MAKITA CORPORATION
 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

the Securities Exchange Act of 1934

For the month of October, 2003

MAKITA CORPORATION


(Translation of registrant’s name into English)

3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, 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 by furnishing the information contained in this Form, the registrant 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

SIGNATURES
CONSOLIDATED FINANCIAL RESULTS
THE MAKITA GROUP
MANAGEMENT POLICIES
OPERATING RESULTS AND FINANCIAL POSITION
CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
SIGNIFICANT ACCOUNTING POLICIES
OPERATING SEGMENT INFORMATION
MARKETABLE SECURITIES AND INVESTMENT SECURITIES
DERIVATIVES TRANSACTIONS
ESTIMATED RETIREMENT AND TERMINATION ALLOWANCES
NET SALES BY PRODUCT CATEGORIES
OVERSEAS SALES BY PRODUCT CATEGORIES
EARNINGS PER SHARE
SUPPORT DOCUMENTATION

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.

         
        MAKITA CORPORATION
(Registrant)
         
    By:   /s/ Masahiko Goto
        (Signature)
        Masahiko Goto
        President

Date: October 28, 2003

 


 

(MAKITA LOGO)

Makita Corporation

 

Consolidated Financial Results
for the six months
ended September 30, 2003
(U.S. GAAP Financial Information)

 

(English translation of “KESSAN TANSHIN”
originally issued in Japanese language)

 


 

(MAKITA LOGO)

CONSOLIDATED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003

October 28, 2003

Makita Corporation
Stock code: 6586
URL: http://www.makita.co.jp/
Masahiko Goto, President
Date of Board Meeting: October 28, 2003
(Consolidated financial information has been prepared in accordance
with accounting principles generally accepted in the United States.)

1.   Results of the six months ended September 30, 2003 (From April 1, 2003 to September 30, 2003)
 
(1)   FINANCIAL RESULTS
                                                 

                      Yen (million)                
   
    For the six months ended   For the six months ended   For the fiscal year ended
    September 30, 2003   September 30, 2002   March 31, 2003
   
 
 
            %           %           %
Net sales
    91,757       4.7       87,648       7.2       175,603       5.7  
Operating income
    9,247       47.5       6,269       63.9       12,468       112.3  
Income before income taxes
    9,894       123.7       4,423       108.3       9,292       173.1  
Net income
    4,981       58.8       3,137       764.2       6,723       4954.9  
                                                 
                      Yen                
   
Earnings per share:
                       
     Basic      34.25                        20.96                           45.29                  
     Diluted     33.32               20.48               44.20          

                 
Notes:     1.     Equity in net earnings of affiliated companies (including non-consolidated subsidiaries): Not applicable
      2.     Average number of shares outstanding:
 
  Six months ended September 30, 2003:              145,451,532
  Six months ended September 30, 2002:              149,644,939
  Year ended March 31, 2003:              148,444,219
 
      3.     Change in accounting policies: Not applicable
      4.     Percentage change: Ratio of change against corresponding period of the previous year on Net sales, Operating income, Income before income taxes, Net income.

(2)   FINANCIAL POSITION
                           

      Yen (million)
     
      As of   As of   As of
      September 30, 2003   September 30, 2002   March 31, 2003
     
 
 
Total assets
    277,647       276,228       278,600  
Shareholders’ equity
    185,134       187,336       182,400  
Shareholders’ equity ratio to total assets (%)
    66.7 %     67.8 %     65.5 %
 
      Yen
     
Shareholders’ equity per share
    1,286.27       1,252.23       1,249.59  

 
                       
Note:   Number of shares outstanding:
                       
 
As of September 30, 2003:
    143,930,908                  
 
As of September 30, 2002:
    149,602,105                  
 
As of March 31, 2003:
    145,967,876                  
       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    1  

 


 

(MAKITA LOGO)

(3)  CASH FLOWS

                         

    Yen (million)
   
    For the six months   For the six months   For the fiscal year
    ended September 30,   ended September 30,   ended March 31,
    2003   2002   2003
   
 
 
Net cash provided by operating activities
    11,696       13,206       27,141  
Net cash used in investing activities
    (4,994 )     (2,931 )     (9,659 )
Net cash used in financing activities
    (4,938 )     (6,778 )     (13,381 )
Cash and cash equivalents, end of period
    21,496       21,033       20,370  

(4)   SCOPE OF CONSOLIDATION AND EQUITY METHOD
 
    Consolidated subsidiaries: 40 subsidiaries
 
    Non-consolidated subsidiaries accounted for under the equity method: Not applicable
 
    Affiliated companies accounted for under the equity method: Not applicable
 
(5)   CHANGE IN SCOPE OF CONSOLIDATION AND EQUITY METHOD
     
Consolidation: (Newly included) 1   Equity method: Not applicable

2.   Forecast for the fiscal year ending March 31, 2004 (From April 1, 2003 to March 31, 2004)
         

    Yen (million)
   
    For the fiscal year ending March 31, 2004
   
Net sales
    178,800  
Income before income taxes
    15,600  
Net income
    7,800  
 
    Yen
   
Earnings per share
    54.19  

FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements based on Makita’s own projections and estimates. The power tools market, where Makita is mainly active, is subject to the effects of rapid shifts in economic conditions, demand for housing, currency exchange rates, changes in competitiveness, and other factors. Due to the risks and uncertainties involved, actual results could differ substantially from the content of these statements. Therefore, these statements should not be interpreted as representation that such objectives will be achieved.

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    2  

 


 

(MAKITA LOGO)

THE MAKITA GROUP

     The Makita Group is comprised of 42 companies (Makita Corporation, 40 consolidated subsidiaries and 1 non-consolidated subsidiary, accounted for by the cost method). The Makita Group mainly manufactures and sells electric power tools.

     The Makita Group is outlined as follows:

(ORGANIZATION CHART)

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    3  

 


 

(MAKITA LOGO)

MANAGEMENT POLICIES

(1)   Basic Policies

       Makita has set itself the goal of consolidating a strong position in the global power tool industry as a global supplier of a comprehensive range of power tools that assist people in creating homes and living environments. To do this, the Company is emphasizing such strategic management concepts as giving top priority to customer satisfaction, proactively striving to work in harmony with society, and fostering a flexibly dynamic corporate culture that makes the most of each individual employee’s potentials. The Company aims to generate solid profitability so that it can promote its sustained corporate development and meet the needs of its shareholders, customers, and employees as well as regional societies.

(2)   Basic Policy Regarding Profit Distribution

       Makita’s basic profit distribution policy objective is to strive to strengthen its capabilities and financial position to promote stable operations over the long term while also sustaining cash dividends at a stable level of 18 yen per year.
 
       In addition to dividends, Makita is endeavoring to implement a flexible capital policy, augment the efficiency of its capital employment, and thereby boost shareholder profit as well as realizing other objectives through sustained repurchases of the shares it has issued. In the period from the fiscal year ended March 31, 1999, through the end of the six months ended September 30, 2003 under review, the Company repurchased 16,687,000 of its own outstanding shares, of which 13,000,000 have been retired. These repurchases represented 10.4% of all shares issued by Makita prior to the repurchases. The Company is considering continued stock repurchases in the future as means of further boosting capital efficiency and shareholder profit.

(3)   Policy Regarding Reducing the Basic Trading Unit of Shares

       Makita recognizes that encouraging investors to make stable, long-term investments in its shares is an important issue in its capital policies.
 
       The Company is considering the issue of reduced-quantity trading units but believes that decisions on the issue should be made prudently based on a comprehensive assessment of such factors as stock prices, stock liquidity, the timing of the implementation of nonissuance of stock certificate stipulated by Japanese Commercial Code, and projected cost effectiveness associated with decisions.

(4)   Medium-to-Long-Term Management Strategy

       Through a basic strategy of concentrating corporate assets in Makita’s core business, which is principally power tools for professional use, the Company is working to increase its sales and profitability with operations in this business based on the solid foundation of the Makita brand’s strong association with high quality and Makita’s extensive domestic and overseas marketing and service networks.
 
       In the future, the Company intends to further strengthen its subsidiaries and affiliates in each overseas market and take other measures to bolster and expand its marketing systems while increasing professional users’ satisfaction by maintaining a solid and appealing brand image. These strategies are designed to make Makita what it refers to as a “Strong Company,” a company that can earn and maintain top shares of markets for professional-use power tools in regions worldwide. Makita is striving diligently to be such a “Strong Company” and achieve improved performance.

(5)   Basic Policies Regarding Corporate Governance and Implementation of Related Measures
 
    Basic Policies Regarding Corporate Governance

       Makita believes that bolstering its supervision of management is a crucial means of enhancing management transparency. Besides working to strengthen the capabilities of the Board of Directors and the Board of Auditors, the Company is striving to increase the sophistication of its corporate governance system. In view of the need to ensure that corporate governance systems function effectively, the Company is endeavoring to proactively and promptly disclose information in a manner that promotes proper and transparent operations. The Company is also working to use the Internet to disclose financial information and otherwise undertake a broad range of information disclosure initiatives.

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    4  

 


 

(MAKITA LOGO)

    Implementation of Related Measures

  (1)   Current Management Administration Systems for Management Decision Making, Policy Execution, Supervision, and Other Aspects of Corporate Governance

  o   Makita employs a board-of-auditors system. The Company’s Board of Auditors comprises four members, of which two are outside auditors. The two full-time auditors facilitate capabilities for continuous monitoring of the directors’ performance of their duties. By presenting reports whenever necessary on auditing and corporate matters to the Company’s independent auditor, who is responsible for conducting audits, we work to provide a common base of information with independent auditors.
 
  o   The Board of Directors makes decisions on the Company’s basic policies and statutory issues as well as other important management issues.
 
  o   Makita’s consolidated financial statements and non-consolidated financial statements are subject to audit of independent auditors. The Company employs Asahi & Co. (a member firm of KPMG International, a Swiss cooperative that provides no professional services to clients) to serve as independent public accountants. Regarding the relationships among the Company, Asahi & Co., and engagement partners, there are no noteworthy interest as defined by provisions of the Certified Public Accountant Law in Japan.
 
  o   The Company’s legal advisor confirms the Company’s legal compliance whenever the Company requires legal opinions and judgments. The legal advisor thereby performs a management control function with regard to legal issues.

  (2)   Overview of the Company’s Human and Capital Relationships with Outside Directors and Outside Auditors as well as Transactional Relationships and Other Relationships of Material Interest

           Makita does not currently have outside directors. The Company is not involved with personal, financial, technical, or other types of transactions that might create a conflict of interest with the companies for which outside auditors and their close relatives serve as directors. In addition, the outside auditors have neither been employees nor directors of the Company.

  (3)   Progress in Implementation of Measures Aimed at Strengthening the Company’s Corporate Governance during the Past Year

  o   In April 2003, an Internal Audit Department was established as a means of strengthening a system for performing internal audits whenever necessary.
 
  o   In accordance with U.S. Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley Act), the Company is taking the following active initiatives to improve its corporate governance.

  (a)   In May 2003, the Company formed a Disclosure Committee with the objective of substantially increasing the accuracy and reliability of information disclosed through the clarification of procedures and other matters related to disclosure.
 
  (b)   In August 2003, the Company issued its Policy and Procedures Related to Prior Approvals for Auditing and Non-Auditing Activities requiring prior approval of the Company’s Board of Auditors for entering into a service contract with an independent auditing firm in order to clarify the independence of the Company’s independent auditors.

  o   In June 2003, the Company issued its Business Ethics Guidelines to provide guidance for actions of management and staff, clarify activities that are ethical, forbid conflicts of interest, ensure compliance with relevant laws and regulations, and provide guidelines for disclosure.
 
  o   The Company is also taking initiatives to promote better awareness of compliance issues; these activities include holding study group meetings for new directors, led by the Company’s legal counsel.

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    5  

 


 

(MAKITA LOGO)

OPERATING RESULTS AND FINANCIAL POSITION

1.   Results of Operations
 
(1)   Operations and Results during the Year Under Review

       Regarding economic trends overseas during the period under review, the United States showed a gradual recovery trend supported by upward trends in personal consumption and private capital investment and firmness in housing investment. In Europe, domestic demand in the principal eurozone countries was weak and this, together with other factors, led to a virtual standstill in the economies of the region. On the other hand, in Asia, the pace of economic recovery has been gradual, owing to the influence of SARS and other factors.
 
       In the Japanese economy, although personal consumption and employment conditions continued to be weak, private capital investment and corporate profits showed signs of recovery, leading to a sense that the economy was beginning to bottom out.
 
       Against this backdrop, Makita has moved forward with the expansion of production at its operations in China, taken measures to reduce manufacturing costs through the use of parts manufactured in China as well as other measures, and also continued its ongoing efforts to develop new product to meet user needs.
 
       In the United States, Makita focused especially on strengthening its marketing position in the professional-use market with the aim of enhancing its brand image. The Company also continued to take steps to improve profitability, including reducing inventories and realigning its logistics centers to reduce distribution costs.
 
       On a consolidated basis, net sales amounted to 91,757 million yen, up 4.7% from the same period of the previous fiscal year. Net sales in Japan amounted to 19, 244 million yen, representing a decline of 0.1% year on year; although sales of new products, especially those linked to home remodeling, expanded, the number of new housing starts was stagnant. Overseas sales rose 6.0% year on year, to 72,513 million yen as a result of (a) higher sales in the Europe regions and elsewhere and (b) the favorable impact of the weaker yen relative to the EURO. As a result of this expansion, overseas sales accounted for 79.0% of consolidated net sales for the period.
 
       Looking at overseas sales in individual regions, sales in Europe were up 19.4%, to 32,085 million yen, while sales in North America slipped 8.7%, to 22,085 million yen. Sales in Southeast Asia rose 1.9%, to 7,314 million yen and sales in other regions climbed 8.8%, to 11,029 million yen.
 
       Profitability was positively affected by such developments as an improvement in the cost of sales ratio, owing to the shifting of production to Makita’s subsidiary in China, and improvement among non-operating profit and loss items, including the significant decrease in exchange losses on foreign currency transactions for the period under review compared to foreign exchange losses for the same period of the previous fiscal year. As a result, income before income taxes surged to 9,894 million yen, 123.7% up year on year. Net income for the first six months of the fiscal year under review showed a sharp increase of 58.8%, to 4,981 million yen.
 
       At the General Meeting of Shareholders held in June 2003, a proposal was approved to repurchase a maximum of 5 million of the Company’s shares (with a maximum value of 5 billion yen). Through the end of the first six months of the fiscal year, the Company repurchased a total of 2,002 thousand of its outstanding shares (with a value of 2,142 million yen). In addition, as a result of the retiring of 5 million treasury stock held by the Company on August 20, 2003, the number of treasury stock still held by the Company stood at 4,076 thousand at the end of period.

(2)   Outlook for the Fiscal Year Ending March 31, 2004

       As a significant number of uncertainties remain, including the possibility of sharp movements in foreign currency rates, the operating environment for the Company’s activities is therefore expected to continue to be harsh.

       The outlook for the full year ending March 31, 2004 will be as follows:

  o   The yen is forecast to strengthen against the U.S. dollar.
 
  o   Expansion in the domestic market for power tools is viewed as unlikely.
 
  o   Competition will become more intense in the U.S. market for power tools.
 
  o   Market growth is expected in Eastern Europe/Russia, but Western Europe will remain at a standstill.

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    6  

 


 

(MAKITA LOGO)

       Based on consideration of these and other factors, Makita has prepared the following performance forecast.

    Forecast for the Fiscal Year Ending March 31, 2004
           

      Yen (million)
     
      For the fiscal year ending March 31, 2004
     
Consolidated Basis:
       
 
Net sales
    178,800  
 
Operating income
    15,400  
 
Income before income taxes
    15,600  
 
Net income
    7,800  
 
Non-consolidated Basis:
       
 
Net sales
    83,700  
 
Operating income
    6,000  
 
Ordinary profit
    7,000  
 
Net income
    5,000  

    Assumptions

  1.   The above forecast is based on the assumption of exchange rates of 108 yen to US$1 and 126 yen to 1 Euro for the second half of the fiscal year.
 
  2.   The above forecast does not address the effect of the transfer to government of the substitutional portion of the employee’s pension fund managed by the Company because the final transfer to the government is not determined at this point.

    Based on this outlook, the Company will continue to work to improve performance through expansion of its share of the market for professional-use power tools, expansion of its sales and service systems, and development of value-added products.

FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements based on Makita’s own projections and estimates. The power tools market, where Makita is mainly active, is subject to the effects of rapid shifts in economic conditions, demand for housing, currency exchange rates, changes in competitiveness, and other factors. Due to the risks and uncertainties involved, actual results could differ substantially from the content of these statements. Therefore, these statements should not be interpreted as representation that such objectives will be achieved.

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    7  

 


 

(MAKITA LOGO)

2.  Cash Flows and Financial Ratios
 
       Total cash and cash equivalents (cash) at the end of period amounted to 21,496 million yen, up 1,126 million yen from the same period of the previous fiscal year.

    (Net Cash Provided by Operating Activities)

       Net cash provided by operating activities amounted to 11,696 million yen, down 1,510 million yen from the level at the end of the same period of the previous year. This was primarily owing to a decrease in inventories accompanying measures to reduce inventory stocks.

    (Net Cash Used in Investing Activities)

       Net cash used in investing activities totaled 4,994 million yen, up 2,063 million yen from the level of the same period in the previous year. This was mainly due to purchase of property, plant and equipment such as buildings of head office and purchase of financial instruments such as held-to-maturity securities in preparation for the redemption of convertible bonds due 2005.

    (Net Cash Used in Financing Activities)

       Net cash used in financing activities totaled 4,938 million yen, down 1,840 million yen from the level in the same period of the previous year. This principally reflected the repurchase of the Company’s treasury stock, and the payment of cash dividends.

Financial Ratios

                                         

    As of (fiscal year ended) March 31,   As of
   
  September 30,
    2000   2001   2002   2003   2003
   
 
 
 
 
Equity ratio
    68.5 %     65.5 %     66.6 %     65.5 %     66.7 %
Equity ratio based on a current market price
    49.7 %     40.1 %     45.1 %     43.5 %     52.7 %
Debt redemption (years)
    1.8       6.3       1.4       0.8       0.9  
Interest coverage ratio (times)
    15.7       4.3       20.8       40.4       36.4  
Operating income to net sales ratio
    5.8 %     4.5 %     3.5 %     7.1 %     10.1 %

    Definitions
  Equity ratio: shareholders’ equity/total assets
  Equity ratio based on a current market price: total current market value of outstanding shares/total assets
  Debt redemption: interest-bearing debt/net cash inflow from operating activities
  Interest coverage ratio: net cash inflow from operating activities/interest expense
  Operating income to net sales ratio: operating income/net sales

    Notes

  1.   All figures are calculated based on a consolidated basis.
 
  2.   The total current market value of outstanding shares is calculated by multiplying the closing market price at the period end by the number of outstanding shares (after deducting the number of treasury stock.)
 
  3.   Interest-bearing debt includes all consolidated balance-sheet debt on which interest payments are made.
 
  4.   The debt redemption period for the interim period is calculated based on an estimate of operating cash flows computed by multiplying operating cash flow for the interim period by two.

 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    8  


 

(MAKITA LOGO)

CONSOLIDATED BALANCE SHEETS

                               

          Yen (millions)
         
          As of   As of    
          September 30,   March 31,   Increase
          2003   2003   (Decrease)
















ASSETS
                       
 
CURRENT ASSETS:
                       
   
Cash and cash equivalents
    21,496       20,370       1,126  
   
Time deposits
    5,315       4,520       795  
   
Marketable securities
    39,901       39,193       708  
   
Trade receivables-
                       
     
Notes
    2,005       2,122       (117 )
     
Accounts
    34,377       34,630       (253 )
     
Less- Allowance for doubtful receivables
    (1,556 )     (1,456 )     (100 )
   
Inventories
    56,909       62,606       (5,697 )
   
Deferred income taxes
    3,793       3,515       278  
   
Prepaid expenses and other current assets
    8,568       8,065       503  
 
   
     
     
 
     
Total current assets
    170,808       173,565       (2,757 )
 
   
     
     
 
 
PROPERTY, PLANT AND EQUIPMENT, at cost:
                       
   
Land
    19,829       21,497       (1,668 )
   
Buildings and improvements
    62,482       66,738       (4,256 )
   
Machinery and equipment
    75,647       78,221       (2,574 )
   
Construction in progress
    339       2,165       (1,826 )
 
   
     
     
 
 
    158,297       168,621       (10,324 )
   
Less- Accumulated depreciation
    (97,394 )     (100,823 )     3,429  
 
   
     
     
 
 
    60,903       67,798       (6,895 )
 
   
     
     
 
 
INVESTMENTS AND OTHER ASSETS:
                       
   
Investment securities
    30,182       19,342       10,840  
   
Deferred income taxes
    8,416       10,386       (1,970 )
   
Other assets
    7,338       7,509       (171 )
 
   
     
     
 
 
    45,936       37,237       8,699  
 
   
     
     
 
 
    277,647       278,600       (953 )
 
   
     
     
 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    9  


 

(MAKITA LOGO)

CONSOLIDATED BALANCE SHEETS

                               

          Yen (millions)
         
          As of   As of    
          September 30,   March 31,   Increase
          2003   2003   (Decrease)
















LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
 
CURRENT LIABILITIES:
                       
   
Short-term borrowings
    1,084       2,892       (1,808 )
   
Trade notes and accounts payable
    13,550       13,956       (406 )
   
Accrued payroll
    6,771       7,162       (391 )
   
Accrued expenses and other
    4,157       3,535       622  
   
Income taxes payable
    3,468       3,858       (390 )
   
Deferred income taxes
    314       403       (89 )
 
   
     
     
 
     
Total current liabilities
    29,344       31,806       (2,462 )
 
   
     
     
 
 
LONG-TERM LIABILITIES:
                       
   
Long-term indebtedness
    20,478       19,843       635  
   
Club members’ deposits
    13,424       14,207       (783 )
   
Estimated retirement and termination allowances
    27,515       27,778       (263 )
   
Deferred income taxes
    575       1,407       (832 )
 
   
     
     
 
 
    61,992       63,235       (1,243 )
 
   
     
     
 
MINORITY INTERESTS
    1,177       1,159       18  
 
   
     
     
 
SHAREHOLDERS’ EQUITY:
                       
 
Common stock
    23,803       23,803        
 
Additional paid-in capital
    45,420       45,419       1  
 
Legal reserve and retained earnings
    143,074       143,422       (348 )
 
Accumulated other comprehensive loss
    (23,891 )     (25,134 )     1,243  
 
Treasury stock, at cost
    (3,272 )     (5,110 )     1,838  
 
   
     
     
 
 
    185,134       182,400       2,734  
 
   
     
     
 
 
    277,647       278,600       (953 )
 
   
     
     
 

Note: Accumulated other comprehensive loss as of September 30, 2003 and March 31, 2003 was as follows:

                 

    Yen (millions)
   
    As of   As of
    September 30,   As of March 31,
    2003   2003









Foreign currency translation adjustments
    (14,760 )     (13,022 )
Net unrealized holding gains on available-for-sale securities
    3,459       478  
Minimum pension liability adjustment
    (12,590 )     (12,590 )
 
   
     
 
Total accumulated other comprehensive loss
    (23,891 )     (25,134 )
 
   
     
 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    10  


 

(MAKITA LOGO)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                                     

        Yen (millions)
       
        For the six   For the six                   For the fiscal
        months ended   months ended                   year ended
        September 30,   September 30,   Increase   March 31,
        2003   2002   (Decrease)   2003



        (Amount)   (%)   (Amount)   (%)   (Amount)   (%)   (Amount)   (%)
NET SALES
      91,757       100.0 %       87,648       100.0 %         4,109       4.7 %     175,603       100.0 %
 
Cost of sales
    56,301       61.4 %     55,960       63.8 %     341       0.6 %     110,226       62.8 %
 
   
     
     
     
     
GROSS PROFIT
    35,456       38.6 %     31,688       36.2 %     3,768       11.9 %     65,377       37.2 %
 
Selling, general, administrative and other expenses
    26,209       28.5 %     25,419       29.0 %     790       3.1 %     52,909       30.1 %
 
   
     
     
     
     
OPERATING INCOME
    9,247       10.1 %     6,269       7.2 %     2,978       47.5 %     12,468       7.1 %
 
   
     
     
     
     
OTHER INCOME (EXPENSES):
                                                               
 
Interest and dividend income
    342       0.4 %     418       0.5 %     (76 )     (18.2 %)     786       0.4 %
 
Interest expense
    (315 )     (0.3 %)     (426 )     (0.5 %)     111       26.1 %     (665 )     (0.4 %)
 
Exchange losses on foreign currency transactions, net
    (5 )     (0.0 %)     (1,975 )     (2.3 %)     1,970       99.7 %     (1,460 )     (0.8 %)
 
Realized gains (losses) on securities, net
    335       0.3 %     (172 )     (0.2 %)     507             (2,590 )     (1.5 %)
 
Other, net
    290       0.3 %     309       0.3 %     (19 )     (6.1 %)     753       0.5 %
 
   
     
     
     
     
   
Total
    647       0.7 %     (1,846 )     (2.2 %)     2,493             (3,176 )     (1.8 %)
 
   
     
     
     
     
INCOME BEFORE INCOME TAXES
    9,894       10.8 %     4,423       5.0 %     5,471       123.7 %     9,292       5.3 %
 
   
     
     
     
     
PROVISION FOR INCOME TAXES:
                                                               
 
Current
    4,678       5.1 %     1,600       1.8 %     3,078       192.4 %     2,294       1.3 %
 
Deferred
    235       0.3 %     (314 )     (0.4 %)     549             275       0.2 %
 
   
     
     
     
     
   
Total
    4,913       5.4 %     1,286       1.4 %     3,627       282.0 %     2,569       1.5 %
 
   
     
     
     
     
NET INCOME
    4,981       5.4 %     3,137       3.6 %     1,844       58.8 %     6,723       3.8 %
 
   
     
     
     
     

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    11  


 

(MAKITA LOGO)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

                     

        Yen (millions)
       
        For the six months   For the six months
        ended September 30,   ended September 30,
        2003   2002



COMMON STOCK:
               
 
Beginning balance
    23,803       23,803  
 
   
     
 
 
Ending balance
    23,803       23,803  
 
   
     
 
ADDITIONAL PAID-IN CAPITAL:
               
 
Beginning balance
    45,419       45,419  
 
Gains on sales of treasury stock
    1        
 
   
     
 
 
Ending balance
    45,420       45,419  
 
   
     
 
LEGAL RESERVE AND RETAINED EARNINGS:
               
 
LEGAL RESERVE:
               
   
Beginning balance
    5,669       5,669  
 
   
     
 
   
Ending balance
    5,669       5,669  
 
   
     
 
 
RETAINED EARNINGS:
               
   
Beginning balance
    137,752       133,723  
   
Cash dividends
    (1,314 )     (1,347 )
   
Retirement of treasury stock
    (4,014 )      
   
Net income
    4,981       3,137  
 
   
     
 
   
Ending balance
    137,405       135,513  
 
   
     
 
 
TOTAL OF LEGAL RESERVE AND RETAINED EARNINGS
    143,074       141,182  
 
   
     
 
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
               
 
Beginning balance
    (25,134 )     (16,446 )
 
Adjustment for the period
    1,243       (4,338 )
 
   
     
 
 
Ending balance
    (23,891 )     (20,784 )
 
   
     
 
TREASURY STOCK, at cost:
               
 
Beginning balance
    (5,110 )     (2,229 )
 
Purchases
    (2,179 )     (55 )
 
Retirements and sales
    4,017        
 
   
     
 
 
Ending balance
    (3,272 )     (2,284 )
 
   
     
 
TOTAL SHAREHOLDERS’ EQUITY
    185,134       187,336  
 
   
     
 
DISCLOSURE OF COMPREHENSIVE INCOME (LOSS):
               
 
Net income for the period
    4,981       3,137  
 
Other comprehensive income (loss) for the period, net of tax
    1,243       (4,338 )
 
   
     
 
 
Total comprehensive income (loss) for the period
    6,224       (1,201 )
 
   
     
 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    12  


 

(MAKITA LOGO)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

                 

    Yen (millions)
   
    For the six months   For the six months
    ended September 30,   ended September 30,
    2003   2002



Net cash provided by operating activities
    11,696       13,206  
Net cash used in investing activities
    (4,994 )     (2,931 )
Net cash used in financing activities
    (4,938 )     (6,778 )
Effect of exchange rate changes on cash and cash equivalents
    (638 )     1,806  
 
   
     
 
Net change in cash and cash equivalents
    1,126       5,303  
Cash and cash equivalents, beginning of period
    20,370       15,730  
 
   
     
 
Cash and cash equivalents, end of period
    21,496       21,033  
 
   
     
 

SIGNIFICANT ACCOUNTING POLICIES

1.   Scope of consolidation and equity method

    Consolidated subsidiaries: 40 consolidated subsidiaries

    Major subsidiaries are as follows:

    Makita U.S.A Inc., Makita Werkzeug GmbH (Germany), Makita (U.K.) Ltd., Makita (China) Co., Ltd.,

    Makita (Australia) Pty. Ltd., etc.

2.   Change in scope of consolidation and equity method

    Consolidation: (Newly included) 1: Makita Farramentas, Sociedad Unipersonal, Lda.

3.   Consolidated Accounting Policies (Summary)

    Consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.

  (1)   Marketable and Investment Securities

      The Company conforms with SFAS No.115 “Accounting for Certain Investments in Debt and Equity Securities”.

  (2)   Inventories

      Inventories are mainly stated at the lower of average cost or market. Inventory costs include raw materials, labor and manufacturing overheads.

  (3)   Property, Plant and Equipment and Depreciation

      Depreciation of property, plant and equipment is computed by using the declining-balance method over the estimated useful lives.

  (4)   Income Taxes

      Provision is made currently for income taxes applicable to all items of revenue and expense included in the consolidated financial statements regardless of when such items are taxable or deductible. The Company conforms with SFAS No.109, “Accounting for Income Taxes”.

  (5)   Pension Plans

      The Company conforms with SFAS No.87, “Employer’s Accounting for Pensions”, in accounting for retirement and termination benefit plans.

  (6)   Earnings Per Share

      The Company conforms with SFAS No.128, “Earnings per Share”. SFAS No.128 requires dual presentation of basic and diluted earnings per share.
       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    13  


 

(MAKITA LOGO)

  (7)   Impairment of Long-Lived Assets

      The Company conforms with SFAS No. 144, “Accounting for the Impairment or Disposed of Long-Lived Assets”, effective April 1, 2002.

  (8)   Derivative Financial Instruments

      The Company conforms with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, and amendment of SFAS No. 133.”

  (9)   Use of Estimates in the Preparation of Financial Statements

      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

  (10)   Revenue Recognition

      The Company and consolidated subsidiaries recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred and the title and risk of loss has passed to customers, the sales price is fixed or determinable, and collectibility is reasonably assured, which typically occurs when products are received by customers.
       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    14  


 

(MAKITA LOGO)

OPERATING SEGMENT INFORMATION

Six months ended September 30, 2003

                                                                     

        Yen (millions)
       
                                                        Corporate    
                North           Southeast                   and elimi-   Consoli-
        Japan   America   Europe   Asia   Other   Total   nations   dated

Sales:
                                                               
 
(1) External customers
    23,705       22,162       32,327       3,588       9,975       91,757             91,757  
 
(2) Intersegment
    18,947       1,816       2,357       10,242       41       33,403       (33,403 )      
 
   
     
     
     
     
     
     
     
 
   
Total
    42,652       23,978       34,684       13,830       10,016       125,160       (33,403 )     91,757  
 
   
     
     
     
     
     
     
     
 
Operating expenses
    39,867       24,022       31,260       12,374       9,390       116,913       (34,403 )     82,510  
Operating income
    2,785       (44 )     3,424       1,456       626       8,247       1,000       9,247  

 
Six months ended September 30, 2002
 

        Yen (millions)
       
                                                        Corporate    
                North           Southeast                   and elimi-   Consoli-
        Japan   America   Europe   Asia   Other   Total   nations   dated

Sales:
                                                               
 
(1) External customers
    23,678       24,280       26,997       3,442       9,251       87,648             87,648  
 
(2) Intersegment
    19,317       1,714       2,471       9,373       45       32,920       (32,920 )      
 
   
     
     
     
     
     
     
     
 
   
Total
    42,995       25,994       29,468       12,815       9,296       120,568       (32,920 )     87,648  
 
   
     
     
     
     
     
     
     
 
Operating expenses
    40,353       26,694       27,915       11,435       8,777       115,174       (33,795 )     81,379  
Operating income
    2,642       (700 )     1,553       1,380       519       5,394       875       6,269  

 
Year ended March 31, 2003
 

        Yen (millions)
       
                                                        Corporate    
                North           Southeast                   and elimi-   Consoli-
        Japan   America   Europe   Asia   Other   Total   nations   dated

Sales:
                                                               
 
(1) External customers
    46,896       45,807       57,995       7,013       17,892       175,603             175,603  
 
(2) Intersegment
    39,943       3,898       5,227       18,775       82       67,925       (67,925 )      
 
   
     
     
     
     
     
     
     
 
   
Total
    86,839       49,705       63,222       25,788       17,974       243,528       (67,925 )     175,603  
 
   
     
     
     
     
     
     
     
 
Operating expenses
    82,913       49,436       59,343       23,388       17,316       232,396       (69,261 )     163,135  
Operating income
    3,926       269       3,879       2,400       658       11,132       1,336       12,468  

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    15  


 

(MAKITA LOGO)

MARKETABLE SECURITIES AND INVESTMENT SECURITIES

1.   Available-for-sale securities
As of September 30, 2003

                                   

      Yen (millions)
     
              Gross unrealized holding    
      Cost  
  Fair value
          Gains   Losses    

Marketable securities:
                               
 
Equity securities
    1,358       788             2,146  
 
Debt securities
    5,502       87       128       5,461  
 
Funds in trusts and investments in trusts
    31,313       631       13       31,931  
 
   
     
     
     
 
 
    38,173       1,506       141       39,538  
 
   
     
     
     
 
Investment securities:
                               
 
Equity securities
    8,301       5,055       20       13,336  
 
Debt securities
    2,955       62             3,017  
 
Investments in trusts
    893       63             956  
 
   
     
     
     
 
 
    12,149       5,180       20       17,309  
 
   
     
     
     
 

 
As of March 31, 2003
 

      Yen (millions)
     
              Gross Unrealized Holding    
      Cost  
  Fair value
          Gains   Losses    

Marketable securities:
                               
 
Equity securities
    1,582       259       78       1,763  
 
Debt securities
    7,797       125       1       7,921  
 
Funds in trusts and investments in trusts
    29,491       44       26       29,509  
 
   
     
     
     
 
 
    38,870       428       105       39,193  
 
   
     
     
     
 
Investment securities:
                               
 
Equity securities
    8,783       1,570       490       9,863  
 
Debt securities
    2,954       52             3,006  
 
Investments in trusts
    922       64             986  
 
   
     
     
     
 
 
    12,659       1,686       490       13,855  
 
   
     
     
     
 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    16  


 

(MAKITA LOGO)

2.   Held-to-maturity securities
As of September 30, 2003

                                     

        Yen (millions)
       
                Gross Unrealized Holding    
        Cost  
  Fair value
            Gains   Losses    

Marketable securities:
                               
 
Debt securities
    363       0             363  
 
   
     
     
     
 
Investment securities:
                               
 
Debt securities
    12,873       1       9       12,865  
 
   
     
     
     
 

 
As of March 31, 2003
 

        Yen (millions)
       
                Gross Unrealized Holding    
        Cost  
  Fair value
            Gains   Losses    

Investment securities:
                               
 
Debt securities
    5,487       1       1       5,487  
 
   
     
     
     
 

DERIVATIVES TRANSACTIONS

Figures for derivatives transactions are omitted because Makita discloses financial information under electronic declaration process in accordance with Article 27-30-6 of the Securities and Exchange Law in Japan.

ESTIMATED RETIREMENT AND TERMINATION ALLOWANCES

The Company and certain of its consolidated subsidiaries have various contributory and noncontributory employees’ benefit plans covering substantially all of the employees. The Company provides retirement and termination allowances based on projections of the values of employee benefit payment liabilities and annuity fund assets at the end of the fiscal year.

The domestic plan represents substantially the entire pension obligation as of September 30, 2003. The discount rate and expected long-term rate of return on plan assets assumed to determine the pension obligation for the Company relevant to the domestic plan were 2.0% and 2.0% for the half year ended September 30, 2003, 2.0% and 2.5% for the year ended March 31, 2003 and 2.5 % and 2.5 % for the half year ended September 30, 2002, respectively.

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    17  


 

(MAKITA LOGO)

NET SALES BY PRODUCT CATEGORIES

                                                   

      Yen (millions)
     
      For the six   For the six   For the fiscal
      months ended   months ended   year ended
      September 30,   September 30,   March 31,
      2003   2002   2003



      (Amount)   (%)   (Amount)   (%)   (Amount)   (%)
Finished goods
    76,569       83.4 %     73,347       83.7 %     146,847       83.6 %
Parts, repairs and accessories
    15,188       16.6 %     14,301       16.3 %     28,756       16.4 %
 
   
     
     
 
Total net sales
    91,757       100.0 %     87,648       100.0 %     175,603       100.0 %
 
   
     
     

OVERSEAS SALES BY PRODUCT CATEGORIES

                                                   

      Yen (millions)
     
      For the six   For the six   For the fiscal
      months ended   months ended   year ended
      September 30,   September 30,   March 31,
      2003   2002   2003



      (Amount)   (%)   (Amount)   (%)   (Amount)   (%)
Finished goods
    61,773       85.2 %     58,538       85.6 %     117,100       85.6 %
Parts, repairs and accessories
    10,740       14.8 %     9,845       14.4 %     19,722       14.4 %
 
   
     
     
 
Total overseas sales
    72,513       100.0 %     68,383       100.0 %     136,822       100.0 %
 
   
     
     

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    18  


 

(MAKITA LOGO)

EARNINGS PER SHARE

                         

    Yen
 
    As of   As of   As of
    September 30,
2003
  September 30,
2002
  March 31,
2003



Shareholders’ equity per share
    1,286.27       1,252.23       1,249.59  

                           

      Yen
     
      For the six months   For the six months   For the fiscal year
      ended September 30,   ended September 30,   ended March 31,
      2003   2002   2003



Earnings per share:
                       
 
Basic
    34.25       20.96       45.29  
 
Diluted
    33.32       20.48       44.20  

A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations is as follows:

                           

      Yen (million)
     
      For the six months   For the six months   For the fiscal year
      ended September 30,   ended September 30,   ended March 31,
      2003   2002   2003



Net income available to common shareholders
    4,981       3,137       6,723  
Effect of dilutive securities:
                       
 
1.6% unsecured convertible bonds, due 2003
          8       13  
 
1.5% unsecured convertible bonds, due 2005
    57       56       115  
 
   
     
     
 
Diluted net income
    5,038       3,201       6,851  
 
   
     
     
 
 
      Shares
     
Weighted average common shares outstanding
    145,451,532       149,644,939       148,444,219  
Dilutive effect of:
                       
 
1.6% unsecured convertible bonds, due 2003
          927,205       828,134  
 
1.5% unsecured convertible bonds, due 2005
    5,749,811       5,749,811       5,749,811  
 
   
     
     
 
Diluted common shares outstanding
    151,201,343       156,321,955       155,022,164  
 
   
     
     
 

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    19  


 

(MAKITA LOGO)

SUPPORT DOCUMENTATION

1.   Results and forecast

                                                                   

      Yen (millions)
     
      For the six months   For the six months   For the fiscal year   For the fiscal year
      ended September 30,   ended September 30,   ended March 31,   ending March 31,
      2002   2003   2003   2004
      (Results)   (Results)   (Results)   (Forecast)
     
 
 
 
      (Amount)   (%)   (Amount)   (%)   (Amount)   (%)   (Amount)   (%)
Net sales
    87,648       7.2 %     91,757       4.7 %     175,603       5.7 %     178,800       1.8 %
 
Domestic
    19,265       (4.2 )%     19,244       (0.1 )%     38,781       (1.8 )%     38,700       (0.2 )%
 
Overseas
    68,383       10.9 %     72,513       6.0 %     136,822       8.0 %     140,100       2.4 %
Operating income
    6,269       63.9 %     9,247       47.5 %     12,468       112.3 %     15,400       23.5 %
Income before income taxes
    4,423       108.3 %     9,894       123.7 %     9,292       173.1 %     15,600       67.9 %
Net income
    3,137       764.2 %     4,981       58.8 %     6,723       4,954.9 %     7,800       16.0 %
EPS (Yen)
  20.96   34.25   45.29   54.19
Employees
  8,242   8,471   8,344  

2.   Net sales by geographic area

                                   

      Yen (millions)
     
      For the six months   For the six months
      ended September 30,   ended September 30,
      2002   2003
      (Results)   (Results)


      (Amount)   (%)   (Amount)   (%)
Japan
    19,265       (4.2 )%     19,244       (0.1 )%
North America
    24,185       (1.9 )%     22,085       (8.7 )%
Europe
    26,876       17.7 %     32,085       19.4 %
Southeast Asia
    7,181       27.1 %     7,314       1.9 %
Other regions
    10,141       18.8 %     11,029       8.8 %
 
Total
    87,648       7.2 %     91,757       4.7 %

3.   Exchange rates

                         

    Yen
   
    For the six months   For the six months   For the six months
    ended September 30,   ended September 30,   ending March 31,
    2002   2003   2004
    (Results)   (Results)   (Forecast)
   
 
 
Yen/U.S. Dollar
    123.07       118.07       108  
Yen/Euro
    116.92       133.51       126  

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    20  


 

(MAKITA LOGO)

4.   Sales growth in local currency basis (major countries)

         

    For the six
    months ended
    September 30,
    2003
    (Results)
   
U.S.A.
    (6.2 %)
Germany
    3.1 %
U.K.
    8.6 %
France
    3.5 %
China
    13.8 %
Australia
    7.2 %

5.   Production ratio (unit basis)

                 

    For the six   For the six
    months ended   months ended
    September 30,   September 30,
    2002   2003
    (Results)   (Results)
   
 
Domestic
    37.9 %     34.7 %
Overseas
    62.1 %     65.3 %

6.   Capital expenditures, depreciation and amortization, and R&D cost

                         

    Yen (millions)
   
    For the six   For the six   For the fiscal
    months ended   months ended   year ending
    September 30,   September 30,   March 31,
    2002   2003   2004
    (Results)   (Results)   (Forecast)
   
 
 
Capital expenditures
    3,021       2,270       4,500  
Depreciation and amortization
    4,319       4,330       9,000  
R&D cost
    1,910       1,954       3,900  

7.   Cash flow

                 

    Yen (millions)
   
    For the six   For the six
    months ended   months ended
    September 30,   September 30,
    2002   2003
    (Results)   (Results)
   
 
Net cash provided by operating activities
    13,206       11,696  
Net cash used in investing activities
    (2,931 )     (4,994 )
Net cash used in financing activities
    (6,778 )     (4,938 )

       

English Translation of “KESSAN TANSHIN” originally issued in Japanese language
    21