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

Operating results

(Note) Comprehensive income
Second quarter of the year ended March 31, 2014: ¥1,551 million (-28.3%)
Second quarter of the year ended March 31, 2013: ¥2,165 million (98.9%)

Financial position

(Reference) Shareholders’ equity
Second quarter of the year ended March 31, 2014: ¥30,955 million
Second quarter of the year ended March 31, 2013: ¥30,439 million

Dividends

Forecast earnings for the year ending March 31, 2014

Qualitative Information Regarding the Consolidated Results for the First Quarter

Analytical Review on Consolidated Operating Results

During the cumulative second (April-September) quarter, the Japanese economy was recovering from moderate deflation, supported by the pickup in corporate and personal expenditures following the upturn in business sentiment and job creation that was driven by the government’s economic measures.

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 aimed to expand sales of “BiGMO”, a data display tool highlighting the amusing and thrilling features of diversified pachislot games in a comprehensible way together with another key product “IL-X”. At the same time, they aimed to promote sales of “VEGASIA,” a CR unit. The Segment also held an event titled “MIRAIGATE 2013 ? a new standard for the creation of the next generation entertainment hall” in major cities in Japan, which received good reception from a number of visitors involved in pachinko hall operations. The Control System Segment presented planning proposals to customers on performance display devices towards “contribution to customers,” while addressing the enhancement of planning and development capabilities in collaboration with Group companies for enhancement of the development line.

As a result of the above, during the cumulative consolidated second quarter, net sales amounted to \25,882 million, down 6.4% from the same period last year. Consolidated operating income was \2,487 million (down 31.0% from last year), consolidated ordinary income was \2,559 million (down 31.3% from last year), and consolidated net income amounted to \1,543 million (down 28.7% from last year).

Information System Segment

During the cumulative second (April-September) quarter for this segment, the key products continuously achieved good reputation in the market. In particular, the CR unit “VEGASIA” was highly evaluated for its enhanced security and effective operational capacity in conjunction with hall computing systems, and so were the data display tool “BiGMO” for highlighting the amusing and thrilling features of diversified pachislot game in a comprehensible way, and the call-out lamp “IL-X” for its colorfulness of illumination. In addition, the Information System Segment also enhanced the services of “C II Standard”, a hall supporting service system using the MIRAIGATE network, for further improvement of customer satisfaction. However, the results did not reach those of the same period of the previous fiscal year when sales increased significantly due to the release of the then new product.

As a result, sales in the Information System Segment were \15,562 million (down 6.9% from the same period of the previous fiscal year), and segment income was \2,950 million (down 26.8% from last year).

Control System Segment

During the cumulative consolidated second (April-September) quarter, Control System Segment strove to enhance planning and proposal capabilities and strengthen the development line in collaboration with the Group companies.

As a result, net sales in the Control System Segment were \10,320 million (down 5.7% from the same period of the previous fiscal year), and segment operating income amounted to \508 million (down 7.5% from last year).
(Note) Business segment sales and income figures include intersegment transactions.

Analytical Review on Consolidated Financial Position

Total assets as of September 30, 2013 were \48,611 million, a decrease of \8,094 million from the end of the previous consolidated fiscal year. The main factors for the decrease were a decrease in notes and accounts payable-trade, a decrease in cash and deposits due mainly to income taxes paid, and a decrease in notes receivable-trade reflecting a decline in net sales during the cumulative second (April-September) quarter compared to the preceding six months from October 1, 2012 to March 31, 2013.

Total liabilities as of September 30, 2013 were \17,655 million, a decrease of \8,611 million from those at the end of the previous consolidated fiscal year. The main factors for the decrease were a decrease in accrued income taxes and a decrease in notes and accounts payable-trade due to a smaller amount of purchases during the cumulative second (April-September) quarter compared to the preceding six months from October 1, 2012 to March 31, 2013.

Total net assets as of September 30, 2013 were \30,955 million, an increase of \516 million from those at the end of the previous consolidated fiscal year, due mainly to the fact that the net income during the cumulative second (April-September) quarter was greater than the dividend paid. The Group’s equity ratio was 63.7% (a rise of 10.0 percentage point compared to that at the end of the previous consolidated fiscal year).

Qualitative Information Regarding Forecast of Consolidated Operating Results

There are no revisions to full-year earnings forecasts for the fiscal year ending March 31, 2014 that were announced on May 13, 2013. In addition, with regard to operating risks that could have a significant impact on the Group’s consolidated operating results and other operating data, there were no significant changes from the disclosed description contained in the latest annual securities report that was submitted on June 28, 2013.

Assets

Current assets

Noncurrent assets

Property, plant and equipment

Intangible assets

Liabilities

Current liabilities

Noncurrent liabilities

Net assets