Q&As on the Presentation of Performance Results for the Fiscal Year Ended March 31, 2015 (FY2015.3) (Held on May 1, 2015)

A1 : We are taking a cautious attitude toward the pace of recovery in other regions. For example, in Russia, successive price increases accompanying sudden foreign currency fluctuations led to surges in demand, but the outlook going forward is uncertain. Also, since there are some concerns about the economy of Brazil and other matters, we have issued a cautious forecast.

A2 : We want to grow sales by launching new digital mixer products (especially the TF Series) and expanding sales in the commercial installed sound market, including audio systems for public spaces in hotels, shopping malls, etc.
Revenues from the installation of audio facilities expanded significantly in the fourth quarter of FY2015.3, but, looking ahead, we are taking a cautious attitude, and issued a forecast of 9% growth, rather than double-digit growth. However, the underlying trend toward recovery seems to be gaining strength, and we want to aim for double-digit growth.
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A3 : The reason for the increase in SG&A expenses above the planned level was that, in the fourth quarter, expenses were incurred above those called for in the cost reduction plan that was prepared during the third quarter. In addition, promotion expenditures on our sales drive were above the scheduled level.

A4 : Formerly, engineers were scattered in various business divisions, but with the formation of the Development Group, they have been concentrated into one organizational unit that is expected to realize technological synergies in product development.

A5 : The work flow for the installation of PA equipment begins with orders placed by customers and is then followed by the implementation and reporting of sales. Therefore, there is a time gap between the receipt of orders and sales, and sales tend to be bunched together in March each year. Consequently, there is not much of a reactionary decline after the end of the previous fiscal year. This fiscal year, so far, the flow of orders has been steady as in the previous fiscal year.

A6 : In part because we are taking a conservative view of PA equipment installation work within the audio equipment business, we are forecasting growth in operating income of 6%, to ¥6.5 billion for the current fiscal year.

A7 : The change in our operation of the music schools does not involve measures for shrinking this business, but is aimed at strengthening it through the centralization of operations.
Also, the changes in operations this time apply only to the domestic music school business. The overseas music school business is aiming for continued growth under the existing operating systems.

A8 : The forecast for the euro in FY2016.3 has changed substantially from last year's actual ¥141 per euro to ¥130. The outlook for operating income takes account of the major negative impact of this change in foreign currency valuations.

A9 : Sales have not yet recovered fully. Our view is that sales of high-end grand pianos will not recover fully during the current fiscal year, but we anticipate that demand for upright pianos will recover.

A10 : The principal reasons for this were increases in dividends received and patent income, plus the reporting of additions to deferred tax assets.

A11 : Profitability has improved because of the reduction in fixed costs accompanying structural reforms and cuts in R&D expenses. We have taken sales of ¥13.0 billion and operating income of ¥500 million as a base line for the current year, but we want to raise income by expanding sales of high-margin products.

A12 : We will expand sales in China, where pianos account for a high percentage of total sales. The markets for other musical instruments, including digital pianos and guitars, are also expanding; therefore, we want to increase sales of these products.
We also believe that the launching of new products manufactured in our plants in China, which are major production bases, will contribute to sales growth.
Regarding distribution inventories, although the situation has not improved dramatically, our understanding is that inventories are gradually being normalized.

A13 : The content of our cost reductions includes "lowering procurement costs," "restraining personnel costs through improvement in productivity," and "realizing the positive impact of manufacturing structural reforms in Japan." These reductions have proceeded almost in line with plans, and the outlook is for them to continue this fiscal year.
Looking forward, we believe there is still leeway for lowering procurement costs and improving productivity.
To further procurement cost reductions, we established a procurement representative office in Shenzhen, China, where we have centralized our overseas parts procurement. We believe that these costs can be reduced further.
Also regarding productivity increases, we believe we can make further progress in cost reductions through improvements in production methods and in other areas.