Financial Report for the Six-Month Period Ended September 30, 2003 (Consolidated)

Transcription

1 Financial Report for the Six-Month Period Ended September 30, 2003 (Consolidated) Company Name: MAX CO., LTD. Stock Code: 6454 Head Office: 6-6, Hakozaki-cho, Nihonbashi, Chuo-ku, Tokyo, JAPAN URL: ( Inquiries: Mitsuo Suzuki, Senior Manager Tel: (03) Date Approved by Board of Directors: October 23, 2003 Application of U.S. GAAP: No October 23, 2003 Stock Listings: Each 1st Section of Tokyo and Osaka 1. Results for the Six Months Ended September 30, 2003 and 2002 (1) Consolidated Operating Results (Millions of yen, %) Six months ended Six months ended Year ended March 31, 2003 September 30, 2003 September 30, 2002 Net sales 23, % 22,140 (8.4)% 45,898 Operating income 1, ,751 (35.9) 3,681 Ordinary income 1, ,758 (39.4) 3,822 Net income 1, (41.1) 1,328 Net income per share (yen) Net income per share, diluted (yen) Return on equity (%) Return on total assets (%) Ordinary income to net sales (%) Notes: 1. Investment loss on equity method: six months ended September 30, 2003: JPY million; six months ended September 30, 2002: JPY million; year ended March 31, 2003: JPY million. 2. Average number of shares outstanding (consolidated): 52,435,994 (six months ended September 30, 2003), 54,614,523 (six months ended September 30, 2002), 54,095,100 (year ended March 31, 2003) 3. Changes in accounting methods: None 4. Percentages given for net sales, operating income, ordinary income, and net income reflect the rate of increase (decrease) compared to the previous fiscal year. (2) Consolidated Financial Position (Millions of yen, %) Six months ended Six months ended Year ended March 31, 2003 September 30, 2003 September 30, 2002 Total assets 67,402 70,104 68,546 Shareholders equity 54,000 54,372 54,071 Shareholders equity ratio (%) Shareholders equity per share (yen) 1, , , Note: The number of issued shares at the end of each period: 51,569,396 (as of September 30, 2003); 53,939,936 (as of September 30, 2002); 52,869,645 (as of March 31, 2003) (3) Consolidated Cash Flows Six months ended Six months ended September 30, 2003 September 30, 2002 Year ended March 31, 2003 Net cash provided by operating activities 3,436 1,181 2,518 Net cash used in investing activities (285) (823) (722) Net cash used in financing activities (2,386) (1,886) (3,073) Cash and cash equivalents at end of year 5,383 4,371 4,623 (4) Scope of Consolidation and Application of the Equity Method The number of consolidated subsidiaries: 20; consolidated subsidiaries accounted for by the equity method: ; affiliated companies: (5) Changes in the Scope of Consolidation and Application of the Equity Method Consolidated subsidiaries: additions; 1 removal Companies accounted for by the equity method: additions; removals 1

2 2. Forecast of Consolidated Operating Results from April 1, 2003 to March 31, 2004 Year ending March 31, 2004 Net sales 48,800 Operating income 3,760 Ordinary income 3,960 Net income 3,120 Note: Forecast net income per share: These forecasts were based on information possessed by the Max Group at this point in time. More recent data may mean that the actual figures are different than those indicated. A section discussing the aforementioned forecasts appears on page 7 of this document. 2

3 1. Management Policies 1. Basic Management Policies The corporate philosophy of MAX CO., LTD., is to expand Customer Value by becoming a group in which everyone grows together by enthusiastically combining their strengths. Thanks to all our employees strenuous efforts, we are realizing continued growth. This organizational capacity enables us to pursue an expansion in both business and profits as we aim for continued success and advancement. Our basic management stance is summarized by the following three points: 1. We will strive to ensure that the management is open. In an accurate and timely manner, we disclose our business policies and business results, including consolidated earnings, in accordance with the international accounting standards. 2. We will strive to ensure that all employees may participate in the management. Our employees participate actively in the Company s management, helping to expand the success of the business through their respective roles. 3. We will strive to realize a management structure in which profit is divided among employees and stockholders. Through these efforts, we endeavor to expand our business and contribute to society. 2. Basic Policy Regarding the Distribution of Profits Returning profits to our shareholders is one of our most important management policies. With a fundamental emphasis on ROE, we maintain a policy of making dividend payments that are underpinned by the growth in operations. Regarding the dividends paid to shareholders, we set the lower limit of the payout ratio at 30%. As for the dividends on shareholders equity, we are targeting a rate upward of 2%. Concerning internal capital reserves, we will make use of our current business assets to develop new businesses, expanding into growth markets and other business fields to pay larger dividends to shareholders in the future. 3. Stance and Policy on Reducing the Unit of Investment Max regards attracting more individual investors as a key management issue and is committed to profit sharing in line with the aforementioned payout ratio and ratio of dividends to shareholders equity. Furthermore, Max is endeavoring to enhance its home page and prepare straightforward business reports for individual investors. Reducing the unit of investment in the purchase of shares is an effective means of attracting more individual investors and revitalizing the stock market by increasing trade opportunities. However, implementing such an investment unit reduction is expensive, and Max will proceed cautiously while taking into consideration future stock market demands, fluctuations in the Company s share price, and other critical factors. 4. Medium- to Long-Term Management Strategies and Targets In the medium term, it is crucial that we create a strong Max that is capable of surviving the competition in the 21st century. To this end, we are reforming the Company s financial base and rebuilding its profitability structure. Max has subdivided its marketing division into five sales departments, established new business domains for each of these sales departments, and is working to expand operations by using the Company s unique marketing activities to raise Max s innovation ratio (an average of the percentage of net sales accounted for by new products during the past three years) to 30%. In addition, the sales department will strive to create Max fans repeat buyers by strengthening ties with customers that have purchased our products and quickly gaining an understanding of customer s product-related needs, including performance and function, which will lead to new products and services. The manufacturing department is working to reduce production costs through the creation of a manufacturing system in line with customer demand and the development of overseas manufacturing bases. Max will also incorporate market and client requests as quickly as possible regarding quality and functionality into its products, and is committed to creating products that customers will adore. Furthermore, we are reforming Max s profitability structure by subdividing each business segment into smaller units and implementing controls on sales profit through a profit-margin ratio approach. As for our management targets, Max aims to maintain its high profitability structure and keep consolidated ordinary income as 10% of net sales. 3

4 5. Issues to Be Addressed by the Company (1) Improving Corporate Value To raise our ROE over the medium term, Max is rebuilding the profit structure of its existing businesses while implementing measures to promote new businesses. In the office equipment division, Max is leveraging its brand power in regard to staplers and renewing its lineup of stationary products to bolster sales prowess. As market needs for print-on-demand services increase, Max aims to position its automatic stapler business for future growth by focusing on automatic stapler devices and consumables as well as working to expand paper post-processing applications for use in copying machines and printers. The industrial equipment department is endeavoring to gain a top market position, particularly in regard to its high-pressure nailer business, and make a foray into the concrete tools and consumables business. In addition, Max is working to expand its homeenvironment appliances business, which includes such products as bathroom-use dryer/heater/ventilator units, by making standardized installation ventilation systems in homes and offering products that stay ahead of market needs arising from factors including heightened environmental consciousness and the increasing necessity of ventilation equipment. In the U.S. and European markets, Max will continue to endeavor to expand sales of pneumatic nailers and rebar tiers which have established a firm foothold in these markets. Max is striving to expand its Southeast Asian operations by working to bolster display equipment sales and enhance cost competitiveness by expanding overseas production. Max will offer new user-friendly products to bolster customer confidence in the Max brand, which the Company has cultivated through its staplers and pneumatic nailers. Moreover, the Company will enhance its management by improving cash flow and profitability. (2) Environmental Conservation Measures Max views the issue of environmental conservation as an important task to be addressed. The Company s initiatives in this direction include its in-house formation of the EMS Committee, which is devising measures to minimize by-products of corporate activities that pose a burden on the environment. This committee is examining the Company s activities at every stage, from product development to manufacturing and waste disposal, to identify ways to reduce waste. On the administrative front, the committee oversees the use of environmentally friendly office supplies. In addition, Max s two factories in Gunma Prefecture have acquired ISO certification. 6. Corporate Governance Policy Max has adopted an audit system of corporate governance. To respond quickly and appropriately to the rapidly changing operating environment, Max is restructuring its Board of Directors. The Company has appointed several external auditors to the Board of Auditors, which aptly oversees and manages Max Group operations. Regarding the restructuring of the Board of Directors, Max introduced a Corporate Officer System, delegated decision-making concerning management policies and strategies as well as the oversight of business operations to the Board of Directors, and worked to attain an appropriate number of board members to bring about more substantial and lively debate as well as to ensure a swift and precise decision-making process. Under the Corporate Officer System, individuals who have been vested with authority by the representative director execute business operations in accordance with management policies and strategies decided by the Board of Directors. The Corporate Officer System helps to expedite the execution of duties and clearly delineate responsibilities. Through the resolution of these various challenges, we are working continuously to manage this Company in a way that will be valued and deemed trustworthy by our shareholders. 4

5 2. Operating Results and Consolidated Financial Position 1. Consolidated Results for Six-Month Period Ended September 30 (April 1, 2003 to September 30, 2003) (1) Operating Results As for the Japanese economy during the first six months ended September 30, 2003, conditions continued to be unclear due to the war in Iraq and the spread of SARS centered in Southeast Asia; however, despite some variation between industries, signs pointed to a rebound in capital spending and a budding recovery in certain areas of consumer spending was also evident. Under these conditions, to develop Max into a company that can grow together with its customers, we formulated and implemented specific reforms of the profit structure, allocated management resources to create new business growth, and advanced the reform of employee consciousness founded on every employee working in union with the entire Company to support business growth. Net sales during the period under review increased 8.3% compared to the same period in the prior fiscal year, to 23,984 million, and ordinary income increased 3.5%, to 1,820 million. Furthermore, with the authorization to return certain employee pension fund assets to the government, special gains from the cancellation of insurance totaled 1,302 million, and, as a result, net income increased 93.3%, to 1,902 million. Profit/Loss Results (Millions of yen, %) Six months ended % of Six months ended % of Increase Change year September 30, 2003 net sales September 30, 2002 net sales (decrease) on year Net sales 23, % 22, % 1, % Operating income 1, , Ordinary income 1, , Net income 1, Sales, by Segment Net Sales (Millions of yen, %) Segment Region Six months ended % of Six months ended % of Increase Change year September 30, 2003 net sales September 30, 2002 net sales (decrease) on year Office Equipment Industrial Equipment Segment Total Domestic 7, % 7, % % Foreign 2, , Total 9, , Domestic 11, , , Foreign 2, , Total 13, , , Domestic 19, , , Foreign 4, , Total 23, , ,

6 Earnings performances by segment in the period under review are as follows: In the Office Equipment Division, earnings from lettering equipment were down, as companies worked to pare expenses and refrained from buying machines. However, with office equipment, to renew our line of stationery products with a model of our number 10 stapler commemorating the 50th anniversary of its launch, we boosted earnings though the launch of new quick-drying ink pads both for everyday use and for use with personal seals. Overseas, expanded sales of Letter Twin, a product for printing on electric wire tube, in China and Taiwan boosted earnings in this division. We also boosted earnings from auto staplers by making proposals to copier manufacturers for new digitalized and networked copier models, and we increased overall production of auto stapler, including an increase of production in China. As a result, earnings in this division overall increased 4.4% over the first half of the prior fiscal year. As for the Industrial Equipment Division, earnings from nailers grew in Japan as a result of the rise in new housing starts, and activities to expand marketing through cooperation with major retail outlets based on customer data led to expanded sales of highpressure nailers, compressors, screw nailers, and other equipment as well as consumables. In the environmental-related equipment business, the implementation of revisions to the Building Standard Law made mechanical ventilation systems mandatory, and sales of 24-hour ventilation systems, particularly for residential housing and rental apartments, grew sharply, and earnings improved. Overseas, the newly launched rebar tying equipment for tying thick rebar spread in popularity, driving up earnings. As a result, earnings for the entire division climbed 11.3%. (2) Consolidated Financial Position Consolidated Cash Flows Six months ended Six months ended Increase Year ended September 30, 2003 September 30, 2002 (decrease) March 31, 2002 Balance of cash and cash equivalents at start of term 4,623 5,922 (1,298) 5,922 Cash flows from operating activities 3,436 1,181 2,255 2,518 Cash flows from investing activities (285) (823) 538 (722) Cash flows from financing activities (2,386) (1,886) (500) (3,073) Effect of exchange rate fluctuations on cash and cash equivalents (4) (22) 18 (21) Decrease in cash and cash equivalents 760 (1,551) 2,311 1,298 Balance of cash and cash equivalents at end of September 30, ,383 4,371 1,012 4,623 1 Cash flows from operating activities Net cash provided by operating activities during the interim period ended September 30, 2003, rose 2,255 million over the first half of the previous fiscal year, to 3,436 million primarily due to an increase in net sales boosting income before income taxes to 325 million (not including special gains from the cancellation of insurance of 1,302 million), a reduction to payments of corporate income taxes paid of 1,051, and other factors. 2 Cash flows from investing activities Net cash used in investing activities amounted to 285 million. Despite an inflow of 935 million from acquisitions and the redemption or disposal of marketable and investment securities, which was 538 million higher than the first half of the previous fiscal year, outflows from the acquisition of tangible fixed assets and other factors totaled 1,076 million. 3 Cash flows from financing activities Cash flows used in financing activities during the interim period totaled 2,386 million, down 500 million from the first half of the previous fiscal year, which resulted from 559 million in expenditures to buy back Max shares. Consequently, consolidated cash and cash equivalents at September 30, 2003, rose 760 million from 4,623 million, to 5,383 million. 6

7 Max Group Cash Flow Indices and Trends (%) Six months ended Year ended Six months ended Year ended September 30, 2003 March 31, 2003 September 30, 2002 March 31, 2002 Equity ratio (%) 80.1% 78.9% 77.6% 75.8% Market value based equity ratio (%) Number of years of amortization Interest coverage ratio Notes: 1. All of the figures in the aforementioned indices were calculated on a consolidated basis. 2. The aforementioned indices were calculated as follows: Equity ratio: equity/total assets Market value based equity ratio: total market capitalization/total assets Number of years of amortization: interest-bearing debt/operating cash flow Interest coverage ratio: operating cash flow/interest payment 3. Total market capitalization was calculated by multiplying the closing stock price at the end of the term by the total number of outstanding shares at the end of the term (excluding treasury shares). The cash flow from operating activities in the consolidated cash flow statement was used as operating cash flow in the calculations above. Interest-bearing debt refers to the portion of debt posted in the consolidated balance sheets upon which interest is paid. The amount from the paid interest column in the consolidated statements of cash flows was used as interest payment in the calculations above. 2. Forecast for Fiscal 2003 (1) Forecasts of operating results and net sales by segment from April 1, 2003 to March 31, 2004 (consolidated) Despite indications for a pickup in capital spending and improvements in corporate earnings gradually boosting the bottomed out economy, deflation is expected persist and the yen is forecast to appreciate at a faster pace. These and other factors are expected to contribute to an uncertain business environment. To offset these conditions, Max will strengthen its business competitiveness through establishing and reinforcing core technologies as well as accelerating the cultivation of new businesses. In the Office Equipment Division, we will seek to expand sales by renewing our existing line of products and expanding in-store displays through business tie-ups with the top vendors in each region. In the Industrial Equipment Division, we will work to take advantage of the rising trend in domestic housing starts by focusing our efforts on expanding marketing through cooperation with influential retail outlets as well as entering the market for concrete tools by launching new products and expanding our market for rebar tying equipment in Europe and North America. With regard to environmental-related equipment business, demand for 24-hour ventilation systems is projected to rise now that the revised Building Standard Law has taken effect, and Max will respond by launching new products and strengthening efforts to offer proposals to boost sales. For fiscal 2003, we forecast net sales of 48,800 million, operating income of 3,760 million, ordinary income of 3,960 million, and net income of 3,120 million. (Fiscal 2003 Forecast) (Millions of yen, %) FY2003 Percentage of Percentage of Increase Change year FY2002 (Est.) net sales net sales (decrease) on year Net sales 48, % 45, % 2, % operating income 3, , Ordinary income 3, , Net income 3, , , (2) Prospects for a Distribution of Profits MAX CO., LTD., intends to make a dividend payment in accordance with the Company s aforementioned policy concerning the distribution of profits. Taking into account the Company s earnings forecasts, we are targeting an annual dividend payment of 22 per share. All members of our staff are making continual efforts to realize our performance targets. 7

8 Consolidated Balance Sheets Six months ended Six months ended Year ended September 30, 2003 September 30, 2002 March 31, 2003 (Millions of yen, %) Change from FY02 year-end Increase (decrease) Assets Current assets 26, % 27, % 26, % (136) Cash and cash deposits 5,383 4,382 4, Notes and accounts receivable 11,786 11,250 11, Marketable securities 3,062 5,440 3,516 (454) Inventories trade 4,478 5,176 4,881 (403) Other 1,369 1,295 1,480 (111) Allowance for doubtful accounts (10) (19) (20) 10 Fixed assets 41, , , (1,007) Tangible fixed assets 18,241 18,806 18, Buildings and structures 6,274 6,611 6,347 (72) Machinery, equipment and vehicles 2,827 3,104 2,978 (150) Land 6,949 6,949 6,949 Construction in progress Other 1,694 1,599 1, Intangible assets Investments and other assets 22,869 23,634 23,934 (1,065) Investment securities 18,162 17,782 17, Long-term loans 1,348 1,211 1, Other 3,364 4,661 5,057 (1,692) Allowance for doubtful accounts (7) (21) (23) 160 Total assets 67, % 70, % 68, % (1,143) 8

9 Consolidated Balance Sheets Six months ended Six months ended Year ended September 30, 2003 September 30, 2002 March 31, 2003 (Millions of yen, %) Change from FY02 year-end Increase (decrease) Liabilities Current liabilities 9, % 10, % 9, % 91 Notes and accounts payable trade 3,565 4,588 3, Short-term loans 2,055 2,508 2,105 (50) Accounts payable other 1,757 1,727 2,038 (281) Income taxes payable Consumption taxes payable Accrued bonuses 1, ,131 (125) Other (11) Long-term liabilities 3, , , (1,170) Long-term loans Reserve for retirement benefits 2,666 4,204 3,905 (1,239) Reserve for retirement benefits to directors and corporate auditors Consolidated goodwill (3) Other (7) Total liabilities 13, , , (1,078) Minority interests Shareholders equity Common stock 12, , , Capital surplus 10, , , Retained earnings 35, , , Discrepancies on revaluation of land (2,152) (3.2) (2,152) (3.1) (2,152) (3.1) Net unrealized loss on securities (328) (0.5) (118) (0.2) 459 Foreign currency exchange adjustment (128) (0.2) (133) (0.2) (128) (0.2) 0 Treasury stock (2,757) (4.1) (673) (1.0) (1,534) (2.2) (1,222) Total shareholders equity 54, , , (70) Total liabilities, minority interests and shareholders equity 67, % 70, % 68, % (1,143) 9

10 Consolidated Statements of Income Six months period Six months period ended ended Increase (decrease) September 30, 2003 September 30, 2002 (Millions of yen, %) Year ended March 31, 2003 Net sales 23, % 22, % 1, % 45, % Cost of sales 14, , , Gross profit 9, , , Selling, general and administrative expenses 7, , , Operating income 1, , , Non-operating income (31) Interest income (36) 232 Dividend income (1) 34 Rental income Amortization of consolidation goodwill Other non-operating income Non-operating expenses (72) Interest expenses (2) 41 Taxes and duties Foreign exchange losses (62) 225 Other non-operating expenses (7) 91 Ordinary income 1, , , Special income 1, , Gains from sales of fixed assets 0 (0) 0 Reversal of allowance for doubtful accounts 6 6 Gains from sales of investment securities Gains from the return of the portion 1,302 1,302 of the National Welfare Pension Fund fomerly managed by the Company Special losses (86) 1, Losses on sales of fixed assets 46 (46) 58 Losses on retirement of fix assets (39) 209 Losses on write-down of investment securities 1,369 Net income before income taxes 3, , , , Corporate, inhabitant, and enterprise taxes ,399 Deferred income taxes (552) Minority interests 5 6 (1) 10 Net income 1, % % % 1, % 10

11 Consolidated Statements of Retained Earnings Six months period Six months period ended ended Increase (decrease) September 30, 2003 September 30, 2002 Year ended March 31, 2003 (Capital surplus) Balance at the beginning of the period 10,517 10,517 10,517 Additional paid-in capital at beginning of the period 10,517 10,517 Increase in capital surplus 0 0 Net gains from sales of treasury stock 0 0 Capital surplus at the end of period 10,518 10, ,517 (Retained earnings) Retained earnings at the beginning 35,119 35, ,033 of the period Increase in retained earnings 1, ,328 Net income 1, ,328 Decrease in retained earnings 1,210 1,243 (33) 1,243 Cash dividends 1,163 1,204 (41) 1,204 Bonuses to directors and corporate auditors Retained earnings at the end of period 35,811 34,774 1,036 35,119 11

12 Consolidated Statements of Cash Flows Six months Six months period ended period ended September 30, 2003 September 30, 2002 Increase Year ended (decrease) March 31, 2003 I. Cash flows from operating activities Net income before taxes 3,272 1,644 1,627 2,185 Depreciation expenses (21) 2,088 Amortization of consolidation goodwill (3) (3) (7) Decrease in allowance for doubtful accounts (26) (0) (26) 1 Decrease in accrued bonuses (125) (278) Decrease in reserve for retirement benefits for employees, 142 (125) 268 (391) directors and corporate auditors Gains from the return of the portion of the National Welfare Pension (1,302) (1,302) Fund formerly managed by the Company Interest and dividend income (109) (147) 37 (267) Interest expenses (2) 41 Effect of exchange rate changes 6 (2) 9 (0) Losses from the disposal of fixed assets (39) 209 Gains from the sales of fixed assets (0) 0 (0) Losses from the sales of fixed assets 46 (46) 58 Gains from sales of investment securities (170) (170) Loss on write-down of investment securities 1,369 (Increase) decrease in notes and accounts receivable trade (62) 329 (391) (137) Decrease (increase) in inventory assets (175) 872 Increase (decrease) in notes and accounts payable trade 204 (876) 1,080 (2,110) Increase (decrease) in accrued consumption tax payable (7) 27 Accrued bonuses to directors and auditors (47) (39) (8) (39) Increase in other assets 251 (56) 308 (83) Increase (decrease) in other liabilities (295) (225) (70) 208 Subtotal 3,139 1,917 1,222 4,119 Interest and dividends received (21) 280 Interest expenses paid (18) (20) 2 (39) Corporate income taxes paid 207 (844) 1,051 (1,841) Net cash provided by operating activities 3,436 1,181 2,255 2,518 II. Cash flows from investing activities Expenditure for the acquisition of marketable and investment securities (2,481) (1,405) (1,076) (3,834) Proceeds from the redemption or disposal of marketable 3,436 1,424 2,011 4,830 and investment securities Expenditure for the acquisition of tangible fixed assets (1,076) (856) (220) (1,654) Proceeds from the sales of tangible fixed assets 8 63 (55) 27 Expenditure for a loan (335) (148) (187) (287) Proceeds from the repayment of a loan Expenditure for time deposits (0) 0 (0) Proceeds from the repayment of time deposits 3 (3) 15 Net cash used in investing activities (285) (823) 538 (722) III. Cash flows from financing activities Expenditure for the repayment of loans (0) (17) 17 (342) Expenditure for the acquisition of treasury stock (1,224) (665) (559) (1,526) Proceeds from the sale of treasury stock 1 1 Amount paid for dividend payment (1,163) (1,203) 40 (1,204) Net cash used in financing activities (2,386) (1,886) (500) (3,073) IV. Effect of exchange rate changes on cash and cash equivalents (4) (22) 18 (21) V. Decrease in cash and cash equivalents 760 (1,551) 2,311 (1,298) VI. Cash and cash equivalents at the beginning of fiscal year 4,623 5,922 (1,298) 5,922 VII. Balance of cash and cash equivalents at end of fiscal year 5,383 4,371 1,012 4,623 12

13 Segment Data 1. Consolidated Business Operations, by Segment Six-month period ended September 30, 2003 Office Industrial Elimination/ Total Equipment Equipment Corporate Consolidated I. Net sales and operating income/loss (1) Net sales to outside customers 9,999 13,984 23,984 23,984 (2) Intersegment sales Total 9,999 13,984 23,984 23,984 Operating expenses 8,152 14,060 22,213 22,213 Operating income 1,846 (75) 1,771 1,771 Six-month period ended September 30, 2002 Office Industrial Elimination/ Total Equipment Equipment Corporate Consolidated I. Net sales and operating income (1) Net sales to outside customers 9,574 12,566 22,140 22,140 (2) Intersegment sales Total 9,574 12,566 22,140 22,140 Operating expenses 7,959 12,429 20,388 20,388 Operating income 1, ,751 1,751 Year ended March 31, 2003 Office Industrial Elimination/ Total Equipment Equipment Corporate Consolidated I. Net sales and operating income (1) Net sales to outside customers 19,952 25,946 45,898 45,898 (2) Intersegment sales Total 19,952 25,946 45,898 45,898 Operating expenses 16,506 25,711 42,217 42,217 Operating income 3, ,681 3,681 (Note) Method of Business Segment Classification 1. Business segments are classified by product line. 2. The leading products of each business segment Business Category Main Products Office Equipment Auto staplers, staplers, staples, numbering machines, paper punches, time recorders, check writers, vinyl cutting machines, printing machines, cutter/printers, tube marking machines, brush handwriting software, brush handwriting plotters, drafting machines, parallel rulers, plotters, etc. Industrial Equipment Pneumatic nailers, hand tackers, system nailers, collated screw drivers, collated screw nailers, various staples, nails, screws, concrete reinforcing bar tying machines, air compressors, vegetable bunching machines, bag sealing machines, dry/heater/ventilators for bathrooms, 24-hour residential ventilation systems with air to air heat exchangers, etc. 2. Segment Data by Location For the current and previous consolidated fiscal years, Japan accounts for more than 90% of the total net sales of all segments and total assets of all segments, and therefore this information has not been included. 13

14 3. Consolidated Overseas Net Sales Six-month period ended September 30, 2003 The Americas Asia Other Regions Total I. Overseas net sales 1,812 1,973 1,109 4,895 II. Consolidated net sales 23,984 III. Overseas net sales as a percentage 7.6% 8.2% 4.6% 20.4% of consolidated net sales Six-month period ended September 30, 2002 The Americas Asia Other Regions Total I. Overseas net sales 1,639 1, ,449 II. Consolidated net sales 22,140 III. Overseas net sales as a percentage 7.4% 8.4% 4.3% 20.1% of consolidated net sales Year ended March 31, 2003 The Americas Asia Other Regions Total I. Overseas net sales 3,254 3,786 2,022 9,063 II. Consolidated net sales 45,898 III. Overseas net sales as a percentage 7.1% 8.2% 4.4% 19.7% of consolidated net sales Notes: 1. Overseas net sales consists of sales by MAX CO., LTD., and its consolidated subsidiaries in countries or regions outside of Japan. 2. The category for country or region depends on the geographical proximity. 3. The main categories can be defined as follows: The Americas: United States and Canada Asia: Malaysia and Singapore Other Regions: Europe 14