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Consolidated Financial Results April 1, 2014 September 30, PDF

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Consolidated Financial Results April 1, 2014 September 30, 2014 October 30, 2014 In preparing its consolidated financial information, ORIX Corporation and its subsidiaries have complied with accounting
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Consolidated Financial Results April 1, 2014 September 30, 2014 October 30, 2014 In preparing its consolidated financial information, ORIX Corporation and its subsidiaries have complied with accounting principles generally accepted in the United States of America. These documents may contain forward-looking statements about expected future events and financial results that involve risks and uncertainties. Such statements are based on our current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, those described under Risk Factors in the Company s annual report on Form 20-F filed with the United States Securities and Exchange Commission. The Company believes that it will be considered a passive foreign investment company for United States Federal income tax purposes in the year to which these consolidated financial results relate and for the foreseeable future by reason of the composition of its assets and the nature of its income. A U.S. holder of the shares or ADSs of the Company is therefore subject to special rules generally intended to eliminate any benefits from the deferral of U.S. Federal income tax that a holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Investors should consult their tax advisors with respect to such rules, which are summarized in the Company s annual report. For further information please contact: Investor Relations ORIX Corporation World Trade Center Building, Hamamatsucho, Minato-ku, Tokyo JAPAN Tel: Fax: Corporate Name: ORIX Corporation Listed Exchanges: Tokyo Stock Exchange (Securities No. 8591) New York Stock Exchange (Trading Symbol : IX) Head Office: Tokyo JAPAN Tel: (URL Consolidated Financial Results from April 1, 2014 to September 30, 2014 (U.S. GAAP Financial Information for ORIX Corporation and its Subsidiaries) 1. Performance Highlights as of and for the Six Months Ended September 30, 2014 (1) Performance Highlights - Operating Results (Unaudited) (millions of yen)*1 Net Income Attributable to Total Year-on-Year Operating Year-on-Year Income before Year-on-Year ORIX Corporation Year-on-Year Revenues Income Income Taxes*2 Shareholders September 30, , % 136, % 203, % 142, % September 30, , % 106, % 122, % 80, % Comprehensive Income Attributable to ORIX Corporation Shareholders was 150,777 million for the six months ended September 30, 2014 (year-on-year change was a 76.2% increase) and 85,568 million for the six months ended September 30, 2013 (year-on-year change was a 90.3% increase). Basic Diluted Earnings Per Share Earnings Per Share September 30, September 30, *Note 1: *Note 2: Unless otherwise stated, all amounts shown herein are in millions of Japanese yen, except for Per Share amounts which are in single yen. Income before Income Taxes as used throughout the report represents Income before Income Taxes and Discontinued Operations. (2) Performance Highlights - Financial Position (Unaudited) Total Total Shareholders Shareholders Assets Equity Equity Equity Ratio September 30, ,215,063 2,225,025 2,036, % March 31, ,069,392 2,095,178 1,918, % *Note 3: Shareholders Equity refers to Total ORIX Corporation Shareholders Equity. Shareholders Equity Ratio is the ratio of Total ORIX Corporation Shareholders Equity to Total Assets. 2. Dividends (Unaudited) Dividends Per Share March 31, *Note 4: Dividend amount for the fiscal year ending March 31, 2015 has not yet been determined. 3. Targets for the Year Ending March 31, 2015 (Unaudited) Year-on-Year Net Income Attributable to Year-on-Year Basic Fiscal Year Total Revenues ORIX Corporation Shareholders Earnings Per Share March 31, ,800, % 210, % *Note 5: Operating Income and Income before Income Taxes and Discontinued Operations are not disclosed as it is difficult to forecast Discontinued operations, net of applicable tax effect. 4. Other Information (1) s in Significant Consolidated Subsidiaries Yes ( x ) No ( ) Addition - ( Hartford Life Insurance K.K. ) Exclusion - None ( ) *Note 6: For details, please see (1) s in Significant Consolidated Subsidiaries in Section 2 Others on page 8. (2) Adoption of Simplified Accounting Method Yes ( ) No ( x ) (3) s in Accounting Principles, Procedures and Disclosures 1. s due to adoptions of new accounting standards Yes ( ) No ( x ) 2. Other than those above Yes ( x ) No ( ) *Note 7: For details, please see (3) s in Accounting Principles, Procedures and Disclosures in Section 2 Others on page 8. (4) Number of Issued Shares (Ordinary Shares) 1. The number of issued shares, including treasury stock, was 1,323,639,628 as of September 30, 2014, and 1,322,777,628 as of March 31, The number of treasury stock shares was 15,487,877 as of September 30, 2014, and 13,333,334 as of March 31, The average number of outstanding shares was 1,309,723,795 for the six months ended September 30, 2014, and 1,243,360,021 for the six months ended September 30, 1. Summary of Consolidated Financial Results (1) Analysis of Financial Highlights Financial Results for the Six-Month Period Ended September 30, 2014 Six-month period ended September 30, 2013 Six-month period ended September 30, 2014 Year on Year Total Revenues (millions of yen) 609, , ,072 55% Total Expenses (millions of yen) 502, , ,884 61% Income Before Income Taxes and Discontinued Operations (millions of yen) 122, ,004 80,873 66% Net Income Attributable to ORIX Corporation Shareholders (millions of yen) 80, ,106 61,698 77% Earnings Per Share (Basic) (yen) % (Diluted) (yen) % ROE (Annualized) (%) ROA (Annualized) (%) Note: ROE is the ratio of Net Income Attributable to ORIX Corporation Shareholders for the period to average ORIX Corporation Shareholders Equity. Economic Environment Since the beginning of this year, the global economy had been on a recovery path led by the U.S. economy. However, views are now divided on the world s future economic prospects, and the stock market is becoming more sensitive towards the results of major economic indicators. In the United States, the job market and consumer spending are on an improving trend, while debates surrounding the timing of the interest rate hike are gaining momentum. On the other hand, we are seeing some uncertainties in the future of the European economy, and the market is paying particular attention to the future course of monetary easing policy by the European Central Bank. In Asia, the emerging markets in the region are experiencing different levels of growth. China s economic growth is steadily declining towards a more sustainable level while other Asian countries are maintaining certain level of growth despite experiencing some effects from the global economy. The Japanese economy continues to grow modestly with solid employment conditions, despite signs of weakness in some of the economic indicators due to the consumption tax hike that went into effect in April Overview of Business Performance (April 1, 2014 to September 30, 2014) Total revenues for the six-month period ended September 30, 2014 (hereinafter, the second consolidated period ) increased 55% to 945,175 million compared to 609,103 million during the same period of the previous fiscal year. Compared to the same period of the previous fiscal year, life insurance premiums and related investment income increased as a result of the recognition of investment income from underlying investments related to variable annuity and variable life insurance contracts in accordance with the consolidation of Hartford Life Insurance K.K. (hereinafter, HLIKK ) acquired on July 1, In addition, revenues from asset management and servicing increased due to the consolidation of Robeco Groep N.V. (hereinafter, Robeco ) which became a consolidated subsidiary on July 1, Sales of goods increased primarily due to contribution from subsidiaries acquired as a part of our private equity investments. Furthermore, other operating revenues and real estate sales increased due to contributions from DAIKYO INCORPORATED (hereinafter, DAIKYO ) which became a consolidated subsidiary on February 27, 2014, contributions from subsidiaries acquired as a part of our private equity investments, and growth in our environment and energy-related business. In addition, brokerage commissions and net gains on investment securities increased due to the sale of shares of Monex Group Inc. On the other hand, interest on loans and investment securities decreased compared to the same period of the previous fiscal year due to decreases in the average balance of installment loans and gains from sales of loans. Total expenses increased 61% to 809,000 million compared to 502,116 million during the same period of the previous fiscal year. As with the abovementioned revenue increase, life insurance costs, costs of real estate sales, expenses from asset management and servicing, costs of goods sold, and other operating expenses primarily increased. Selling, general and administrative expenses also increased due to an increase in consolidation of acquired companies - 2 - and strong fee business in the United States. Meanwhile, interest expense decreased compared to the same period of the previous fiscal year due to a decrease in the average balance of borrowings. Gains on sales of subsidiaries and affiliates and liquidation losses, net increased compared to the same period of the previous fiscal year primarily due to the recognition of gain on sale of partial shares of STX Energy Co., Ltd. (presently GS E&R Corp., hereinafter, STX Energy ). In addition, the acquisition of HLIKK resulted in a bargain purchase gain of 36,761 million due to an excess of fair value of the net assets acquired over the fair value of the consideration transferred. As a result of the foregoing, income before income taxes and discontinued operations for the second consolidated period increased 66% to 203,004 million compared to 122,131 million during the same period of the previous fiscal year, and net income attributable to ORIX Corporation shareholders increased 77% to 142,106 million compared to 80,408 million during the same period of the previous fiscal year. Segment Information Segment profits increased 63% to 204,485 million compared to 125,526 million during the same period of the previous fiscal year. The Retail, Overseas Business, and Real Estate segments made significant profit contributions and the Corporate Financial Services and Maintenance Leasing segments also displayed strong performance, while profits from the Investment and Operation segment decreased compared to the same period of the previous fiscal year. Segment information for the second consolidated period is as follows: Corporate Financial Services Segment: Lending, leasing and fee business September 30, 2013 September 30, 2014 Year on Year Segment Profits (millions of yen) 11,446 12,646 1,200 10% As of March 31, 2014 As of September 30, 2014 Year on Year Segment Assets (millions of yen) 992, ,575 (8,503) (1%) In Japan, we are seeing steady growth in capital expenditures and continued improvement in corporate revenues, despite a temporary negative impact on consumer spending and housing investment arising from the consumption tax hike that went into effect in April We are also seeing an increase in lending by financial institutions to small and medium enterprises ( SMEs ) in addition to large corporations, while the competition in the lending business continues to intensify. Installment loan revenues decreased in line with a decrease in the average balance of installment loans. On the other hand, direct financing lease revenues remained robust due to an increase in the average balance of direct financing leases. Segment profits increased compared to the same period of the previous fiscal year due to robust fee business including solar panel and life insurance sales to domestic SMEs. Segment assets decreased compared to the end of the previous fiscal year due to a decrease in installment loans despite an increase in investment in securities. Maintenance Leasing Segment: Automobile leasing and rentals, car sharing and precision measuring equipment and IT-related equipment rentals and leasing September 30, 2013 September 30, 2014 Year on Year Segment Profits (millions of yen) 20,513 21, % As of March 31, 2014 As of September 30, 2014 Year on Year Segment Assets (millions of yen) 622, ,143 34,134 5% The Japanese automobile leasing industry has been experiencing steady recovery in the number of new auto leases in - 3 - line with Japan s steady economic recovery, despite some temporary negative impact from the consumption tax hike that went into effect in April Furthermore, in the retail market, we are seeing new developments such as online retailers entry into the used car sales business. Operating lease revenues and direct financing lease revenues increased in line with the steady expansion of assets in the automobile business, and costs of operating leases and selling, general and administrative expenses increased in line with an increase in revenues. Segment profits increased compared to the same period of the previous fiscal year as a result of an increase in profits driven by the asset growth despite a decrease in gains on sales of used cars. Segment assets increased compared to the end of the previous fiscal year due to steady increases in investment in operating leases and investment in direct financing leases mainly in the automobile business. Real Estate Segment: Real estate development, rental and financing; facility operation; REIT asset management; and real estate investment and advisory services September 30, 2013 September 30, 2014 Year on Year Segment Profits (millions of yen) 8,769 15,750 6,981 80% As of March 31, 2014 As of September 30, 2014 Year on Year Segment Assets (millions of yen) 962, ,334 (77,070) (8%) Office rents and vacancy rates in the Japanese office building market are continuing to show signs of improvement. In the J-REIT market, property acquisitions are increasing, and we are also seeing sales of large-scale real estates and rising sales prices due to increased competition among buyers. In addition, REITs are expanding their investment targets, as can be seen with the planned listing of the healthcare REIT that mainly invests in senior housing such as private nursing homes. Rental and interest revenues decreased due to a decrease in asset balance and real estate sales decreased in connection with a decrease in the number of condominium units delivered mainly by ORIX Real Estate. On the other hand, gains on sales of real estate under operating leases increased. In addition, segment profits increased compared to the same period of the previous fiscal year due to decreases in losses from inventory valuation, which are included in costs of real estate sales, and write-downs of long-lived assets. Segment assets decreased compared to the end of the previous fiscal year mainly as a result of sales of rental properties. Investment and Operation Segment: Environment and energy-related business, principal investment, and loan servicing (asset recovery) September 30, 2013 September 30, 2014 Year on Year Segment Profits (millions of yen) 22,215 15,323 (6,892) (31%) As of March 31, 2014 As of September 30, 2014 Year on Year Segment Assets (millions of yen) 565, ,045 40,305 7% In the Japanese environment and energy-related industry, even though the renewable energy purchase program is being reassessed, the significance of renewable energy is on the rise with investment targets expanding beyond solar power generation projects to include wind and geothermal power generation projects. In the capital markets, the fiscal year ended March 31, 2014 marked the fourth consecutive year of increase in the number of initial public offerings. Such favorable environment is continuing into this fiscal year with listing of major companies taking place in both Japan and overseas. Segment profits decreased compared to the same period of the previous fiscal year due to a decrease in installment loan revenues in the loan servicing business and profit from DAIKYO despite solid profit contributions from the investees in the principal investment business and the environment and energy-related business Segment assets increased compared to the end of the previous fiscal year due to an increase in assets in the environment and energy-related business, offsetting a decrease in installment loans in the loan servicing business. Retail Segment: Life insurance, banking and the card loan business September 30, 2013 September 30, 2014 Year on Year Segment Profits (millions of yen) 28,379 77,724 49, % As of March 31, 2014 As of September 30, 2014 Year on Year Segment Assets (millions of yen) 2,166,986 3,907,031 1,740,045 80% Although the life insurance business is being affected by macroeconomic factors such as domestic population decline, we are seeing increasing number of companies developing new products in response to the rising demand for medical insurance. In the consumer finance sector, loan demand is increasing due to the improved consumer confidence resulting from Japan s economic recovery and consumer finance providers are enhancing their sales activities accordingly. Segment profits increased significantly compared to the same period of the previous fiscal year due to the recognition of gain on sale of shares of Monex Group Inc. and a bargain purchase gain of 36,761 million resulting from the acquisition of HLIKK on July 1, 2014, in addition to an increase in installment loan revenues in the banking business and an increase in insurance premium income as a result of an increase in the number of policies in force in the life insurance business. Segment assets increased significantly compared to the end of the previous fiscal year as a result of an increase in investment in securities due to the consolidation of HLIKK which was acquired on July 1, 2014 in addition to an increase in assets in the banking business. Overseas Business Segment: Leasing, lending, investment in bonds, investment banking, asset management and shipand aircraft-related operations September 30, 2013 September 30, 2014 Year on Year Segment Profits (millions of yen) 34,204 61,533 27,329 80% As of March 31, 2014 As of September 30, 2014 Year on Year Segment Assets (millions of yen) 1,972,138 2,090, ,982 6% In the United States, the job market and consumer spending are on an improving trend, while debates surrounding the timing of the interest rate hike are gaining momentum. On the other hand, we are seeing some uncertainties in the future of the European economy, and the market is paying particular attention to the future course of monetary easing policy by the European Central Bank. In Asia, the emerging markets in the region are experiencing different levels of growth. China s economic growth is steadily declining towards a more sustainable level while other countries are maintaining certain level of growth despite experiencing some effects from the global economy. Fee revenues in the United States increased in addition to an increase in asset management revenues as a result of the acquisition of Robeco on July 1, Furthermore, we recognized a gain on sale of partial shares of STX Energy, which was deconsolidated by the sale. Segment profits increased significantly compared to the same period of the previous fiscal year despite an increase in selling, general, and administrative expenses due to an increase in revenues. Segment assets increased compared to the end of the previous fiscal year due to increases in installment loans and investment in securities in the United States despite a decrease in other operating assets due to the sale of partial shares of STX Energy, which as a result of the sale became an equity method affil
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