Table of Contents
Table of Contents
| MAKITA
CORPORATION |
||||
| (Registrant) |
||||
| By: | /s/ | Masahiko Goto | ||
| (Signature) | ||||
| Masahiko Goto President |
||||
Table of Contents
Makita Corporation
The 94th Semiannual Report
for the six months
ended September 30, 2005
(U.S. GAAP Financial Information)
(English translation of “CHUKAN HOUKOKUSHO”
semiannual report originally issued in Japanese language
for the benefit and information of shareholders
of the Company’s common stock)
Table of Contents
A MESSAGE FROM THE PRESIDENT
We are pleased to present the results for Makita’s 94th interim period, ended September 30, 2005.
| n | The First Time for Sales to Exceed 100 Billion Yen for an Interim Period |
Regarding consolidated results for the interim period under review, net sales rose 9.5% over the same period of the previous fiscal year, to 106,649 million yen, the first time for sales to exceed 100 billion yen for an interim period. Sales in Japan rose 5.3%, to 20,029 million yen, as a result of the robust performance of newly introduced rechargeable power tools. Overseas sales expanded 10.5%, to 86,620 million yen, led by expansion in sales in European markets. As a result, overseas sales accounted for 81.2% of net sales for the period.
Examining overseas sales by individual region, sales in Europe were up 14.8%, to 41,802 million yen, while sales in North America expanded 4.8%, to 20,648 million yen. Sales in Asia declined 9.1%, to 8,472 million yen, and sales in other regions increased 21.0%, to 15,698 million yen.
Regarding earnings, the cost to sales ratio improved owing to the impact of a stronger euro. As a special factor, the resolution of the golf course rehabilitation issue was followed by a gain from the sale of this business amounting to 8.5 billion yen. Accordingly, operating income climbed 33.1%, to 25,897 million yen, and income before income taxes increased 31.0%, to 26,504 million yen. Regarding income taxes, the Company recorded an impairment loss on its golf course assets during the fiscal year ended March 31, 2004, and did not recognize any related deferred tax assets. However, accompanying the completion of civil rehabilitation proceedings, the Company recorded the deferred tax assets for the interim period under review. As a consequence, net income for the interim period was nearly double the amount for the interim term of the previous fiscal year and amounted to 25,807 million yen.
In addition, the Company received permission from the Nagoya District Court on April 11, 2005, to withdraw from its golf course operations, which had been under civil rehabilitation proceedings since September 2004. Accordingly, based on rehabilitation plans confirmed on May 7, 2005, rehabilitation obligations were settled and management rights to the golf course were transferred to Tokyo Tatemono Co., Ltd., as of May 31, 2005.
| n | An Agreement to Acquire the Automatic Nailer Business of Kanematsu-NNK Corp. |
As a comprehensive manufacturer of tools for professional use, Makita signed an agreement on September 30, 2005, to acquire the automatic nailer business of Kanematsu-NNK Corp. for a total of 1.6 billion yen as of January 1, 2006, to strengthen its position in the air-pressure power tool business. In acquiring this business, Makita will have no obligations for liabilities related to the issue of Kanematsu-NNK’s falsification of certificates.
| n | Issues to Be Addressed |
Regarding the outlook for performance, there are still uncertainties in the operating environment, including the sharp rise in the price of crude oil and concerns about the future course of the U.S. economy.
In the future, the Company intends to further strengthen its subsidiaries in all overseas markets and will work to expand production overseas, in China and other countries, to substantially enhance its cost competitiveness. Also, by increasing its capabilities for developing new products that satisfy professional users and maintaining its brand image, Makita is striving to be what it refers to as a “Strong Company”, or, in other words, a company that can earn and maintain worldwide market leadership in markets for professional-use power tools. In this way, Makita is striving to be such a “Strong Company” and achieve improved performance.
1
Table of Contents
| n | The Interim Dividends of 19 Yen Per Share |
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. However, in the event special circumstances arise, computation of the amount of dividends will be based on consolidated net income after certain adjustments. For the interim period under review, Makita will pay a dividend of 19 yen per share, as announced in April 2005.
Based on its dividend policy, Makita’s Board of Directors will decide on proposals for the dividend for the end of the fiscal year at their meeting to approve the financial statements after they are finalized near the end of April 2006. Their proposals will be presented for discussion and final approval at the Annual General Meeting of Shareholders.
We look forward to the continuing support and cooperation of our shareholders.
| November 2005 | ||
| Masahiko Goto President and Representative Director |
2
Table of Contents
CONDENSED CONSOLIDATED BALANCE SHEETS
| Yen (millions) |
||||||||
| As of | As of | |||||||
| March 31, 2005 |
September 30, 2005 |
|||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash, cash equivalents and time deposits |
33,251 | 30,603 | ||||||
Marketable securities |
57,938 | 53,848 | ||||||
Trade receivables |
39,506 | 40,473 | ||||||
Inventories |
66,003 | 73,395 | ||||||
Prepaid expenses and other current assets |
11,194 | 14,015 | ||||||
Total current assets |
207,892 | 212,334 | ||||||
PROPERTY, PLANT AND EQUIPMENT, at cost |
52,824 | 55,042 | ||||||
INVESTMENTS AND OTHER ASSETS |
29,188 | 31,602 | ||||||
| 289,904 | 298,978 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Short-term borrowings |
9,060 | 3,962 | ||||||
Trade notes and accounts payable |
10,574 | 11,827 | ||||||
Club members’ deposits |
12,836 | - | ||||||
Other current liabilities |
25,756 | 26,347 | ||||||
Total current liabilities |
58,226 | 42,136 | ||||||
LONG-TERM LIABILITIES |
10,639 | 9,854 | ||||||
| 68,865 | 51,990 | |||||||
MINORITY INTERESTS |
1,399 | 1,409 | ||||||
SHAREHOLDERS’ EQUITY: |
||||||||
Common stock |
23,805 | 23,805 | ||||||
Additional paid-in capital |
45,430 | 45,434 | ||||||
Legal reserve and retained earnings |
163,171 | 183,802 | ||||||
Accumulated other comprehensive loss |
(9,249 | ) | (3,824 | ) | ||||
Treasury stock, at cost |
(3,517 | ) | (3,638 | ) | ||||
| 219,640 | 245,579 | |||||||
| 289,904 | 298,978 | |||||||
Notes
| 1. | Consolidated financial information has been prepared in accordance with accounting principles generally accepted in the United States. | |
| 2. | Consolidated subsidiaries: 44 subsidiaries for the year ended
March 31, 2005 45 subsidiaries for the six months ended September 30, 2005 |
|
| 3. | Amounts of less than 1 million yen have been rounded. |
3
Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| Yen (millions) |
||||||||
| For the six months | For the six months | |||||||
| ended September 30, | ended September 30, | |||||||
| 2004 |
2005 |
|||||||
NET SALES |
97,430 | 106,649 | ||||||
Cost of sales |
56,375 | 61,554 | ||||||
GROSS PROFIT |
41,055 | 45,095 | ||||||
Selling, general, administrative and other expenses |
21,591 | 19,198 | ||||||
OPERATING INCOME |
19,464 | 25,897 | ||||||
OTHER INCOME (EXPENSES): |
||||||||
Interest and dividend income |
535 | 548 | ||||||
Interest expense |
(293 | ) | (233 | ) | ||||
Exchange gains (losses) on foreign currency transactions, net |
(81 | ) | 4 | |||||
Realized gains on securities, net |
223 | 360 | ||||||
Other, net |
390 | (72 | ) | |||||
Total |
774 | 607 | ||||||
INCOME BEFORE INCOME TAXES |
20,238 | 26,504 | ||||||
PROVISION FOR INCOME TAXES: |
||||||||
Current |
5,175 | 6,419 | ||||||
Deferred |
2,110 | (5,722 | ) | |||||
Total |
7,285 | 697 | ||||||
NET INCOME |
12,953 | 25,807 | ||||||
4
Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
| Yen (millions) |
||||||||
| For the six months | For the six months | |||||||
| ended September 30, | ended September 30, | |||||||
| 2004 |
2005 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
12,953 | 25,807 | ||||||
Adjustments to reconcile net income to net cash
provided by operating activities- |
||||||||
Depreciation and amortization |
2,664 | 2,658 | ||||||
Deferred income taxes |
2,110 | (5,722 | ) | |||||
Realized gains on securities |
(223 | ) | (360 | ) | ||||
Gain on disposals or sales of property, plant and equipment |
(0 | ) | (8,598 | ) | ||||
Changes in assets and liabilities- |
||||||||
Trade receivables |
55 | 14 | ||||||
Inventories |
(5,795 | ) | (5,581 | ) | ||||
Payables and accrued expenses |
1,138 | 1,192 | ||||||
Income taxes payable |
(711 | ) | 220 | |||||
Benefit obligation |
(4,708 | ) | (270 | ) | ||||
Other, net |
1,607 | (11 | ) | |||||
Net cash provided by operating activities |
9,090 | 9,349 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Capital expenditures |
(2,071 | ) | (4,856 | ) | ||||
Purchases of available for sale securities |
(12,413 | ) | (13,297 | ) | ||||
Purchases of held to maturity securities |
(803 | ) | (1,799 | ) | ||||
Proceeds from sales of available for sale securities |
10,062 | 21,742 | ||||||
Proceeds from sales of property, plant and equipment |
20 | 800 | ||||||
Decrease (increase) in time deposits |
(1,273 | ) | 3,959 | |||||
Decrease (increase) in other assets, net |
41 | (373 | ) | |||||
Net cash provided by (used in) investing activities |
(6,437 | ) | 6,176 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Increase (decrease) in short-term borrowings |
69 | (2,837 | ) | |||||
Repayment of club members’ deposits |
(344 | ) | (6,375 | ) | ||||
Purchases and sales of common stock |
(65 | ) | (117 | ) | ||||
Cash dividends paid |
(1,871 | ) | (5,176 | ) | ||||
Other, net |
- | (35 | ) | |||||
Net cash used in financing activities |
(2,211 | ) | (14,540 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |
510 | (76 | ) | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
952 | 909 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
24,576 | 25,384 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
25,528 | 26,293 | ||||||
5
Table of Contents
CONSOLIDATED NET SALES BY GEOGRAPHIC AREA
| Yen (billions) |
||||||||||||||||||||
| For the six months ended |
||||||||||||||||||||
| September | March 31, | September | March 31, | September | ||||||||||||||||
| 30, 2003 |
2004 |
30, 2004 |
2005 |
30, 2005 |
||||||||||||||||
Japan |
19.2 | 19.9 | 19.0 | 20.4 | 20.0 | |||||||||||||||
North America |
22.1 | 19.8 | 19.7 | 18.8 | 20.6 | |||||||||||||||
Europe |
32.1 | 34.3 | 36.4 | 38.8 | 41.8 | |||||||||||||||
Asia |
7.3 | 6.9 | 9.3 | 7.0 | 8.5 | |||||||||||||||
Other regions |
11.1 | 11.5 | 13.0 | 12.3 | 15.7 | |||||||||||||||
Total |
91.8 | 92.4 | 97.4 | 97.3 | 106.6 | |||||||||||||||
| Note: | The table above sets forth Makita’s consolidated net sales by geographic area based on customer location for the periods presented. |
OPERATING INCOME TO NET SALES RATIO
| % |
||||||||||||||||||||
| For the six months ended |
||||||||||||||||||||
| September | March 31, | September | March 31, | September | ||||||||||||||||
| 30, 2003 |
2004 |
30, 2004 |
2005 |
30, 2005 |
||||||||||||||||
Consolidated |
10.1 | 5.9 | 20.0 | 12.3 | 24.3 | |||||||||||||||
Non-consolidated |
8.1 | 10.4 | 13.5 | 12.4 | 12.9 | |||||||||||||||
PRODUCTION BY COUNTRY
| Million units |
||||||||||||||||||||
| For the six months ended |
||||||||||||||||||||
| September | March 31, | September | March 31, | September | ||||||||||||||||
| 30, 2003 |
2004 |
30, 2004 |
2005 |
30, 2005 |
||||||||||||||||
Japan |
1.80 | 1.72 | 2.22 | 1.63 | 2.03 | |||||||||||||||
U.S.A. |
0.55 | 0.60 | 0.66 | 0.51 | 0.54 | |||||||||||||||
U.K. |
0.51 | 0.64 | 0.61 | 0.68 | 0.71 | |||||||||||||||
China |
1.94 | 2.36 | 3.13 | 3.26 | 3.28 | |||||||||||||||
Other |
0.40 | 0.38 | 0.42 | 0.45 | 0.48 | |||||||||||||||
Total |
5.20 | 5.70 | 7.04 | 6.53 | 7.04 | |||||||||||||||
6
Table of Contents
CONDITION OF SHAREHOLDERS AND SHARES
(As of September 30, 2005)
| Total number of shares outstanding | 148,008,760 shares (including 4,283,509 shares of treasury stock) | |
| Number of shareholders | 10,275 |
10 largest shareholders
| Name of shareholder |
Number of shares held (thousand) |
Shareholding ratio (%) |
||||||
Hero & Co. |
9,091 | 6.14 | ||||||
The Chase Manhattan Bank, N.A. London |
8,636 | 5.83 | ||||||
Japan Trustee Services Bank, Ltd. (Trust account) |
5,756 | 3.89 | ||||||
Northern Trust Company (AVFC) Sub-account American Client |
5,601 | 3.78 | ||||||
The Master Trust Bank of Japan, Ltd. (Trust account) |
5,252 | 3.55 | ||||||
The UFJ Bank, Limited |
4,370 | 2.95 | ||||||
The Bank of New York, Treaty Jasdec Account |
3,976 | 2.69 | ||||||
Makita Cooperation Companies’ Investment Association |
3,873 | 2.62 | ||||||
Nippon Life Insurance Company |
3,712 | 2.51 | ||||||
Maruwa Co., Ltd. |
3,309 | 2.24 | ||||||
Total |
53,579 | 36.20 | ||||||
| 1. | Hero & Co. is the nominal holder of the shares of The Bank of New York, the trustee bank for the Company’s American Depositary Shares. | |
| 2. | In addition to the above, the Company owns 4,283 thousand shares of treasury stock. |
Distribution of share-ownership
| Class of shareholder |
Number of shares held (thousand) |
Shareholding ratio (%) |
||||||
Foreign investors |
53,081 | 35.9 | ||||||
Financial institutions and securities firms |
44,302 | 29.9 | ||||||
Japanese individuals and other |
28,040 | 18.9 | ||||||
Other Japanese business corporations |
18,300 | 12.4 | ||||||
Treasury stock |
4,283 | 2.9 | ||||||
Price per share and volume of shares traded on The Tokyo Stock Exchange
| 2004 |
2005 |
|||||||||||||||||||||||||||||||||||||||||||||||
| Oct. |
Nov. |
Dec. |
Jan. |
Feb. |
Mar. |
Apr. |
May |
June |
July |
Aug. |
Sep. |
|||||||||||||||||||||||||||||||||||||
High (yen) |
1,557 | 1,668 | 1,874 | 1,889 | 2,010 | 2,115 | 2,010 | 2,200 | 2,355 | 2,540 | 2,405 | 2,375 | ||||||||||||||||||||||||||||||||||||
Low (yen) |
1,379 | 1,463 | 1,550 | 1,705 | 1,815 | 1,889 | 1,755 | 1,926 | 2,075 | 2,150 | 2,190 | 2,150 | ||||||||||||||||||||||||||||||||||||
Volume (thousand shares) |
9,008 | 11,060 | 10,370 | 9,369 | 10,300 | 8,718 | 9,075 | 10,331 | 9,222 | 8,227 | 7,256 | 10,669 | ||||||||||||||||||||||||||||||||||||
7
Table of Contents
CORPORATE DATA
(As of September 30, 2005)
Makita Corporation
Phone: (0566) 98-1711
Website: http://www.makita.co.jp/
| Date of founding | March 21, 1915 | |||||
| Date of incorporation | December 10, 1938 | |||||
| Paid-in Capital | 24,206 million yen (non-consolidated) | |||||
| Description of business | Production and sales of electric power tools, stationary woodworking machines, air tools, garden tools and household tools | |||||
| Number of consolidated subsidiaries | 45 (Domestic 3, Overseas 42) | |||||
| Plants | Two in Japan, seven outside of Japan (two in China, and one each in the United States, Canada, Brazil, the United Kingdom, and Germany) | |||||
| Employees | 8,557 (consolidated) 2,880 (non-consolidated) | |||||
| Board of Directors | ||||||
| President and Representative Director | Masahiko Goto | |||||
| Managing Director | Masami Tsuruta | (General Manager of Domestic Sales Marketing Headquarters) | ||||
| Directors | Yasuhiko Kanzaki | (General Manager of International Sales Headquarters: Europe Area) | ||||
| Kenichiro Nakai | (General Manager of Administration Headquarters) | |||||
| Tadayoshi Torii | (General Manager of Production Headquarters) | |||||
| Tomoyasu Kato | (General Manager of Development and Engineering Headquarters) | |||||
| Kazuya Nakamura | (General Manager of International Sales Headquarters: Asia and Oceania Area) | |||||
| Masahiro Yamaguchi | (General Manager of Purchasing Headquarters) | |||||
| Shiro Hori | (General Manager of International Sales Headquarters: America Area and International Administration) | |||||
| Tadashi Asanuma | (Assistant General Manager of Domestic Sales Marketing Headquarters) | |||||
| Hisayoshi Niwa | (General Manager of Quality Headquarters) | |||||
| Zenji Mashiko | (Assistant General Manager of Domestic Sales Marketing Headquarters) | |||||
| Outside Director | Motohiko Yokoyama | (President and Representative Director of Toyoda Machine Works, Ltd.) | ||||
| Board of Statutory Auditors | ||||||
| Standing Statutory Auditor | Akio Kondo | |||||
| Hiromichi Murase | ||||||
| Statutory Auditor | Keiichi Usui | (Outside Auditor) | ||||
| Shoichi Hase | (Outside Auditor, Patent Attorney) | |||||
| Independent Registered Public Accounting Firm | ||||||
| KPMG AZSA & Co. (a member firm of KPMG International, a Swiss cooperative that provides no professional services to clients) | ||||||
8
Table of Contents
INFORMATION ON SHARES
Fiscal period |
March 31 of each year | |
Annual general shareholders meeting of shareholders |
June of each year | |
Number of shares constituting one unit |
100 shares | |
| The share trading unit was reduced from 1,000 shares to 100 shares as of October 3, 2005. | ||
Record dates |
1) AGM and cash dividend for the second half March 31 of each year |
|
| 2) Cash dividend for the interim period September 30 of each year |
||
Transfer agent of common stock |
The Chuo Mitsui Trust &
Banking Company, Limited 3-33-1, Shiba, Minato-ku, Tokyo 105-8574, Japan |
|
Its handling office |
The Chuo Mitsui Trust and Banking Company, Limited Nagoya Branch Office 15-33, Sakae 3-chome, Naka-ku, Nagoya, Aichi 460-8685, Japan |
|
Its liaison offices |
Head office and nationwide branch offices of The Chuo Mitsui Trust and Banking Company, Limited | |
| Head office and nationwide branch offices of Japan Securities Agents, Ltd. | ||
Means of public notice |
Website: http://www.makita.co.jp/ir/index1.htm | |
Common stock listings |
Domestic Tokyo and Nagoya stock exchanges | |
| Overseas American Depositary Receipts: NASDAQ System | ||
9