Changes in Key Consolidated Management Indices and Other Figures (Quarterly) 5
Balance by product Jun 211 Sep 211 Dec 211 Mar 212 Jun 212 Sep 212 Dec 212 Mar 213 Commercial notes 2,158 2,6 2,84 2,119 2,484 1,784 2,37 1,656 Operating loans 15,76 14,16 12,712 27,713 24,886 24,984 2,241 18,227 Loans for banking business - - - - - - 22,517 48,21 Advances paid installment 1,295 8,831 74,44 65,24 6,44 55,319 51,756 48,133 Purchased receivables 3,355 3, 2,51 2,31 2,239 2,28 2,482 2,529 Long term loans receivable 2,16 1,437 9,779 8,487 7,548 6,63 5,837 4,686 Credit guarantee balance 11,114 12,93 16,174 22,72 24,515 27,111 33,235 33,194 Changes in balance for key products Commercial notes 2,158 2,6 2,84 2,119 2,484 1,784 2,37 1,656 4, 2, Operating loans 27,713 24,984 24,886 15,76 14,16 2,241 18,227 12,712 1, 5, Advances paid-installment 8,831 74,44 65,24 6,44 55,319 51,756 48,133 1,295 Purchased receivables 3,355 3, 2,51 2,31 2,239 2,28 2,482 2,529 4, 2, 11,114 Credit guarantee balance 27,111 22,72 24,515 12,93 16,174 33,235 33,194 1 With regard the balance of commercial notes, although it fluctuates across quarters due to the decrease in the volume of large sum transactions, it remains mostly flat. 2 With regard to the balance of purchased receivables, it once increased due to the acquisitions of Takefuji s consumer finance business by Nihon Hoshou (former Lopro Corporation), and Credia as a consolidated subsidiary in July 212 through the stock acquisition of Neoline Holdings (current JT Investment, dissolved in Nov 212 and under liquidation process). It has decreased since then, due to smooth collection on loans. 3 Advances paid-installment significantly increased due to the acquisition of KC Card as a consolidated subsidiary through acquiring KC s shares from Rakuten, Inc. in August 211. Most recently, by balance configuration replacement policy implemented for the purpose of reducing risks, the volume of shopping transactions have stayed relatively stable, but cash advances have been in a decreasing trend contributing to the decrease in its total balance. 4 The balance of purchased receivables fell as a result of smooth recovery, but the group has been proactively purchasing new receivables. As a result, it has been increasing since December 212. 5 Credit guarantee balance has been accrued smoothly through guaranteeing loans made by Saikyo Bank, Ltd. and Tokyo Star Bank, Ltd. Dated march 213, its balance has increased by 5% since March 212. The Group has still been working toward increasing the number of tie-up banks. 6 Loans by banking business refers to partial assets of Mirae Savings Bank Co., Ltd. and receivables of Solomon Savings Bank, Ltd. assumed by Chinae Savings Bank. 6
Allowance for Doubtful Accounts, etc. Allowance for doubtful accounts Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Balance of doubtful accounts (a) 6,87 5,244 4,93 8,7 7,739 7,828 14,361 15,387 Allowance for doubtful accounts (b) 3,37 2,611 2,828 2,68 2,862 3,88 9,4 9,195 Allowance rate against balance of nonperforming loans (b)/(a) 54.3% 49.8% 57.4% 32.3% 37.% 39.5% 65.5% 59.8% Allowance against advances paid-installment - 13,933 13,5 11,928 1,458 8,859 6,981 5,861 Other allowance for doubtful accounts - - - - - 214 999 986 For secured loans or guaranteed loans, allowance for doubtful account is computed by reducing the estimated net realizable value guaranteed and the estimated collateral disposition from the amount of loans receivable while taking into consideration the debtor s financial condition and operating results. Allowance for doubtful account is also provided for purchased receivables, right to indemnification, membership, investment, and other assets etc. Provision for loss on interest repayments Provision for loss on interest repayment 5,276 5,177 4,655 4,15 3,932 9,514 8,856 8,438 Provision for loss on interest repayment against advances paid-installment - 17,629 16,615 15,733 13,935 12,415 11,727 1,738 Provision for loss on guarantees Credit guarantee balance (c) 11,114 12,93 16,174 22,72 24,515 27,111 33,235 33,194 Secured 6,465 8,76 1,696 12,457 13,961 15,478 16,6 16,735 Unsecured 4,649 4,854 5,478 9,614 1,553 11,632 16,634 16,458 Provision for loss on guarantees (d) 188 18 178 29 286 361 459 59 Provision rate against credit guarantee balance (d)/(c) 1.7% 1.4% 1.1% 1.3% 1.2% 1.3% 1.4% 1.8% Provision against contingent liabilities of subsidiaries - - - - - 2,869 3,335 3,427 Allowance rate against balance of nonperforming loans dropped in March 212. This is due to increase in receivables that are low in risk of falling into doubtful account, after reducing allowance for uncollectable amount of receivables upon assuming Takefuji s receivables. It temporarily increased by a significant amount in December 212, when Chinae Savings Bank recorded allowance that meets potential risks for the assets assumed from Mirae Savings Bank Co., Ltd. in October 212. Also in September 211, when the company made KC Card its consolidated subsidiary, attempts were made to prepare for losses from bad-debts by providing allowances for doubtful accounts & losses on interest repayment, to be recorded against advances paid-installment. Both allowances have decreased along with the decrease in the balance of advances paid installment. With regard to allowance for loss on guarantees, along with expansion of tie-up banks for credit guarantee business, the percentage of guarantees for unsecured loan products of tie-up banks has increased. Also allowance rate has gradually increased as risk-burden ratio is set higher for guarantees on unsecured loans than for secured loans. 7
Operating Revenue Fiscal 212 Fiscal 213 Jun11 Sep11 Dec 11 Mar 12 Total Jun 12 Sep.12 Dec.12 Mar.13 Total Discount revenue 5 52 5 5 24 52 49 42 45 19 Interests on loans 949 948 96 835 3,639 1,444 1,414 1,285 978 5,123 Collection from purchased receivables 93 511 698 627 2,74 53 571 593 78 2,43 Installment payment paying for commission 88 2,514 3,539 3,94 9,236 2,8 2,597 2,44 2,177 1,16 Guarantee commission received 145 167 196 291 81 359 418 431 543 1,751 Other financial revenue 1, 928 774 654 3,358 1,77 1,492 2,751 917 6,868 Gain on bad debts recovered 86 122 133 193 536 1,359 1,768 1,843 1,663 6,634 Sales on real estate business 379 765 41 1,89 2,645 1,9 824 1,64 1,35 4,285 Amusement related sales Sales on amusement business 4,654 4,475 4,354 13,484 Other sales 124 655 559 1,339 Operating revenue of banking business 1,222 1,222 others 169 32 43 425 1,346 521 674 616 551 2,364 Operating revenue 3,774 6,331 7,14 7,262 24,58 9,867 14,589 16,198 15,27 55,683 Gain on bad debts recovered has been assigned to a category since 1Q FY13 as it increased its significance. In order to aid comparison, quarterly data from 1Q FY12 are listed. Additionally, amusement related sales has been assigned to a category since 2Q FY13 as profit & loss of Adores and Break was consolidated in July 212, and operating revenue of banking business has been categorized since FY213 due to the start of Chinae Savings Bank in Oct 212. 2, 15, 1, 5, Operating Revenue 14,589 16,198 15,27 9,867 6,331 7,14 7,262 3,774 Operating revenue has steadily been increasing every period. Its main breakdown is below. 1 Installment payment paying for commission has been in a decreasing trend due to flat sales of shopping and decrease in cash advances, yet its overall performances have been stable. 2 Takefuji s business revenue assumed by Nihon Hoshou led to increase interest on loans receivable, other financial revenue, and recoveries of write-offs. 3 Adores and Break became J Trust consolidated subsidiaries. By this transaction, amusement related sales was generated. 4 Chinae Savings Bank opened for business during Fiscal 213. By this transaction, operating revenue by banking business was generated. 8
Selling, General and Administrative Expenses Fiscal 212 Fiscal 213 Jun 11 Sep 11 Dec 11 Mar 12 Total Jun 12 Sep 12 Dec 12 Mar 14 Total Personnel expenses 928 1,35 1,491 1,49 5,261 1,951 2,391 2,411 2,594 9,349 Other expenses 751 1,314 1,42 1,825 5,312 1,653 2,575 2,73 2,842 9,82 Expenses related to bad debts 648 1,216 1,52 937 3,855 533 348 858 1,999 3,74 Selling, general and administrative expenses 2,328 3,881 3,965 4,254 14,429 4,138 5,314 6,1 7,437 22,892 3, 1, 928 Personnel expenses 1,951 1,35 1,491 1,49 2,391 2,411 2,594 3, 1, 751 Other expenses 1,314 1,42 1,825 1,653 2,575 2,73 2,842 3, 1, Expenses related to bad debts 1,999 1,216 1,52 937 858 648 533 348 Personnel expenses and other expenses have increased due to factors such as significant increase of employees along with the expansion of the scale of the Group s business Background of this transaction ; acquisition of Next Japan Holdings by share exchange and Neoline Holdings by stock acquisition (Neoline Holdings dissolved in Nov 212 and currently in the process of liquidation), Chinae Savings Bank s acquisition of partial assets/liabilities from Mirae Savings Bank Co., Ltd. After KC Card was acquired in Sep 211, expenses related to bad debts started showing a decreasing trend, which was due to the reduced burden of providing allowances, as reflected by the decreases in the rate of doubtful accounts and in the balance of bad debts. Nevertheless, they started increasing in Dec 212 when early settlement was promoted for filed refund claims, and provision for loss on interest repayment was reviewed and recorded against the increased number of achieved settlement. They further increased in March 213 when provision for loss on guarantees was recorded against increase credit guarantee balance. 9
Quarterly Consolidated Results Unit: Millions of Yen Fiscal 212 Fiscal 213 Jun 11 Sep 11 Dec 11 Mar 12 Total Jun 12 Sep 12 Dec 12 Mar 13 Total Operating income 579 1,378 2,294 1,287 5,539 4,39 3,451 4,89 424 12,5 Ordinary income 586 71 2,518 1,678 5,486 3,87 3,612 5,593 628 13,74 Net income 377 29,928 2,684 1,51 34,5 3,991 3,453 5,442 421 13,39 Gain on negative goodwill - 29,444 - - 29,444 155 139 - - 294 Net income without gain on negative goodwill 377 484 2,684 1,51 5,56 3,836 3,313 5,442 421 13,14 6, Operating Income 6, Ordinary Income 5,593 4,39 4,89 3,451 2,294 1,378 1,287 579 424 3,87 3,612 2,518 1,678 586 71 628 3, 5, 2,5 377 484 2,684 Jun11 Sep11 Dec11 Net Income Net Income Net Income (without gain on negative goodwill) 1,51 3,836 3,313 5,442 421 Mar12 Jun12 Sep12 Dec12 Mar13 Due to the increase in expenses related to bad debts and initial investment cost to Chinae Savings Bank, operating income, ordinary income and net income all have dropped in 4Q FY213 compared to 3Q FY213. However on full-year basis, operating income, ordinary income, and net income have steadily increased, along with expansion in advances paid- installment, interest on loans, gain on bad debts recovered, other financial revenue, sales on amusement business, operating revenue of banking business background of these increases; Takefuji s financial services acquired by Nihon Hoshou, acquisition of Adores, break, as subsidiaries and Chinae Savings Bank that opened for business 1
Changes in Key Consolidated Management Indices and Other Figures Cash out amount accompanied by interest refund claims Apr 1 May 1 Jun 1 Jun 1 Aug 1 Sep 1 Oct 1 Nov 1 Dec 1 Jan 11 Feb 11 Mar 11 No. of Claims 563 479 52 464 412 451 55 525 59 453 576 591 Year-on-Year 84.6% 76.8% 5.3% 8.5% 79.1% 49.3% 66.7% 6.1% 2.7% 6.3% 4.2% 2.8% Cash Out 7,995 73,825 74,725 9,177 11,43 114,75 283,218 285,182 141,75 83,448 98,72 162,716 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 No. of Claims 45 357 441 322 793 762 767 728 62 542 639 561 Year-on-Year 2.1% 25.5% 15.2% 3.6% 92.5% 69.% 51.9% 38.7% 18.3% 19.6% 1.9% 5.1% Cash Out 155,484 116,941 12,897 13,98 19,224 253,17 287,41 429,263 33,92 222,316 236,45 441,19 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 12 Mar 13 No. of Claims 633 656 63 558 487 455 57 528 436 425 418 481 Year-on-Year 4.7% 83.8% 36.7% 73.3% 38.6% 4.3% 25.7% 27.5% 27.6% 21.6% 34.6% 14.3% Cash Out 479,82 498,97 648,29 375,19 27,622 343,812 28,99 314,48 424,735 278,221 499,2 265,434 7, 6, 5, 4, 3, 2, 1, Changes in the number of claims and refund amount Unit : Thousands of Yen Cash-Out 9 KC Card becomes a No. of Claims Refund claims have been Takefuji files for 793 subsidiary 767 8 decreasing on year-on-year corporate basis. For March 213, they 762 728 rehabilitation 656 7 decreased by 14% compared to 639 633 March 212. 62 563 576 591 63 57 6 With regard to cash out, it was 561 once in an increasing trend 52 525 59 542 558 528 481 464 5 having promoted early 55 479 451 45 441 487 settlement and the number of 453 455 436 412 425 4 settlements has increased 357 418 since March 212. Most 322 3 recently refund claims have decreased having promoted 2 settlement ahead of schedule for creditors with high refund 1 ratio (proportion of cash-out to the claimed amount). 21 211 212 Accordingly cash out amount decreased along with refund 4 5 6 7 8 9 1 11 12 1 2 3 4 5 6 7 8 9 1 11 12 1 2 3 4 5 6 7 8 9 1 11 12 1 2 3 ratio. 11