November 7, 2014 Summary of Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2015 (Six Months Ended September 30, 2014) [Japanese GAAP] Company name: NITTOKU ENGINEERING CO., LTD. Listing: Tokyo Stock Exchange (JASDAQ) Stock code: 6145 URL: http://www.nittoku.co.jp Representative: Nobushige Kondo, President Contact: Hiroshi Isoda, General Administration Division Executive General Manager Tel: +81-48-837-2011 Scheduled date of filing of Quarterly Report: November 14, 2014 Scheduled date of payment of dividend: December 1, 2014 Preparation of supplementary materials for quarterly financial results: Yes Holding of quarterly financial results meeting: Yes (for analysts and institutional investors) Note: The original disclosure in Japanese was released on November 7, 2014 at 15:00 (GMT +9). 1. Consolidated Financial Results for the Second Quarter Ended September 30, 2014 (April 1, 2014 September 30, 2014) (All amounts are rounded down to the nearest million yen) (1) Consolidated results of operations (Percentages represent year-on-year changes) Net sales Operating income Ordinary income Net income Million yen % Million yen % Million yen % Million yen % Six months ended Sep. 30, 2014 9,925 23.0 1,006 70.2 1,022 54.3 677 54.2 Six months ended Sep. 30, 2013 8,072 (20.7) 591 (64.8) 662 (61.8) 439 (60.3) Note: Comprehensive income (million yen) Six months ended Sep. 30, 2014: 1,022 (up 42.9%) Six months ended Sep. 30, 2013: 715 (down 26.7%) Net income per share Diluted net income per share Yen Yen Six months ended Sep. 30, 2014 37.47 - Six months ended Sep. 30, 2013 24.31 - (2) Consolidated financial position Total assets Net assets Equity ratio Million yen Million yen % As of Sep. 30, 2014 26,587 18,741 70.3 As of Mar. 31, 2014 23,100 17,821 77.0 Reference: Shareholders equity (million yen) As of Sep. 30, 2014: 18,696 As of Mar. 31, 2014: 17,779 2. Dividends Dividend per share 1Q-end 2Q-end 3Q-end Year-end Total Yen Yen Yen Yen Yen Fiscal year ended Mar. 31, 2014-14.00-14.00 28.00 Fiscal year ending Mar. 31, 2015-14.00 Fiscal year ending Mar. 31, 2015 (forecast) - 14.00 28.00 Note: Revisions to the most recently announced dividend forecast: None The 2Q-end dividend per share is planned to be resolved at the Board of Directors meeting on November 14, 2014. 3. Consolidated Earnings Forecast for the Fiscal Year Ending March 31, 2015 (April 1, 2014 March 31, 2015) (Percentages represent year-on-year changes) Net sales Operating income Ordinary income Net income Net income per share Million yen % Million yen % Million yen % Million yen % Yen Full year 20,500 41.8 2,300 220.8 2,350 183.7 1,500 126.1 83.02 Note: Revisions to the most recently announced consolidated earnings forecast: None
* Notes (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): Yes Newly added: 1 (KOIDE ENGINEERING CO., LTD.) Excluded: - (2) Application of special accounting methods in the preparation of the quarterly consolidated financial statements: None (3) Changes in accounting policies and accounting-based estimates, and restatements 1) Changes in accounting policies due to revisions in accounting standards, others: Yes 2) Changes in accounting policies other than 1) above: None 3) Changes in accounting-based estimates: None 4) Restatements: None (4) Number of outstanding shares (common stock) 1) Number of shares outstanding at the end of period (including treasury shares) As of Sep. 30, 2014: 18,098,923 shares As of Mar. 31, 2014: 18,098,923 shares 2) Number of treasury shares at end of period As of Sep. 30, 2014: 30,494 shares As of Mar. 31, 2014: 30,426 shares 3) Average number of shares outstanding during the period Six months ended Sep. 30, 2014: 18,068,464 shares Six months ended Sep. 30, 2013: 18,068,716 shares * Information regarding the implementation of quarterly review procedures - The current quarterly financial report is exempted from quarterly review procedures based on the Financial Instruments and Exchange Act. At the time of disclosure, the review procedures for the quarterly financial statements have not been completed. * Explanation of appropriate use of earnings forecasts, and other special items - Forecasts of future performance in these materials are based on assumptions judged to be valid and information available to the Company s management at the time the materials were prepared. These materials are not promises by the Company regarding future performance. Actual results may differ significantly from these forecasts for a number of reasons. For discussion of the assumptions and other factors considered by the Company in preparing the above projections, please refer to page 4 of the attachments 1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements.
Contents of Attachments 1. Qualitative Information on Quarterly Consolidated Financial Performance 2 (1) Explanation of Results of Operations 2 (2) Explanation of Financial Position 3 (3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements 4 2. Matters Related to Summary Information (Notes) 4 (1) Changes in Significant Subsidiaries during the Period 4 (2) Application of Special Accounting Methods in the Preparation of the Quarterly Consolidated Financial Statements 4 (3) Changes in Accounting Policies and Accounting-based Estimates, and Restatements 4 3. Quarterly Consolidated Financial Statements 5 (1) Quarterly Consolidated Balance Sheet 5 (2) Quarterly Consolidated Statements of Income and Comprehensive Income 7 (3) Quarterly Consolidated Statement of Cash Flows 9 (4) Notes to Quarterly Consolidated Financial Statements 10 Going Concern Assumption 10 Significant Changes in Shareholders Equity 10 Segment and Other Information 10 1
1. Qualitative Information on Quarterly Consolidated Financial Performance (1) Explanation of Results of Operations In the first half of the current fiscal year, the global economy recovered slowly in part because of expectations about the U.S. economic recovery. However, there was volatility in economic statistics and other indicators worldwide as markets reacted to worries about the economies and public-sector financial soundness in Europe and China and about geopolitical risks. In markets associated with coil winding machines, the major product of the Nittoku Engineering Group, there is steady progress involving digital technology and information technology across a broad array of products and devices in recent years. Progress is taking place in the enormous smartphone and automobile markets. The use of these technologies is also growing for electronics devices, digital consumer devices, industrial equipment, medical equipment and other various infrastructure. This trend extends as well to equipment that is vital to creating smart cities and smart houses. Furthermore, all these advances require better performance, smaller size and high-volume output for semiconductor chips, sensors, imaging devices, audio devices, motors and other components. The emergence of many new digital products has resulted in the establishment in emerging countries of labor-intensive manufacturers of products and parts as well as growth of OEM and ODM operations. The resulting creation of a global supply chain has rapidly transformed these products and parts into commodities. Mass production of key components with the performance, quality, compact size, fine circuit lines and other characteristics needed to add more value is impossible without automation. Automated production equipment has been developed to meet this demand. In addition, as wages in emerging countries climbed in tandem with economic growth, there has been competition among companies to use automated equipment in order to reduce expenses. Growing reliance on automated equipment means that manufacturers are depending on these machines for the performance as well as the quality of their products and components. This is why OEM, ODM and other suppliers are seeking manufacturers of equipment that can create added value. Automated production equipment plays a significant role in maintaining the stable operation of factories, too. The existence of a local support network is often a critical point when companies select a manufacturers of equipment. This is particularly true for foreign automakers operating in China. As a result, manufacturers of automated production equipment that can meet these requirements have become a key factor affecting the competitive edge of OEM companies, manufacturers of digital products and components, and manufacturers of finished products. For many years, the Nittoku Engineering Group has been developing machines capable of meeting the need for coils with better performance, higher efficiency and smaller size as well as for high-volume production. Coils are a key component for digital products, particularly those used in smartphones and automobiles. Furthermore, group companies have started going beyond coil winding machines to enter the field of factory automation by utilizing the Group s core technologies. Activities include the development of factory automation equipment that covers processes before and after coil winding as well in order to solve problems created by rising wages resulting from labor-intensive manufacturing. At the same time, the global network of bases to provide support and services for customers has been growing. By providing a substitute for the production technologies of OEM, ODM and other suppliers, these activities to enter the factory automation are one reason for the rapid recovery in orders at the Nittoku Engineering Group. As a result, net sales increased 23.0% from one year earlier to 9,925 million yen with operating income up 70.2% to 1,006 million yen, ordinary income up 54.3% to 1,022 million yen, and net income up 54.2% to 677 million yen. Results by business segment were as follows. Coil Winding Machine Business This segment accounts for about 94% of total sales. As was explained earlier, consolidated sales in this segment were 9,308 million yen (up 20.2% year on year) and segment profit (operating income) was 1,276 million yen (up 52.6%). On a non-consolidated basis, segment orders were 10,053 million yen (up 87.7%), sales (production) were 8,560 million yen (up 24.1%) and the order backlog was 8,138 million yen (up 154.4%) at the end of the second quarter. 2
Contactless IC Tag and Card Business Sales increased sharply because of rapid measures to expand production capacity in response to demands for much higher output of IC card products. There were also big increases in orders received and the order backlog. However, segment profit declined because of the initial expenses incurred in the first quarter associated with increasing production capacity. As a result, consolidated sales were 514 million yen (up 131.1% year on year) and segment profit (operating income) was 26 million yen (down 28.6%). On a non-consolidated basis, segment orders were 581 million yen (up 123.2%), sales (production) were 514 million yen (up 131.1%) and the order backlog was 340 million yen (up 91.5%) at the end of the second quarter. Real Estate Leasing Business Consolidated sales in this segment were 101 million yen (down 2.5% year on year) and segment profit (operating income) was 84 million yen (up 21.4%). (2) Explanation of Financial Position Assets Current assets were 18,802 million yen at the end of the second quarter, 3,301 million yen more than at the end of the previous fiscal year. There were increases of 1,021 million yen in cash and deposits, 1,307 million yen in notes and accounts receivable-trade, and 837 million yen in work in process. Non-current assets increased 185 million yen to 7,784 million yen. This was mainly attributable to a 114 million yen increase in machinery, equipment and vehicles, net, and a 71 million yen increase in goodwill. As a result, total assets were 26,587 million yen, 3,486 million yen more than at the end of the previous fiscal year. Liabilities Current liabilities increased 3,276 million yen to 7,355 million yen. There were increases of 1,786 million yen in notes and accounts payable-trade, 381 million yen in income taxes payable, and 556 million yen in short-term lease and guarantee deposited under other. Non-current liabilities decreased 709 million yen to 489 million yen. This was mainly attributable to a 160 million yen increase in deferred tax liabilities, a 291 million yen decrease in net defined benefit liability, and the reclassification of guarantee deposits under other of 578 million yen to current liabilities. As a result, total liabilities increased 2,566 million yen from the end of the previous fiscal year to 7,845 million yen. Net assets Net assets increased 920 million yen from the end of the previous fiscal year to 18,741 million yen. Cash flows Cash and cash equivalents (hereinafter net cash ) decreased 462 million yen from the end of the previous fiscal year to 5,014 million yen at the end of the first half of the current fiscal year. The cash flow components during the first half and the main reasons for changes are as described below. Cash flow from operating activities Net cash provided by operating activities was 1,165 million yen (compared with 55 million yen used in the same period of the previous fiscal year). Main factors include a 1,061 million yen increase in notes and accounts receivable-trade, a 808 million yen increase in inventories, income before income taxes and minority interests of 1,022 million yen, and a 1,742 million yen increase in notes and accounts payable-trade. Cash flow from investing activities Net cash used in investing activities was 1,478 million yen (up 16.9% year on year). Main factors include proceeds from withdrawal of time deposits of 2,422 million yen, proceeds from earnest related sales of property, plant and 3
equipment of 184 million yen, payments into time deposits of 3,848 million yen, and purchase of shares of subsidiaries resulting in change in scope of consolidation of 95 million yen. Cash flow from financing activities Net cash used in financing activities was 253 million yen (down 21.6% year on year). Main factors include cash dividends paid of 253 million yen. (3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements On November 4, 2014, the Company has revised its earnings forecast for the fiscal year ending March 31, 2015. The earnings forecasts are based on information available at the time of the release of this report. Actual results may differ from these forecasts for a number of reasons. 2. Matters Related to Summary Information (Notes) (1) Changes in Significant Subsidiaries during the Period In the first quarter of the current fiscal year, the Company has purchased the shares of Koide Engineering Co., Ltd., and made it a consolidated subsidiary. (2) Application of Special Accounting Methods in the Preparation of the Quarterly Consolidated Financial Statements Not applicable. (3) Changes in Accounting Policies and Accounting-based Estimates, and Restatements Changes in Accounting Policies The Company has applied the Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ) Statement No. 26, May 17, 2012) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012) from the first quarter of the current fiscal year, for provisions set forth in the main clauses of Paragraph 35 of the Accounting Standard for Retirement Benefits and Paragraph 67 of the Guidance on Accounting Standard for Retirement Benefits. Accordingly, the Company reviewed methods for calculating retirement benefit obligations and service costs, and revised the method of attributing estimated retirement benefit obligations to periods from the straight-line basis to the benefit formula basis, and revised the method of determining the discount rate to the method using a single weighted average discount rate reflecting the estimated period and amount of benefit payment. For the application of these accounting standards, etc. in accordance with the transitional accounting treatments set forth in Paragraph 37 of the Accounting Standard for Retirement Benefits, the adjustments associated with the change in calculation methods of retirement benefit obligations and service costs are recorded in retained earnings at the beginning of the first half of the current fiscal year. The result was a decrease of 233 million yen in net defined benefit liability, and an increase of 150 million yen in retained earnings at the beginning of the first half. The effect of this change on operating income, ordinary income, and income before income taxes and minority interests in the first half is insignificant. 4
3. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheet Assets Current assets FY3/14 (As of Mar. 31, 2014) Second quarter of FY3/15 (As of Sep. 30, 2014) Cash and deposits 8,611,388 9,632,488 Notes and accounts receivable-trade 3,863,193 5,170,779 Securities - 248,400 Work in process 1,718,156 2,555,913 Raw materials and supplies 629,741 551,381 Deferred tax assets 131,685 216,858 Other 551,473 433,009 Allowance for doubtful accounts (3,999) (6,040) Total current assets 15,501,640 18,802,790 Non-current assets Property, plant and equipment Buildings and structures, net 2,757,624 2,712,461 Machinery, equipment and vehicles, net 421,793 535,909 Land 1,590,665 1,619,665 Other, net 209,590 196,216 Total property, plant and equipment 4,979,672 5,064,252 Intangible assets Goodwill - 71,622 Other 85,706 85,723 Total intangible assets 85,706 157,345 Investments and other assets Investment securities 1,909,392 1,888,061 Deferred tax assets 968 - Other 633,651 693,987 Allowance for doubtful accounts (10,663) (19,166) Total investments and other assets 2,533,348 2,562,882 Total non-current assets 7,598,727 7,784,481 Total assets 23,100,367 26,587,271 5
Liabilities Current liabilities FY3/14 (As of Mar. 31, 2014) Second quarter of FY3/15 (As of Sep. 30, 2014) Notes and accounts payable-trade 2,895,613 4,682,024 Income taxes payable 26,559 407,611 Provision for bonuses 279,572 386,853 Other 877,165 1,879,046 Total current liabilities 4,078,911 7,355,536 Non-current liabilities Deferred tax liabilities 2,335 162,816 Net defined benefit liability 414,306 122,425 Other 783,102 204,579 Total non-current liabilities 1,199,744 489,821 Total liabilities 5,278,655 7,845,357 Net assets Shareholders equity Capital stock 6,884,928 6,884,928 Capital surplus 2,542,054 2,542,054 Retained earnings 7,759,871 8,334,506 Treasury shares (23,207) (23,274) Total shareholders equity 17,163,646 17,738,215 Accumulated other comprehensive income Valuation difference on available-for-sale securities 215,652 341,753 Foreign currency translation adjustment 464,773 675,513 Remeasurements of defined benefit plans (64,421) (58,599) Total accumulated other comprehensive income 616,004 958,667 Minority interests 42,061 45,031 Total net assets 17,821,712 18,741,913 Total liabilities and net assets 23,100,367 26,587,271 6
(2) Quarterly Consolidated Statements of Income and Comprehensive Income Quarterly Consolidated Statement of Income (For the Six-month Period) First six months of FY3/14 (Apr. 1, 2013 Sep. 30, 2013) First six months of FY3/15 (Apr. 1, 2014 Sep. 30, 2014) Net sales 8,072,790 9,925,687 Cost of sales 6,039,228 7,271,353 Gross profit 2,033,561 2,654,333 Selling, general and administrative expenses 1,441,924 1,647,472 Operating income 591,636 1,006,860 Non-operating income Interest income 19,820 25,495 Dividend income 13,364 15,099 Amortization of negative goodwill 23,103 - Other 27,578 19,049 Total non-operating income 83,867 59,645 Non-operating expenses Foreign exchange losses - 30,190 Other 12,696 13,789 Total non-operating expenses 12,696 43,979 Ordinary income 662,808 1,022,526 Extraordinary income Gain on sales of non-current assets 10 80 Other 268 265 Total extraordinary income 278 345 Extraordinary losses Loss on retirement of non-current assets 76 170 Other 135 89 Total extraordinary losses 211 259 Income before income taxes and minority interests 662,875 1,022,612 Income taxes-current 183,325 388,118 Income taxes-deferred 36,022 (42,693) Total income taxes 219,348 345,425 Income before minority interests 443,526 677,186 Minority interests in income 4,353 179 Net income 439,173 677,007 7
Quarterly Consolidated Statement of Comprehensive Income (For the Six-month Period) First six months of FY3/14 (Apr. 1, 2013 Sep. 30, 2013) First six months of FY3/15 (Apr. 1, 2014 Sep. 30, 2014) Income before minority interests 443,526 677,186 Other comprehensive income Valuation difference on available-for-sale securities 136,038 126,100 Foreign currency translation adjustment 135,897 213,529 Remeasurements of defined benefit plans, net of tax - 5,822 Total other comprehensive income 271,936 345,452 Comprehensive income 715,463 1,022,638 Comprehensive income attributable to Comprehensive income attributable to owners of parent 712,385 1,019,669 Comprehensive income attributable to minority interests 3,077 2,969 8
(3) Quarterly Consolidated Statement of Cash Flows Cash flows from operating activities First six months of FY3/14 (Apr. 1, 2013 Sep. 30, 2013) First six months of FY3/15 (Apr. 1, 2014 Sep. 30, 2014) Income before income taxes and minority interests 662,875 1,022,612 Depreciation 178,389 173,541 Amortization of goodwill - 3,769 Amortization of negative goodwill (23,103) - Increase (decrease) in allowance for doubtful accounts 83 8,989 Increase (decrease) in provision for bonuses (31,034) 92,900 Increase (decrease) in provision for retirement benefits (18,847) - Increase (decrease) in net defined benefit liability - (283,172) Interest and dividend income (33,185) (40,595) Interest expenses 55 3 Loss on retirement of property, plant and equipment 76 170 Loss (gain) on sales of property, plant and equipment 73 - Decrease (increase) in notes and accounts receivable-trade 448,264 (1,061,786) Decrease (increase) in inventories 593,126 (808,445) Increase (decrease) in notes and accounts payable-trade (1,523,073) 1,742,112 Other, net (78,685) 81,082 Subtotal 175,014 931,181 Interest and dividend income received 32,248 42,046 Interest expenses paid (55) (3) Income taxes paid (263,058) (36,000) Income taxes refund - 228,265 Net cash provided by (used in) operating activities (55,850) 1,165,489 Cash flows from investing activities Payments into time deposits (2,314,119) (3,848,645) Proceeds from withdrawal of time deposits 1,716,292 2,422,974 Purchase of property, plant and equipment (100,398) (60,779) Proceeds from sales of property, plant and equipment 2,177 422 Proceeds from earnest related sales of property, plant and equipment - 184,368 Purchase of investment securities (525,891) (50,600) Purchase of shares of subsidiaries resulting in change in scope of consolidation - (95,666) Purchase of insurance funds (34,941) (39,679) Other, net (8,211) 9,051 Net cash provided by (used in) investing activities (1,265,093) (1,478,553) Cash flows from financing activities Purchase of treasury shares (220) (66) Cash dividends paid (323,379) (253,520) Net cash provided by (used in) financing activities (323,600) (253,587) Effect of exchange rate change on cash and cash equivalents 81,155 104,566 Net increase (decrease) in cash and cash equivalents (1,563,389) (462,084) Cash and cash equivalents at beginning of period 7,182,545 5,476,178 Cash and cash equivalents at end of period 5,619,156 5,014,093 9
(4) Notes to Quarterly Consolidated Financial Statements Going Concern Assumption Not applicable. Significant Changes in Shareholders Equity First six months of FY3/15 (Apr. 1, 2014 Sep. 30, 2014) Not applicable. Segment and Other Information I. First six months of FY3/14 (Apr. 1, 2013 Sep. 30, 2013) 1. Information related to net sales, profit or loss for each reportable segment Net sales Coil winding machine business Reportable segment Contactless IC tag and card business Real estate leasing business External sales 7,745,586 222,758 104,445 8,072,790 Inter-segment sales and transfers - - - - Total 7,745,586 222,758 104,445 8,072,790 Segment profit 836,732 36,510 69,252 942,495 Total 2. Reconciliation of amounts shown on the quarterly consolidated statement of income with total profit or loss for reportable segments Profit Amount Total for reportable segments 942,495 Corporate expenses (Note) (350,858) Operating income on the quarterly consolidated statement of income 591,636 Note: Corporate expenses mainly include general and administrative expenses that cannot be attributed to reportable segments. II. First six months of FY3/15 (Apr. 1, 2014 Sep. 30, 2014) 1. Information related to net sales, profit or loss for each reportable segment Net sales Coil winding machine business Reportable segment Contactless IC tag and card business Real estate leasing business External sales 9,308,916 514,890 101,880 9,925,687 Inter-segment sales and transfers - - - - Total 9,308,916 514,890 101,880 9,925,687 Segment profit 1,276,773 26,077 84,081 1,386,932 Total 2. Reconciliation of amounts shown on the quarterly consolidated statement of income with total profit or loss for reportable segments Profit Amount Total for reportable segments 1,386,932 Corporate expenses (Note) (380,071) Operating income on the quarterly consolidated statement of income 1,006,860 Note: Corporate expenses mainly include general and administrative expenses that cannot be attributed to reportable segments. 10
3. Information related to revisions for reportable segments As described in the section Changes in Accounting Policies, the Company has revised the methods for calculating retirement benefit obligations and service costs in the first three months of FY3/15. Accordingly, the calculating method for these items for business segments have been revised as well. The effect of this change on segment profit is insignificant in the first six months of FY3/15. This summary report is solely a translation of Kessan Tanshin (in Japanese, including attachments), which has been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who prefer an English translation. 11