stocks outstanding at the end of the fiscal year ended September 30, Estimated shares issued from exercise of incentive warrants* * The estimated shares from exercise of incentive warrants are calculated on the assumption that all of the outstanding 3,423 shares as of the end of September 2003 will be issued. 3. Of all plans, forecasts, strategies and others, those which are not historical facts are future outlooks based upon certain conditions and our management s judgement based upon currently available data. Therefore, we advise that you not rely solely on these outlooks in weighing our business results, corporate value and other factors. Please also be informed that actual financial results may vary widely from these outlooks due to various factors. Important factors that may have an impact on actual financial results include: (1) The economic situation surrounding the company (index of mining and industrial output, inventory index, etc.) and changes in the employment situation; (2) Fluctuations in interest rates, etc.; (3) Damage to cooperate infrastructure due to disasters, including earthquakes; and (4) Changes in the relevant laws, including the Labor Standards Law and the Worker Dispatch Law, and in interpretations of thereof. However, the factors that may affect the financial results shall not be limited to these. Furthermore, please bear in mind that notwithstanding new data, future events or any other results whatsoever, we will not always reexamine our outlooks

9 Reference Quarterly results of operations (consolidated) Fiscal year ending September st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Oct. Dec Jan. Mar Apr. June 2004 July Sep Millions of yen Millions of yen Millions of yen Millions of yen Net sales 11,249 Gross profit 3,224 Operating income 813 Ordinary income 821 Income before income taxes and minority interests 824 Net income 415 Yen Yen Yen Yen Net income per share 3, Diluted net income per share 3, Millions of yen Millions of yen Millions of yen Millions of yen Total assets 15,689 Shareholders equity 9,274 Yen Yen Yen Yen Shareholders equity per share 69, Millions of yen Millions of yen Millions of yen Millions of yen Cash flows from operating activities (1,384) Cash flows from investing activities (187) Cash flows from financing activities 1,158 Cash and cash equivalents at end of period 4,737 Fiscal year ended September st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Oct. Dec Jan. Mar Apr. June 2003 July Sep Millions of yen Millions of yen Millions of yen Millions of yen Net sales 9,066 9,650 9,173 10,054 Gross profit 2,652 2,821 2,586 2,938 Operating income Ordinary income Income before income taxes and minority interests Net income Yen Yen Yen Yen Net income per share 7, , , , Diluted net income per share 4, , , Millions of yen Millions of yen Millions of yen Millions of yen Total assets 14,766 15,963 13,943 15,493 Shareholders equity 7,707 8,029 8,332 8,719 Yen Yen Yen Yen Shareholders equity per share 177, , , , Millions of yen Millions of yen Millions of yen Millions of yen Cash flows from operating activities (478) Cash flows from investing activities (196) (287) 1, Cash flows from financing activities 584 (499) (1,754) (71) Cash and cash equivalents at end of period 3,650 3,686 4,252 5,150 Note: Diluted net income per share (for quarter) is not reported since there is no outstanding potential stock

10 Reference Changes in quarterly business results by business segment for the fiscal year ending September 30, 2004 Spot Fiscal year ending September 2004 (October 1, 2003 September 30, 2004) (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Total (1) Sales to external customers 7,009 7,009 (2) Inter-segment sales or the amount of transfers Total 7,064 7,064 Operating expenses 6,270 6,270 Operating income or loss ( ) Fiscal year ended September 2003 (October 1, 2002 September 30, 2003) (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Total (1) Sales to external customers 5,626 5,555 5,366 5,657 22,205 (2) Inter-segment sales or the amount of transfers Total 5,755 5,657 5,418 5,756 22,588 Operating expenses 5,047 5,081 4,976 5,212 20,318 Operating income or loss ( ) ,269 Factory Fiscal year ending September 2004 (October 1, 2003 September 30, 2004) (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Total (1) Sales to external customers 2,898 2,898 (2) Inter-segment sales or the amount of transfers Total 2,914 2,914 Operating expenses 2,775 2,775 Operating income or loss ( ) Fiscal year ended September 2003 (October 1, 2002 September 30, 2003) (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Total (1) Sales to external customers 2,458 2,804 2,503 2,946 10,713 (2) Inter-segment sales or the amount of transfers Total 2,466 2,811 2,516 2,957 10,752 Operating expenses 2,367 2,630 2,440 2,721 10,158 Operating income or loss ( )

11 Technology Fiscal year ending September 2004 (October 1, 2003 September 30, 2004) (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Total (1) Sales to external customers 1,233 1,233 (2) Inter-segment sales or the amount of transfers Total 1,233 1,233 Operating expenses 1,222 1,222 Operating income or loss ( ) Fiscal year ended September 2003 (October 1, 2002 September 30, 2003) (Millions of yen) First quarter Second quarter Third quarter Fourth quarter Total (1) Sales to external customers 887 1,042 1,175 1,207 4,313 (2) Inter-segment sales or the amount of transfers Total 911 1,057 1,179 1,653 4,802 Operating expenses 942 1,040 1,108 1,509 4,600 Operating income or loss ( )

12 (3) Changes in Consolidated Financial Condition Total assets Shareholders equity Shareholders equity ratio Shareholders equity per share Millions of yen Millions of yen % Yen First quarter ended December ,689 9, , First quarter ended December ,766 7, , (Reference) Fiscal year ended September ,493 8, , [Consolidated cash flows] Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities (Millions of yen) Cash and cash equivalents at end of period First quarter ended December 2003 (1,384) (187) 1,158 4,737 First quarter ended December 2002 (478) (196) 584 3,650 (Reference) Fiscal year ended September ,545 1,604 (1,741) 5,150 Changes in consolidated financial condition At the end of this quarter, cash and cash equivalents totaled 4,737 million, up 1,086 million from a year earlier. Cash flows from operating activities Net cash used in operating activities in this quarter was 1,384 million, compared with 478 million used in the same time last year. This was primarily attributable to the fact that net income before income taxes and minority interests was 824 million, trade receivable increased 476 million (trade payable decreased 162 million) and income tax paid was 1,142 million. Cash flows from investing activities Net cash used in investing activities was 187 million, compared with 196 million used in the previous year. This was mainly due to the fact that expenditures incurred to acquire tangible fixed assets as we opened outlets were 101 million and those incurred to acquire intangible fixed assets, such as software, were 77 million. Cash flows from financing activities Net cash provided by financing activities was 1,158 million, compared with 584 million gained in the previous year. The main reason was that while payments of dividends were 175 million, short-term borrowing decreased 1,200 million

13 2. Consolidated Financial Statements for the First Quarter (1) Consolidated Balance Sheet for the First Quarter (Thousands of yen) As of December 31, 2003 As of December 31, 2002 As of September 30, 2003 Amount % Amount % Amount % Assets I Current assets 1 Cash and deposits 4,544,994 3,150,812 4,650,781 2 Trade notes and accounts receivables 5,491,482 4,518,694 5,018,484 3 Securities 501, , ,233 4 Inventories 72,512 57,663 70,665 5 Other current assets 495, , ,139 Allowance for doubtful accounts (56,149) (60,604) (56,894) Total current assets 11,049, ,341, ,060, II Fixed assets 1 Tangible fixed assets (1) Buildings and structures *1 568, , ,871 Accumulated depreciation 134, , , , , ,493 (2) Machinery and vehicles 24,081 34,748 25,900 Accumulated depreciation 11,070 13,010 13,358 21,389 12,791 13,108 (3) Furniture and fixtures 387, , ,929 Accumulated depreciation 213, , , , , ,253 (4) Land *1 606,469 2,343, ,469 (5) Constriction in progress 3,225 9,720 Total tangible fixed assets 1,228, ,990, ,237, Intangible fixed assets (1) Software 656, , ,336 (2) Other 93, ,673 58,262 Total intangible fixed assets 750, , , Investment and other assets (1) Investment securities *2 747, , ,649 (2) Insurance reserve fund 857, ,927 (3) Other 1,097,549 1,495,499 1,118,276 Allowance for doubtful accounts (40,363) (31,152) (36,355) Total investment and other assets 2,661, ,876, ,493, Total fixed assets 4,640, ,425, ,433, III Deferred assets 1 Discount on bond Total deferred assets Total assets 15,689, ,766, ,493,

14 I Liabilities Current liabilities (Thousands of yen) As of December 31, 2003 As of December 31, 2002 As of September 30, 2003 Amount % Amount % Amount % 1 Short-term borrowings *1 2,100,000 2,112, ,000 2 Current portion of long-term debt *1 201, , ,314 3 Accounts payable-other 1,506,140 1,335,279 2,059,843 4 Accrued expenses 866, ,182 5 Income taxes payable 317, ,572 1,162,544 6 Accrued bonuses 219, , ,017 7 Other current liabilities 401, , ,446 II Total current liabilities 5,611, ,284, ,933, Fixed liabilities 1 Corporate bonds 9,900 2 Long-term debt *1 344,114 1,200, ,386 3 Allowance for employee retirement benefits 4 Allowance for officers retirement benefits 270, , ,081 2, ,739 5 Other fixed liabilities 47, ,773 70,189 Total fixed liabilities 663, ,691, , Total liabilities 6,275, ,976, ,635, Minority interests Minority interests 140, , , Shareholders equity I Common stock 3,403, ,261, ,289, II Capital surplus 2,630, ,486, ,514, III Retained surplus 3,504, ,463, ,264, IV Net unrealized holding gains on securities 116, , , V Treasury stock (380,966) (2.4) (507,955) (3.4) (380,966) (2.5) Total shareholder s equity 9,274, ,707, ,719, Total liabilities, minority interests and shareholders equity 15,689, ,766, ,493,

15 (2) Consolidated Profit and Loss Statement for First Quarter October 1, 2003 to December 31, 2003 October 1, 2002 to December 31, 2002 (Thousands of yen) October 1, 2002 to September 30, 2003 Amount % Amount % Amount % I Net sales 11,249, ,066, ,945, II Cost of sales 8,024, ,414, ,946, Gross profit 3,224, ,652, ,998, III Selling, general and administrative expenses *1 2,410, ,014, ,543, Operating income 813, , ,455, IV Non-operating income 1 Interest income 2,119 9,532 42,831 2 Rental income 7,294 29,773 77,268 3 Profit on investment in silent partner 12,909 13,795 57,746 4 Equity in earnings of affiliates 1,654 2,382 6,721 5 Other 22,708 46, ,218 72, , , V Non-operating expenses 1 Interest expense 7,928 18,546 53,003 2 Amortization of software 2,499 2,499 10,000 3 Other 28,218 38, ,918 37, , , Ordinary income 821, , ,558, VI Extraordinary income 1 Gain on sale of fixed assets *2 109,486 2 Gain on sale of investment securities 3 Reversal of allowances for doubtful accounts 4 Reversal of allowances for employee retirement benefits 5 Reversal of allowances for officers retirement benefits ,685 11,811 10,546 6,424 14, Life insurance surrendered value 11, ,555 14, , , VII Extraordinary loss 1 Loss on sales of fixed assets * Loss on disposal of fixed assets 3 Loss on sale of investment securities 4 Loss on valuation of investment securities 5 Loss on relocation of the head office *4 *5 1,543 1,975 28,081 3,318 10,260 43,567 81,955 6 Penalty *6 16,001 7 Employee retirement benefits expenses 1,

16 October 1, 2003 to December 31, 2003 October 1, 2002 to December 31, 2002 October 1, 2002 to September 30, 2003 Amount % Amount % Amount % 8 Loss on insurance cancellation 7,188 8, , , Income before income taxes and minority interests 824, , ,552, Current income taxes 296, ,843 1,479,602 Deferred income taxes 103, , (33,291) 347, (207,058) 1,272, Minority interests (or loss) 9, (6,919) (0.1) 83, Net income 415, , ,196,

17 (3) Consolidated Retained Surplus Statement for First Quarter October 1, 2003 to December 31, 2003 October 1, 2002 to December 31, 2002 (Thousands of yen) October 1, 2002 to September 30, 2003 Capital surplus Amount Amount Amount I Capital surplus at beginning of period 2,514,473 2,514,473 2,486,474 2,486,474 2,486,474 2,486,474 II Increase in capital surplus 1 New stock issuance 115, ,974 27,999 27,999 III Capital surplus at end of period 2,630,447 2,486,474 2,514,473 Retained surplus I Retained surplus at beginning of period 3,264,994 3,264,994 2,199,480 2,199,480 2,199,480 2,199,480 II Increase in retained surplus 1 Net income 415, ,840 1,196,630 2 Increase in retained surplus for merger of consolidated subsidiary 3 Increase in retained surplus on exclusion of equity method III Decrease in retained surplus 24, , , ,221,395 1 Dividends paid 175,716 65, ,943 2 Decrease in retained surplus for merger of consolidated subsidiary 2,468 3 Loss on disposal of treasury stock 175,716 67,637 46, ,881 IV Retained surplus at end of period 3,504,762 2,463,683 3,264,

18 I (4) Consolidated Cash Flows Statement for First Quarter Cash flows from operating activities October 1, 2003 to December 31, 2003 October 1, 2002 to December 31, 2002 (Thousands of yen) October 1, 2002 to September 30, 2003 Amount Amount Amount 1 Income before income taxes and minority interests 824, ,472 2,552,349 2 Depreciation and amortization 67,397 50, ,265 3 Increase in allowance for doubtful accounts 3,262 14,702 16,196 4 Increase (decrease) in allowance for bonuses (229,706) (111,202) 135,550 5 Increase in allowance for employee retirement benefits 13,004 15,251 28,509 6 Increase (decrease) in allowance for officers retirement benefits 329 (1,586) (663) 7 Interest and dividend income (6,119) (9,532) (42,976) 8 Interest expenses 7,928 18,546 53,003 9 Loss on disposal of fixed assets 1,543 1,975 49, New stock issue expenses and amortization of discount on bonds 2, Profit on investment in anonymous partnerships (12,909) (13,795) (57,746) 12 Loss on valuation of investment securities 10,260 43, Amortization of goodwill 2,129 1,053 8, Amortization of consolidated adjustment accounts 1,331 9,023 29, Equity in earnings of affiliates (1,654) (2,382) (6,721) 16 Increase in trade receivable (476,355) (584,545) (1,089,832) 17 Increase in inventories (1,846) (16,018) (29,020) 18 Increase (decrease) in trade payable (162,824) 52, , Increase (decrease) in insurance reserve fund (47,145) 770 (158,977) 20 Other (224,625) (101,265) 288,995 Subtotal (238,889) 6,981 2,344, Interest and dividend received 4,165 8,064 37, Interest paid (7,145) (16,586) (50,733) 23 Income taxes paid (1,142,539) (477,378) (785,495) Net cash provided by (used in) operating activities (1,384,408) (478,918) 1,545,

19 II Cash flows from investing activities October 1, 2003 to December 31, 2003 October 1, 2002 to December 31, 2002 October 1, 2002 to September 30, 2003 Amount Amount Amount 1 Purchase of time deposits (7,610) 2 Purchase of securities (99,700) (299,700) 3 Purchase of tangible fixed assets (101,655) (38,995) (188,696) 4 Purchase of intangible fixed assets (77,260) (59,203) (294,696) 5 Proceeds from sales of investment securities 2,263 80,577 6 Purchase of shares in subsidiary (1,400) (27,000) 7 Advanced for loans receivable (2,029) (2,500) (6,630) 8 Collection on loans receivable 2,612 1, ,973 9 Other (10) 1,835,495 III Net cash provided by (used in) investing activities (187,353) (196,226) 1,604,324 Cash flows from financing activities 1 Increase (decrease) in short-term borrowings 1,200, ,900 (429,100) 2 Repayments of long-term debt (75,345) (122,287) (1,486,456) 3 Issuance of common stock 227,400 54,900 4 Payments of dividends (175,817) (65,169) (107,156) 5 Payments of dividends to minority shareholders (8,000) 6 Other (9,975) (11,331) 226,689 Net cash provided by (used in) financing activities 1,158, ,112 (1,741,123) IV Net increase in cash and cash equivalents (413,500) (91,031) 1,409,030 V Cash and cash equivalents at beginning of period 5,150,894 3,741,864 3,741,864 VI Cash and cash equivalents at end of period *1 4,737,394 3,650,832 5,150,

20 Significant Accounting Policies in the Preparation of the First Quarter Financial Statements Item Oct. 1, 2003 Dec. 31, 2003 Oct. 1, 2002 Dec. 31, 2002 Oct. 1, 2002 Sep. 30, Matters concerning the scope of consolidation The accompanying financial statements include the accounts of the parent company and all five of its consolidated subsidiaries. Fullcast Office Support Co., Ltd. Fullcast Technology Co., Ltd. Fullcast Sports Co., Ltd. Fullcast Factory Co., Ltd. Fullcast Central Co., Ltd. The accompanying financial statements include the accounts of the parent company and all six of its consolidated subsidiaries. Fullcast Office Support Co., Ltd. Fullcast Technology Co., Ltd. Fullcast HR Consulting Co., Ltd. Fullcast Sports Co., Ltd. Fullcast Factory Co., Ltd. Fullcast Central Co., Ltd. The accompanying financial statements include the accounts of the parent company and all five of its consolidated subsidiaries. Fullcast Office Support Co., Ltd. Fullcast Technology Co., Ltd. Fullcast Sports Co., Ltd. Fullcast Factory Co., Ltd. Fullcast Central Co., Ltd. Organizational changes in the first quarter were as follows: Fullcast With Co., Ltd. and Fullcast System Consulting Co., Ltd. merged on October 1, 2002 and the new entity formed through the merger was named Fullcast Technology Co., Ltd. Fullcast Lady Co., Ltd. was split and transferred a part of its business to the parent company on October 1, Following the split, the company was renamed Fullcast Office Support Co., Ltd. Organizational changes in the fiscal year were as follows: Fullcast With Co., Ltd. and Fullcast System Consulting Co., Ltd. merged on October 1, 2002 and the new entity formed through the merger was named Fullcast Technology Co., Ltd. Fullcast Lady Co., Ltd. was split and transferred a part of its business to the parent company on October 1, Following the split, the company was renamed Fullcast Office Support Co., Ltd. Fullcast HR Consulting Co., Ltd. was merged by Fullcast Office Support Co., Ltd. on January 1, Matters concerning the application of the equity method (1) The accompanying financial statements include the accounts of the following affiliate accounted for by the equity method. Neo Career Inc. (1) The accompanying financial statements include the accounts of the following two affiliates accounted for by the equity method. Adgrams Inc. Neo Career Inc. (2) The quarterly balance sheet dates of affiliates companies differ from the balance sheet date of the Company. Financial statements of their respective first quarter balance sheet dates are used in the preparation of the consolidated financial statements. (1) The accompanying financial statements include the accounts of the following affiliate accounted for by the equity method. Neo Career Inc. Adgrams Inc. sold parts of its shares on September 24, Due to its declined stockholding ratio as a result, it was excluded from the application of the equity method as of the same date

21 Item Oct. 1, 2003 Dec. 31, 2003 Oct. 1, 2002 Dec. 31, 2002 Oct. 1, 2002 Sep. 30, Quarterly (fiscal year) accounting period of consolidated subsidiaries The first quarter balance sheet dates of the consolidated subsidiaries are the same as the first quarter balance sheet date of the Company. The fiscal year balance sheet dates of the consolidated subsidiaries are the same as the balance sheet date of the Company. 4. Matters concerning significant accounting policies (1) Valuation criteria and methods for principal assets a. Securities Other securities Securities with market quotations Other securities that have market value are carried at fair value on the first quarter balance sheet date. (Unrealized holding gain or loss is included in shareholders equity. The cost of securities sold is determined by the weighted-average method.) Embedded derivatives: Since it is not possible to measure embedded derivatives separately from their respective hybrid host contracts on the financial reporting date, entire contracts are treated as financial instruments and changes in their fair value are reported in net profit or loss. (1) Valuation criteria and methods for principal assets a. Securities Other securities Securities with market quotations Other securities that have market value are carried at fair value on the first quarter balance sheet date. (Unrealized holding gain or loss is included in shareholders equity. The cost of securities sold is determined by the weighted-average method.) (1) Valuation criteria and methods for principal assets a. Securities Other securities Securities with market quotations Other securities that have market value are carried at fair value on the fiscal year balance sheet date. (Unrealized holding gain or loss is included in shareholders equity. The cost of securities sold is determined by the weighted-average method.) Embedded derivatives: Since it is not possible to measure embedded derivatives separately from their respective hybrid host contracts on the financial reporting date, entire contracts are treated as financial instruments and changes in their fair value are reported in net profit or loss. Securities without market quotations Securities without market quotations are stated at cost, cost being determined by the weighted-average method. Securities without market quotations Securities without market quotations b. Derivatives Market value method. b. Derivatives b. Derivatives c. Inventories Raw materials and supplies Raw materials and supplies are stated at cost determined primarily by the first-in-first-out method. Work in process Work in process is stated at cost, cost being determined by the specific identification method. c. Inventories Raw materials and supplies Work in process c. Inventories Raw materials and supplies Work in process

22 Item Oct. 1, 2003 Dec. 31, 2003 Oct. 1, 2002 Dec. 31, 2002 Oct. 1, 2002 Sep. 30, 2003 (2) Depreciation method for (2) Depreciation method for (2) Depreciation method for major depreciable assets major depreciable assets major depreciable assets a. Tangible fixed assets Declining-balance method Depreciation on buildings (excluding furniture and fixtures) acquired on or after April 1, 1998 is computed using the straight-line method. The useful life of principal assets is as follows: Buildings and structures 3-56 years Machinery and vehicles 2-10 years Furniture and fixtures 1-10 years b. Intangible fixed assets Straight-line method The development costs of software intended for internal use are amortized over an expected useful life of 3-5 years by the straight-line method. As for software intended for commercial use, whichever larger amount is given, amortized value based upon estimated sales over an expected effective life of 3 years, or equated amortized value based upon the remaining marketable life. c. Deferred assets New stock issue expenses Expensed as accrued. Discount on bond Discount on bond is amortized using the straight-line method in accordance with the provisions of the Commercial Code of Japan. a. Tangible fixed assets The useful life of principal assets is as follows: Buildings and structures 2-56 years Machinery and vehicles 2-10 years Furniture and fixtures 2-19 years b. Intangible fixed assets Straight-line method The development costs of software intended for internal use are amortized over an expected useful life of 3-5 years by the straight-line method. c. Deferred assets Discount on bond a. Tangible fixed assets The useful life of principal assets is as follows: Buildings and structures 2-56 years Machinery and vehicles 2-10 years Furniture and fixtures 2-19 years b. Intangible fixed assets Straight-line method The development costs of software intended for internal use are amortized over an expected useful life of 3-5 years by the straight-line method. As for software intended for commercial use, whichever larger amount is given, amortized value based upon estimated sales over an expected effective life of 3 years, or equated amortized value based upon the remaining marketable life. c. Deferred assets New stock issue expenses Expensed as accrued. Discount on bond

23 Item Oct. 1, 2003 Dec. 31, 2003 Oct. 1, 2002 Dec. 31, 2002 Oct. 1, 2002 Sep. 30, 2003 (3) Recognition of significant allowances a. Allowance for doubtful accounts To prepare for credit losses on accounts receivable and loans receivable etc., allowances equal to the estimated amount of uncollectible receivables are provided for general receivables based on the historical write-off ratio, and bad receivables based on case-by-case determination of collectibility. (3) Recognition of significant allowances a. Allowance for doubtful accounts (3) Recognition of significant allowances a. Allowance for doubtful accounts b. Accrued bonuses As a means of providing for bonus obligations, the Company designates in the reserve account an amount accrued for the first quarter among the estimated amount for the fiscal year. c. Allowance for employee retirement benefits To provide for accrued employees retirement benefits, the Company and part of its consolidated affiliates provide an allowance in the amount deemed to have accrued at the end of the first quarter based on projected benefit obligations and pension assets at the end of the first quarter. Actuarial differences are primarily amortized in the fiscal year in which they are recognized. b. Accrued bonuses c. Allowance for employee retirement benefits To provide for accrued employees retirement benefits, the Company provides an allowance in the amount deemed to have accrued at the end of the first quarter based on projected benefit obligations and pension assets at the end of the first quarter. Actuarial differences are primarily amortized in the fiscal year in which they are recognized. b. Accrued bonuses As a means of providing for bonus obligations, the Company designates in the reserve account an estimated amount based on the actual bonus expense for the accounting period. c. Allowance for employee retirement benefits To provide for accrued employees retirement benefits, the Company and part of its consolidated affiliates provide an allowance in the amount deemed to have accrued at the end of the fiscal year based on projected benefit obligations and pension assets at the end of the fiscal year. Actuarial differences are primarily amortized in the fiscal year in which they are recognized. (Additional information) As for one of the consolidated affiliates, to allow the provision of retirement benefits for employees, the amount that can be acknowledged to be accrued at end of this consolidated fiscal year had been appropriated based upon estimated amounts of retirement benefit debts and pension funds at end of this consolidated fiscal year

24 Item Oct. 1, 2003 Dec. 31, 2003 Oct. 1, 2002 Dec. 31, 2002 Oct. 1, 2002 Sep. 30, 2003 However, the board of directors decided to abolish this retirement benefit program on September 17, In the wake of this decision, the unused balance of this term of the balance of the retirement benefit allowance at end of this consolidated fiscal year of 14,906 thousand was withdrawn to be included in extraordinary income. d. Allowance for officers retirement benefits To provide for accrued officers severance benefits, the Company and certain consolidated subsidiaries provide an allowance for the aggregate amount payable at the end of the first quarter pursuant to the Company s rules on officers retirement benefits. d. Allowance for officers retirement benefits d. Allowance for officers retirement benefits To provide for accrued officers severance benefits, the Company and certain consolidated subsidiaries provide an allowance for the aggregate amount payable at the end of the fiscal year pursuant to the Company s rules on officers retirement benefits. (4) Translation of significant foreign currency-denominated assets and liabilities Foreign currency-denominated monetary assets and liabilities are translated into yen at the exchange rate in effect on the first quarter balance sheet date. Translation gain or loss is accounted as profit or loss. (5) Accounting for leases Finance leases other than those which are deemed to transfer the ownership of the leased assets to the lessees, are accounted for by the method similar to that applicable to ordinary operating leases. (6) Accounting for major hedges a. Hedge accounting method The company applies the deferred accounting method. Interest rate swap transactions that qualify for special treatment under Note 14 of the Opinion Concerning Establishment of Accounting Standards for Financial Instruments are accounted for by the short-cut method. (4) Translation of significant foreign currency-denominated assets and liabilities (5) Accounting for leases (6) Accounting for major hedges a. Hedge accounting method (4) Translation of significant foreign currency-denominated assets and liabilities Foreign currency-denominated monetary assets and liabilities are translated into yen at the exchange rate in effect on the fiscal year balance sheet date. Translation gain or loss is accounted as profit or loss. (5) Accounting for leases (6) Accounting for major hedges a. Hedge accounting method

25 Item Oct. 1, 2003 Dec. 31, 2003 Oct. 1, 2002 Dec. 31, 2002 Oct. 1, 2002 Sep. 30, 2003 b. Hedge method and b. Hedge method and b. Hedge method and transactions transactions transactions The hedge method and risk hedge are as follows: Hedge method: Interest rate swap Risk hedged: Interests on borrowings c. Hedging policy The Company uses hedge transactions to reduce interest rate risk. The responsible division executes all the derivative transactions the company enters into. Internal audit executive checks the procedures and ascertains the adequacy of individual derivative transactions. d. Evaluation of hedge effectiveness Interest rate swap transactions In principle, the Company assesses the effectiveness of individual hedge transactions at the end of consolidated fiscal year (including interim periods). The Company does not assess the effectiveness of a hedge transaction if there is a high correlation (principal, interest rate, period etc.) and high degree of effectiveness between the hedging instrument and the risk hedged. c. Hedging policy d. Evaluation of hedge effectiveness Interest rate swap transactions c. Hedging policy d. Evaluation of hedge effectiveness Interest rate swap transactions (7) Other significant accounting policies in the preparation of quarterly financial statements Accounting for consumption taxes All amounts stated are exclusive of national consumption tax and local consumption tax. (7) Other significant accounting policies in the preparation of quarterly financial statements Accounting for consumption taxes (7) Other significant accounting policies in the preparation of fiscal year financial statements Accounting for consumption taxes 5. Scope of cash and cash equivalents on quarterly consolidated cash flows statements For the purpose of quarterly consolidated cash flows statements, cash and cash equivalents consists of vault cash, deposits that can be withdrawn on demand, and short-term investments, with original maturities of three months or less, that are readily convertible to known amounts of cash and present insignificant risk of change in value. For the purpose of fiscal year consolidated cash flows statements, cash and cash equivalents consists of vault cash, deposits that can be withdrawn on demand, and short-term investments, with original maturities of three months or less, that are readily convertible to known amounts of cash and present insignificant risk of change in value