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 August, 2007.

 


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 First Quarter Consolidated Financial Results (April 1, 2007 – June 30, 2007) filed with the Tokyo Stock Exchange on Thursday, August 9, 2007.

  


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: August 9, 2007     By   /s/ Yasuhiko Fujiki
       

Yasuhiko Fujiki

Director

President, Chief Operating Officer and

Chief Financial Officer

ORIX Corporation


Table of Contents

Consolidated Financial Results

April 1, 2007 – June 30, 2007

 

August 9, 2007

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 123.26 to $1.00, the approximate exchange rate prevailing at June 30, 2007.

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, 2007 to June 30, 2007

(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 Three Months Ended June 30, 2007 and 2006, and the Year Ended March 31, 2007

 

  (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

   

Net

Income

 

Year-on-Year

Change

 

June 30, 2007

  284,019   5.1 %   52,999   (23.5 %)   70,854   (10.3 )%   45,778   (2.8 )%

June 30, 2006

  270,212   27.3 %   69,235   40.9 %   78,990   36.5 %   47,103   24.6 %

March 31, 2007

  1,141,474   22.9 %   282,396   31.7 %   316,304   26.9 %   196,506   18.1 %

 

     Basic Earnings
Per Share
   Diluted Earnings
Per Share

June 30, 2007

   501.27    488.19

June 30, 2006

   523.51    504.02

March 31, 2007

   2,177.10    2,100.93

*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 Income Taxes, Minority Interests in Earnings of Subsidiaries, Discontinued Operations and Extraordinary Gain.

 

  (2) Performance Highlights—Financial Position (Unaudited)

 

     Total
Assets
   Shareholders’
Equity
  

Shareholders’
Equity

Ratio

   

Shareholders’
Equity

Per Share

June 30, 2007

   8,724,936    1,247,341    14.3 %   13,629.34

June 30, 2006

   7,223,560    986,502    13.7 %   10,955.86

March 31, 2007

   8,207,187    1,194,234    14.6 %   13,089.83

 

  (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

June 30, 2007

   (74,086 )   (395,447 )   442,426     189,223

June 30, 2006

   116,129     (178,905 )   (33,282 )   149,498

March 31, 2007

   226,128     (802,278 )   545,014     215,163

 

2. Forecasts for the Year Ending March 31, 2008 (Unaudited)

Forecasts for the year ending March 31, 2008 have not been changed since the public release on May 10, 2007.

 

3. Other Information

 

(1)    Changes in Significant Consolidated Subsidiaries

   Yes  (    )    No  ( x )

(2)    Adoption of Simplified Accounting Method

   Yes  (    )    No  ( x )

(3)    Changes in Accounting Principles, Procedures and Disclosures

   Yes  (    )    No  ( x )


Table of Contents

[Summary of Consolidated Financial Results]

 

1. Analysis of Results of Operations

Financial Highlights for the Three Months Ended June 30, 2007

 

Income before Income Taxes*

   70,854 million yen (Down 10% year on year)

Net Income

   45,778 million yen (Down 3% year on year)

Earnings Per Share (Basic)

   501.27 yen (Down 4% year on year)

Earnings Per Share (Diluted)

   488.19 yen (Down 3% year on year)

Shareholders’ Equity Per Share

   13,629.34 yen (Up 4% on March 31, 2007)

ROE (Annualized)

   15.0% (June 30, 2006: 19.4%)

ROA Annualized)

   2.16% (June 30, 2006: 2.60%)
  

* ”Income before income taxes” refers to “income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain.”

Revenues: 284,019 million yen (Up 5% year on year)

Revenues increased 5% to 284,019 million yen compared with the same period of the previous fiscal year. Although revenues from “direct financing leases,” “brokerage commissions and net gains on investment securities,” “real estate sales” and “gains on sales of real estate under operating leases” decreased year on year, revenues from “operating leases,” “interest on loans and investment securities,” “life insurance premiums and related investment income” and “other operating revenues” were up compared to the same period of the previous fiscal year.

Revenues from “direct financing leases” decreased 16% to 19,471 million yen compared to the same period of the previous fiscal year. In Japan, revenues from “direct financing leases” were down 17% to 12,948 million yen compared to 15,597 million yen in the same period of the previous fiscal year due to the lower level of operating assets in addition to the decrease in revenues from cancellations and decrease in revenues from sales of direct financing lease assets. Overseas, revenues were down 14% to 6,523 million yen compared to 7,577 million yen in the same period of the previous fiscal year due primarily to the lower level of operating assets as a result of the sale of a business unit in the third quarter of the previous fiscal year.

Revenues from “operating leases” increased 13% to 70,716 million yen compared to the same period of the previous fiscal year. In Japan, revenues were up 10% to 51,542 million yen compared to 46,798 million yen in the same period of the previous fiscal year due to an expansion in real estate and automobile operating leases in addition to an increase in revenues from the precision measuring and other equipment rental operations. Overseas, revenues were up 24% to 19,174 million yen compared to 15,507 million yen in the same period of the previous fiscal year due to the expansion of automobile operating leases in the Asia, Oceania and Europe segment, despite a decrease in revenues from gains on sales of operating lease assets.

Revenues from “interest on loans and investment securities” increased 27% to 54,423 million yen compared to the same period of the previous fiscal year. In Japan, “interest on loans and investment securities” increased 27% to 43,153 million yen compared to 33,910 million yen in the same period of the previous fiscal year due primarily to an expansion of loans to corporate customers, including non-recourse loans, as well as the contribution to revenues from the loan servicing operations. Overseas, revenues were up 26% to 11,270 million yen compared to 8,922 million yen in the same period of the previous fiscal year due to an expansion of loans to corporate customers in The Americas segment.

 

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Revenues from “brokerage commissions and net gains on investment securities” decreased 23% to 7,999 million yen compared to the same period of the previous fiscal year. Brokerage commissions decreased 13% year on year. Net gains on investment securities decreased 26% year on year due to the decrease in revenues from the venture capital operations.

Although life insurance premiums were flat year on year, revenues from “life insurance premiums and related investment income” were up 10% year on year to 32,552 million yen due to an increase in life insurance related investment income.

Although real estate sales were recorded in the Oceania region, “real estate sales” decreased 40% year on year to 17,354 million yen due mainly to a decrease in the number of condominiums sold to buyers in Japan in the first quarter of this fiscal year compared to the first quarter of the previous fiscal year.

“Gains on sales of real estate under operating leases” (refer to (Note 1) below) were down 49% year on year to 5,830 million yen due to a decrease in sales of office buildings and other real estate under operating leases not classified under discontinued operations.

“Other operating revenues” increased 23% year on year to 75,674 million yen. In Japan, revenues were up 23% to 59,461 million yen compared to 48,182 million yen in the same period of the previous fiscal year due to the increase in revenues associated with the real estate management operations, including golf courses and training facilities, and contribution from the beginning of this fiscal year from companies in which we invested in the previous fiscal year, as well as the expansion of revenues from the integrated facilities management operations and its related services, and the automobile maintenance service operations. Overseas, revenues increased 23% to 16,213 million yen compared to 13,165 million yen in the same period of the previous fiscal year due to the recognition of ship-related revenues in the Asian region, despite a decrease in revenues from the investment banking operations in The Americas segment.

Note 1: Subsidiaries, business units, and certain rental properties sold or to be disposed of by sale without significant continuing involvements are reported under discontinued operations and the related amounts that had been previously reported have been reclassified retroactively.

Expenses: 231,020 million yen (Up 15% year on year)

Expenses increased 15% to 231,020 million yen compared with the same period of the previous fiscal year. Although “interest expense,” “costs of operating leases,” “other operating expenses,” “selling, general and administrative expenses,” “provision for doubtful receivables and probable loan losses” and “write-downs of securities” increased, “life insurance costs” and “costs of real estate sales” were down year on year.

“Interest expense” was up 40% year on year to 24,901 million yen due mainly to the increase in Japan. In Japan, “interest expense” increased 57% year on year due to the higher interest rates as well as higher average debt levels. Overseas, “interest expense” increased 19% year on year due mainly to the higher average debt levels.

“Costs of operating leases” were up 18% year on year to 45,804 million yen accompanying the increase in operating lease assets.

“Life insurance costs” were almost flat year on year at 26,974 million yen.

“Costs of real estate sales” were down 32% year on year to 15,610 million yen along with the decrease in “real estate sales.”

“Other operating expenses” were up 34% year on year to 42,059 million yen accompanying the increase in “other operating revenues.”

 

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“Selling, general and administrative expenses” were up 14% year on year to 66,673 million yen due to an increase in general and administrative expenses for write-downs of intangible assets, in addition to recorded expenses associated with companies in which we invested in the previous fiscal year from the beginning of this fiscal year, and associated with the expansion of the existing operations.

“Provision for doubtful receivables and probable loan losses” almost tripled year on year to 7,128 million yen due to some reversals of the provision for doubtful receivables and probable loan losses in the same period of the previous fiscal year, and reflecting an increase in installment loans.

There were no “write-downs of long-lived assets” recorded in the first quarter of this fiscal year.

“Write-downs of securities” were up 13% year on year to 1,767 million yen.

Net Income: 45,778 million yen (Down 3% year on year)

“Operating income” was down 23% year on year to 52,999 million yen due to the reasons noted above.

“Equity in net income of affiliates” increased 97% to 17,848 million yen due to an increase in profits from equity method affiliates both in Japan and overseas, and an increase in earnings from investments in residential condominiums developed through certain joint ventures.

“Gains on sales of subsidiaries and affiliates and liquidation losses” were 7 million yen.

As a result, “income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain” decreased 10% year on year to 70,854 million yen.

“Minority interests in earnings of subsidiaries, net” increased 8% year on year to 956 million yen.

“Income from continuing operations” decreased 10% year on year to 41,278 million yen.

“Discontinued operations (refer to (Note 1) on page 2), net of applicable tax effect” more than tripled year on year to 4,500 million yen due mainly to the sales of real estate under operating leases in Japan.

As a result, “net income” decreased 3% year on year to 45,778 million yen.

Segment Information

Segment profits (refer to (Note 2) below) declined for the “Corporate Financial Services,”

“Automobile Operations,” “Real Estate-Related Finance” and “Real Estate,” segments; and increased for the “Rental Operations,” “Life Insurance,” “Other,” “The Americas” and “Asia, Oceania and Europe” segments compared to the same period of the previous fiscal year.

The results of the reported segments from the first quarter of this fiscal year reflect the revised business classification of the Company. Accordingly, leasing operations of the affiliates, which had been included in the “Other” segment, have been included in the “Corporate Financial Services” segment from the first quarter of this fiscal year (refer to (Note 1) below on page 12 of the Segment Information).

Note 2: Since the Company evaluates the performance of its segments based on profits before income taxes, tax expenses are not included in segment profits. In addition, results of discontinued operations are included in “Segment Revenues” and “Segment Profits” of each segment, if any.

 

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Operations in Japan

Corporate Financial Services Segment:

Segment revenues were up 14% year on year to 29,890 million yen due primarily to the expansion of loans to corporate customers.

Segment profits decreased 38% to 7,111 million yen compared to 11,473 million yen in the same period of the previous fiscal year due to the increases in “interest expense” and “provision for doubtful receivables and probable loan losses,” in addition to the recognition of write-downs of intangible assets.

Segment assets increased 7% on March 31, 2007 to 1,988,400 million yen due to the expansion of loans to corporate customers.

Automobile Operations Segment:

Segment revenues increased 3% year on year to 37,701 million yen due to the increase in revenues from operating leases and maintenance services in the automobile leasing operations.

Segment profits decreased 7% to 5,826 million yen compared to 6,258 million yen in the same period of the previous fiscal year due to the increase in expenses accompanying an increase in revenues from operating leases and maintenance services, in addition to the increase in expenses associated with the opening of new stores and purchases in anticipation of the cyclical upturn in the market in the automobile rental operations.

Segment assets increased 3% on March 31, 2007 to 525,613 million yen due to the expansion of operating lease assets.

Rental Operations Segment:

Segment revenues were up 20% year on year to 18,489 million yen due to the increase in revenues from operating leases including precision measuring equipment.

Segment profits more than doubled to 2,840 million yen compared to 1,269 million yen in the same period of the previous fiscal year as there were no losses on the sale of investment securities, which were recorded in the same period of the previous fiscal year, and due to an increase in segment revenues.

Segment assets were flat on March 31, 2007 at 120,183 million yen due to a decrease in investment in direct financing leases, despite an increase in operating lease assets.

Real Estate-Related Finance Segment:

Segment revenues increased 19% year on year to 21,578 million yen due to an expansion of revenues associated with corporate loans, including non-recourse loans, and contributions from the loan servicing operations, despite the absence of revenues from real estate sales, which were recorded in the same period of the previous fiscal year.

Segment profits decreased 3% to 10,246 million yen compared to 10,598 million yen in the same period of the previous fiscal year due to the absence of gains from real estate sales, which were recorded in the same period of the previous fiscal year, in addition to the increases in “provision for doubtful receivables and probable loan losses” and “interest expense,” despite an increase in segment revenues.

Segment assets increased 12% on March 31, 2007 to 1,695,282 million yen due mainly to an increase in corporate loans, including non-recourse loans.

 

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Real Estate Segment:

Segment revenues decreased 12% year on year to 61,607 million yen due to a decrease in the number of condominiums sold to buyers, in addition to the decrease in revenues from sales of real estate under operating leases, despite an increase in revenues associated with real estate rental activities, including office buildings, and management operations, including golf courses and training facilities.

Segment profits decreased 12% to 18,252 million yen compared to 20,709 million yen in the same period of the previous fiscal year due to the decrease in segment revenues mentioned above, despite an increase in the contribution from residential condominiums developed through certain joint ventures which were accounted for by the equity method. The total number of condominiums sold to buyers increased from 811 units in the first quarter of the previous fiscal year to 830 units in the first quarter of this fiscal year.

Segment assets increased 5% on March 31, 2007 to 946,009 million yen due mainly to the expansion of operating assets, including operating lease assets.

Life Insurance Segment:

Although revenues from life insurance premiums were flat year on year, segment revenues were up 9% year on year to 32,175 million yen due to an increase in life insurance related investment income.

Segment profits almost tripled to 2,856 million yen compared to 1,139 million yen in the same period of the previous fiscal year due to an increase in segment revenues.

Segment assets increased 3% on March 31, 2007 to 527,156 million yen.

Other Segment:

Although gains on investment securities at the venture capital operations decreased, segment revenues were flat year on year at 30,930 million yen due to the contribution from the beginning of this fiscal year from companies in which we invested in the previous fiscal year.

Segment profits increased 20% to 12,828 million yen compared to 10,666 million yen in the same period of the previous fiscal year due to an increase in contributions from equity method affiliates in Japan.

Segment assets increased 3% on March 31, 2007 to 794,607 million yen.

Overseas Operations

The Americas Segment:

Segment revenues increased 2% year on year to 24,307 million yen due mainly to the increase in revenues associated with corporate loans.

Segment profits increased 5% to 5,413 million yen compared to 5,167 million yen in the same period of the previous fiscal year accompanying the increase in segment revenues.

Segment assets increased 7% on March 31, 2007 to 520,187 million yen due mainly to the increase in corporate loans.

Asia, Oceania and Europe Segment:

Although gains on sales of operating lease assets decreased, segment revenues were up 55% year on year to 36,999 million yen due to the expansion of operating leases, including automobile leasing, and the recognition of real estate sales and ship-related revenues.

Segment profits increased 8% to 12,594 million yen compared to 11,624 million yen in the same period of the previous fiscal year accompanying the increase in segment revenues.

 

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Segment assets were up 8% on March 31, 2007 to 677,987 million yen due mainly to the increase in operating lease assets and investment in affiliates.

 

2. Analysis of Financial Condition

Analysis of Assets, Liabilities, Shareholders’ Equity

Operating Assets: 7,065,573 million yen (Up 6% on March 31, 2007)

Operating assets were up 6% on March 31, 2007 to 7,065,573 million yen. All operating assets including “investment in direct financing leases,” “installment loans,” “investment in operating leases,” “investment in securities” and “other operating assets” increased on March 31, 2007.

Summary of Cash Flows

Cash and cash equivalents decreased by 25,940 million yen to 189,223 million yen compared to March 31, 2007.

“Cash flows from operating activities” used 74,086 million yen in the first quarter of this fiscal year and provided 116,129 million yen in the first quarter of the previous fiscal year. This was due to the increased outflows from “increase in inventories” and “decrease in accrued expenses.”

“Cash flows from investing activities” used 395,447 million yen in the first quarter of this fiscal year and used 178,906 million yen in the first quarter of the previous fiscal year due mainly to the increase in outflows associated with the increase in “installment loans made to customers,” as a result of the expansion of loans to corporate customers, and “purchases of available-for-sale securities.”

“Cash flows from financing activities” provided 442,426 million yen in the first quarter of this fiscal year and used 33,282 million yen in the first quarter of the previous fiscal year due to the increase in debt accompanying the increase in operating assets.

 

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Consolidated Financial Highlights

(For the Three Months Ended June 30, 2006 and 2007, and the Year Ended March 31, 2007) (Unaudited)

 

                       (millions of JPY, except for per share data)  

Operating Assets

   June 30,
2006
    Year-on-year
Change
    June 30,
2007
    Year-on-year
Change
    Relationship
to
March 31,
2007
    March 31,
2007
    Year-on-year
Change
 

Investment in Direct Financing Leases

   1,437,711     98 %   1,288,317     90 %   102 %   1,258,404     88 %

Installment Loans

   3,036,818     124 %   3,707,066     122 %   106 %   3,490,326     119 %

Investment in Operating Leases

   721,127     125 %   912,310     127 %   106 %   862,049     120 %

Investment in Securities

   692,559     117 %   999,500     144 %   114 %   875,581     128 %

Other Operating Assets

   93,226     102 %   158,380     170 %   104 %   152,106     166 %
                                          

Total

   5,981,441     116 %   7,065,573     118 %   106 %   6,638,466     113 %

Operating Results

                                          

Total Revenues

   270,212     127 %   284,019     105 %   —       1,141,474     123 %

Income before Income Taxes, Minority Interests in Earnings of Subsidiaries, Discontinued Operations and Extraordinary Gain

   78,990     136 %   70,854     90 %   —       316,304     127 %

Net Income

   47,103     125 %   45,778     97 %   —       196,506     118 %

Earnings Per Share

              

Net Income

              

Basic

   523.51     121 %   501.27     96 %   —       2,177.10     116 %

Diluted

   504.02     123 %   488.19     97 %   —       2,100.93     117 %

Shareholders’ Equity Per Share

   10,955.86     125 %   13,629.34     124 %   104 %   13,089.83     123 %

Financial Position

                                          

Shareholders’ Equity

   986,502     129 %   1,247,341     126 %   104 %   1,194,234     125 %

Number of Outstanding Shares (thousands of shares)

   90,043     103 %   91,519     102 %   100 %   91,234     101 %

Long-and Short-Term Debt and Deposits

   4,890,505     115 %   5,970,723     122 %   109 %   5,483,922     111 %

Total Assets

   7,223,560     117 %   8,724,936     121 %   106 %   8,207,187     113 %

Shareholders’ Equity Ratio

   13.7 %   —       14.3 %   —       —       14.6 %   —    

Return on Equity (annualized)

   19.4 %   —       15.0 %   —       —       18.3 %   —    

Return on Assets (annualized)

   2.60 %   —       2.16 %   —       —       2.54 %   —    

New Business Volumes

                                          

Direct Financing Leases

              

New Receivables Added

   201,398     103 %   187,493     93 %   —       720,840     81 %

New Equipment Acquisitions

   179,126     102 %   163,998     92 %   —       636,723     80 %

Installment Loans

   465,075     128 %   638,727     137 %   —       2,226,282     121 %

Operating Leases

   62,308     127 %   97,358     156 %   —       348,561     110 %

Investment in Securities

   56,900     111 %   175,621     309 %   —       331,055     140 %

Other Operating Transactions

   24,027     79 %   31,311     130 %   —       215,409     163 %

 

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Condensed Consolidated Statements of Income

(For the Three Months Ended June 30, 2006 and 2007, and the Year Ended March 31, 2007)

(Unaudited)

 

                           (millions of JPY, millions of US$)  
     Three
Months
ended
June 30,
2006
    Year
-on-
year
Change
(%)
   Three
Months
ended
June 30,
2007
    Year
-on-
year
Change
(%)
   Year ended
March 31,
2007
    Year
-on-
year
Change
(%)
  

U.S. dollars
Three
Months
ended

June 30,
2007

 

Total Revenues :

   270,212     127    284,019     105    1,141,474     123    2,304  
                                       

Direct financing leases

   23,174     107    19,471     84    90,355     94    158  

Operating leases

   62,305     123    70,716     113    256,091     122    574  

Interest on loans and investment securities

   42,832     120    54,423     127    201,531     126    441  

Brokerage commissions and net gains on investment securities

   10,450     124    7,999     77    70,684     145    65  

Life insurance premiums and related investment income

   29,669     98    32,552     110    132,835     96    264  

Real estate sales

   29,025     151    17,354     60    87,178     116    141  

Gains on sales of real estate under operating leases

   11,410     196    5,830     51    22,958     256    47  

Other operating revenues

   61,347     152    75,674     123    279,842     145    614  
                                       

Total Expenses :

   200,977     123    231,020     115    859,078     120    1,874  
                                       

Interest expense

   17,759     132    24,901     140    81,491     138    202  

Costs of operating leases

   38,657     117    45,804     118    164,693     123    371  

Life insurance costs

   27,071     99    26,974     100    115,565     98    219  

Costs of real estate sales

   22,910     137    15,610     68    73,999     112    127  

Other operating expenses

   31,409     119    42,059     134    147,693     120    341  

Selling, general and administrative expenses

   58,583     145    66,673     114    253,467     136    541  

Provision for doubtful receivables and probable loan losses

   2,631     56    7,128     271    13,798     85    58  

Write-downs of long-lived assets

   —       —      —       —      2,316     28    —    

Write-downs of securities

   1,559     87    1,767     113    5,592     123    14  

Foreign currency transaction loss, net

   398     —      104     26    464     —      1  
                                       

Operating Income

   69,235     141    52,999     77    282,396     132    430  
                                       

Equity in Net Income of Affiliates

   9,074     125    17,848     197    31,946     100    145  

Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses

   681     47    7     1    1,962     72    0  
                                       

Income before Income Taxes, Minority Interests in Earnings of Subsidiaries, Discontinued Operations and Extraordinary Gain

   78,990     136    70,854     90    316,304     127    575  
                                       

Provision for Income Taxes

   32,413     137    28,620     88    126,452     131    232  
                                       

Income before Minority Interests in Earnings of Subsidiaries, Discontinued Operations and Extraordinary Gain

   46,577     136    42,234     91    189,852     124    343  
                                       

Minority Interests in Earnings of Subsidiaries, Net

   885     241    956     108    4,781     148    8  
                                       

Income from Continuing Operations

   45,692     135    41,278     90    185,071     124    335  
                                       

Discontinued Operations:

                 

Income from discontinued operations, net

   2,421        7,559        17,692        61  

Provision for income taxes

   (1,010 )      (3,059 )      (6,830 )      (25 )
                                       

Discontinued operations, net of applicable tax effect

   1,411     36    4,500     319    10,862     64    36  
                                       

Extraordinary Gain, Net of Applicable Tax Effect

   —       —      —       —      573     —      —    
                                       

Net Income

   47,103     125    45,778     97    196,506     118    371  
                                       

Note: 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.

 

8


Table of Contents

Condensed Consolidated Balance Sheets

(As of June 30, 2006 and 2007, and March 31, 2007)

(Unaudited)

 

                 (millions of JPY, millions of US$)  
     June 30,
2006
    June 30,
2007
   

March 31,

2007

   

U.S. dollars
June 30,

2007

 

Assets

        

Cash and Cash Equivalents

   149,498     189,223     215,163     1,535  

Restricted Cash

   85,709     149,104     121,569     1,210  

Time Deposits

   780     1,467     913     12  

Investment in Direct Financing Leases

   1,437,711     1,288,317     1,258,404     10,452  

Installment Loans

   3,036,818     3,707,066     3,490,326     30,075  

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

   (92,220 )   (93,539 )   (89,508 )   (759 )

Investment in Operating Leases

   721,127     912,310     862,049     7,402  

Investment in Securities

   692,559     999,500     875,581     8,109  

Other Operating Assets

   93,226     158,380     152,106     1,285  

Investment in Affiliates

   327,025     414,462     367,762     3,363  

Other Receivables

   170,149     231,297     212,324     1,876  

Inventories

   143,894     228,533     216,150     1,854  

Prepaid Expenses

   44,259     59,726     54,855     485  

Office Facilities

   91,349     91,384     90,682     741  

Other Assets

   321,676     387,706     378,811     3,145  
                        

Total Assets

   7,223,560     8,724,936     8,207,187     70,785  
                        

Liabilities and Shareholders’ Equity

        

Short-Term Debt

   1,174,667     1,446,137     1,174,391     11,732  

Deposits

   344,887     468,255     446,474     3,799  

Trade Notes, Accounts Payable and Other Liabilities

   359,484     420,456     381,110     3,411  

Accrued Expenses

   70,206     88,807     122,202     721  

Policy Liabilities

   497,596     487,887     491,946     3,958  

Current and Deferred Income Taxes

   234,032     285,144     320,412     2,313  

Security Deposits

   149,642     181,009     174,196     1,469  

Long-Term Debt

   3,370,951     4,056,331     3,863,057     32,909  
                        

Total Liabilities

   6,201,465     7,434,026     6,973,788     60,312  
                        

Minority Interests

   35,593     43,569     39,165     354  
                        

Common Stock

   89,172     101,352     98,755     822  

Additional Paid-in Capital

   108,573     122,502     119,402     994  

Retained Earnings:

        

Legal reserve

   2,220     2,220     2,220     18  

Retained earnings

   772,397     957,384     921,823     7,767  

Accumulated Other Comprehensive Income

   18,408     66,952     55,253     543  

Treasury Stock, at Cost

   (4,268 )   (3,069 )   (3,219 )   (25 )
                        

Total Shareholders’ Equity

   986,502     1,247,341     1,194,234     10,119  
                        

Total Liabilities and Shareholders’ Equity

   7,223,560     8,724,936     8,207,187     70,785  
                        

          June 30,
2006
    June 30,
2007
    March 31,
2007
    U.S. dollars
June 30, 2007
 

Note:

   Accumulated Other Comprehensive Income         
           Net unrealized gains on investment in securities    46,372     73,791     72,994     599  
           Minimum pension liability adjustments    (620 )   —       —       —    
           Defined benefit pension plans    —       3,379     3,604     27  
           Foreign currency translation adjustments    (30,759 )   (11,193 )   (22,620 )   (91 )
           Net unrealized gains on derivative instruments    3,415     975     1,275     8  

 

9


Table of Contents

Condensed Consolidated Statements of Shareholders’ Equity

(For the Three Months Ended June 30, 2006 and 2007, and the Year Ended March 31, 2007) (Unaudited)

 

           (millions of JPY, millions of US$)  
     Three Months
ended
June 30, 2006
    Three Months
ended
June 30, 2007
   

Year

ended
March 31,2007

    U.S. dollars
Three Months
ended
June 30, 2007
 

Common Stock:

        

Beginning balance

   88,458     98,755     88,458     801  

Exercise of warrants and stock acquisition rights

   263     397     2,259     3  

Conversion of convertible bond

   451     2,200     8,038     18  
                        

Ending balance

   89,172     101,352     98,755     822  
                        

Additional Paid-in Capital:

        

Beginning balance

   106,729     119,402     106,729     969  

Exercise of warrants, stock acquisition rights and stock options

   263     396     2,257     3  

Conversion of convertible bond

   452     1,719     6,250     14  

Stock-based compensation

   1,015     804     3,515     7  

Other, net

   114     181     651     1  
                        

Ending balance

   108,573     122,502     119,402     994  
                        

Legal Reserve:

        

Beginning balance

   2,220     2,220     2,220     18  
                        

Ending balance

   2,220     2,220     2,220     18  
                        

Retained Earnings:

        

Beginning balance

   733,386     921,823     733,386     7,479  

Cash dividends

   (8,092 )   (11,863 )   (8,092 )   (96 )

Net income

   47,103     45,778     196,506     371  

Capital transactions of equity-method investee

   —       1,641     —       13  

Other, net

   —       5     23     0  
                        

Ending balance

   772,397     957,384     921,823     7,767  
                        

Accumulated Other Comprehensive Income:

        

Beginning balance

   27,603     55,253     27,603     448  

Net change of unrealized gains on investment in securities

   (4,484 )   797     22,138     6  

Net change of minimum pension liability adjustments

   12     —       (5 )   —    

Defined benefit pension plans

   —       (225 )   —       (2 )

Adjustment to initially apply FASB Statement No. 158

   —       —       4,241     —    

Net change of foreign currency translation adjustments

   (4,627 )   11,427     3,512     93  

Net change of unrealized gains on derivative instruments

   (96 )   (300 )   (2,236 )   (2 )
                        

Ending balance

   18,408     66,952     55,253     543  
                        

Treasury Stock:

        

Beginning balance

   (4,750 )   (3,219 )   (4,750 )   (26 )

Exercise of stock options

   486     53     1,518     0  

Other, net

   (4 )   97     13     1  
                        

Ending balance

   (4,268 )   (3,069 )   (3,219 )   (25 )
                        

Total Shareholders’ Equity:

        

Beginning balance

   953,646     1,194,234     953,646     9,689  

Increase, net

   32,856     53,107     240,588     430  
                        

Ending balance

   986,502     1,247,341     1,194,234     10,119  
                        

Summary of Comprehensive Income:

        

Net income

   47,103     45,778     196,506     371  

Other comprehensive income

   (9,195 )   11,699     23,409     95  
                        

Comprehensive income

   37,908     57,477     219,915     466  
                        

 

10


Table of Contents

Condensed Consolidated Statements of Cash Flows

(For the Three Months Ended June 30, 2006 and 2007, and the Year Ended March 31, 2007)

(Unaudited)

 

           (millions of JPY, millions of US$)  
     Three Months
ended
June 30, 2006
    Three Months
ended
June 30, 2007
   

Year

ended
March 31, 2007

    U.S. dollars
Three Months
ended
June 30, 2007
 

Cash Flows from Operating Activities:

        

Net income

   47,103     45,778     196,506     371  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

        

Depreciation and amortization

   34,533     39,822     153,348     323  

Provision for doubtful receivables and probable loan losses

   2,631     7,128     13,798     58  

Decrease in policy liabilities

   (6,112 )   (4,059 )   (11,762 )   (33 )

Gains from securitization transactions

   (297 )   (101 )   (7,762 )   (1 )

Equity in net income of affiliates

   (9,074 )   (17,848 )   (31,946 )   (145 )

Gains on sales of subsidiaries and affiliates and liquidation losses

   (681 )   (7 )   (1,962 )   (0 )

Extraordinary gain

   —       —       (573 )   —    

Minority interests in earnings of subsidiaries, net

   885     956     4,781     8  

Gains on sales of available-for-sale securities

   (5,614 )   (1,605 )   (49,262 )   (13 )

Gains on sales of real estate under operating leases

   (11,410 )   (5,830 )   (22,958 )   (47 )

Gains on sales of operating lease assets other than real estate

   (4,220 )   (4,205 )   (12,105 )   (34 )

Write-downs of long-lived assets

   —       —       2,316     —    

Write-downs of securities

   1,559     1,767     5,592     14  

Decrease (increase) in restricted cash

   86,996     (27,228 )   51,299     (221 )

Increase in loans held for sale

   —       (12,569 )   (52,811 )   (102 )

Decrease (increase) in trading securities

   6,159     (2,007 )   11,248     (16 )

Increase in inventories

   (1,803 )   (22,541 )   (85,899 )   (183 )

Increase in prepaid expenses

   (3,629 )   (4,606 )   (13,708 )   (37 )

Increase (decrease) accrued expenses

   (18,835 )   (35,541 )   36,594     (288 )

Increase in security deposits

   39     4,916     21,182     40  

Other, net

   (2,101 )   (36,306 )   20,212     (295 )
                        

Net cash provided by (used in) operating activities

   116,129     (74,086 )   226,128     (601 )
                        

Cash Flows from Investing Activities:

        

Purchases of lease equipment

   (255,216 )   (267,020 )   (1,031,591 )   (2,166 )

Principal payments received under direct financing leases

   168,417     130,379     610,780     1,058  

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

   19,410     20,255     275,998     164  

Installment loans made to customers

   (465,075 )   (619,936 )   (2,173,322 )   (5,030 )

Principal collected on installment loans

   332,352     414,256     1,554,422     3,361  

Proceeds from sales of operating lease assets

   49,844     55,541     158,396     451  

Investment in affiliates, net

   (2,225 )   (10,234 )   (6,000 )   (83 )

Purchases of available-for-sale securities

   (42,290 )   (161,760 )   (254,044 )   (1,312 )

Proceeds from sales of available-for-sale securities

   18,495     25,077     105,829     203  

Maturities of available-for-sale securities

   6,310     27,722     39,252     225  

Purchases of other securities

   (14,490 )   (13,861 )   (76,710 )   (112 )

Proceeds from sales of other securities

   5,568     12,470     73,316     101  

Purchases of other operating assets

   (1,746 )   (2,017 )   (50,238 )   (16 )

Acquisitions of subsidiaries, net of cash acquired

   (10,145 )   (2,076 )   (19,270 )   (17 )

Sales of subsidiaries, net of cash disposed

   529     —       3,019     —    

Other, net

   11,356     (4,243 )   (12,115 )   (35 )
                        

Net cash used in investing activities

   (178,906 )   (395,447 )   (802,278 )   (3,208 )
                        

Cash Flows from Financing Activities:

        

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

   (123,791 )   73,011     (111,360 )   592  

Proceeds from debt with maturities longer than three months

   452,161     735,045     2,230,830     5,963  

Repayment of debt with maturities longer than three months

   (366,202 )   (376,308 )   (1,655,581 )   (3,053 )

Net increase (decrease) in deposits due to customers

   (8,367 )   21,699     93,175     176  

Issuance of common stock

   526     793     4,516     6  

Dividends paid

   (8,092 )   (11,863 )   (8,092 )   (96 )

Net increase (decrease) in call money

   20,000     —       (10,000 )   —    

Other, net

   483     49     1,526     1  
                        

Net cash provided by (used in) financing activities

   (33,282 )   442,426     545,014     3,589  
                        

Effect of Exchange Rate Changes on Cash and Cash Equivalents

   (299 )   1,167     443     9  
                        

Net Increase (Decrease) in Cash and Cash Equivalents

   (96,358 )   (25,940 )   (30,693 )   (211 )

Cash and Cash Equivalents at Beginning of Period

   245,856     215,163     245,856     1,746  
                        

Cash and Cash Equivalents at End of Period

   149,498     189,223     215,163     1,535  
                        

 

11


Table of Contents

Segment Information

(For the Three Months Ended June 30, 2006 and 2007, and the Year Ended March 31, 2007)

(Unaudited)

 

                                       (millions of JPY, millions of US$)
     Three Months ended June 30, 2006    Three Months ended June 30, 2007    Year ended March 31, 2007
     Segment
Revenues
    Segment
Profits
    Segment
Assets
   Segment
Revenues
    Segment
Profits
    Segment
Assets
   Segment
Revenues
    Segment
Profits
    Segment
Assets

Operations in Japan

                    

Corporate Financial Services

   26,248     11,473     1,703,627    29,890     7,111     1,988,400    123,328     58,231     1,861,403

Automobile Operations

   36,627     6,258     526,245    37,701     5,826     525,613    146,966     28,224     510,805

Rental Operations

   15,351     1,269     121,039    18,489     2,840     120,183    67,859     10,869     121,621

Real Estate-Related Finance

   18,180     10,598     1,234,172    21,578     10,246     1,695,282    82,345     44,682     1,517,927

Real Estate

   70,231     20,709     689,273    61,607     18,252     946,009    245,336     51,236     901,237

Life Insurance

   29,530     1,139     509,171    32,175     2,856     527,156    132,060     9,921     511,051

Other

   30,588     10,666     644,006    30,930     12,828     794,607    145,443     60,387     773,595
                                                  

Sub-Total

   226,755     62,112     5,427,533    232,370     59,959     6,597,250    943,337     263,550     6,197,639
                                                  

Overseas Operations

                    

The Americas

   23,855     5,167     442,100    24,307     5,413     520,187    119,940     31,315     487,900

Asia, Oceania and Europe

   23,941     11,624     597,567    36,999     12,594     677,987    103,593     37,763     625,036
                                                  

Sub-Total

   47,796     16,791     1,039,667    61,306     18,007     1,198,174    223,533     69,078     1,112,936
                                                  

Segment Total

   274,551     78,903     6,467,200    293,676     77,966     7,795,424    1,166,870     332,628     7,310,575
                                                  

Difference between Segment Totals and Consolidated Amounts

   (4,339 )   87     756,360    (9,657 )   (7,112 )   929,512    (25,396 )   (16,324 )   896,612
                                                  

Consolidated Amounts

   270,212     78,990     7,223,560    284,019     70,854     8,724,936    1,141,474     316,304     8,207,187
                                                  
    

U.S. dollars

Three Months ended June 30, 2007

                                 
     Segment
Revenues
    Segment
Profits
    Segment
Assets
                                 

Operations in Japan

                    

Corporate Financial Services

   242     58     16,132              

Automobile Operations

   306     47     4,264              

Rental Operations

   150     23     975              

Real Estate-Related Finance

   175     83     13,754              

Real Estate

   500     148     7,675              

Life Insurance

   261     23     4,277              

Other

   251     104     6,446              
                              

Sub-Total

   1,885     486     53,523              
                              

Overseas Operations

                    

The Americas

   197     44     4,221              

Asia, Oceania and Europe

   300     102     5,500              
                              

Sub-Total

   497     146     9,721              
                              

Segment Total

   2,382     632     63,244              
                              

Difference between Segment Totals and Consolidated Amounts

   (78 )   (57 )   7,541              
                              

Consolidated Amounts

   2,304     575     70,785              
                              

Note: 1. The results of the reported segments from the first quarter of this fiscal year reflect the revised business classification of the Company. Accordingly, leasing operations of the affiliates, which had been included in the “Other” segment, have been included in the “Corporate Financial Services” segment from the first quarter of this fiscal year. Therefore, certain related amounts that had been previously reported are reclassified.

 

          2. Since the Company evaluates the performance of its segments based on profits before income taxes, tax expenses are not included in segment profits. In addition, results of discontinued operations are included in “Segment Revenues” and “Segment Profits” of each segment, if any.

 

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