Consolidated Financial Results for the 1st Quarter of the FY2013 - FY2013

(Rounded down to the nearest million)

Business results for the first quarter of the year ending March 31, 2014

Operating results

(Percentage figures denote year-over-year changes.)

	Net sales		Operating income		Ordinary income		Net income
	Million yen	%	Million yen	%	Million yen	%	Million yen	%
First quarter, year ending March 31, 2014	11,340	-16.0	1,315	-35.3	1,357	-36.0	792	-36.8
First quarter, year ending March 31, 2013	13,497	11.1	2,032	994.0	2,121	891.2	1,254	－

(Note) Comprehensive income
First quarter of the year ended March 31, 2014: ¥792 million (-37.0%)
First quarter of the year ended March 31, 2013: ¥1,257 million (—%)

	Net income per share	Diluted net income per share
	Yen	Yen
First quarter, year ending March 31, 2014	53.60	－
First quarter, year ending March 31, 2013	84.85	－

Financial position

	Total assets	Net assets	Shareholders’ equity ratio
	Million yen	Million yen	%
First quarter, year ending March 31, 2014	47,597	30,197	63.4
Year ended March 31, 2013	56,706	30,439	53.7

(Reference) Shareholders’ equity
First quarter of the year ended March 31, 2014: ¥30,197 million
First quarter of the year ended March 31, 2013: ¥30,439 million

Dividends

	Annual dividends
	First quarter-end	Second quarter-end	Third quarter-end	Year-end	Annual
	Yen	Yen	Yen	Yen	Yen
Year ended March 31, 2013	－	20.00	－	70.00	90.00
Year ended March 31, 2014	－
Year ended March 31, 2014 (Forecast)		10.00	－	30.00	40.00

(Note) Revision of the most recently released dividend forecasts: No

Forecast earnings for the year ending March 31, 2014

	Net sales		Operating income		Ordinary income		Net income		Net income per share
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
First half ending September, 2014	25,000	-9.6	1,500	-58.4	1,500	-59.7	800	-63.0	54.11
Entire – year	51,000	-13.4	4,000	-43.0	4,000	-44.8	2,000	-51.9	135.29

(Note) Revision of the most recently released performance forecasts: No

Qualitative Information Regarding the Consolidated Results for the First Quarter

Analytical Review on Consolidated Operating Results

During the cumulative consolidated first (April-June) quarter, the Japanese economy was picking up steadily, supported by improved export environment coupled with the ongoing depreciation of yen and high stock prices, in anticipation of economic recovery driven by monetary easing and other stimulus measures taken by the new Abe Administration.

The pachinko business, a part of the amusement industry in which the Daikoku Denki Group (“the Group”) is engaged, has not yet experienced the ripple effects from the economic recovery. Specifically, in pachinko game machines, the operation of pachinko game machines with a playing cost of 4-yen per pachinko ball remained on downward trend, putting pachinko halls, our customers, in a tough business environment.

Under these market environments, the Information System Segment promoted sales of VEGASIA, a new CR unit with enhanced functions in conjunction with the “C II” Series hall computing system. The Control System Segment focused on planning and development activities, such as building up a hybrid development line in collaboration with the Group companies for the enhancement of the development line.

As a result of the above, during the cumulative consolidated first quarter, net sales amounted to \11,340 million, down 16.0% from the same period last year. Consolidated operating income was \1,315 million (down 35.3% year on year), consolidated ordinary income was \1,357 million (down 36.0% year on year), and consolidated net income amounted to \792 million (down 36.8% year on year).

Business results by segment are as follows.

Information System Segment

During the cumulative consolidated first (April-June) quarter, while a CR unit “VEGASIA”, highly evaluated for its security standard and effective operational capacity, maintained a favorable level of sales in the market , in addition to good ground that “BiGMO,” a data display tool highlighting the amusing and thrilling features of diversified pachislot game in a comprehensible way and “IL-X,” a call-out lamp with colorful illumination, have continued to receive positive reviews, the Information System Segment’s results of this quarter fell short of the last year’s sales which was increased significantly due to the release of a new product.

As a result, net sales in the Information System Segment were \7,161 million (down 22.2% from the same period of the previous fiscal year), and segment operating income was \1,387 million (down 40.3% year on year).

Control System Segment

During the cumulative consolidated first (April-June) quarter, Control System Segment redefined the scope of services and roles among the Group companies and focused on planning and proposal activities for the enhancement of the development line.

As a result, net sales in the Control System Segment were \4,178 million (down 2.7% from the same period of the previous fiscal year), and segment operating income amounted to \400 million (up 64.6% year on year).
(Note) Business segment sales and income figures include intersegment transactions.

Analytical Review on Consolidated Financial Position

Total assets as of June 30, 2013 were \47,597 million, a decrease of \9,109 million from the end of the previous consolidated fiscal year. The main factors for the decrease were a decrease in cash and deposits due to income taxes paid, notes and accounts payable-trade and cash dividends paid, a decrease in notes receivable-trade because those collected during the preceding consolidated fiscal year matured in this first quarter, and a decrease in noncurrent assets resulting from the depreciation posted in this first quarter.

Total liabilities as of June 30, 2013 were \17,399 million, a decrease of \8,867 million from those at the end of the previous consolidated fiscal year. The main factors for the decrease were a decrease in notes payable-trade because those drawn during the preceding consolidated fiscal year were settled in the first quarter and a decrease in income taxes payable due to payment of income taxes in this first quarter.

Total net assets as of June 30, 2013 were \30,197 million, a decrease of \242 million from those at the end of the previous consolidated fiscal year, due mainly to a decrease in retained earnings resulting from the dividend payment . The Group’s equity ratio was 63.4% (a rise of 9.7 percentage point compared to that at the end of the previous consolidated fiscal year).

Balance sheets

Assets

(Millions of yen)

Current assets

	Fiscal year ended March 31,2013	Three months ended June 30,2013
Cash and deposits	18,506	13,227
Notes and accounts receivable-trade	11,538	9,191
Merchandise and finished goods	5,670	5,589
Work in process	126	81
Raw materials and supplies	2,851	2,302
Deferred tax assets	487	246
Other	676	604
Allowance for doubtful accounts	-67	-57
Total current assets	39,789	31,184

Noncurrent assets

Property, plant and equipment
Buildings and structures, net	4,316	4,260
Land	4,220	4,220
Other	969	954
Total property, plant and equipment	9,506	9,436
Intangible assets
Software	1,617	1,476
Other	676	604
Total intangible assets	1,752	1,606
Investments and other assets
Deferred tax assets	2,464	2,260
Real estate for investment, net	971	967
Long-term time deposits	600	500
Other	1,874	1,888
Allowance for doubtful accounts	-253	-247
Total investments and other assets	5,657	5,369
Total noncurrent assets	16,916	16,412
Total assets	56,706	47,597

Liabilities

(Millions of yen)

Current liabilities

	Fiscal year ended March 31,2013	Three months ended June 30,2013
Notes and accounts payable-trade	18,137	12,356
Current portion of long-term loans payable	399	491
Income taxes payable	2,731	125
Provision for directors’ bonuses	178	71
Other	3,096	2,795
Total current liabilities	24,544	15,839

Noncurrent liabilities

Long-term loans payable	870	700
Provision for retirement benefits	248	248
Provision for directors’ retirement benefits	370	378
Other	233	232
Total noncurrent liabilities	1,722	1,560
Total liabilities	26,267	17,399

Net assets

(Millions of yen)

	Fiscal year ended March 31,2013	Three months ended June 30,2013
Capital stock	674	674
Capital surplus	680	680
Retained earnings	29,079	28,837
Treasury stock	-1	-1
Total shareholders’ equity	30,432	30,190
Valuation difference on available-for-sale securities	6	7
Total valuation and translation adjustments	6	7
Total net assets	30,439	30,197
Total liabilities and net assets	56,706	47,597

Statements of incomes

(Millions of yen)

	Three months ended June 30,2012	Three months ended June 30,2013
Net sales	13,497	11,340
Cost of sales	8,860	7,598
Gross profit	4,637	3,741
Reversal of unrealized gain on deferred revenue	4	6
Deduction of unrealized gain on deferred revenue	0	0
Gross profit-net	4,641	3,748
Selling, general and administrative expenses	2,608	2,432
Operating income	2,032	1,315
Non-operating income	111	52
Interest income	1	1
Dividends income	6	5
Real estate rent	18	18
Other	85	27
Non-operating expenses	22	11
Interest expenses	9	1
Rent expenses on real estates	12	9
Other	0	0
Ordinary income	2,121	1,357
Extraordinary income	6	0
Extraordinary loss	2	0
Income before income taxes	2,126	1,357
Income taxes-current	1,004	118
Income taxes-deferred	-136	446
Minority interests in income	3	0
Net income (loss)	1,254	792