Q&As on the Presentation of Performance Results for the Second Quarter of the Fiscal Year Ending March 31, 2015 (FY2015.3) (Held on November 4, 2014)

A1 : The principal factor accounting for the decline in sales in the electronic devices segment was that sales of graphics LSIs for amusement equipment are now expected to be substantially below the planned level.

A2 : We think that the graphics LSIs that are now under development will contribute to sales. In addition, we will be working to expand sales not only of semiconductor chips but also module-related products. In particular, we will strive to expand the top line through sales of sound domain products, such as speaker modules and other items.

Regarding the breakeven point, there are a number of different points of view, but we are assuming that amount will decrease to about ¥12.0 billion as a result of the transition to fabless production.

A3 : Digital musical instruments include Electones, digital pianos, and portable pianos.

During the period, we introduced new products in the Electone lineup. We think sales will certainly decline gradually from the next period onward. However, from a global perspective, favorable performance is expected to continue for digital pianos and portable pianos, which are growing faster than sales of Electones, and this will cover the gradual decline in Electone sales. The outlook is, therefore, for expansion in sales.

A4 : Audio equipment handles sound, and there are technological affinities between professional audio equipment and musical instruments. Looking ahead, to give greater satisfaction to our customers, we are going to offer products that reflect an awareness of the potential connectivity and team play among musical instruments and professional audio equipment.

A5 : Under our structural reforms this time, we are working to achieve a ¥1.5 billion reduction through lowering fixed costs. In addition, we are looking to achieve a ¥1.0 billion improvement (cutback) in R&D and other expenses. Therefore, in total, we are aiming for a ¥2.5 billion improvement in our cost position.

A6 : During the latter half of the previous fiscal year, sales increased because of the introduction of our new TYROS portable keyboard. Since this fiscal year will be the second for this product, our outlook is for lower growth in sales. Moreover, there are uncertainties regarding future directions in the European market. Also, we have assumed that growth of digital piano sales will be more moderate in the second half.

A7 : We are expecting that some SG&A expenses that should have been incurred in the first half of the fiscal year will be carried over into the second half. However, after taking account of the status of sales and other factors, we will continue to work to cut the costs contained in the initial SG&A expense plans. We do not think there will be any special reasons during the second half.

A8 : Since demand is strongest at the end of the calendar year, typically, promotional expenses and costs associated with inventories rise in the third and fourth quarters compared with the first and second quarters. For this reason, we are assuming this will occur in FY2015.3, and are not expecting any special factors in the second half of the year.

A9 : We are expecting an increase in factory automation (FA) equipment sales in the fourth quarter as well as an increase in golf product sales in the fourth quarter. We are, therefore, assuming that we will show a profit in the fourth quarter.

A10 : At the beginning of the current fiscal year, we had assumed that recovery in the audio and graphics LSIs for amusement equipment would take place in the second quarter, but at the last briefing, we explained that this would be delayed until the third quarter. However, difficult conditions have persisted in this business, and we have revised our outlook and are now forecasting that improvement will be delayed until the fourth quarter.

A11 : The reasons why we decided to make the transfer not at the beginning of the next fiscal year, but six months later, included our decision to manufacture and inventory products through June 2015 to provide for the current level of supply. The other main reason was because the company that will take over these operations requested that the transfer take place after changes in factory layout were implemented. The operational losses that will be incurred during this interval are included in the current period among structural reform expenses, as costs related to the transfer. Therefore, the beneficial effects on profitability will emerge at the beginning of the next fiscal year.

A12 : Our operating income ratios improved from the first quarter to the second quarter.

In a typical year, the first factor accounting for this is an increase in capacity utilization at our factories from the first quarter to the second quarter. This year, in addition to this factor, we have seen the depreciation in the value of the yen and made steady progress toward the cost reductions targeted in our medium-term plan.

A13 : Under our medium-term management plan, we are working to cut costs by ¥15.0 billion, and this will absorb expected increases in labor and other costs at overseas factories. We are, therefore, planning for a net improvement in manufacturing costs of ¥7.0 billion. We think we are still on track toward reaching these objectives.

A14 : On a shipments basis, there are some differences by region, but movements in North America are steady, advances in shipments were reported in Europe and in China during the second quarter, but conditions were somewhat weaker. Our understanding is that there have not been any major changes in market conditions as such that would differ from our expectations.

A15 : Basically, the directions of our businesses will not undergo major changes.