Form 6-K
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 6-K

 


 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE Act of 1934

 

For the month of February, 2006.

 


 

ORIX Corporation

(Translation of Registrant’s Name into English)

 


 

Mita NN Bldg., 4-1-23 Shiba, Minato-Ku,

Tokyo, 108-0014, 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  x        Form 40-F  ¨

 

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

 

Yes  ¨        No  x

 



Table of Contents

Table of Documents Filed

 

          Page

1.

   ORIX’s Third Quarter Consolidated Financial Results (April 1, 2005 - December 31, 2005) filed with the Tokyo Stock Exchange on Tuesday, February 7, 2006.     


Table of Contents

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.

 

    ORIX Corporation

Date: February 8, 2006

  By  

/s/ Shunsuke Takeda


        Shunsuke Takeda
        Director
        Vice Chairman and CFO
        ORIX Corporation


Table of Contents

Consolidated Financial Results

April 1, 2005 – December 31, 2005


 

February 7, 2006

 

In preparing its consolidated financial information, ORIX Corporation and its subsidiaries have complied with accounting principles generally accepted in the United States of America, except as modified to account for stock splits in accordance with the usual practice in Japan.

 

U.S. Dollar amounts have been calculated at Yen 118.07 to $1.00, the approximate exchange rate prevailing at December 31, 2005.

 

These documents may contain forward-looking statements about expected future events and financial results that involve risks and uncertainties. Such statements are based on our current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, those described under “Risk Factors” in the Company’s annual report on Form 20-F filed with the United States Securities and Exchange Commission.

 

The Company believes that it will be considered a “passive foreign investment company” for United States Federal income tax purpose in the year to which these consolidated financial results relate and for the foreseeable future by reason of the composition of its assets and the nature of its income. A U.S. holder of the shares or ADSs of the Company is therefore subject to special rules generally intended to eliminate any benefits from the deferral of U.S. Federal income tax that a holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Investors should consult their tax advisors with respect to such rules, which are summarized in the Company’s annual report.

 

For further information please contact:

 

Corporate Communications

ORIX Corporation

Mita NN Bldg., 4-1-23 Shiba, Minato-ku, Tokyo 108-0014

JAPAN

Tel: +81-3-5419-5102    Fax: +81-3-5419-5901

E-mail: raymond_spencer@orix.co.jp


Table of Contents

Consolidated Financial Results from April 1, 2005 to December 31, 2005

(U.S. GAAP Financial Information for ORIX Corporation and its Subsidiaries)

 

Corporate Name:

   ORIX Corporation

Listed Exchanges:

   Tokyo Stock Exchange (Securities No. 8591)
     Osaka Securities Exchange
     New York Stock Exchange (Trading Symbol : IX)

Head Office:

   Tokyo JAPAN
     Tel: +81-3-5419-5102
     (URL http://www.orix.co.jp/grp/ir_e/ir_index.htm)

 

 

1. Performance Highlights for the Nine Months Ended December 31, 2005 and 2004, and the Year Ended March 31, 2005

 

 

(1) Performance Highlights - Operating Results (Unaudited)

 

     (millions of JPY)*1

 
     Total
Revenues


   Year-on-Year
Change


    Operating
Income


   Year-on-Year
Change


    Income before
Income Taxes*2


   Year-on-Year
Change


 

December 31, 2005

   658,802    5.8 %   168,348    84.8 %   192,023    70.7 %

December 31, 2004

   622,714    17.3 %   91,116    33.4 %   112,466    36.5 %

March 31, 2005

   900,034    —       128,942    —       152,332    —    
     Net Income

   Year-on-Year
Change


   

Basic Earnings

Per Share


   

Diluted Earnings

Per Share*3


 

December 31, 2005

   126,097    86.2 %   1,434.39     1,359.01  

December 31, 2004

   67,718    47.6 %   808.27     743.17  

March 31, 2005

   91,496    —       1,087.82     1,002.18  

1.      Equity in Net Income of Affiliates was a net gain of JPY 20,716 million for the nine months ended December 31, 2005, a net gain of JPY 17,803 million for the nine months ended December 31, 2004 and a net gain of JPY 20,043 million for the year ended March 31, 2005.

2.      The average number of shares was 87,909,798 for the nine months ended December 31, 2005, 83,781,217 for the nine months ended December 31, 2004 and 84,110,243 for the year ended March 31, 2005.

3.      Adoption of simplified accounting method

  

Yes ( x )

  

No (    )

    

4.      Changes in Accounting Principles

  

Yes (    )

  

No ( x )

  

(except for adoptions of new accounting principles)

5.      Changes in Numbers of Consolidated Subsidiaries and Affiliates

  

Yes ( x )

  

No (    )

    

Additions: Consolidated Subsidiaries 7, Affiliates 5

  

Deletions: Consolidated Subsidiaries 14, Affiliates 7

 

*Note 1:   Unless otherwise stated, all amounts shown herein are in millions of Japanese yen or millions of U.S. dollars, except for Per Share amounts which are in single yen.
*Note 2:   “Income before Income Taxes” as used throughout the report represents “Income before Discontinued Operations and Income Taxes.”
*Note 3:   Diluted earnings per share reflects application of accounting for the effect of contingently convertible instruments set forth in EITF Issue No.04-8.

 

 

(2) Performance Highlights - Financial Position (Unaudited)

 

     Total Assets

   Shareholders’
Equity


   Shareholders’
Equity Ratio


    Shareholders’
Equity Per Share


December 31, 2005

   6,686,456    898,828    13.4 %   10,099.03

December 31, 2004

   5,873,033    641,332    10.9 %   7,642.86

March 31, 2005

   6,068,953    727,333    12.0 %   8,322.96

1. The number of outstanding shares was 89,001,424 as of December 31, 2005, 83,912,548 as of December 31, 2004 and 87,388,706 as of March 31, 2005.

 

 

(3) Performance Highlights - Cash Flows (Unaudited)

 

     Cash Flows
from Operating Activities


   Cash Flows
from Investing Activities


    Cash Flows
from Financing Activities


   Cash and Cash Equivalents
at End of Period


December 31, 2005

   140,718    (466,715 )   315,286    135,931

December 31, 2004

   73,554    (334,182 )   188,573    80,129

March 31, 2005

   126,467    (408,004 )   274,343    145,380

 

 

2. Forecasts for the Year Ending March 31, 2006 (Unaudited)

 

Fiscal Year


   Total Revenues

   Income before Income Taxes

   Net Income

March 31, 2006

   900,000    245,000    155,000

 

Note :      Basic Earnings Per Share is forecasted to be JPY 1,741.55.


Table of Contents

Summary of Consolidated Financial Results

 

1. Nine Months Ended December 31, 2005

 

Financial Highlights

 

Income before Income Taxes*    192,023 million yen (Up 71% year on year)

Net Income

   126,097 million yen (Up 86% year on year)

Earnings Per Share (Basic)

   1,434.39 yen (Up 77% year on year)

Earnings Per Share (Diluted)

   1,359.01 yen (Up 83% year on year)

Shareholders’ Equity Per Share

   10,099.03 yen (Up 21% on March 31, 2005)

ROE (Annualized)

   20.7% (December 31, 2004: 15.0%)

ROA (Annualized)

   2.64% (December 31, 2004: 1.57%)

* “Income before income taxes” refers to “income before discontinued operations and income taxes.”

 

 

Revenues: 658,802 million yen (Up 6% year on year)

Revenues increased 6% to 658,802 million yen in the first nine months of this fiscal year compared with the same period of the previous fiscal year. Although “real estate sales” decreased year on year, revenues from “direct financing leases,” “operating leases,” “interest on loans and investment securities,” “brokerage commissions and net gains on investment securities,” “life insurance premiums and related investment income,” “gains on sales of real estate under operating leases,” and “other operating revenues” were up compared to the same period of the previous fiscal year.

 

Furthermore, “transportation revenues,” which were recorded in the previous fiscal year, are recorded as “equity in net income of affiliates” during this fiscal year as shown in (Note 1) on page 2.

 

Revenues from “direct financing leases” increased 11% to 92,264 million yen compared to the same period of the previous fiscal year. In Japan, revenues from “direct financing leases” performed steadily overall and were up 10% year on year. Revenues from “direct financing leases” were up due to the larger contribution from the securitization of direct financing leases compared to the same period of the previous fiscal year and the operations of ORIX Kitakanto Corporation, which entered the ORIX Group during the previous fiscal year. Overseas, revenues were up 13% year on year. Although The Americas segment showed signs of improvement, revenues were lower as a result of a lower average balance of operating assets compared to the same period of the previous fiscal year, while the expansion of the leasing operations in the Asia, Oceania and Europe segment resulted in the higher overall revenues.

 

Revenues from “operating leases” increased 14% to 150,396 million yen compared to the same period of the previous fiscal year. In Japan, although revenues from the precision measuring and other equipment rental operations were down year on year, there was an increase in automobile and real estate operating leases that contributed to a 10% increase year on year. Overseas, revenues were up 26% year on year due to the expansion of automobile operating leases in the Asia, Oceania and Europe segment.

 

Revenues from “interest on loans and investment securities” increased 20% to 117,987 million yen compared to the same period of the previous fiscal year. In Japan, “interest on loans and investment securities” increased 18% year on year. The increase in revenues was due mainly to an expansion of revenues associated with loans to corporate customers, including non-recourse loans, and the loan servicing operations. Overseas, revenues were up 26% year on year, due to the contribution from loans to corporate customers in The Americas segment.

 

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Revenues from “brokerage commissions and net gains on investment securities” increased 37% to 28,200 million yen compared to the same period of the previous fiscal year. Brokerage commissions were up 91% year on year due to an increase in the level of trading volume on the stock market in Japan. Net gains on investment securities were up 27% year on year due to the sale of securities mainly associated with our venture capital operations and corporate rehabilitation fund investments in Japan and securities investments in The Americas segment.

 

“Life insurance premiums and related investment income” were up 1% year on year to 98,175 million yen. Life insurance premiums were flat year on year, while life insurance related investment income increased year on year.

 

“Real estate sales” decreased 22% year on year to 53,459 million yen. Although revenues associated with the sales of residential condominiums to buyers increased compared to the same period of the previous fiscal year, there was no sale of office buildings and other real estate developments in the first nine months of this fiscal year that was recorded in the same period of the previous fiscal year. Furthermore, residential condominiums developed through certain joint ventures were accounted for by the equity method, and are included as a net of revenues and selling costs in “equity in net income of affiliates.” The revenues from the aforementioned joint ventures were 1,656 million yen.

 

“Gains on sales of real estate under operating leases” were up almost nine-fold year on year to 9,433 million yen due to the increase in sales of rental purpose office buildings and other real estate.

 

“Other operating revenues” increased 33% year on year to 108,888 million yen due to the increase in revenues associated with companies in which we invested as part of our corporate rehabilitation business in the previous fiscal year that contributed from the beginning of this fiscal year and increase in revenues associated with our integrated facilities management operations.

 

(Note 1)

“Transportation revenues” and “costs of transportation revenues” associated with the operations of Footwork Express Co., Ltd. in which we invested as part of our corporate rehabilitation business, were included in the same period of the previous fiscal year based on a three-month lag basis as permitted under U.S. GAAP. However, ORIX’s share in Footwork Express Co., Ltd. was reduced in December 2004 due to an increase in capital whereby the substantive participating rights of a minority shareholder were increased. As a result, ORIX no longer has a controlling financial interest in the company and accounted for this company as an equity method affiliate at the end of the fiscal year ended March 31, 2005. ORIX has started recording its proportionate share of net income or loss of the company by the equity method from the beginning of the fiscal year ending March 31, 2006 instead of recording “transportation revenues” and “costs of transportation revenues.”

 

Expenses: 490,454 million yen (Down 8% year on year)

Expenses were down 8% to 490,454 million yen compared with the same period of the previous fiscal year. Although “interest expense,” “costs of operating leases,” “other operating expenses,” and “selling, general and administrative expenses” increased, “life insurance costs,” “costs of real estate sales,” “provision for doubtful receivables and probable loan losses,” “write-downs of long-lived assets,” and “write-downs of securities” were down year on year. For details on “costs of transportation revenues,” please see (Note 1) shown above.

 

“Interest expense” was up 14% year on year to 46,242 million yen. In Japan, “interest expense” increased due to the higher average debt levels, and “interest expense” also increased overseas due to the higher interest rates despite the lower average debt levels.

 

“Costs of operating leases” were up 11% year on year to 101,281 million yen accompanying the increase in revenues from “operating leases.”

 

“Life insurance costs” decreased 5% year on year to 82,976 million yen due mainly to lower insurance payments.

 

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“Costs of real estate sales” were down 26% year on year to 46,013 million yen accompanying the decrease in “real estate sales.” Furthermore, 5,230 million yen in selling costs associated with residential condominiums developed through certain joint ventures were accounted for by the equity method.

 

“Other operating expenses” were up 35% year on year to 66,307 million yen accompanying the increase in “other operating revenues.”

 

“Selling, general and administrative expenses” were up 5% year on year to 132,310 million yen. Although there were no expenses associated with Footwork Express Co., Ltd., which became an equity method affiliate ((Note 1) on page 2), an increase in costs, which were included from the beginning of this fiscal year, associated with an increase in the number of consolidated companies in the previous fiscal year and expansion of business scope led to the higher expenses.

 

Despite an increase in operating assets, “provision for doubtful receivables and probable loan losses” was down 56% year on year to 11,987 million yen due to a lower level of non-performing assets.

 

“Write-downs of long-lived assets” were down year on year to 521 million yen.

 

“Write-downs of securities” were down 3% year on year to 3,878 million yen as we recorded write-downs associated mainly with equity investments made by our venture capital operations in Japan.

 

Net Income: 126,097 million yen (Up 86% year on year)

“Operating income” was up 85% year on year to 168,348 million yen.

 

“Equity in net income of affiliates” was up 16% to 20,716 million yen compared to the same period of the previous fiscal year due to the steady performance of equity method affiliates in both Japan and overseas. Included in “equity in net income of affiliates” are earnings on investments in operating companies accounted for by the equity method and earnings on investments in residential condominiums developed through certain joint ventures, which are also accounted for by the equity method. The “equity in net income of affiliates” associated with residential condominium joint ventures was a loss of 3,574 million yen, which is primarily attributable to the upfront recognition of advertising expenses, associated with some large-scale residential condominium development projects, preceding the revenue recognition of completed sales upon title transfer to buyers.

 

“Gains on sales of subsidiaries and affiliates and liquidation loss” were down 17% year on year to 2,959 million yen.

 

“Income before discontinued operations and income taxes” increased 71% year on year to 192,023 million yen.

 

“Discontinued operations, net of applicable tax effect” (Note 2) were up 150% year on year to 13,221 million yen.

 

As a result, “net income” increased 86% year on year to 126,097 million yen.

 

(Note 2)

Subsidiaries, businesses, and real estate under operating leases that have been sold or that are to be disposed for which there is no significant continuing involvement, are reclassified to discontinued operations. Income and expenses generated by such subsidiaries, businesses, and real estate under operating leases are retroactively reclassified.

 

Operating Assets: 5,611,344 million yen (Up 9% on March 31, 2005)

Operating assets were up 9% on March 31, 2005 to 5,611,344 million yen as all operating asset categories were up.

 

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Segment Information (“Segment Profits” refer to income before income taxes)

 

Segment profits were up year on year for the “Corporate Financial Services,” “Automobile Operations,” “Real Estate-Related Finance,” “Real Estate,” “Life Insurance,” “Other,” “The Americas,” and “Asia, Oceania and Europe” segments, while the “Rental Operations” segment was lower compared to the same period of the previous fiscal year.

 

The results of the reported segments from April 1, 2005 reflect the revised operating structure following the reorganization of the Company. Accordingly, the real estate-related equity investment operations and the REIT asset management operations, which had been included in the “Real Estate-Related Finance” segment, were included in the “Real Estate” segment from the first quarter of this fiscal year (Please refer to (Note 1) on page 14 of the Segment Information).

 

Operations in Japan

 

Corporate Financial Services Segment:

Segment revenues were up 22% year on year to 74,671 million yen due to the expansion of loans to corporate customers, an increase in contribution from direct financing leases compared to the same period of the previous fiscal year, and due to the recognition of gains from securitization.

 

Segment profits increased 35% to 38,445 million yen compared to 28,556 million yen in the same period of the previous fiscal year due to the increase in segment revenues and the lower “provision for doubtful receivables and probable loan losses” as a result of the lower level of non-performing assets.

 

Segment assets increased 9% on March 31, 2005 to 1,639,685 million yen due to an increase in loans to corporate customers despite the lower level of direct financing leases as a result of securitization.

 

Automobile Operations Segment:

Segment revenues increased 9% year on year to 72,706 million yen. Although the automobile rental operations were lower compared to the same period of the previous fiscal year, the automobile leasing operations expanded.

 

Segment profits increased 14% to 18,590 million yen in line with the increase in segment revenues compared to 16,247 million yen in the same period of the previous fiscal year.

 

Segment assets increased 12% on March 31, 2005 to 504,276 million yen due to the expansion of the automobile leasing operations.

 

Rental Operations Segment:

Segment revenues were down 3% year on year to 49,178 million yen as the precision measuring and other equipment rental operations had fewer orders from electronics and communications equipment manufacturers despite an increase in revenues from transactions being accounted for as direct financing leases.

 

Segment profits decreased 10% to 6,612 million yen compared to 7,314 million yen in the same period of the previous fiscal year. Although gains on investment securities were recorded, the reduction in segment revenues resulted in the lower profits.

 

Segment assets were up 2% on March 31, 2005 to 120,962 million yen.

 

Real Estate-Related Finance Segment:

Segment revenues increased 10% year on year to 51,333 million yen due to the expansion of revenues associated with corporate loans, including non-recourse loans, the loan servicing operations, and gains on investment securities.

 

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Segment profits increased 96% to 26,770 million yen compared to 13,664 million yen in the same period of the previous fiscal year due to the increase in segment revenues and reduction in non-performing assets, which resulted in a lower “provision for doubtful receivables and probable loan losses.”

 

Segment assets increased 7% on March 31, 2005 to 1,027,610 million yen due mainly to the increase in corporate loans.

 

Real Estate Segment:

Segment revenues increased 17% year on year to 146,845 million yen. Lower “real estate sales” were recorded as there were no revenues associated with the sale of real estate developments, such as office buildings, in the first nine months of this fiscal year that were recorded in the same period of the previous fiscal year despite an increase in revenues associated with the sales of residential condominiums. On the other hand, the increase in gains associated with sales of real estate under operating leases and revenues associated with our integrated facilities management operations led to the higher segment revenues.

 

Segment profits increased 40% to 26,011 million yen compared to 18,623 million yen in the same period of the previous fiscal year due to the increase in gains associated with the sales of real estate under operating leases, despite the recognition of advertising expenses that were incurred preceding the revenue recognition of completed sales for residential condominiums upon title transfer to buyers.

 

Segment assets increased 11% on March 31, 2005 to 556,675 million yen due to the purchase of some rental purpose real estate despite the reclassification of some assets to “office facilities” upon a change in their use.

 

Life Insurance Segment:

Segment revenues were up 1% year on year to 97,650 million yen. Although life insurance premiums were flat year on year, life insurance related investment income increased year on year.

 

Segment profits increased 79% year on year to 10,324 million yen compared to 5,765 million yen in the same period of the previous fiscal year due mainly to the lower insurance payments.

 

Segment assets were down 8% on March 31, 2005 to 523,272 million yen due to a reclassification of some assets as a result of a change in their use to “office facilities” and a decrease in the investment portfolio associated with the maturity of some endowment insurance policies.

 

Other Segment:

Segment revenues decreased 23% year on year to 78,539 million yen. Although there were contributions to revenues from companies that we invested in the previous fiscal year, as part of our corporate rehabilitation business, and from the securities operations and gains on investment securities, revenues from the card loan operations were flat year on year and the change in the accounting treatment of “transportation revenues” to “equity in net income of affiliates,” as previously described on the (Note 1) on page 2, led to the lower revenues.

 

Segment profits increased 86% to 30,268 million yen compared to 16,286 million yen in the same period of the previous fiscal year due to the aforementioned contributing factors to segment revenues and the lower “provision for doubtful receivables and probable loan losses” associated with the card loan operations.

 

Segment assets were up 34% on March 31, 2005 to 654,042 million yen. The increase in segment assets was due to a change in the cardholder membership agreement at the card loan operations whereby the balance of certain card loans that were previously accounted for as off-balance sheet assets no longer meet the requirements for such accounting treatment and were accounted for as on-balance sheet assets from the third quarter of this fiscal year and due to the increase in loans related to margin trading at the securities brokerage.

 

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Overseas Operations

 

The Americas Segment:

Segment revenues were up 27% year on year to 46,625 million yen. Although there was a decrease in revenues associated with direct financing leases and operating leases, revenues from interest on loans to corporate customers and sales on real estate increased year on year. In addition, there was also a contribution from the gain on the sale of the primary and master servicing business.

 

Segment profits more than doubled to 27,591 million yen compared to 12,207 million yen in the same period of the previous fiscal year due to the increase in segment revenues and reductions in the “provision for doubtful receivables and probable loan losses” and “selling, general and administrative expenses.”

 

Segment assets were up 7% on March 31, 2005 to 431,659 million yen. Although there was a withdrawal from an investment in an affiliate accompanying its termination, segment assets were up due to the increase in loans to corporate customers and the effect of a depreciation of the yen against the dollar.

 

Asia, Oceania and Europe Segment:

Segment revenues were up 25% year on year to 67,476 million yen due to the steady performance of automobile and machine equipment leasing and increase in revenues from the ship-related operations.

 

Segment profits increased 55% to 27,100 million yen compared to 17,517 million yen in the same period of the previous fiscal year due to an increase in segment revenues as described above, the steady performance of “equity in net income of affiliates,” and the contribution from the gain on the sale of an affiliate.

 

Segment assets were up 12% on March 31, 2005 to 559,701 million yen due mainly to the increase in direct financing leases and the depreciation of the yen against the dollar.

 

2. Summary of Cash Flows (Nine Months Ended December 31, 2005)

 

Cash and cash equivalents decreased by 9,449 million yen to 135,931 million yen compared to March 31, 2005.

 

“Cash flows from operating activities” provided 140,718 million yen in the first nine months of this fiscal year and provided 73,554 million yen in the same period of the previous fiscal year due primarily to inflows associated with the increase in net income.

 

“Cash flows from investing activities” used 466,715 million yen in the first nine months of this fiscal year compared to 334,182 million yen in the same period of the previous fiscal year. Outflows exceeded inflows as the “purchases of lease equipment” exceeded the sum of “principal payments received under direct financing leases” and “proceeds from sales of operating lease assets,” and “installment loans made to customers” exceeded “principal collected on installment loans.”

 

“Cash flows from financing activities” provided 315,286 million yen in the first nine months of this fiscal year compared to 188,573 million yen in the same period of the previous fiscal year, due to the increase in debt accompanying the increase in operating assets.

 

3. Summary of Third Quarter (Three Months Ended December 31, 2005)

 

In the third quarter revenues increased 9,539 million yen year on year. Revenues from “direct financing leases” were up compared to the third quarter of the previous fiscal year due to the increase in the average balance of direct financing leases and the contribution from gains on securitization. Revenues from “operating leases” and “interest on loans and investment securities” were up due to the increase in the average balance of the associated operating assets compared with the third quarter of the previous fiscal year. “Brokerage commissions and net gains on investment securities” were up due to the increase in brokerage commissions despite the decrease in net gains on investment securities. “Life insurance premiums and related investment income” were down compared to the same period of the previous fiscal year due to the lower life insurance related investment income although life insurance premiums were flat year on year. “Real estate sales” decreased year on year as sales of office buildings recorded in the third quarter of the previous fiscal year were absent in the current period. “Losses on sales of real estate under operating leases,” associated with office buildings that are not accounted for under discontinued operations were recorded. “Other operating revenues” were up year on year due mainly to the contribution to revenues associated with companies in which we invested as part of our corporate rehabilitation business from the fourth quarter of the previous fiscal year.

 

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On the other hand, expenses were down 8,727 million yen compared to the third quarter of the previous fiscal year. “Interest expense” increased year on year as a result of the increase in the average balance of operating assets. “Costs of operating leases” were up year on year in line with the increase in revenues from “operating leases.” “Life insurance costs” were down compared with the same period of the previous fiscal year due mainly to the lower insurance payments. “Costs of real estate sales” decreased in line with the lower “real estate sales.” “Other operating expenses” increased in line with the increase in associated revenues in the third quarter of this fiscal year. “Selling, general and administrative expenses” were up year on year despite the change in accounting for Footwork Express Co., Ltd. (please refer to (Note 1) on page 2 for details) which went from being accounted for as a consolidated company to an equity method affiliate, as there was an increase in costs associated with the increase in the number of consolidated companies from the fourth quarter of the previous fiscal year and due to the expansion of business scope. The “provision for doubtful receivables and probable loan losses” was down compared to the third quarter of the previous fiscal year due to a lower level of non-performing assets. There were no “write-downs of long-lived assets” in the third quarter of this fiscal year and “write-downs of securities” were down year on year.

 

This resulted in an increase in “operating income” by 18,266 million yen to 53,177 million yen compared with the third quarter of the previous fiscal year.

 

“Equity in net income of affiliates” was down year on year due to the lower contribution from an equity method affiliate in The Americas segment that performed well in the same period of the previous fiscal year and due to the recording of “gains on sales of subsidiaries and affiliates.” “Income before discontinued operations and income taxes” increased by 15,751 million yen compared to the third quarter of the previous fiscal year to 59,445 million yen.

 

“Discontinued operations, net of applicable tax effect” added 7,419 million yen and “net income” in the third quarter of this fiscal year rose by 17,113 million yen to 42,143 million yen compared with a “net income” of 25,030 million yen in the third quarter of the previous fiscal year.

 

4. Outlook and Forecasts for the Fiscal Year Ending March 31, 2006

 

For the fiscal year ending March 31, 2006 we have revised our consolidated results forecast made at the interim results announcement on November 8, 2005 as follows. “Revenues” 900,000 million yen (flat compared with the fiscal year ended March 31, 2005), “income before income taxes” of 245,000 million yen (up 61%), and “net income” of 155,000 million yen (up 69%).

 

     Millions of Yen

     Total Revenues

   Income before
Income Taxes*


   Net Income

Previous Forecast (A)

   890,000    230,000    140,000

New Forecast (B)

   900,000    245,000    155,000

Change (B-A)

   10,000    15,000    15,000

Change (%)

   1.1    6.5    10.7

(Reference)

              

Fiscal 2005 Results

   900,034    152,332    91,496

* “Income before income taxes” refers to “income before discontinued operations and income taxes.”

 

- 7 -


Table of Contents

Consolidated Financial Highlights

(For the Nine Months Ended December 31, 2005 and 2004, and the Year Ended March 31, 2005)

(Unaudited)

 

     (millions of JPY, except for per share data)

 
     December 31,
2005


    Change
from
March 31,
2005


    Year-on-year
Change


    December 31,
2004


    Year-on-year
Change


    March 31,
2005


   

Year-on-year

Change


 

Operating Assets

                                          

Investment in Direct Financing Leases

   1,495,765     103 %   101 %   1,480,526     96 %   1,451,574     100 %

Installment Loans

   2,727,640     114 %   117 %   2,328,427     105 %   2,386,597     107 %

Investment in Operating Leases

   621,492     100 %   108 %   576,621     116 %   619,005     115 %

Investment in Securities

   669,748     114 %   111 %   605,511     111 %   589,271     107 %

Other Operating Assets

   96,699     117 %   118 %   81,885     116 %   82,651     115 %
    

 

 

 

 

 

 

Total

   5,611,344     109 %   111 %   5,072,970     104 %   5,129,098     106 %

Operating Results

                                          

Total Revenues

   658,802     —       106 %   622,714     117 %   900,034     122 %

Income before Discontinued Operations and Income Taxes

   192,023     —       171 %   112,466     136 %   152,332     148 %

Net Income

   126,097     —       186 %   67,718     148 %   91,496     169 %

Earnings Per Share

                                          

Net Income

                                          

Basic

   1,434.39     —       177 %   808.27     147 %   1,087.82     169 %

Diluted

   1,359.01     —       183 %   743.17     146 %   1,002.18     167 %

Shareholders’ Equity Per Share

   10,099.03     121 %   132 %   7,642.86     116 %   8,322.96     123 %

Financial Position

                                          

Shareholders’ Equity

   898,828     124 %   140 %   641,332     116 %   727,333     129 %

Number of Outstanding Shares (’000)

   89,001     102 %   106 %   83,913     100 %   87,389     104 %

Long-and Short-Term Debt and Deposits

   4,518,350     109 %   111 %   4,060,447     103 %   4,146,322     107 %

Total Assets

   6,686,456     110 %   114 %   5,873,033     104 %   6,068,953     108 %

Shareholders’ Equity Ratio

   13.4 %   —       —       10.9 %   —       12.0 %   —    

Return on Equity (annualized)

   20.7 %   —       —       15.0 %   —       14.2 %   —    

Return on Assets (annualized)

   2.64 %   —       —       1.57 %   —       1.56 %   —    

New Business Volumes

                                          

Direct Financing Leases

                                          

New Receivables Added

   670,853     —       111 %   601,777     98 %   863,137     108 %

New Equipment Acquisitions

   601,120     —       112 %   536,022     98 %   767,672     108 %

Installment Loans

   1,254,454     —       114 %   1,098,271     133 %   1,545,517     137 %

Operating Leases

   184,571     —       104 %   177,600     150 %   248,327     131 %

Investment in Securities

   163,190     —       98 %   165,745     185 %   244,600     200 %

Other Operating Transactions

   87,740     —       87 %   101,346     96 %   129,604     70 %

 

- 8 -


Table of Contents

Condensed Consolidated Statements of Income

(For the Nine Months Ended December 31, 2005 and 2004, and the Year Ended March 31, 2005)

(Unaudited)

 

     (millions of JPY, millions of US$)

 
     Nine Months
ended
December 31,
2005


   

Year-on-year
Change

(%)


   Nine Months
ended
December 31,
2004


   

Year-on-year
Change

(%)


   Year
ended
March 31,
2005


   

Year-on-year
Change

(%)


  

U.S. dollars

 

December 31,
2005


 

Total Revenues :

   658,802     106    622,714     117    900,034     122    5,580  
    

 
  

 
  

 
  

Direct Financing Leases

   92,264     111    83,381     99    113,514     101    781  

Operating Leases

   150,396     114    132,018     110    178,803     109    1,274  

Interest on Loans and Investment Securities

   117,987     120    98,532     113    135,458     117    999  

Brokerage Commissions and Net Gains on Investment Securities

   28,200     137    20,588     145    33,905     130    239  

Life Insurance Premiums and Related Investment Income

   98,175     101    97,045     104    137,004     102    832  

Real Estate Sales

   53,459     78    68,197     99    123,162     126    453  

Gains on Sales of Real Estate under Operating Leases

   9,433     869    1,086     12    1,554     17    80  

Transportation Revenues

   —       —      39,715     —      55,339     —      —    

Other Operating Revenues

   108,888     133    82,152     154    121,295     152    922  
    

 
  

 
  

 
  

Total Expenses :

   490,454     92    531,598     115    771,092     118    4,154  
    

 
  

 
  

 
  

Interest Expense

   46,242     114    40,737     90    55,428     94    392  

Costs of Operating Leases

   101,281     111    91,634     104    122,971     103    858  

Life Insurance Costs

   82,976     95    87,058     105    122,896     103    703  

Costs of Real Estate Sales

   46,013     74    61,802     99    113,830     128    390  

Costs of Transportation Revenues

   —       —      34,051     —      46,594     —      —    

Other Operating Expenses

   66,307     135    49,111     165    76,141     167    561  

Selling, General and Administrative Expenses

   132,310     105    126,216     112    176,276     113    1,121  

Provision for Doubtful Receivables and Probable Loan Losses

   11,987     44    26,996     82    39,530     83    101  

Write-downs of Long-Lived Assets

   521     6    9,165     218    11,713     95    4  

Write-downs of Securities

   3,878     97    3,999     100    4,930     94    33  

Foreign Currency Transaction Loss (Gain), Net

   (1,061 )   —      829     95    783     50    (9 )
    

 
  

 
  

 
  

Operating Income

   168,348     185    91,116     133    128,942     151    1,426  
    

 
  

 
  

 
  

Equity in Net Income of Affiliates

   20,716     116    17,803     122    20,043     112    175  

Gains on Sales of Subsidiaries and Affiliates and Liquidation Loss

   2,959     83    3,547     —      3,347     —      25  
    

 
  

 
  

 
  

Income before Discontinued Operations and Income Taxes

   192,023     171    112,466     136    152,332     148    1,626  
    

 
  

 
  

 
  

Provision for Income Taxes

   79,147     158    50,032     133    68,023     133    670  
    

 
  

 
  

 
  

Income from Continuing Operations

   112,876     181    62,434     140    84,309     162    956  
    

 
  

 
  

 
  

Discontinued Operations:

                                       

Income from Discontinued Operations, Net

   21,700          8,882          12,052          184  

Provision for Income Taxes

   (8,479 )        (3,598 )        (4,865 )        (72 )
    

 
  

 
  

 
  

Discontinued Operations, Net of Applicable Tax Effect

   13,221     250    5,284     540    7,187     476    112  
    

 
  

 
  

 
  

Net Income

   126,097     186    67,718     148    91,496     169    1,068  
    

 
  

 
  

 
  

 

Note:

  1. Pursuant to FASB Statement No. 144 (“Accounting for the Impairment or Disposal of Long-Lived Assets”), the results of operations which meet the criteria for discontinued operations are reported as a separate component of income, and those related amounts that had been previously reported are reclassified.
    2. In the previous fiscal year, “Transportation Revenues” and “Costs of Transportation Revenues” were disclosed separately. However, as the logistics subsidiary became an affiliate, the proportionate share of the net income (loss) is recorded in “Equity in Net Income of Affiliates” by the equity method.

 

- 9 -


Table of Contents

Condensed Consolidated Statements of Income

(For the Three Months Ended December 31, 2005 and 2004)

(Unaudited)

 

     (millions of JPY, millions of US$)

 
     Three Months
ended
December 31,
2005


   

Year-on-year
Change

(%)


   Three Months
ended
December 31,
2004


   

Year-on-year
Change

(%)


  

U.S. dollars

 

December 31,
2005


 

Total Revenues :

   221,924     104    212,385     120    1,880  
    

 
  

 
  

Direct Financing Leases

   31,229     113    27,720     101    264  

Operating Leases

   50,768     115    43,975     105    430  

Interest on Loans and Investment Securities

   41,105     125    32,957     119    348  

Brokerage Commissions and Net Gains on Investment Securities

   7,784     104    7,502     114    66  

Life Insurance Premiums and Related Investment Income

   29,705     97    30,704     108    252  

Real Estate Sales

   22,083     84    26,298     100    187  

Losses on Sales of Real Estate under Operating Leases

   (12 )   6    (195 )   —      0  

Transportation Revenues

   —       —      12,788     —      —    

Other Operating Revenues

   39,262     128    30,636     176    333  
    

 
  

 
  

Total Expenses :

   168,747     95    177,474     115    1,430  
    

 
  

 
  

Interest Expense

   16,100     122    13,251     92    136  

Costs of Operating Leases

   34,577     114    30,402     105    293  

Life Insurance Costs

   24,737     91    27,139     109    210  

Costs of Real Estate Sales

   18,248     81    22,540     92    155  

Costs of Transportation Revenues

   —       —      10,652     —      —    

Other Operating Expenses

   23,869     120    19,821     186    202  

Selling, General and Administrative Expenses

   45,377     109    41,626     110    384  

Provision for Doubtful Receivables and Probable Loan Losses

   5,131     50    10,337     99    44  

Write-downs of Long-Lived Assets

   —       —      —       —      —    

Write-downs of Securities

   1,210     98    1,236     64    10  

Foreign Currency Transaction Loss (Gain), Net

   (502 )   —      470     118    (4 )
    

 
  

 
  

Operating Income

   53,177     152    34,911     152    450  
    

 
  

 
  

Equity in Net Income of Affiliates

   5,109     64    8,038     297    43  

Gains on Sales of Subsidiaries and Affiliates

   1,159     156    745     —      10  
    

 
  

 
  

Income before Discontinued Operations and Income Taxes

   59,445     136    43,694     171    503  
    

 
  

 
  

Provision for Income Taxes

   24,721     124    19,925     172    209  
    

 
  

 
  

Income from Continuing Operations

   34,724     146    23,769     171    294  
    

 
  

 
  

Discontinued Operations

                            

Income from Discontinued Operations, Net

   11,984          2,107          102  

Provision for Income Taxes

   (4,565 )        (846 )        (39 )
    

 
  

 
  

Discontinued Operations, Net of Applicable Tax Effect

   7,419     588    1,261     226    63  
    

 
  

 
  

Net Income

   42,143     168    25,030     173    357  
    

 
  

 
  

 

- 10 -


Table of Contents

Condensed Consolidated Balance Sheets

(As of December 31, 2005 and March 31, 2005)

(Unaudited)

 

     (millions of JPY, millions of US$)

 
    

December 31,

2005


   

March 31,

2005


   

U.S. dollars

December 31,

2005


 

Assets

                  

Cash and Cash Equivalents

   135,931     145,380     1,151  

Restricted Cash

   91,796     53,193     777  

Time Deposits

   5,196     8,678     44  

Investment in Direct Financing Leases

   1,495,765     1,451,574     12,668  

Installment Loans

   2,727,640     2,386,597     23,102  

Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses

   (103,916 )   (115,250 )   (880 )

Investment in Operating Leases

   621,492     619,005     5,264  

Investment in Securities

   669,748     589,271     5,672  

Other Operating Assets

   96,699     82,651     819  

Investment in Affiliates

   302,005     274,486     2,558  

Other Receivables

   156,741     160,263     1,328  

Inventories

   124,572     113,203     1,055  

Prepaid Expenses

   51,076     45,082     433  

Office Facilities

   96,282     65,410     815  

Other Assets

   215,429     189,410     1,825  
    

 

 

Total Assets

   6,686,456     6,068,953     56,631  
    

 

 

Liabilities and Shareholders’ Equity

                  

Short-Term Debt

   1,011,487     947,871     8,567  

Deposits

   368,358     336,588     3,120  

Trade Notes, Accounts Payable and Other Liabilities

   319,750     270,737     2,708  

Accrued Expenses

   79,071     95,407     669  

Policy Liabilities

   505,716     550,880     4,283  

Current and Deferred Income Taxes

   225,444     179,859     1,909  

Security Deposits

   139,297     98,415     1,180  

Long-Term Debt

   3,138,505     2,861,863     26,582  
    

 

 

Total Liabilities

   5,787,628     5,341,620     49,018  
    

 

 

Common Stock

   82,560     73,100     699  

Additional Paid-in Capital

   100,747     91,045     854  

Retained Earnings:

                  

Legal Reserve

   2,220     2,220     19  

Retained Earnings

   693,095     570,494     5,870  

Accumulated Other Comprehensive Income (Loss)

   25,849     (1,873 )   219  

Treasury Stock, at Cost

   (5,643 )   (7,653 )   (48 )
    

 

 

Total Shareholders’ Equity

   898,828     727,333     7,613  
    

 

 

Total Liabilities and Shareholders’ Equity

   6,686,456     6,068,953     56,631  
    

 

 

     December 31,
2005


    March 31,
2005


   

U.S. dollars
December 31,

2005


 

Note :   Accumulated Other Comprehensive Income (Loss)

                  

    Net unrealized gains on investment in securities

   51,487     40,150     436  

    Minimum pension liability adjustments

   (1,121 )   (1,090 )   (9 )

    Foreign currency translation adjustments

   (25,335 )   (39,610 )   (215 )

    Net unrealized gains (losses) on derivative instruments

   818     (1,323 )   7  

 

- 11 -


Table of Contents

Condensed Consolidated Statements of Shareholders’ Equity

(For the Nine Months Ended December 31, 2005 and 2004, and the Year Ended March 31, 2005)

(Unaudited)

 

     (millions of JPY, millions of US$)

 
    

Nine Months

ended

December 31,

2005


   

Nine Months

ended

December 31,

2004


   

Year

ended

March 31,
2005


   

U.S. dollars

 

December 31,

2005


 

Common Stock:

                        

Beginning balance

   73,100     52,068     52,068     619  

Issuance during the year

   9,460     641     21,032     80  
    

 

 

 

Ending balance

   82,560     52,709     73,100     699  
    

 

 

 

Additional Paid-in Capital:

                        

Beginning balance

   91,045     70,015     70,015     771  

Issuance during the year and other, net

   9,702     646     21,030     83  
    

 

 

 

Ending balance

   100,747     70,661     91,045     854  
    

 

 

 

Legal Reserve:

                        

Beginning balance

   2,220     2,220     2,220     19  
    

 

 

 

Ending balance

   2,220     2,220     2,220     19  
    

 

 

 

Retained Earnings:

                        

Beginning balance

   570,494     481,091     481,091     4,832  

Cash dividends

   (3,496 )   (2,093 )   (2,093 )   (30 )

Net income

   126,097     67,718     91,496     1,068  
    

 

 

 

Ending balance

   693,095     546,716     570,494     5,870  
    

 

 

 

Accumulated Other Comprehensive Income (Loss):

                        

Beginning balance

   (1,873 )   (33,141 )   (33,141 )   (16 )

Net change of unrealized gains on investment in securities

   11,337     7,570     15,102     96  

Net change of minimum pension liability adjustments

   (31 )   266     6,877     0  

Net change of foreign currency translation adjustments

   14,275     (94 )   6,019     121  

Net change of unrealized gains on derivative instruments

   2,141     2,208     3,270     18  
    

 

 

 

Ending balance

   25,849     (23,191 )   (1,873 )   219  
    

 

 

 

Treasury Stock:

                        

Beginning balance

   (7,653 )   (8,206 )   (8,206 )   (65 )

Net (increase) decrease

   2,010     423     553     17  
    

 

 

 

Ending balance

   (5,643 )   (7,783 )   (7,653 )   (48 )
    

 

 

 

Total Shareholders’ Equity:

                        

Beginning balance

   727,333     564,047     564,047     6,160  

Increase, net

   171,495     77,285     163,286     1,453  
    

 

 

 

Ending balance

   898,828     641,332     727,333     7,613  
    

 

 

 

Summary of Comprehensive Income :

                        

Net income

   126,097     67,718     91,496     1,068  

Other comprehensive income

   27,722     9,950     31,268     235  
    

 

 

 

Comprehensive income

   153,819     77,668     122,764     1,303  
    

 

 

 

 

- 12 -


Table of Contents

Condensed Consolidated Statements of Cash Flows

(For the Nine Months Ended December 31, 2005 and 2004, and the Year Ended March 31, 2005)

(Unaudited)

 

     (millions of JPY, millions of US$)

 
    

Nine Months
ended
December 31,

2005


    Nine Months
ended
December 31,
2004


    Year ended
March 31,
2005


   

U.S. dollars

 

December 31,

2005


 

Cash Flows from Operating Activities:

                        

Net income

   126,097     67,718     91,496     1,068  

Adjustments to reconcile net income to net cash provided by operating activities:

                        

Depreciation and amortization

   96,890     97,219     132,158     821  

Provision for doubtful receivables and probable loan losses

   11,987     26,996     39,530     102  

Decrease in policy liabilities

   (45,164 )   (38,621 )   (41,902 )   (383 )

Gains from securitization transactions

   (6,356 )   (2,744 )   (12,520 )   (54 )

Equity in net income of affiliates

   (20,716 )   (17,803 )   (20,043 )   (175 )

Gains on sales of subsidiaries and affiliates and liquidation loss

   (2,959 )   (3,547 )   (3,347 )   (25 )

Gains on sales of available-for-sale securities

   (8,641 )   (14,333 )   (14,761 )   (73 )

Gains on sales of real estate under operating leases

   (9,433 )   (1,086 )   (1,554 )   (80 )

Gains on sales of operating lease assets other than real estate

   (5,833 )   (3,397 )   (4,746 )   (49 )

Write-downs of long-lived assets

   521     9,165     11,713     4  

Write-downs of securities

   3,878     3,999     4,930     33  

Increase in restricted cash

   (38,225 )   (10,667 )   (17,517 )   (324 )

Increase in trading securities

   (10,333 )   (15,432 )   (21,430 )   (88 )

Increase in inventories

   (25,618 )   (29,176 )   (21,906 )   (217 )

Increase in prepaid expenses

   (4,374 )   (2,212 )   (975 )   (37 )

Increase (decrease) in accrued expenses

   (18,824 )   (7,872 )   8,255     (159 )

Increase in security deposits

   38,904     12,883     19,567     329  

Other, net

   58,917     2,464     (20,481 )   499  
    

 

 

 

Net cash provided by operating activities

   140,718     73,554     126,467     1,192  
    

 

 

 

Cash Flows from Investing Activities:

                        

Purchases of lease equipment

   (794,722 )   (696,071 )   (942,489 )   (6,731 )

Principal payments received under direct financing leases

   483,285     468,106     633,724     4,093  

Net proceeds from securitization of lease receivables, loan receivables and securities

   151,116     74,315     191,976     1,280  

Installment loans made to customers

   (1,252,768 )   (1,098,051 )   (1,545,297 )   (10,610 )

Principal collected on installment loans

   846,481     928,679     1,287,144     7,169  

Proceeds from sales of operating lease assets

   114,826     64,334     73,928     973  

Investment in and dividends received from affiliates, net

   (2,243 )   39     (48,257 )   (19 )

Purchases of available-for-sale securities

   (137,612 )   (151,696 )   (219,890 )   (1,166 )

Proceeds from sales of available-for-sale securities

   103,750     72,367     127,452     879  

Maturities of available-for-sale securities

   23,008     53,574     82,373     195  

Purchases of other securities

   (25,412 )   (14,049 )   (24,283 )   (215 )

Proceeds from sales of other securities

   16,981     7,819     11,456     144  

Purchases of other operating assets

   (21,397 )   (6,868 )   (9,216 )   (181 )

Acquisitions of subsidiaries, net of cash acquired

   (2,005 )   (5,799 )   (12,506 )   (17 )

Sales of subsidiaries, net of cash disposed

   2,383     —       —       20  

Other, net

   27,614     (30,881 )   (14,119 )   233  
    

 

 

 

Net cash used in investing activities

   (466,715 )   (334,182 )   (408,004 )   (3,953 )
    

 

 

 

Cash Flows from Financing Activities:

                        

Net increase (decrease) in debt with maturities of three months or less

   110,729     16,832     (34,227 )   938  

Proceeds from debt with maturities longer than three months

   1,470,020     1,373,413     1,934,048     12,450  

Repayment of debt with maturities longer than three months

   (1,300,583 )   (1,223,032 )   (1,665,050 )   (11,015 )

Net increase in deposits due to customers

   31,770     26,736     44,043     269  

Issuance of common stock

   4,829     1,279     2,052     41  

Dividends paid

   (3,496 )   (2,093 )   (2,093 )   (30 )

Net decrease in call money

   —       (5,000 )   (5,000 )   —    

Other, net

   2,017     438     570     17  
    

 

 

 

Net cash provided by financing activities

   315,286     188,573     274,343     2,670  
    

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

   1,262     (51 )   339     11  
    

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

   (9,449 )   (72,106 )   (6,855 )   (80 )

Cash and Cash Equivalents at Beginning of Period

   145,380     152,235     152,235     1,231  
    

 

 

 

Cash and Cash Equivalents at End of Period

   135,931     80,129     145,380     1,151  
    

 

 

 

 

- 13 -


Table of Contents

Segment Information

(For the Nine Months Ended December 31, 2005 and 2004, and the Year Ended March 31, 2005)

(Unaudited)

 

     (millions of JPY)

     Nine months ended December 31, 2005

   Nine months ended December 31, 2004

   Year ended March 31, 2005

     Segment
Revenues


    Segment
Profits


    Segment
Assets


   Segment
Revenues


    Segment
Profits


    Segment
Assets


   Segment
Revenues


    Segment
Profits


    Segment
Assets


Operations in Japan

                                                  

Corporate Financial Services

   74,671     38,445     1,639,685    61,027     28,556     1,532,659    87,708     43,848     1,506,311

Automobile Operations

   72,706     18,590     504,276    66,755     16,247     453,153    89,404     21,088     451,715

Rental Operations

   49,178     6,612     120,962    50,693     7,314     117,599    68,447     9,384     118,427

Real Estate-Related Finance

   51,333     26,770     1,027,610    46,528     13,664     932,754    77,389     13,856     956,047

Real Estate

   146,845     26,011     556,675    126,029     18,623     450,511    195,906     23,959     500,755

Life Insurance

   97,650     10,324     523,272    97,027     5,765     572,742    136,857     7,223     567,023

Other

   78,539     30,268     654,042    102,597     16,286     416,146    143,754     20,970     489,758
    

 

 
  

 

 
  

 

 

Sub-Total

   570,922     157,020     5,026,522    550,656     106,455     4,475,564    799,465     140,328     4,590,036

Overseas Operations

                                                  

The Americas

   46,625     27,591     431,659    36,780     12,207     427,689    53,084     15,621     403,399

Asia, Oceania and Europe

   67,476     27,100     559,701    54,009     17,517     487,579    73,089     22,133     498,855
    

 

 
  

 

 
  

 

 

Sub-Total

   114,101     54,691     991,360    90,789     29,724     915,268    126,173     37,754     902,254
    

 

 
  

 

 
  

 

 

Segment Total

   685,023     211,711     6,017,882    641,445     136,179     5,390,832    925,638     178,082     5,492,290
    

 

 
  

 

 
  

 

 

Difference between Segment totals and Consolidated Amounts

   (26,221 )   (19,688 )   668,574    (18,731 )   (23,713 )   482,201    (25,604 )   (25,750 )   576,663
    

 

 
  

 

 
  

 

 

Consolidated Amounts

   658,802     192,023     6,686,456    622,714     112,466     5,873,033    900,034     152,332     6,068,953
    

 

 
  

 

 
  

 

 

 

     (millions of US$)

             U.S. dollars December 31, 2005        

     Segment
Revenues


    Segment
Profits


    Segment
Assets


Operations in Japan

                

Corporate Financial Services

   632     326     13,887

Automobile Operations

   616     158     4,271

Rental Operations

   417     56     1,025

Real Estate-Related Finance

   435     227     8,703

Real Estate

   1,244     220     4,715

Life Insurance

   827     87     4,432

Other

   665     256     5,539
    

 

 

Sub-Total

   4,836     1,330     42,572

Overseas Operations

                

The Americas

   395     234     3,656

Asia, Oceania and Europe

   571     229     4,740
    

 

 

Sub-Total

   966     463     8,396
    

 

 

Segment Total

   5,802     1,793     50,968
    

 

 

Difference between Segment totals and Consolidated Amounts

   (222 )   (167 )   5,663
    

 

 

Consolidated Amounts

       5,580         1,626          56,631
    

 

 

 

*Note   1:   The results of the reported segments from April 1, 2005 reflect the revised operating structure following the reorganization of the Company. Accordingly, real estate-related equity investment operations and the REIT asset management operations, which had been included in the “Real Estate-Related Finance” segment, were included in the “Real Estate” segment from the first quarter of this fiscal year. Therefore, certain related amounts that had been previously reported are reclassified.
    2:   Effective January 1, 2005, the Company integrated seven group companies, which were involved in automobile leasing and rental operations, into ORIX Auto Corporation, in order to control and manage the overall automobile operations under one company. The automobile leasing operations, which had been included in the “Corporate Financial Services” segment and the automobile rental operations that had been included in the “Rental Operations” segment were included in the “Automobile Operations” segment from the previous fiscal year. The “Rental Operations” segment included only the rental operations of precision measuring and other equipment. The Company changed the management of its overseas operations, whereby the “Europe” segment and the “Asia and Oceania” segment were combined and from the previous fiscal year the new segment was shown as the “Asia, Oceania and Europe” segment.
    3:   Since the Company evaluates the performance for the segments based on profits before income taxes, tax expenses are not included in the segment profits. In addition, results of discontinued operations are included in “Segment Revenues” and “Segment Profits” of each segment, if any. Such amounts are eliminated in “Difference between Segment totals and Consolidated Amounts.”

 

- 14 -


Table of Contents

Key Quarterly Financial Data (Unaudited)

 

     (millions of JPY)

 
     Fiscal 2005

    Fiscal 2006

 

Balance Sheet Data


   Q1 (04/4-6)

    Q2 (04/7-9)

    Q3 (04/10-12)

    Q4 (05/1-3)

    Q1 (05/4-6)

    Q2 (05/7-9)

    Q3 (05/10-12)

 

1) Investment in Direct Financing Leases

   1,454,461     1,465,856     1,480,526     1,451,574     1,470,338     1,462,354     1,495,765  

Japan

   1,183,421     1,187,595     1,212,340     1,183,791     1,186,866     1,164,647     1,174,590  

Overseas

   271,040     278,261     268,186     267,783     283,472     297,707     321,175  

2) Installment Loans

   2,221,554     2,254,387     2,328,427     2,386,597     2,440,842     2,491,927     2,727,640  

Japan

   1,997,881     2,019,718     2,100,661     2,153,949     2,211,360     2,258,906     2,469,362  

Overseas

   223,673     234,669     227,766     232,648     229,482     233,021     258,278  

3) Investment in Operating Leases

   529,078     536,489     576,621     619,005     574,801     591,056     621,492  

Japan

   385,532     380,550     425,178     466,489     425,815     439,063     466,059  

Overseas

   143,546     155,939     151,443     152,516     148,986     151,993     155,433  

4) Investment in Securities

   579,193     591,714     605,511     589,271     593,911     618,688     669,748  

Japan

   423,111     446,026     466,607     467,562     466,859     489,625     531,882  

Overseas

   156,082     145,688     138,904     121,709     127,052     129,063     137,866  

5) Other Operating Assets

   68,004     72,932     81,885     82,651     91,677     98,740     96,699  

Japan

   61,071     64,772     74,538     75,156     84,390     90,551     93,012  

Overseas

   6,933     8,160     7,347     7,495     7,287     8,189     3,687  
    

 

 

 

 

 

 

Total Operating Assets

   4,852,290     4,921,378     5,072,970     5,129,098     5,171,569     5,262,765     5,611,344  
    

 

 

 

 

 

 

Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses

   (128,726 )   (125,309 )   (120,508 )   (115,250 )   (110,689 )   (103,028 )   (103,916 )

Allowance/Investment in Direct Financing Leases and Installment Loans

   3.5 %   3.4 %   3.2 %   3.0 %   2.8 %   2.6 %   2.5 %
    

 

 

 

 

 

 

Total Assets

   5,651,018     5,724,771     5,873,033     6,068,953     6,185,171     6,333,055     6,686,456  
    

 

 

 

 

 

 

Short-Term Debt, Long-Term Debt and Deposits

   3,876,782     3,912,797     4,060,447     4,146,322     4,236,166     4,269,728     4,518,350  

Policy Liabilities

   577,024     559,815     554,161     550,880     537,746     519,849     505,716  
    

 

 

 

 

 

 

Total Liabilities

   5,056,239     5,105,522     5,231,701     5,341,620     5,420,568     5,511,635     5,787,628  
    

 

 

 

 

 

 

Shareholders’ Equity

   594,779     619,249     641,332     727,333     764,603     821,420     898,828  
    

 

 

 

 

 

 

Total Liabilities & Shareholders’ Equity

   5,651,018     5,724,771     5,873,033     6,068,953     6,185,171     6,333,055     6,686,456  
    

 

 

 

 

 

 

New Business Volumes


   Q1 (04/4-6)

    Q2 (04/7-9)

    Q3 (04/10-12)

    Q4 (05/1-3)

    Q1 (05/4-6)

    Q2 (05/7-9)

    Q3 (05/10-12)

 

Direct Financing Leases: New receivables added

   188,262     210,689     202,826     261,360     196,181     219,254     255,418  

Japan

   150,035     169,583     160,378     220,748     153,585     169,741     207,371  

Overseas

   38,227     41,106     42,448     40,612     42,596     49,513     48,047  

Direct Financing Leases: New equipment acquisitions

   166,937     188,911     180,174     231,650     175,106     193,855     232,159  

Japan

   130,715     148,909     139,736     187,930     134,333     145,029     184,172  

Overseas

   36,222     40,002     40,438     43,720     40,773     48,826     47,987  

Installment Loans: New loans added

   307,530     396,510     394,231     447,246     363,952     419,662     470,840  

Japan

   273,289     352,816     351,053     417,336     329,457     374,084     411,923  

Overseas

   34,241     43,694     43,178     29,910     34,495     45,578     58,917  

Operating Leases: New equipment acquisitions

   40,737     55,077     81,786     70,727     48,932     62,979     72,660  

Japan

   33,195     35,750     70,626     62,193     30,794     44,201     58,066  

Overseas

   7,542     19,327     11,160     8,534     18,138     18,778     14,594  

Investment in Securities: New securities added

   45,486     60,092     60,167     78,855     51,178     60,532     51,480  

Japan

   38,795     56,822     58,932     76,261     49,603     59,867     47,863  

Overseas

   6,691     3,270     1,235     2,594     1,575     665     3,617  

Other Operating Transactions: New assets added

   29,354     26,429     45,563     28,258     30,376     25,189     32,175  

Japan

   29,354     25,017     45,386     27,888     30,376     25,189     32,175  

Overseas

   —       1,412     177     370     —       —       —    

 

- 15 -


Table of Contents
     (millions of JPY)

 
     Fiscal 2005

    Fiscal 2006

 

Income Statement Data


   Q1 (04/4-6)

    Q2 (04/7-9)

   Q3 (04/10-12)

    Q4 (05/1-3)

    Q1 (05/4-6)

    Q2 (05/7-9)

   Q3 (05/10-12)

 

Revenues

                                        

1) Direct Financing Leases

   27,399     28,262    27,720     30,133     28,722     32,313    31,229  

Japan

   21,698     22,268    21,915     24,260     22,775     25,802    23,901  

Overseas

   5,701     5,994    5,805     5,873     5,947     6,511    7,328  

2) Operating Leases

   45,178     42,865    43,975     46,785     47,763     51,865    50,768  

Japan

   34,943     32,450    32,660     35,450     35,026     38,531    36,607  

Overseas

   10,235     10,415    11,315     11,335     12,737     13,334    14,161  

3) Interest on Loans and Investment Securities

   29,763     35,812    32,957     36,926     36,064     40,818    41,105  

Interest on loans

   27,063     33,233    30,549     34,476     33,287     37,874    37,882  

Japan

   23,383     29,195    26,591     29,537     28,588     32,302    32,257  

Overseas

   3,680     4,038    3,958     4,939     4,699     5,572    5,625  

Interest on investment securities

   2,700     2,579    2,408     2,450     2,777     2,944    3,223  

Japan

   264     313    268     336     423     544    551  

Overseas

   2,436     2,266    2,140     2,114     2,354     2,400    2,672  

4) Brokerage Commissions and Net Gains on Investment Securities

   5,159     7,927    7,502     13,317     8,443     11,973    7,784  

Brokerage commissions

   1,226     1,001    997     1,292     1,255     2,068    2,827  

Net gains on investment securities

   3,933     6,926    6,505     12,025     7,188     9,905    4,957  

5) Life Insurance Premiums and Related Investment Income

   30,208     36,133    30,704     39,959     30,229     38,241    29,705  

Life insurance premiums

   28,007     33,676    26,966     37,157     28,393     32,915    26,717  

Related investment income

   2,201     2,457    3,738     2,802     1,836     5,326    2,988  

6) Real Estate Sales

   21,840     20,059    26,298     54,965     19,214     12,162    22,083  

Japan

   21,840     20,059    26,298     54,965     19,214     12,162    22,083  

Overseas

   —       —      —       —       —       —      —    

7) Gains (Losses) on Sales of Real Estate under Operating Leases

   1,198     83    (195 )   468     5,820     3,625    (12 )

Japan

   1,198     83    (195 )   468     5,820     3,625    (12 )

Overseas

   —       —      —       —       —       —      —    

8) Transportation Revenues

   12,775     14,152    12,788     15,624     —       —      —    

Japan

   12,775     14,152    12,788     15,624     —       —      —    

Overseas

   —       —      —       —       —       —      —    

9) Other Operating Revenues

   25,952     25,564    30,636     39,143     33,307     36,319    39,262  

Japan

   24,113     24,306    29,408     38,027     32,247     34,653    37,811  

Overseas

   1,839     1,258    1,228     1,116     1,060     1,666    1,451  
    

 
  

 

 

 
  

Total Revenues

   199,472     210,857    212,385     277,320     209,562     227,316    221,924  
    

 
  

 

 

 
  

Expenses

                                        

1) Interest Expense

   13,719     13,767    13,251     14,691     14,498     15,644    16,100  

2) Costs of Operating Leases

   32,780     28,452    30,402     31,337     33,460     33,244    34,577  

3) Life Insurance Costs

   27,965     31,954    27,139     35,838     27,239     31,000    24,737  

4) Costs of Real Estate Sales

   20,543     18,719    22,540     52,028     16,664     11,101    18,248  

5) Costs of Transportation Revenues

   11,714     11,685    10,652     12,543     —       —      —    

6) Other Operating Expenses

   14,055     15,235    19,821     27,030     20,318     22,120    23,869  

7) Selling, General and Administrative Expenses

   37,607     46,983    41,626     50,060     41,886     45,047    45,377  

8) Provision for Doubtful Receivables and Probable Loan Losses

   8,793     7,866    10,337     12,534     4,725     2,131    5,131  

9) Write-downs of Long-Lived Assets

   —       9,165    —       2,548     —       521    —    

10) Write-downs of Securities

   1,468     1,295    1,236     931     1,800     868    1,210  

11) Foreign Currency Transaction Loss (Gain), Net

   (172 )   531    470     (46 )   (643 )   84    (502 )
    

 
  

 

 

 
  

Total Expenses

   168,472     185,652    177,474     239,494     159,947     161,760    168,747  
    

 
  

 

 

 
  

Operating Income

   31,000     25,205    34,911     37,826     49,615     65,556    53,177  

Equity in Net Income of Affiliates

   4,754     5,011    8,038     2,240     7,263     8,344    5,109  

Gains (Losses) on Sales of Subsidiaries and Affiliates and Liquidation Loss

   839     1,963    745     (200 )   1,459     341    1,159  

Income before Discontinued Operations and Income Taxes

   36,593     32,179    43,694     39,866     58,337     74,241    59,445  

Provision for Income Taxes

   16,064     14,043    19,925     17,991     23,937     30,489    24,721  

Income from Continuing Operations

   20,529     18,136    23,769     21,875     34,400     43,752    34,724  

Discontinued Operations, Net of Applicable Tax Effect

   2,998     1,025    1,261     1,903     3,389     2,413    7,419  
    

 
  

 

 

 
  

Net Income

   23,527     19,161    25,030     23,778     37,789     46,165    42,143  
    

 
  

 

 

 
  

 

Key Ratios, Per Share Data and Employees


   Q1 (04/4-6)

    Q2 (04/7-9)

    Q3 (04/10-12)

    Q4 (05/1-3)

    Q1 (05/4-6)

    Q2 (05/7-9)

    Q3 (05/10-12)

 

Return on Equity (ROE)*

   16.2 %   12.6 %   15.9 %   13.9 %   20.3 %   23.3 %   19.6 %

Return on Assets (ROA)*

   1.67 %   1.35 %   1.73 %   1.59 %   2.47 %   2.95 %   2.59 %

Shareholders’ Equity Ratio

   10.5 %   10.8 %   10.9 %   12.0 %   12.4 %   13.0 %   13.4 %

Debt-to-Equity Ratio (times)

   6.5     6.3     6.3     5.7     5.5     5.2     5.0  

Shareholders’ Equity Per Share (yen)

   7,104.39     7,389.48     7,642.86     8,322.96     8,731.00     9,333.32     10,099.03  

Basic EPS (yen)

   281.05     228.73     298.51     280.13     432.08     525.69     476.76  

Diluted EPS (yen)

   258.14     211.02     270.41     255.48     409.74     498.00     453.01  

Number of Employees

   14,917     15,184     15,699     13,734     14,154     14,310     14,429  

*annualized

 

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Table of Contents
     (millions of JPY)

     Fiscal 2005

   Fiscal 2006

Segment Information


   Q1 (04/4-6)

   Q2 (04/7-9)

   Q3 (04/10-12)

   Q4 (05/1-3)

   Q1 (05/4-6)

   Q2 (05/7-9)

   Q3 (05/10-12)

Operations in Japan

                                  

Corporate Financial Services

   19,355    21,419    20,253    26,681    22,456    25,206    27,009

Automobile Operations

   21,379    22,697    22,679    22,649    24,462    24,449    23,795

Rental Operations

   19,623    15,358    15,712    17,754    15,765    17,873    15,540

Real Estate-Related Finance

   11,376    15,318    19,834    30,861    15,493    19,372    16,468

Real Estate

   44,302    40,590    41,137    69,877    51,495    46,523    48,827

Life Insurance

   30,260    36,046    30,721    39,830    30,093    38,085    29,472

Other

   32,786    34,664    35,147    41,157    24,589    25,330    28,620
    
  
  
  
  
  
  

Sub-Total

   179,081    186,092    185,483    248,809    184,353    196,838    189,731
    
  
  
  
  
  
  

Overseas Operations

                                  

The Americas

   11,172    12,848    12,760    16,304    12,773    13,720    20,132

Asia, Oceania and Europe

   17,058    17,714    19,237    19,080    20,220    23,614    23,642
    
  
  
  
  
  
  

Sub-Total

   28,230    30,562    31,997    35,384    32,993    37,334    43,774
    
  
  
  
  
  
  

Total Segment Revenues

   207,311    216,654    217,480    284,193    217,346    234,172    233,505
    
  
  
  
  
  
  

Operations in Japan

                                  

Corporate Financial Services

   7,909    9,364    11,283    15,292    11,379    12,445    14,621

Automobile Operations

   5,022    5,894    5,331    4,841    6,280    7,145    5,165

Rental Operations

   2,411    2,633    2,270    2,070    1,634    3,658    1,320

Real Estate-Related Finance

   2,584    7,632    3,448    192    6,892    13,426    6,452

Real Estate

   8,837    3,668    6,118    5,336    12,781    7,781    5,449

Life Insurance

   1,879    2,113    1,773    1,458    1,632    6,121    2,571

Other

   6,374    5,426    4,486    4,684    8,198    8,061    14,009
    
  
  
  
  
  
  

Sub-Total

   35,016    36,730    34,709    33,873    48,796    58,637    49,587
    
  
  
  
  
  
  

Overseas Operations

                                  

The Americas

   1,210    3,515    7,482    3,414    7,152    6,918    13,521

Asia, Oceania and Europe

   5,934    4,999    6,584    4,616    7,569    12,178    7,353
    
  
  
  
  
  
  

Sub-Total

   7,144    8,514    14,066    8,030    14,721    19,096    20,874
    
  
  
  
  
  
  

Total Segment Profits

   42,160    45,244    48,775    41,903    63,517    77,733    70,461
    
  
  
  
  
  
  

Operations in Japan

                                  

Corporate Financial Services

   1,441,748    1,467,823    1,532,659    1,506,311    1,544,319    1,602,587    1,639,685

Automobile Operations

   426,706    441,202    453,153    451,715    461,148    489,313    504,276

Rental Operations

   116,020    117,741    117,599    118,427    115,660    116,982    120,962

Real Estate-Related Finance

   853,426    867,605    932,754    956,047    977,407    961,049    1,027,610

Real Estate

   391,209    398,388    450,511    500,755    478,389    520,730    556,675

Life Insurance

   561,819    565,021    572,742    567,023    548,898    521,022    523,272

Other

   419,110    421,744    416,146    489,758    495,998    519,727    654,042
    
  
  
  
  
  
  

Sub-Total

   4,210,038    4,279,524    4,475,564    4,590,036    4,621,819    4,731,410    5,026,522
    
  
  
  
  
  
  

Overseas Operations

                                  

The Americas

   451,032    446,231    427,689    403,399    406,247    398,936    431,659

Asia, Oceania and Europe

   467,721    499,426    487,579    498,855    514,018    527,255    559,701
    
  
  
  
  
  
  

Sub-Total

   918,753    945,657    915,268    902,254    920,265    926,191    991,360
    
  
  
  
  
  
  

Total Segment Assets

   5,128,791    5,225,181    5,390,832    5,492,290    5,542,084    5,657,601    6,017,882
    
  
  
  
  
  
  

 

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