Summary of Consolidated Financial Results for the Six Months Ended September 30, 2017 [Japanese GAAP]

Company Name : NGK INSULATORS, LTD. Stock Exchange Listings : Tokyo and Nagoya Listing Code : 5333

URL : http://www.ngk.co.jp/english/ Representative : President Taku Oshima (Mr.)

Contact : General Manager Finance & Accounting Department Hideaki Shindo (Mr.)

(TEL) +81-52-872-7230

October 31, 2017

Date of the Filing of Securities Report "Shihanki Hokokusho" (Scheduled) : November 9, 2017 Date of Dividend Payment (Scheduled) : December 1, 2017 Availability of supplementary explanatory materials prepared for financial results : Available

Briefing session on financial results to be held : Yes (for securities analysts and institutional investors)

(All yen amounts are rounded down to the nearest million.)

  1. Consolidated Financial Results for the Six Months Ended September 30, 2017 (from April 1, 2017 to September 30, 2017)

    (Note) Comprehensive income

    : Six months ended September 30, 2017

    38,151 million yen

    -%

    : Six months ended September 30, 2016

    (4,418) million yen

    -%

  2. Consolidated Operating Results (Percentage figures represent increase (decrease) from previous period.)

    Net sales

    Operating income

    Ordinary income

    Profit attributable to owners of parent

    Six months ended September 30, 2017

    Millions of yen

    Millions of yen

    Millions of yen

    Millions of yen

    219,754

    13.1

    35,874

    4.7

    34,212

    5.7

    19,792

    (8.9)

    Six months ended September 30, 2016

    194,254

    (7.8)

    34,267

    (17.1)

    32,357

    (19.6)

    21,717

    (21.0)

    Profit per share

    Diluted profit per share

    Six months ended September 30, 2017

    Six months ended September 30, 2016

    Yen

    61.53

    67.08

    Yen

    61.42

    66.97

  3. Consolidated Financial Position

  4. Total assets

    Total net assets

    Ratio of net worth to total assets

    September 30, 2017

    Millions of yen

    Millions of yen

    816,511

    459,400

    54.8

    March 31, 2017

    759,434

    427,593

    54.9

    (Reference) Net worth : As of September 30, 2017 447,814 million yen

    : As of March 31, 2017 416,740 million yen

  5. Dividend Payment

    Cash dividends per share

    First quarter-end

    Second quarter-end

    Third quarter-end

    Year-end

    Total (Full-year)

    Year ended March 31, 2017

    Yen

    Yen

    Yen

    Yen

    Yen

    -

    20.00

    -

    20.00

    40.00

    Year ending March 31, 2018

    -

    21.00

    Year ending March 31, 2018 (forecast)

    -

    23.00

    44.00

    (Note) Revision of cash dividend forecast during this period : Yes

  6. Forecasts of Consolidated Financial Results for the Fiscal Year Ending March 31, 2018

  7. (Percentage figures represent increase (decrease) from previous period.)

    Net sales

    Operating income

    Ordinary income

    Profit attributable to owners of parent

    Profit per share

    Year ending March 31, 2018

    Millions of yen

    440,000

    9.7

    Millions of yen

    70,000

    10.7

    Millions of yen

    70,000

    8.4

    Millions of yen

    46,000

    26.4

    Yen

    143.00

    (Note) Revision of forecasts of consolidated financial results during this period : Yes

    Notes

    1. Significant changes in subsidiaries during this period (changes in specified subsidiaries, "tokutei kogaisha" defined in the "Cabinet Office Ordinance on Disclosure of Corporate Information, etc.", involving a change of the scope of consolidation during this period) : None New ― company ( ) , Exclusion ― company ( )

    2. Application of special accounting methods for preparing quarterly consolidated financial statements : None

    3. Changes in accounting policies, accounting estimates or retrospective restatements

    4. Changes due to revisions of accounting standards : None

    5. Changes in accounting policies other than the above (i) : None

    6. Changes in accounting estimates : None

    7. Retrospective restatement : None

      September 30,

      2017

      327,560,196 shares

      March 31, 2017

      327,560,196 shares

      September 30,

      2017

      5,871,593 shares

      March 31, 2017

      5,915,570 shares

      September 30,

      2017

      321,667,967 shares

      September 30,

      2016

      323,738,082 shares

    8. Number of shares outstanding (Common Shares)

    9. Number of shares outstanding at period end including treasury stocks

    10. Number of treasury stocks at period end

    11. Average number of shares outstanding over period

      • These quarterly financial statements are not subject to the quarterly review procedure.

      • Explanation of appropriate use of results forecasts and other notes

      This document contains forward-looking statements that are based on information and certain assumption NGK INSULATORS, LTD. ("NGK") has acquired and deemed reasonable as of the time of the release and NGK does not guarantee the achievement of them. Actual future results and trends may differ materially from those in the forecasts due to a variety of factors.

      Contents of Appendix 1. Qualitative Information on Quarterly Financial Statements・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 2

      (1) Explanation of Business Results ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 2

      (2) Explanation of Financial Position ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 2

      (3) Explanation of Forward-looking Statements including Forecasts for Consolidated Financial Statements・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 3

      2. Consolidated Financial Statements and Notes ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 4

      (1) Consolidated Balance Sheet ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 4

      (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ・・ 6

      Consolidated Statement of Income ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 6

      Consolidated Statement of Comprehensive Income ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 7

      (3) Notes to Consolidated Financial Statements ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8

      (Note on the Assumption as a Going Concern) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8

      (Significant Changes in Stockholder's Equity)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8

      (Additional Information) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8

      (Consolidated Balance Sheet) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8

      (Consolidated Statement of Income) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 9

      (Segment Information)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 10

      1. Qualitative Information on Quarterly Financial Statements
      2. Explanation of Business Results

        During the six months ended September 30, 2017, the Japanese economy remained on a moderate recovery course, underpinned by improvements in the employment and income environment. Among overseas economies, developed economies, such as the U.S. and Europe, continued on a moderate recovery, and China and emerging countries were also robust with a sign of pick up.

        The NGK Group saw sluggish performance in NAS® (sodium-sulfur) batteries in the Power Business Segment, while overseas shipments of insulators increased. In the Ceramics Business Segment, the quantity of ceramic substrates for catalytic conversion (large-size HONEYCERAM) increased due to an increase in truck sales in the Chinese market, and the quantity of sensors increased due to an increases in sensor usage caused by tighter emissions regulations in Europe and China. In the Electronics Business Segment, the quantity of ceramic packages decreased due to sluggish investment into mobile phone base stations in China, while the quantity of ceramic components for semiconductor manufacturing equipment increased as semiconductors became increasingly shrinking.

        As a result of the above, consolidated net sales for the six months ended September 30, 2017 increased by 13.1% year on year to ¥219,754 million. In terms of earnings, despite increases in costs for research and development, depreciation, start ups, etc. as a result of increased consolidated net sales, operating income increased by 4.7% year on year to ¥35,874 million and ordinary income increased by 5.7% to ¥34,212 million. Profit attributable to owners of the parent decreased by 8.9% to ¥19,792 million owing to posting an impairment loss on fixed assets of ¥2,462 million and provision of reserve for loss related to competition law of

        ¥1,070 million under extraordinary losses.

        By segment, the Power Business Segment posted ¥27,230 million in net sales, an increase of 3.2% year on year, and an operating loss of ¥2,109 million, compared to an operating loss of ¥2,783 million in the same period of the previous year. In the Ceramics Business Segment, net sales increased by 9.8% year on year to

        ¥131,044 million and operating income decreased by 15.1% year on year to ¥29,837 million. In the Electronics Business Segment, net sales increased by 26.6% year on year to ¥61,530 million and operating income increased by 324.6% year on year to ¥8,143 million.

      3. Explanation of Financial Position

        As of September 30, 2017, total assets were ¥816,511 million, an increase of ¥57,077 million from the previous fiscal year-end. This was mainly due to increases in tangible assets and cash and bank deposits.

        Total liabilities increased by ¥25,270 million from the previous fiscal year-end to ¥357,111 million. This was mainly due to increases in long-term borrowings and long-term bonds payable despite decreases in income taxes payable and provision for loss related to competition law.

        Total net assets stood at ¥459,400 million, or ¥31,807 million higher than the previous fiscal year-end, due to increases in retained earnings and foreign currency translation adjustments.

      4. Explanation of Forward-looking Statements including Forecasts for Consolidated Financial
      5. Statements

        With regard to the financial results forecasts for the full year ending March 31, 2018, sales and profits are both expected to exceed previous forecasts as a result of factors including a weaker yen than initial assumptions (¥105 to the U.S. dollar and ¥115 to the euro) and an increase of demand for ceramic components for semiconductor manufacturing equipment in the Electronics Business Segment.

        The consolidated financial results forecasts for the second half of the fiscal year assume that the yen trades at

        ¥110 to the U.S. dollar and ¥125 to the euro.

        (Average exchange rates during the period: ¥111 to the U.S. dollar and ¥126 to the euro)

        Forecasts of consolidated financial results for the fiscal year ending March 31,2018 (Millions of yen)

        April1, 2017 - March 31, 2018 Net sales

        Operating Income

        Ordinary Income

        Profit attributable to owners of parent

        Profit per share (yen)

        Previous forecast (A)

        420,000

        67,000

        68,000

        45,000

        139.91

        Revised forecast (B)

        440,000

        70,000

        70,000

        46,000

        143.00

        Change (B-A)

        20,000

        3,000

        2,000

        1,000

        Change (%)

        4.8

        4.5

        2.9

        2.2

        For Reference :

        Results from previous year

        (the year ended March 31, 2017)

        401,266

        63,212

        64,557

        36,379

        112.71

        Above Financial results forecasts are based on information that are currently available and actual results may differ materially from those in the forecasts due to various factors.

        2.Consolidated Financial Statements and Notes (1)Consolidated Balance Sheet

        (Millions of yen)

        As of September 30,

        2017

        As of March 31,

        2017

        Assets

        Current assets

        Cash and bank deposits 140,454 119,145

        Notes and accounts receivable trade 99,513 92,181

        Securities 72,496 71,659

        Inventories 124,689 119,081

        Other 33,022 37,062

        Allowance for doubtful accounts (553) (867)

        Total current assets 469,623 438,263 Non-current assets

        Tangible assets

        Buildings and structures

        74,610

        66,293

        Machinery and vehicles

        112,714

        97,018

        Other

        63,764

        65,795

        Total tangible assets

        251,090

        229,107

        Intangible assets

        3,554

        2,962

        Investments and other assets

        Investment securities

        76,322

        72,526

        Other

        16,068

        16,723

        Allowance for doubtful accounts

        (147)

        (148)

        Total investments and other assets

        92,242

        89,101

        Total non-current assets

        346,888

        321,170

        Total assets

        816,511

        759,434

        (Millions of yen)

        As of September 30,

        2017

        As of March 31,

        2017

        Liabilities

        Current liabilities

        Notes and accounts payable trade 44,697 38,898

        Short-term borrowings 7,052 6,016

        Current portion of long-term borrowings 8,416 6,973 Income taxes payable ※1 11,822 21,056 Provision for NAS battery safety measures 3,393 3,650

        Provision for loss related to competition law 2,607 9,167

        Other 40,807 42,676

        Total current liabilities 118,798 128,439 Long-term liabilities

        Bonds payable 10,000 ー

        Long-term borrowings 185,222 161,160

        Net defined benefit liability 21,455 20,926

        Other 21,635 21,314

        Total long-term liabilities 238,313 203,401

        Total liabilities 357,111 331,841 Net assets

        Shareholders' equity

        Common stock 69,849 69,849

        Capital surplus 71,982 72,055

        Retained earnings 303,355 289,996

        Treasury stock (12,315) (12,407)

        Total shareholders' equity 432,871 419,492 Accumulated other comprehensive income (loss)

        Unrealized gain on available -for-sale securities 26,997 23,458 Deferred loss on derivatives under hedge

        accounting (61)(20)

        Foreign currency translation adjustments (2,359) (15,475)

        Defined retirement benefit plans (9,633) (10,713)

        Total accumulated other comprehensive income (loss)

        14,942 (2,751)

        Stock acquisition rights 986 898

        Non-controlling interests 10,599 9,953

        Total net assets 459,400 427,593 Total liabilities and net assets 816,511 759,434 (2)Consolidated Statement of Income and Consolidated Statement of Comprehensive Income Consolidated Statement of Income

        (Millions of yen)

        Six months ended

        September 30, 2017

        Six months ended

        September 30, 2016

        Net sales 219,754 194,254

        Cost of sales 150,966 128,621

        Gross profit 68,787 65,632

        Selling, general and administrative expenses 32,913 31,365

        Operating income 35,874 34,267

        Non-operating income

        Interest income 301 220

        Dividend income 981 734

        Gain on valuation of derivatives ー 393

        Other 1,592 568

        Total non-operating income 2,875 1,917 Non-operating expenses

        Interest expense 1,147 1,025

        Equity in loss of unconsolidated subsidiaries

        and associated companies 915296

        Foreign exchange loss 145 2,302

        Loss on valuation of derivatives 667 ー Loss on liquidation of subsidiaries and

        affiliates 1,459

        Other 202 202

        Total non-operating expense 4,537 3,827

        Ordinary income 34,212 32,357

        Extraordinary income

        Gain on sales of fixed assets 37 184

        Gain on sales of investment securities 0 74

        Total extraordinary income 38 258

        Extraordinary loss

        Loss on sales and disposals of fixed assets 460 124

        Impairment loss 2,462 3,205

        Provision of reserve for loss related to

        competition law 1,0701,062

        Total extraordinary loss 3,993 4,392

        Income before income taxes and

        non-controlling interests

        Income taxes - current

        ※1

        8,142

        6,839

        Income taxes - deferred

        2,038

        (340)

        Income taxes - total

        10,181

        6,498

        Profit

        20,075

        21,725

        Profit attributable to non-controlling interests

        283

        7

        Profit attributable to owners of parent

        19,792

        21,717

        30,257 28,224 Consolidated Statement of Comprehensive Income

        (Millions of yen)

        Six months ended September 30,

        2017

        Six months ended September 30,

        2016

        Profit 20,075 21,725

        Other comprehensive income (loss)

        Unrealized gain (loss) on available-for-sale securities 3,560 (786)

        Deferred loss on derivatives under hedge accounting (43) (184) Foreign currency translation adjustments 13,587 (26,405)

        accounted for by using the equity method

        (64)

        (120)

        Total other comprehensive income (loss)

        18,075

        (26,144)

        Comprehensive income (loss)

        38,151

        (4,418)

        Comprehensive income (loss) attributable to:

        Owners of parent

        37,486

        (3,972)

        Non-controlling interests

        664

        (446)

        Defined retirement benefit plans 1,035 1,351 Share of other comprehensive loss of associates

        (3) Notes to Consolidated Financial Statements (Note on the Assumption as a Going Concern)

        Not applicable

        (Significant Changes in Stockholder's Equity)

        Not applicable

        (Additional Information)

        With respect to transactions between NGK and its Polish subsidiary from the fiscal year ended March 31, 2007 through the fiscal year ended March 31, 2010, NGK received a correction based on transfer pricing taxation issued by the Nagoya Regional Taxation Bureau in March 2012. While NGK made a payment of approximately

        ¥6.2 billion in tax penalties including local taxes, it filed a complaint. NGK later requested the Nagoya National Tax Tribunal to carry out an administrative review, and on June 24, 2016, received a written verdict, which partially rescinded the correction. However, it went only so far as to refund approximately ¥0.1 billion of corporation taxes and local taxes, etc. Believing that cancellation should be made in the full amount, NGK filed an action for revocation of the correction with the Tokyo District Court on December 20, 2016.

        While NGK believes that it could still take a considerable amount of time before judgment is passed on the claim, on June 23, 2017 NGK received a correction notice based on transfer pricing taxation for the fiscal year ended March 31, 2011 through the fiscal year ended March 31, 2015. Accordingly, based on the premise that NGK would be subject to the said correction for the fiscal year ended March 31, 2016 and the fiscal year ended

        March 31, 2017 as well, ¥8.5 billion in tax penalties for fiscal years from March 31, 2011 through March 31, 2015, and estimated tax amounts for the fiscal year ended March 31, 2016 and the fiscal year ended March 31, 2017 were added and factored into the financial statements for the fiscal year ended March 31, 2017. In addition, estimated tax amounts for the six months ended September 30, 2017 were recognized under "Income taxes - current" for the fiscal year ending March 31, 2018.

        (Consolidated Balance Sheet) ※1. Income taxes payable

        With respect to transactions between NGK and its Polish subsidiary, NGK received a correction notice based on transfer pricing taxation on June 23, 2017. Therefore, the amount includes estimated tax amounts based on the premise that NGK would be subject to the said correction for the period from the fiscal year ended March 31, 2016, to September 30, 2017.

      6. Contingent liabilities
      7. The NGK Group is subject to an international investigation on the situation of competition.

        Since the receiving of a subpoena by a U.S. subsidiary of NGK from the U.S. Department of Justice (DOJ) in 2011, NGK has cooperated in the investigation concerning ceramic substrates for catalytic converters including establishing the Independent Committee in 2012. In September, 2015, NGK entered into a Plea Agreement with DOJ, agreeing to pay a fine of US$65.3 million based on charges that it violated U.S. laws including the antitrust law in connection with some transactions for ceramic substrates for catalytic converters, and paid the total amount in November 2015. We have entered into negotiations for compensation for damages with the relevant customers. In addition to some customers requiring monetary compensation, civil lawsuits (class action) have also been filed.

        In consideration of such progresses, the NGK Group made an estimate of potential losses, and recognized the estimated amount as of the end of six months ended September 30, 2017, as "provision for loss related to competition law," however, additional losses may arise with the emergence of new facts.

        Overall details of the investigation and negotiations are not disclosed because they may put the NGK Group at a disadvantage.

        (Consolidated Statement of Income) ※1. Income taxes - current

        With respect to transactions between NGK and its Polish subsidiary, NGK received a correction notice based on transfer pricing taxation on June 23, 2017. Therefore, the amount includes estimated tax amounts for the six months ended September 30, 2017 based on the premise that NGK would be subject to the said correction.

        (Segment Information)
        1. Six months ended September 30, 2017 ( from April 1, 2017 to September 30, 2017 )

          (Millions of yen

          Business Segment

          Elimination or Adjustment

          Consolidated

          Power

          Ceramics

          Electronics

          Total

          Sales

          27,216

          131,007

          61,530

          219,754

          219,754

          Sales to customers

          Intersegment sales

          14

          36

          51

          (51)

          Total sales

          27,230

          131,044

          61,530

          219,805

          (51)

          219,754

          Operating incomeloss

          (2,109)

          29,837

          8,143

          35,870

          4

          35,874

        2. Six months ended September 30, 2016 ( from April 1, 2016 to September 30, 2016 )

        3. (Millions of yen

          Business Segment

          Elimination or Adjustment

          Consolidated

          Power

          Ceramics

          Electronics

          Total

          Sales

          26,388

          119,261

          48,604

          194,254

          194,254

          Sales to customers

          Intersegment sales

          7

          49

          56

          (56)

          Total sales

          26,395

          119,311

          48,604

          194,311

          (56)

          194,254

          Operating incomeloss

          (2,783)

          35,132

          1,917

          34,267

          34,267

          (Notes) 1. Elimination or adjustment of operating income (loss) is an adjustment of intersegment transactions.

          2. Main products by business segment

          Business Segment

          Main products

          Power

          Insulators, hardware for insulator assemblies, current limiting arching horns, bushing shells, fuse cut-outs, APM, line arrester and NAS® (sodium-sulfur) batteries

          Ceramics

          Automotive ceramics for exhaust gas purification, corrosion-resistant ceramic apparatuses for chemical industries, gas analyzers, industrial heating systems, refractory products and radioactive waste treatment systems

          Electronics

          Ceramic components for semiconductor manufacturing equipment, ceramic components for electronics, beryllium copper products, and molds

        NGK Insulators Ltd. published this content on 31 October 2017 and is solely responsible for the information contained herein.
        Distributed by Public, unedited and unaltered, on 31 October 2017 09:02:05 UTC.

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