Edgar Filing: MAKITA CORP

MAKITA CORPORATION

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of October, 2004

MAKITA CORPORATION

(Translation of registrant’s name into English)

3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan

(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:]

Form 20-F þ Form 40-F o

[Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.]

Yes o No þ

TABLE OF CONTENTS


SIGNATURES
CONSOLIDATED FINANCIAL RESULTS
THE MAKITA GROUP
MANAGEMENT POLICIES
OPERATING RESULTS AND FINANCIAL POSITION
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
SIGNIFICANT ACCOUNTING POLICIES
OPERATING SEGMENT INFORMATION
MARKETABLE SECURITIES AND INVESTMENT SECURITIES
DERIVATIVES TRANSACTIONS
ESTIMATED RETIREMENT AND TERMINATION ALLOWANCES
NET SALES BY PRODUCT CATEGORIES
OVERSEAS SALES BY PRODUCT CATEGORIES
EARNINGS PER SHARE
SUPPORT DOCUMENTATION (CONSOLIDATION)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


				MAKITA CORPORATION

				(Registrant)

		By:		/s/ Masahiko Goto

				(Signature) Masahiko Goto President

Date: October 28, 2004

(MAKITA LOGO)

Makita Corporation

Consolidated Financial Results
for the six months
ended September 30, 2004
(U.S. GAAP Financial Information)

(English translation of “KESSAN TANSHIN”
originally issued in Japanese language)

(MAKITA LOGO)

CONSOLIDATED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004

October 28, 2004

Makita Corporation
Stock code: 6586
URL: http://www.makita.co.jp/
Masahiko Goto, President
Date of Board Meeting: October 28, 2004
(Consolidated financial information has been prepared in accordance
with accounting principles generally accepted in the United States.)

1. Results of the six months ended September 30, 2004 (From April 1, 2004 to September 30, 2004)

(1) CONSOLIDATED FINANCIAL RESULTS


	Yen (million)
	For the six months ended				For the six months ended				For the year ended March
	September 30, 2003				September 30, 2004				31, 2004
			%				%				%
Net sales		91,757		4.7		97,430		6.2		184,117		4.8
Operating income		9,247		47.5		19,464		110.5		14,696		17.9
Income before income taxes		9,894		123.7		20,238		104.5		16,170		74.0
Net income		4,981		58.8		12,953		160.0		7,691		14.4

	Yen

Net income per share:
Basic		34.25				90.03				53.16
Diluted		33.32				86.97				51.92

Notes:	1.	Equity in net earnings of affiliated companies (including non-consolidated subsidiaries): Not applicable
	2.	Average number of shares outstanding:


		Six months ended September 30, 2004:					143,874,488
		Six months ended September 30, 2003:					145,451,532
		Year ended March 31, 2004:					144,682,696

	3.	Change in accounting policies: Not applicable
	4.	The table above shows the change in the percentage ratio of Net sales, Operating income, Income before income taxes, and Net income against the corresponding period of the previous year.

(2) CONSOLIDATED FINANCIAL POSITION


	Yen (million)
	As of			As of			As of
	September 30, 2003			September 30, 2004			March 31, 2004
Total assets		277,647			291,842			278,116
Shareholders’ equity		185,134			211,721			193,348
Shareholders’ equity ratio to total assets (%)		66.7	%		72.5	%		69.5	%

	Yen

Shareholders’ equity per share		1,286.27			1,471.81			1,343.69


Note: Number of shares outstanding:
As of September 30, 2003:		143,850,904
As of September 30, 2003:		143,930,908
As of March 31, 2004:		143,893,191


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	1

(MAKITA LOGO)

(3) CONSOLIDATED CASH FLOWS


	Yen (million)
	For the six months			For the six months
	ended September 30,			ended September 30,			For the year ended
	2003			2004			March 31, 2004
Net cash provided by operating activities		11,696			9,090			28,941
Net cash used in investing activities		(4,994	)		(6,437	)		(17,262	)
Net cash used in financing activities		(4,938	)		(2,211	)		(6,596	)
Cash and cash equivalents, end of period.		21,496			25,528			24,576

(4)		SCOPE OF CONSOLIDATION AND EQUITY METHOD

		Consolidated subsidiaries: 42 subsidiaries

		Non-consolidated subsidiaries accounted for under the equity method: Not applicable Affiliated companies accounted for under the equity method: Not applicable

(5)		CHANGE IN SCOPE OF CONSOLIDATION AND EQUITY METHOD

		Consolidation (Newly included): Not applicable Equity method: Not applicable

2. Consolidated forecast for the year ending March 31, 2005 (From April 1, 2004 to March 31, 2005)

Yen (million)

For the year ending March 31, 2005

Net sales

191,000

Income before income taxes

29,500

Net income

18,600

Yen

Net income per share

129.30

FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements based on Makita’s own projections and estimates. The power tools market, where Makita is mainly active, is subject to the effects of rapid shifts in economic conditions, demand for housing, currency exchange rates, changes in competitiveness, and other factors. Due to the risks and uncertainties involved, actual results could differ substantially from the content of these statements. Therefore, these statements should not be interpreted as representation that such objectives will be achieved.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	2

(MAKITA LOGO)

THE MAKITA GROUP

The Makita Group is comprised of 44 companies (Makita Corporation, 42 consolidated subsidiaries and 1 non-consolidated subsidiary, accounted for by the cost method.) The Makita Group mainly manufactures and sells electric power tools.

The Makita Group is outlined as follows:

(THE MAKITA GROUP CHART)


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	3

(MAKITA LOGO)

MANAGEMENT POLICIES

1.		Basic Policies

		Makita has set itself the goal of consolidating a strong position in the global power tool industry as a global supplier of a comprehensive range of power tools that assist people in creating homes and living environments. To do this, the Company is emphasizing such strategic management concepts as giving top priority to “Managing to take good care of our customers,” “Proactive, sound management and symbiosis with society,” and “Emphasis on a trustworthy and reliable corporate culture as well as management to draw out the capabilities of each employee.” The Company aims to generate solid profitability so that it can promote its sustained corporate development and meet the needs of its shareholders, customers, and employees as well as regional societies.

2.		Basic Policy Regarding Profit Distribution

		Makita’s basic policy on the distribution of profits is to maintain a dividend payout ratio of 30% or greater, with a lower limit on annual cash dividends of 18 yen per share. In addition, Makita aims to implement a flexible capital policy, augment the efficiency of its capital employment, and thereby boost shareholder profit, Makita continues to consider repurchases of its outstanding shares in light of trends in stock prices. The Company intends to retire treasury stock when necessary based on consideration of the balance of treasury stock and its capital policy.

		Makita intends to maintain a financial position strong enough to withstand the challenges associated with changes in its operating environment and other changes and allocate funds for strategic investments aimed at expanding its global operations.

3.		Medium-to-Long-Term Management Strategy

		Makita furthers its basic strategy of concentrating corporate assets in Makita’s core business, which is principally power tools for professional use, by working to increase its sales and profitability in this business based on the solid foundation of Makita strong “high quality” brand and extensive domestic and overseas marketing and service networks.

		In the future, the Company intends to further strengthen its subsidiaries and affiliates in each overseas market to maintain and expand its high quality brand and marketing systems and thus increase professional users’ satisfaction. These strategies are designed to make Makita what it refers to as a “Strong Company,” a company that can earn and maintain worldwide market leadership in markets for professional-use power tools. Makita is striving diligently to be such a “Strong Company” and achieve improved performance.

4.		Basic Policies Regarding Corporate Governance and Implementation of Related Measures

		Basic Policies Regarding Corporate Governance

		Makita believes that bolstering its supervision of management is a crucial means of enhancing management transparency. It has strengthened the functions of the Board of Directors and the Board of Auditors and is working to enhance its corporate governance system further. In view of the need to ensure that corporate governance systems function effectively, the Company is endeavoring to proactively and promptly disclose information in a manner that promotes proper and transparent operations. The Company is also working to use the Internet to disclose financial information and otherwise undertake a broad range of information disclosure initiatives.

		Implementation of Related Measures

(1)

Current Management Administration Systems for Management Decision Making, Policy Execution, Supervision, and Other Aspects of Corporate Governance

•

Makita employs a board-of-auditors system. The Company’s Board of Auditors comprises four members, of which two are outside auditors. The two full-time auditors facilitate capabilities for continuous monitoring of the directors’ performance of their duties. By presenting reports whenever necessary on auditing and corporate matters to the Company’s independent auditor, who is responsible for conducting audits, we work to share information with independent auditors. In


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	4

(MAKITA LOGO)

			addition, the Board of Auditors has established policies and procedures related to preliminary approval for auditing and non-auditing operations to strengthen the oversight functions of the Company’s auditing firm.

	•		The Board of Directors makes decisions on the Company’s basic policies and statutory issues as well as other important management issues.

	•		An Internal Audit Department is established as a means of strengthening a system for performing internal audits whenever necessary.

	•		The Company had formed a Disclosure Committee comprising representatives from each of its principal departments with the objective of substantially increasing the accuracy and reliability of information disclosed through the clarification of procedures and other matters related to disclosure.

	•		The Company issues its Business Ethics Guidelines to provide guidance for actions of management and staff, clarify activities that are ethical, forbid conflicts of interest, ensure compliance with relevant laws and regulations, and provide guidelines for disclosure.

	•		Makita’s consolidated financial statements and non-consolidated financial statements are subject to audit by independent auditors. The Company employs AZSA & Co. (a member firm of KPMG International, a Swiss cooperative that provides no professional services to clients) to serve as its independent public accountants. There are no noteworthy interest as defined by provisions of the Certified Public Accountant Law in Japan with respect to the relationships among the Company, AZSA & Co., and engagement partners.

	•		The Company’s legal advisor performs a management control function with regard to legal issues by confirming the Company’s legal compliance whenever the Company requires legal opinions and judgments.

	(2)		Overview of the Company’s Human and Capital Relationships with Outside Directors and Outside Auditors as well as Transactional Relationships and Other Relationships of Material Interest

			Makita does not currently have outside directors. The Company is not involved with personal, financial, technical, or other types of transactions that might create a conflict of interest with the companies for which outside auditors and their close relatives serve as directors. In addition, the outside auditors have neither been employees nor directors of the Company.

	(3)		Progress in Implementation of Measures Aimed at Strengthening the Company’s Corporate Governance during the Past Year

			As its shares are listed on NASDAQ, in accordance with U.S. Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley Act), the Company is taking the following active initiatives to improve its corporate governance.

	•		As a means of ensuring thorough conformance with rigorous corporate ethics and compliance standards, the Company established an internal reporting system in April 2004. A liaison office (help line) was established and a system for gathering opinions and information from within the Company was adopted.

	•		To provide better disclosure, the Company started reporting consolidated segment and other information on a quarterly basis (using US GAAP) beginning with the first quarter of the fiscal year ending March 31, 2005.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	5

(MAKITA LOGO)

OPERATING RESULTS AND FINANCIAL POSITION

1. Results of Operations

(1)		Operations and Results during the Year Under Review

		Regarding economic trends overseas during the interim period under review, U.S. economic conditions remained robust on the whole despite the weakening of some economic indicators as a result of a sharp rise in crude oil prices and other factors. In Europe, the U.K. economy continued to be strong, with France and Germany showing signs of economic recoveries, bolstered by active external demand. Asian economies remained strong despite being affected by curtailed investment policies in China.

		The Japanese economy encountered higher materials prices and other worrisome factors. Even so, the economy enjoyed a modest recovery, as indicated by solid increases in exports and capital investment as well as improved personal consumption.

		Under these conditions, Makita worked to increase its profitability by making further progress in shifting its production to China, as well as by strengthening its sales capabilities in Russia, Eastern Europe and the Middle East in line with its sound and proactive global business strategy.

		In the United States, the professional-use market was characterized by further escalation in competition, including mergers among major power tool makers and the aggressive marketing of professional-use power tools by home centers. Amid this situation, the Company focused on strengthening its marketing capabilities while taking steps to enhance its profit structure by making full use of its plants in China, reducing personnel, and implementing other measures.

		Also, the Company decided to withdraw from golf course operations, and on September 8, 2004, petitioned the Nagoya District Court for the commencement of civil rehabilitation proceedings for its wholly owned subsidiary Joyama Kaihatsu, Ltd. Currently, a draft plan for rehabilitation is being drawn up to, among other things, choose an assignee for the golf course business, with a meeting of creditors scheduled for spring 2005.

		Regarding consolidated results for the interim period under review, net sales totaled 97,430 million yen, up 6.2% from the previous interim period. Sales in Japan declined 1.1%, to 19,028 million yen, as weak sales of existing products more than offset strong sales of impact drivers and new products. Overseas sales rose 8.1% to 78,402 million yen, reflecting mainly strong sales in Europe and Asia. As a result, overseas sales accounted for 80.5% of net sales for the period.

		Looking at overseas sales by individual region, sales in Europe were up 13.5%, to 36,415 million yen, while sales in North America fell 10.8%, to 19,697 million yen. Sales in Asia rose 27.4%, to 9,320 million yen, and sales in other regions increased 17.6%, to 12,970 million yen.

		Regarding earnings, the cost to sales ratio improved significantly because of expanded production in Japan and at plants in China. The Company also recorded a gain of approximately 4.4 billion yen on the transfer to the government of the substitutional portion of the employees’ pension fund managed by the Company. As a result, income before income taxes doubled from the previous interim period, to 20,238 million yen, while net income jumped 160%, to 12,953 million yen.

		In connection with the commencement of civil rehabilitation proceedings for the golf course subsidiary, the Company recorded a non-consolidated loss of approximately 6.9 billion yen on the liquidation of an affiliated company. However, as the Company had already carried out impairment loss accounting for the assets in the previous year, consolidated earnings for the period under review were unaffected.

(2)		Outlook for the Year Ending March 31, 2005

		Despite expectations for a global trend of modest economic recovery, sharply higher crude oil prices and other factors make the corporate operating environment uncertain.

		In light of this outlook, Makita will continue working to improve its performance by expanding its share of the professional-use tool market, and it will seek to accomplish this by bolstering its marketing and service networks and developing high-value-added products. The outlook for the year ending March 31, 2005 is as follows:

•

Competition is expected to intensify in the U.S. and other world markets for power tools.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	6

(MAKITA LOGO)

•

Competitive strength is anticipated to continue to be at a high level in the West European market, while the East European and Russian markets will expand market.

Based on these and other factors, Makita has prepared the following performance forecast.

Forecast for the Year Ending March 31, 2005



	Yen (million)
	For the year ending March 31, 2005
Consolidated Basis:
Net sales		191,000
Operating income		29,200
Income before income taxes		29,500
Net income		18,600

Non-consolidated Basis:
Net sales		92,000
Operating income		10,300
Ordinary profit		15,000
Net income		6,900

	Assumptions

	1.		The above forecast is based on the assumption of exchange rates of 105 yen to US$1 and 130 yen to 1 Euro for the second half of the year.

	2.		The above forecast is based on the assumption of exchange rates of 107 yen to US$1 and 131 yen to 1 Euro for the year ending March 31, 2005.

	Our forecasts for dividends are as follows:

For the year ended

For the year ending

March 31, 2004

March 31, 2005

(Results)

(Forecast)

Cash dividend per share for the interim period

9 yen

11 yen (Note 1)
(With a special
dividend of 2 yen)

Cash dividend per share for the second half

13 yen
(With a special
dividend of 4 yen)

(Note 2)

Total cash dividend per share for the year

22 yen
(With a special
dividend of 4 yen)

(Note 2)

Notes

	1.		Commencement of payment of interim dividend: November 25, 2004

	2.		The Board of Directors plans to meet in April 2005 for a report on earnings for the year ending March 31, 2005. At such time, in accordance with the Basic Policy Regarding Profit Distribution on page 4, the Board of Directors plans to propose a dividend equivalent to at least 30% of net income, with a lower limit for the annual dividend set at 18 yen per share (consisting of an interim dividend of 9 yen per share and a term-end dividend of 9 yen per share). The Board of Directors will submit this proposal to the General Meeting of Shareholders.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	7

(MAKITA LOGO)

2.		Cash Flows and Financial Ratios

		Total cash and cash equivalents (cash) at the end of the interim period under review totaled 25,528 million yen, up 952 million yen from the end of the same period of the previous year.

		(Net Cash Provided by Operating Activities)

Although inventories increased, interim net income amounted to 12,953 million yen (including a no cash gain on the transfer to the government of the substitutional portion of the employee’s pension fund formerly managed by the Company). As a result of these and other factors, cash flows from operating activities amounted to 9,090 million yen, representing a decline of 2,606 million yen from the same period of the previous year.

(Net Cash Used in Investing Activities)

Net cash used in investing activities amounted to 6,437 million yen, up 1,443 million yen from the level of the same period of the previous year. This reflected mainly investment in property, plant and equipment, principally metal molds to be used for new products.

(Net Cash Used in Financing Activities)

Net cash used in financing activities declined 2,727 million yen from the same period of the previous fiscal year, to 2,211 million yen, reflecting the payment of cash dividends and other factors.

Financial Ratios


	As of (year ended) March 31,												As of September 30,
	2001			2002			2003			2004			2004
Equity ratio		65.5	%		66.6	%		65.5	%		69.5	%		72.5	%
Equity ratio based on a current market price		40.1	%		45.1	%		43.5	%		69.3	%		76.7	%
Debt redemption (years)		6.3			1.4			0.8			0.7			1.2
Interest coverage ratio (times)		4.3			20.8			40.4			47.8			30.1
Operating income to net sales ratio		4.5	%		3.5	%		7.1	%		8.0	%		20.0	%

Definitions
  Equity ratio: shareholders’ equity/total assets
  Equity ratio based on a current market price: total current market value of outstanding shares/total assets
  Debt redemption: interest-bearing debt/net cash inflow from operating activities
  Interest coverage ratio: net cash inflow from operating activities/interest expense
  Operating income to net sales ratio: operating income/net sales

Notes

	1.		All figures are calculated based on a consolidated basis.

	2.		The total current market value of outstanding shares is calculated by multiplying the closing market price at the period end by the number of outstanding shares (after deducting the number of treasury stock.)

	3.		Interest-bearing debt includes all consolidated balance-sheet debt on which interest payments are made.

	4.		The debt redemption period for the interim period is calculated based on an estimate of operating cash flows computed by multiplying operating cash flow for the interim period by two.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	8

(MAKITA LOGO)

CONDENSED CONSOLIDATED BALANCE SHEETS


	Yen (millions)
	As of			As of September 30,			Increase
	March 31, 2004			2004			(Decrease)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		24,576			25,528			952
Time deposits		4,050			6,068			2,018
Marketable securities		63,990			66,271			2,281
Trade receivables- Notes		2,254			2,542			288
Accounts		34,787			35,943			1,156
Less- Allowance for doubtful receivables		(1,346	)		(1,445	)		(99	)
Inventories		54,326			62,343			8,017
Deferred income taxes		3,691			3,492			(199	)
Prepaid expenses and other current assets		8,117			7,010			(1,107	)

Total current assets		194,445			207,752			13,307

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		18,326			18,458			132
Buildings and improvements		50,648			51,722			1,074
Machinery and equipment		73,000			73,973			973
Construction in progress		222			398			176

		142,196			144,551			2,355
Less- Accumulated depreciation		(89,231	)		(91,338	)		(2,107	)

		52,965			53,213			248

INVESTMENTS AND OTHER ASSETS:
Investment securities		22,139			21,230			(909	)
Deferred income taxes		880			455			(425	)
Other assets		7,687			9,192			1,505

		30,706			30,877			171

		278,116			291,842			13,726


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	9

(MAKITA LOGO)

CONDENSED CONSOLIDATED BALANCE SHEETS


	Yen (millions)
	As of			As of
	March 31,			September 30,			Increase
	2004			2004			(Decrease)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term borrowings		14,128			14,251			123
Trade notes and accounts payable		8,525			9,766			1,241
Accrued payroll		7,168			7,201			33
Accrued expenses and other		10,656			11,571			915
Income taxes payable		6,093			5,529			(564	)
Deferred income taxes		53			237			184

Total current liabilities		46,623			48,555			1,932

LONG-TERM LIABILITIES:
Long-term indebtedness		7,364			7,222			(142	)
Club members’ deposits		13,045			12,701			(344	)
Accrued retirement and termination benefits		15,536			5,600			(9,936	)
Deferred income taxes		235			3,880			3,645
Other liabilities		711			827			116

		36,891			30,230			(6,661	)

MINORITY INTERESTS		1,254			1,336			82

SHAREHOLDERS’ EQUITY:
Common stock		23,803			23,803			—
Additional paid-in capital		45,421			45,423			2
Legal reserve and retained earnings		144,488			155,570			11,082
Accumulated other comprehensive loss		(17,048	)		(9,692	)		7,356
Treasury stock, at cost		(3,316	)		(3,383	)		(67	)

		193,348			211,721			18,373

		278,116			291,842			13,726

Note: Accumulated other comprehensive loss as of March 31, 2004 and September 30, 2004 was as follows:


	Yen (millions)
	As of			As of
	March 31,			September 30,
	2004			2004
Foreign currency translation adjustments		(17,582	)		(13,449	)
Net unrealized holding gains on available-for-sale securities		6,592			5,391
Minimum pension liability adjustment		(6,058	)		(1,634	)

Total accumulated other comprehensive loss		(17,048	)		(9,692	)


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	10

(MAKITA LOGO)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Yen (millions)
	For the six						For the six												For the
	months ended						months ended												year ended
	September 30,						September 30,						Increase						March 31,
	2003						2004						(Decrease)						2004

	(Amount)			(%)			(Amount)			(%)			(Amount)			(%)			(Amount)			(%)
NET SALES		91,757			100.0			97,430			100.0			5,673			6.2			184,117			100.0
Cost of sales		56,301			61.4			56,375			57.9			74			0.1			110,332			59.9

GROSS PROFIT		35,456			38.6			41,055			42.1			5,599			15.8			73,795			40.1
Selling, general, administrative and other expenses		26,209			28.5			21,591			22.1			(4,618	)		(17.6	)		59,099			32.1

OPERATING INCOME		9,247			10.1			19,464			20.0			10,217			110.5			14,696			8.0

OTHER INCOME (EXPENSES):
Interest and dividend income		342			0.4			535			0.5			193			56.4			869			0.5
Interest expense		(315	)		(0.4	)		(293	)		(0.3	)		22			7.0			(605	)		(0.3	)
Exchange losses on foreign currency transactions, net		(5	)		(0.0	)		(81	)		(0.1	)		(76	)		(1,520.0	)		(202	)		(0.1	)
Realized gains on securities, net		335			0.4			223			0.2			(112	)		(33.4	)		555			0.3
Other, net		290			0.3			390			0.5			100			34.5			857			0.4

Total		647			0.7			774			0.8			127			19.6			1,474			0.8

INCOME BEFORE INCOME TAXES		9,894			10.8			20,238			20.8			10,344			104.5			16,170			8.8

PROVISION FOR INCOME TAXES:
Current		4,678			5.1			5,175			5.3			497			10.6			8,745			4.7
Deferred		235			0.3			2,110			2.2			1,875			797.9			(266	)		(0.1	)

Total		4,913			5.4			7,285			7.5			2,372			48.3			8,479			4.6

NET INCOME		4,981			5.4			12,953			13.3			7,972			160.0			7,691			4.2


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	11

(MAKITA LOGO)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


	Yen (millions)
	For the six months			For the six months
	ended September 30,			ended September 30,
	2003			2004
COMMON STOCK:
Beginning balance		23,803			23,803

Ending balance		23,803			23,803

ADDITIONAL PAID-IN CAPITAL:
Beginning balance		45,419			45,421
Gain on sales of treasury stock		1			2

Ending balance		45,420			45,423

LEGAL RESERVE AND RETAINED EARNINGS:
LEGAL RESERVE:
Beginning balance		143,421			144,488
Cash dividends		(1,314	)		(1,871	)
Retirement of treasury stock		(4,015	)		—
Net income		4,981			12,953

Ending balance		137,405			149,901

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Beginning balance		(25,134	)		(17,048	)
Other comprehensive income for the period		1,243			7,356

Ending balance		(23,891	)		(9,692	)

TREASURY STOCK, at cost:
Beginning balance		(5,110	)		(3,316	)
Purchases		(2,179	)		(70	)
Retirements and sales		4,017			3

Ending balance		(3,272	)		(3,383	)

TOTAL SHAREHOLDERS’ EQUITY		185,134			211,721

DISCLOSURE OF COMPREHENSIVE INCOME:
Net income for the period		4,981			12,953
Other comprehensive income for the period, net of tax		1,243			7,356

Total comprehensive income for the period		6,224			20,309


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	12

(MAKITA LOGO)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW



	Yen (millions)
	For the six months			For the six months
	ended September 30,			ended September 30,
	2003			2004

Net cash provided by operating activities		11,696			9,090
Net cash used in investing activities		(4,994	)		(6,437	)
Net cash used in financing activities		(4,938	)		(2,211	)
Effect of exchange rate changes on cash and cash equivalents		(638	)		510

Net change in cash and cash equivalents		1,126			952
Cash and cash equivalents, beginning of period		20,370			24,576

Cash and cash equivalents, end of period		21,496			25,528

SIGNIFICANT ACCOUNTING POLICIES

1.		Scope of consolidation and equity method

		Consolidated subsidiaries: 42 consolidated subsidiaries

		Major subsidiaries are as follows:

			Makita U.S.A Inc., Makita Werkzeug GmbH (Germany), Makita (U.K.) Ltd., Makita (China) Co., Ltd.,

			Makita (Australia) Pty. Ltd., etc.

2.		Consolidated Accounting Policies (Summary)

		Consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.

	(1)		Marketable and Investment Securities

			The Company conforms with SFAS No.115 “Accounting for Certain Investments in Debt and Equity Securities”.

	(2)		Inventories

			Inventories are stated at the lower of average cost or market. Inventory costs include raw materials, labor and manufacturing overheads.

	(3)		Property, Plant and Equipment and Depreciation

			Depreciation of property, plant and equipment is computed by using the declining-balance method over the estimated useful lives.

	(4)		Income Taxes

			Provision is made currently for income taxes applicable to all items of revenue and expense included in the consolidated financial statements regardless of when such items are taxable or deductible. The Company conforms with SFAS No.109, “Accounting for Income Taxes”.

	(5)		Pension Plans

			The Company conforms with SFAS No.87, “Employer’s Accounting for Pensions”, in accounting for retirement and termination benefit plans.

	(6)		Earnings Per Share

			The Company conforms with SFAS No.128, “Earnings per Share”. SFAS No.128 requires dual presentation of basic and diluted net income per share.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	13

(MAKITA LOGO)

	(7)		Impairment of Long-Lived Assets

			The Company conforms with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, effective April 1, 2002.

	(8)		Derivative Financial Instruments

			The Company conforms with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, and amendment of SFAS No. 133” and No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”.

	(9)		Use of Estimates in the Preparation of Financial Statements

			The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

	(10)		Revenue Recognition

			The Company and its consolidated subsidiaries recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss has passed to the customers, the sales price is fixed or determinable and collectibility is reasonably assured, which occurs when products are shipped to customers. When repairs are made and charged to customers, revenue from this source is recognized when the repairs have been completed and the item is shipped to the customer. In addition, the Company deducts sales incentives from revenues, such as co-op advertisement and slotting fees where the Company is not receiving an identifiable benefit, volume based rebates and cash discounts. Such deductions from revenues are estimated and recorded at the time the revenues are recognized, based on past experience and the content of contracts with customers.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	14

(MAKITA LOGO)

OPERATING SEGMENT INFORMATION

Six months ended September 30, 2003



	Yen (millions)
														Corporate
			North											and elimi-			Consoli-
	Japan		America			Europe		Asia		Other		Total		nations			dated

Sales:
(1) External customers		23,705		22,162			32,327		3,588		9,975		91,757		—			91,757
(2) Intersegment		18,947		1,816			2,357		10,242		41		33,403		(33,403	)		—

Total		42,652		23,978			34,684		13,830		10,016		125,160		(33,403	)		91,757

Operating expenses		39,867		24,022			31,260		12,374		9,390		116,913		(34,403	)		82,510
Operating income		2,785		(44	)		3,424		1,456		626		8,247		1,000			9,247

Six months ended September 30, 2004



	Yen (millions)
													Corporate
			North										and elimi-			Consoli-
	Japan		America		Europe		Asia		Other		Total		nations			dated

Sales:
(1) External customers		25,836		19,778		36,652		3,795		11,369		97,430		—			97,430
(2) Intersegment		23,432		1,956		2,992		16,945		103		45,428		45,428			—

Total		49,268		21,734		39,644		20,740		11,472		142,858		(45,428	)		97,430

Operating expenses		37,900		20,784		34,887		18,276		10,574		122,421		(44,455	)		77,966
Operating income		11,368		950		4,757		2,464		898		20,437		(973	)		19,464

Year ended March 31, 2004



	Yen (millions)
													Corporate
			North										and elimi-			Consoli-
	Japan		America		Europe		Asia		Other		Total		nations			dated

Sales:
(1) External customers		48,413		41,699		67,110		6,612		20,283		184,117		—			184,117
(2) Intersegment		40,633		3,978		4,726		22,364		123		71,824		(71,824	)		—

Total		89,046		45,677		71,836		28,976		20,406		255,941		(71,824	)		184,117

Operating expenses		87,594		44,958		64,358		26,048		19,061		242,019		(72,598	)		169,421
Operating income		1,452		719		7,478		2,928		1,345		13,922		774			14,696

Note: Segment information is determined by the location of the Company and its relevant subsidiaries.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	15

(MAKITA LOGO)

MARKETABLE SECURITIES AND INVESTMENT SECURITIES

1. Available-for-sale securities
As of September 30, 2004



	Yen (millions)
	Cost		Gross unrealized holding				Fair value		Carrying Amount
			Gains		Losses

Marketable securities:
Equity securities		1,502		1,139		—		2,641		2,641
Debt securities		4,497		89		4		4,582		4,582
Funds in trusts and investments in trusts		45,161		942		12		46,091		46,091

		51,160		2,170		16		53,314		53,314

Investment securities:
Equity securities		8,439		7,499		20		15,918		15,918
Debt securities		2,955		70		—		3,025		3,025
Investments in trusts		995		89		—		1,084		1,084

		12,389		7,658		20		20,027		20,027

As of March 31, 2004



	Yen (millions)
	Cost		Gross unrealized holding				Fair value		Carrying Amount
			Gains		Losses

Marketable securities:
Equity securities		1,494		1,412		—		2,906		2,906
Debt securities		5,477		83		32		5,528		5,528
Funds in trusts and investments in trusts		41,141		1,093		6		42,228		42,228

		48,112		2,588		38		50,662		50,662

Investment securities:
Equity securities		8,521		9,137		8		17,650		17,650
Debt securities		2,954		75		—		3,029		3,029
Investments in trusts		1,012		47		—		1,059		1,059

		12,487		9,259		8		21,738		21,738


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	16

(MAKITA LOGO)

2. Held-to-maturity securities
As of September 30, 2004



	Yen (millions)
	Cost		Gross unrealized holding				Fair value		Carrying Amount
			Gains		Losses

Marketable securities:
Debt securities		12,957		3		—		12,960		12,957

Investment securities:
Debt securities		1,203		2		1		1,204		1,203

As of March 31, 2004



	Yen (millions)
	Cost		Gross unrealized holding				Fair value		Carrying Amount
			Gains		Losses

Marketable securities:
Debt securities		13,328		7		—		13,335		13,328

Investment securities:
Debt securities		401		—		2		399		401

DERIVATIVES TRANSACTIONS

Figures for derivatives transactions are omitted because Makita discloses financial information under electronic declaration process in accordance with Article 27-30-6 of the Securities and Exchange Law in Japan.

ESTIMATED RETIREMENT AND TERMINATION ALLOWANCES

The Company and certain of its consolidated subsidiaries have various contributory and noncontributory employees’ benefit plans covering substantially all of the employees. The Company provides retirement and termination allowances based on projections of the values of employee benefit payment liabilities and annuity fund assets at the end of the year. The domestic plan represents substantially the entire pension obligation as of September 30, 2004. The discount rate and expected long-term rate of return on plan assets assumed to determine the pension obligation for the Company relevant to the domestic plan were 2.0% and 2.0% for the half year ended September 30, 2003, 2.0% and 2.0% for the year ended March 31, 2004 and 2.0 % and 2.0 % for the half year ended September 30, 2004, respectively.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	17

(MAKITA LOGO)

NET SALES BY PRODUCT CATEGORIES



	Yen (millions)
	For the six					For the six					For the
	months ended					months ended					year ended
	September 30,					September 30,					March 31,
	2003					2004					2004

	(Amount)		(%)			(Amount)		(%)			(Amount)		(%)
Finished goods		76,569		83.4	%		81,982		84.1	%		153,887		83.6	%
Parts, repairs and accessories		15,188		16.6	%		15,448		15.9	%		30,230		16.4	%

Total net sales		91,757		100.0	%		97,430		100.0	%		184,117		100.0	%

OVERSEAS SALES BY PRODUCT CATEGORIES



	Yen (millions)
	For the six					For the six					For the
	months ended					months ended					year ended
	September 30,					September 30,					March 31,
	2003					2004					2004

	(Amount)		(%)			(Amount)		(%)			(Amount)		(%)
Finished goods		61,773		85.2	%		67,358		85.9	%		123,778		85.4	%
Parts, repairs and accessories		10,740		14.8	%		11,044		14.1	%		21,197		14.6	%

Total overseas sales		72,513		100.0	%		78,402		100.0	%		144,975		100.0	%


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	18

(MAKITA LOGO)

EARNINGS PER SHARE

Yen

As of

September 30,

March 31,

2003

2004

Shareholders’ equity per share

1,286.27

1,471.81

1,343.69

Yen

For the six months

For the year

ended September 30,

ended March 31,

2003

2004

Net income per share:

Basic

34.25

90.03

53.16

Diluted

33.32

86.97

51.92

A reconciliation of the numerators and denominators of the basic and diluted net income per share computations is as follows:



	Yen (million)
	For the six months		For the six months		For the year
	ended September 30,		ended September 30,		ended March 31,
	2003		2004		2004

Net income available to common shareholders		4,981		12,953		7,691
Effect of dilutive securities:
1.5% unsecured convertible bonds, due 2005		57		60		119

Diluted net income		5,038		13,013		7,810


		Shares

Weighted average common shares outstanding		145,451,532		143,874,488		144,682,696
Dilutive effect of:
1.5% unsecured convertible bonds, due 2005		5,749,811		5,749,811		5,749,811

Diluted common shares outstanding		151,201,343		149,624,299		150,432,507


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	19

(MAKITA LOGO)

SUPPORT DOCUMENTATION (CONSOLIDATION)

1. Consolidated results and forecast



	Yen (millions)
	For the six months ended						For the six months ended						For the six months ended
	September 30, 2002						September 30, 2003						September 30, 2004
	(Results)						(Results)						(Results)
	(Amount)			(%)			(Amount)			(%)			(Amount)			(%)
Net sales		87,648			7.2			91,757			4.7			97,430			6.2
Domestic		19,265			(4.2	)		19,244			(0.1	)		19,028			(1.1	)
Overseas		68,383			10.9			72,513			6.0			78,402			8.1
Operating income		6,269			63.9			9,247			47.5			19,464			110.5
Income before income taxes		4,423			108.3			9,894			123.7			20,238			104.5
Net income		3,137			764.2			4,981			58.8			12,953			160.0
EPS (Yen)			20.96					34.25							90.03
Cash dividend per share (Yen)			9.00					9.00							11.00
Dividend payout ratio (%)				42.9					26.3							12.2
Employees				8,242					8,471							8,598



	Yen (millions)
	For the year ended				For the year ending
	March 31, 2004				March 31, 2005
	(Results)				(Forecast)
	(Amount)		(%)		(Amount)		(%)
Net sales		184,117		4.8		191,000		3.7
Domestic		39,142		0.9		38,800		(0.9	)
Overseas		144,975		6.0		152,200		5.0
Operating income		14,696		17.9		29,200		98.7
Income before income taxes		16,170		74.0		29,500		82.4
Net income		7,691		14.4		18,600		141.8
EPS (Yen)			53.16				129.30
Cash dividend per share (Yen)			22.00				—
Dividend payout ratio (%)			41.4				—
Employees			8,433				—

Note:

The table above shows the change in the percentage ratio of Net sales, Operating income, Income before income taxes, and Net income against the corresponding period of the previous year.


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	20

(MAKITA LOGO)

2. Consolidated net sales by geographic area



	Yen (millions)
	For the six months ended					For the six months ended					For the six months ended
	September 30, 2002					September 30, 2003					September 30, 2004
	(Results)					(Results)					(Results)
	(Amount)		(%)			(Amount)		(%)			(Amount)		(%)
Japan		19,265		(4.2	)		19,244		(0.1	)		19,028		(1.1	)
North America		24,185		(1.9	)		22,085		(8.7	)		19,697		(10.8	)
Europe		26,876		17.7			32,085		19.4			36,415		13.5
Asia		7,181		27.1			7,314		1.9			9,320		27.4
Other regions		10,141		18.8			11,029		8.8			12,970		17.6
Total		87,648		7.2			91,757		4.7			97,430		6.2

Note:

The table above sets forth Makita’s consolidated net sales by geographic area based on customers location for the periods presented.

3. Exchange rates

Yen

For the six months ended

September 30, 2002

September 30, 2003

September 30, 2004

(Results)

Yen/U.S. Dollar

123.07

118.07

109.80

Yen/Euro

116.92

133.51

133.28



	Yen
	For the six months ending		For the year ending
	March 31, 2005		March 31, 2005
	(Forecast)		(Forecast)
Yen/U.S. Dollar		105		107
Yen/Euro		130		131

4. Sales growth in local currency basis (major countries)



	For the six
	months ended
	September 30, 2004
	(Results)
U.S.A.		(4.6	%)
Germany		7.7	%
U.K.		10.3	%
France		17.6	%
China		1.0	%
Australia		(0.3	%)


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	21

(MAKITA LOGO)

5. Production ratio (unit basis)



	For the six months			For the six months			For the six months
	ended September 30,			ended September 30,			ended September 30,
	2002			2003			2004
	(Results)			(Results)			(Results)
Domestic		37.9	%		34.7	%		31.6	%
Overseas		62.1	%		65.3	%		68.4	%

6. Consolidated capital expenditures, depreciation and amortization, and R&D cost

Yen (millions)

For the six months

ended September 30,

For the year ending

2002

2003

2004

March 31, 2005

(Results)

(Forecast)

Capital expenditures

3,021

2,270

2,071

5,000

Depreciation and amortization

4,319

4,330

2,664

5,500

R&D cost

1,910

1,954

2,048

4,200

7. Consolidated cash flow



	Yen (millions)
	For the six months			For the six months			For the six months
	ended September 30,			ended September 30,			ended September 30,
	2002			2003			2004
	(Results)			(Results)			(Results)
Net cash provided by operating activities		13,206			11,696			9,090
Net cash used in investing activities		(2,931	)		(4,994	)		(6,437	)
Net cash used in financing activities		(6,778	)		(4,938	)		(2,211	)


English Translation of “KESSAN TANSHIN” originally issued in Japanese language	22

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