Asics Q2 ended September 30 , Financials results

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In the second quarter ended September 30, 2014, business was steady in the sporting goods industry on the back of a high level of interest in sports owing to rising health consciousness, as well as a running boom. In the U.S., particularly, which is one of the highest priority areas for the ASICS Group ("the Group"), the footwear market and others continued to show steady growth.

Under these conditions, the Group continued its efforts to reinforce and expand its business on a global scale based on the Five-Year Strategic Plan, "ASICS Growth Plan (AGP) 2015".In the running business, the Group strove to expand the business further as the core business. The Group's efforts to this end included launching various high-function running shoes, GEL-NIMBUS 16 and GEL-CUMULUS 16, onto the market. The Group also carried out initiatives such as supporting marathon events held in different parts of the world, including Paris, Stockholm and the Gold Coast, and holding a trail running event.

In the athletic sports business, the Group concentrated on activities to heighten the value of the ASICS brand. For example, the Group launched replica jerseys of both the South African and Australian national rugby teams. In addition, the Group supplied products to be used by wrestlers representing their countries (in total, six countries) at the 2014 World Wrestling Championship held in Uzbekistan. The Group also supplied products to be used by athletes representing their countries or region (in total, eight countries and one region) at the 17th Asian Games INCHEON 2014 held in the Republic of Korea.

In the Onitsuka Tiger business, the Group strove to heighten the value of Onitsuka Tiger as an innovative and sophisticated brand such by launching shoes designed in collaboration with a famous designer as the latest works of the NIPPON MADE series. On the sales front, the Group worked on expanding sales through such measures as increasing directly managed sales venues. Specifically, the Group opened 46 stores including directly managed ASICS brand stores in Melbourne(Australia), Tsukuba(Japan) and Madrid(Spain), and a directly managed Onitsuka Tiger brand store in Melbourne(Australia).

Other measures to expand sales included promoting expansion of E-commerce running on a shared global IT platform. In the apparel business, the Group worked on strengthening the function of the global sourcing and development in order to expand sales and boost profitability. To this end, the Group centralized the production control function of each country's apparel products in ASICS HongKong Apparel Limited in Hong Kong, and transferred parts of the materials procurement and quality control functions at the ASICS' apparel business to that company.

In addition, the Group pressed ahead with transferring production facilities from areas in China to areas in Southeast Asia for the purpose of reducing costs. Also in this business, the Group worked on expanding running apparel business. In the new business, the Group worked on creating a service that contributes to people's lives by starting the operation of "Tryus Nishinomiya"(Japan), a nursing care service facility specializing in functional training that provides exercise service programs utilizing the Group's sports expertise.

Furthermore, the Group worked on establishing a stable product supply system through the construction of a global logistics network. As part of this work, the Group established the "ASICS European Distribution Center" in Germany as its new logistics base in Europe, and started operations at the center.

The Group strove to strengthen fast-track development and hiring of professional talent on global and regional bases and to ensure the optimal placement of global talent. The Group introduced new human resources system to replace the traditional seniority system. In addition, the Group promoted diversity under the slogan "One Team" --Stronger through Diversity, aiming that diverse employees feel fulfilled in the corporate culture and environment to 3let them perform at peak, and contribute sustainable growth of the business and the organization.

In other activities, as part of a continuous support program for the Great Eastern Japan Earthquake "A Bright Tomorrow Through Sport", the Group supported the Tohoku Food Marathon & Festival 2014 and the "Discover Tomorrow" 1,000-km Relay to Tokyo 2014.

In the second quarter ended September 30, 2014, consolidated net sales were ¥265,097 million. Domestic net sales were ¥47,353 million, overseas sales were ¥217,743 million, gross profit was ¥119,417 million, operating income was ¥33,073 million, ordinary income was ¥35,064 million and net income was ¥24,534 million.

Business results by reportable segment were as follows.

The fiscal year ending December 31, 2014 is a transitional period for the change in the fiscal year end. Therefore, the current fiscal second quarter consolidated period has irregular settlement periods whereby the period of consolidation is six months (April 1, 2014 to September 30, 2014) for the Company and those consolidated subsidiaries whose fiscal year end was on March 31 in the previous fiscal year, and nine months (January 1, 2014 to September 30, 2014) for consolidated subsidiaries whose fiscal year end was on December 31 in the previous fiscal year. As a result, a year-on-year ratio is not disclosed for segments excluding Japan area.

Japan Area Sales increased 0.2% to ¥55,803 million, despite a decline in shoe sales to overseas sales subsidiaries, due mainly to steady sales of running shoes and Onitsuka Tiger shoes. However, segment income decreased 12.2% to ¥1,250 million, due mainly to an increase in selling, general and administrative expenses resulting from new openings of directly managed stores and an increase in amortization of goodwill resulting from an additional acquisition of the shares of subsidiaries in the previous fiscal year.

• America Area Sales were ¥89,683 million and segment income was ¥10,877 million.
• Europe Area Sales were ¥82,544 million and segment income was ¥8,880 million. Oceania/South East and South Asia AreaSales were ¥13,486 million and segment income was ¥2,494 million.
• East Asia Area Sales were ¥23,126 million and segment income was ¥2,198 million.
• Other business Sales were ¥9,116 million and segment loss was ¥252 million.

Explanation on financial position

As for consolidated financial position as of September 30, 2014, total assets increased 5.5% from the end of the previous fiscal year to ¥334,836 million, total liabilities decreased 8.7% from the end of the previous fiscal year to ¥144,234 million and net assets increased 19.4% from the end of the previous fiscal year to ¥190,602 million. Current assets increased 5.0% to ¥252,369 million, mainly reflecting a decrease in cash and deposits and increases 4in notes and accounts receivable-trade and inventories, and an increase in other current assets resulting from an increase in short-term derivative assets. Non-current assets increased 6.8% to ¥82,467 million.

This mainly reflected an increase in property, plant and equipment attributable to extension and improvement work at the ASICS Institute of Sports Science and an increase in investments and other assets resulting from increases in investment in securities and long-term derivative assets. On the other hand, there were decreases in intangible assets including goodwill and brand as well as deferred tax assets. Current liabilities decreased 14.0% to ¥69,818 million, due mainly to decreases in notes and accounts payable-trade and accrued expenses, and a decrease in other current liabilities attributable to a decrease in short-term derivatives liabilities.

Non-current liabilities decreased 3.1% to ¥74,415 million, due mainly to a decrease in other long-term liabilities attributable to a decrease in long-term derivatives liabilities. Shareholders' equity rose 14.5% to ¥170,686 million due to an increase in retained earnings.

Accumulated other comprehensive income increased ¥9,715 million to ¥19,054 million, due mainly to an increase in unrealized deferred gain on hedges. Minority interests decreased 24.8% to ¥834 million. As for cash flows as of September 30, 2014, cash and cash equivalents (hereinafter, "cash") decreased ¥922 million from the end of the previous fiscal year to ¥52,711 million.

The respective cash flow positions for the second quarter ended September 30, 2014 and main factors behind the changes are as follows. The fiscal year ending December 31, 2014 is a transitional period for the change in the fiscal year end. Therefore, the current fiscal second quarter consolidated period has irregular settlement periods whereby the period of consolidation is six months (April 1, 2014 to September 30, 2014) for the Company and those consolidated subsidiaries whose fiscal year end was on March 31 in the previous fiscal year, and nine months (January 1, 2014 to September 30, 2014) for consolidated subsidiaries whose fiscal year end was on December 31 in the previous fiscal year.

As a result, a year-on-year ratio is not disclosed. (Net cash provided by operating activities) Net cash provided by operating activities was ¥10,984 million. The major source of cash was ¥35,221 million from income before income taxes and minority interests, while major uses of cash were ¥9,131 million for income taxes paid, ¥6,243 million for a decrease in notes and accounts payable-trade, ¥4,980 million for an increase in notes and accounts receivable-trade and ¥4,803 million for an increase in inventories.(Net cash used in investing activities) Net cash used in investing activities was ¥5,423 million.

The major source of cash was ¥4,839 million from proceeds from withdrawal of time deposits, while major uses of cash were ¥5,375 million for purchases of property, plant and equipment, ¥2,196 million for purchases of time deposits and ¥1,015 million for purchases of investment in securities. (Net cash used in financing activities) Net cash used in financing activities was ¥5,849 million. Major uses of cash were ¥3,223 million for cash dividends paid and ¥2,091 million for a net decrease in short-term bank loans.

Source ASICS Group ©