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 January 2015

 

 

ORIX Corporation

(Translation of Registrant’s Name into English)

 

 

World Trade Center Bldg., 2-4-1 Hamamatsu-cho, Minato-Ku,

Tokyo, 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

 

 

 


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Table of Documents Filed

 

         Page

1.

  ORIX’s Third Quarter Consolidated Financial Results (April 1, 2014 – December 31, 2014) filed with the Tokyo Stock Exchange on Thursday January 29, 2015.   


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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: January 29, 2015   By  

/s/ Haruyuki Urata

    Haruyuki Urata
    Director
    Deputy President and Chief Financial Officer
    ORIX Corporation


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Consolidated Financial Results

April 1, 2014 – December 31, 2014

 

 

January 29, 2015

In preparing its consolidated financial information, ORIX Corporation and its subsidiaries have complied with accounting principles generally accepted in the United States of America.

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 purposes 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:

Investor Relations

ORIX Corporation

World Trade Center Building, 2-4-1 Hamamatsucho, Minato-ku, Tokyo 105-6135

JAPAN

Tel: +81-3-3435-3121 Fax: +81-3-3435-3154

E-mail: chun_yang@orix.co.jp


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Consolidated Financial Results from April 1, 2014 to December 31, 2014

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

 

Corporate Name:    ORIX Corporation
Listed Exchanges:    Tokyo Stock Exchange (Securities No. 8591)
   New York Stock Exchange (Trading Symbol : IX)
Head Office:    Tokyo JAPAN
   Tel: +81-3-3435-3121
   (URL http://www.orix.co.jp/grp/en/ir/index.html)

1. Performance Highlights as of and for the Nine Months Ended December 31, 2014

(1) Performance Highlights - Operating Results (Unaudited)

 

             (millions of yen)*1  
                                            Net Income         
                                            Attributable to         
                                            ORIX         
     Total      Year-on-Year     Operating      Year-on-Year     Income before      Year-on-Year     Corporation      Year-on-Year  
     Revenues      Change     Income      Change     Income Taxes*2      Change     Shareholders      Change  

December 31, 2014

     1,574,020         67.6     211,165         32.5     281,667         57.3     186,724         58.0

December 31, 2013

     938,886         20.7     159,342         31.9     179,111         32.9     118,177         31.1

“Comprehensive Income Attributable to ORIX Corporation Shareholders” was ¥220,909 million for the nine months ended December 31, 2014 (year-on-year change was a 44.2% increase) and ¥153,181 million for the nine months ended December 31, 2013 (year-on-year change was a 41.3% increase).

 

     Basic
Earnings Per Share
     Diluted
Earnings Per Share
 

December 31, 2014

     142.61         142.41   

December 31, 2013

     93.97         90.69   

 

*Note 1:    Unless otherwise stated, all amounts shown herein are in millions of Japanese yen, 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 and Discontinued Operations.”

(2) Performance Highlights - Financial Position (Unaudited)

 

     Total Assets      Total
Equity
     Shareholders’
Equity
     Shareholders’
Equity Ratio
 

December 31, 2014

     11,379,485         2,302,644         2,106,393         18.5

March 31, 2014

     9,069,392         2,095,178         1,918,740         21.2

 

*Note 3:    “Shareholders’ Equity” refers to “Total ORIX Corporation Shareholders’ Equity.”
   “Shareholders’ Equity Ratio” is the ratio of “Total ORIX Corporation Shareholders’ Equity” to “Total Assets.”

2. Dividends (Unaudited)

 

     Dividends Per Share

March 31, 2014

   23.00

March 31, 2015

   33.00 (forecast)

3. Targets for the Year Ending March 31, 2015 (Unaudited)

 

            Year-on-Year      Net Income Attributable to      Year-on-Year     Basic  

Fiscal Year

  

Total Revenues

     Change      ORIX Corporation Shareholders      Change     Earnings Per Share  

March 31, 2015

     2,100,000         59.3%         215,000         15.1     164.23   

 

*Note 4:    “Operating Income” and “Income before Income Taxes and Discontinued Operations” are not disclosed as it is difficult to forecast “Discontinued operations, net of applicable tax effect.”

4. Other Information

 

(1) Changes in Significant Consolidated Subsidiaries    Yes ( x )    No (    )

Addition - ( Hartford Life Insurance K.K. )                    Exclusion - None (                                                 )

 

*Note 5:    For details, please see “(1) Changes in Significant Consolidated Subsidiaries” in Section 2 “Others” on page 8.

 

(2) Adoption of Simplified Accounting Method    Yes (    )    No ( x )
(3) Changes in Accounting Principles, Procedures and Disclosures   

1. Changes due to adoptions of new accounting standards

   Yes (    )    No ( x )

2. Other than those above

   Yes ( x )    No (    )

 

*Note 6:    For details, please see “(3) Changes in Accounting Principles, Procedures and Disclosures” in Section 2 “Others” on page 8.

(4) Number of Issued Shares (Ordinary Shares)

1. The number of issued shares, including treasury stock, was 1,323,639,628 as of December 31, 2014, and 1,322,777,628 as of March 31, 2014.

2. The number of treasury stock shares was 12,905,567 as of December 31, 2014, and 13,333,334 as of March 31, 2014.

3. The average number of outstanding shares was 1,309,295,023 for the nine months ended December 31, 2014, and 1,257,563,252 for the nine months ended December 31, 2013.

The Company’s shares held through the Trust for Officer’s Compensation Board Incentive Plan (2,153,800 shares) are not included in number of treasury stock shares as of the end of the period, but are included in the average number of shares outstanding as treasury stock shares that are deducted from the basis of the calculation of equity per share, basic and diluted earnings per share.

 

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1. Summary of Consolidated Financial Results

(1) Analysis of Financial Highlights

Financial Results for the Nine-Month Period Ended December 31, 2014

 

             Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change      Year on
Year
Change
 

Total Revenues

  (millions of yen)      938,886         1,574,020         635,134         68

Total Expenses

  (millions of yen)      779,544         1,362,855         583,311         75

Income Before Income Taxes and Discontinued Operations

  (millions of yen)      179,111         281,667         102,556         57

Net Income Attributable to ORIX Corporation Shareholders

  (millions of yen)      118,177         186,724         68,547         58

Earnings Per Share

             
 

(Basic)

 

(yen)

     93.97         142.61         48.64         52
 

(Diluted)

 

(yen)

     90.69         142.41         51.72         57

ROE (Annualized)

 

(%)

     9.0         12.4         3.4         —     

ROA (Annualized)

 

(%)

     1.84         2.44         0.60         —     

 

Note:   ROE is the ratio of Net Income Attributable to ORIX Corporation Shareholders for the period to average ORIX Corporation Shareholders’ Equity.

Economic Environment

In the United States, with recovery in consumer spending and improvement in the job market, quantitative easing program has ended, and the uncertainty now centers on the timing of the Fed’s interest rate increases. Meanwhile, with new monetary easing measures being introduced in Japan and Europe, we are seeing dissimilarities among the monetary policies adopted by different countries.

In Japan, capital expenditures are recovering and companies that benefit from weaker yen are achieving record profits. Meanwhile, consumer spending is losing momentum following the consumption tax hike that went into effect in April 2014, and there are concerns that the recent negative GDP growth rate result may linger. Furthermore, with impacts of the Chinese economy slowing down and the sharp decline in oil prices, economic environments both inside and outside of Japan continue to exhibit signs of instability and imbalance.

Overview of Business Performance (April 1, 2014 to December 31, 2014)

Total revenues for the nine-month period ended December 31, 2014 (hereinafter, “the third consolidated period”) increased 68% to ¥1,574,020 million compared to ¥938,886 million during the same period of the previous fiscal year. In addition to an increase in operating leases revenues, which resulted principally from expansion in the domestic auto leasing business, life insurance premiums and related investment income also increased as a result of the recognition of investment income from underlying investments related to variable annuity and variable life insurance contracts in connection with the consolidation of Hartford Life Insurance K.K. (hereinafter, “HLIKK”), which we acquired on July 1, 2014. In addition, services income increased due to contributions from Robeco Groep N.V. (hereinafter, “Robeco”), which was acquired on July 1, 2013, and from other newly acquired and consolidated subsidiaries acquired as part of our private equity investments, as well as expansion in the environment and energy-related business. Sales of goods and real estate increased primarily due to contributions from newly acquired and consolidated subsidiaries and DAIKYO INCORPORATED (hereinafter, “DAIKYO”) which became a consolidated subsidiary on February 27, 2014. Furthermore, gains on investment securities and dividends increased due to the sale of shares of Monex Group Inc. On the other hand, finance revenues decreased compared to the same period of the previous fiscal year due to reduced gains from sales of installment loans and decreased yield in the installment loan business.

Total expenses increased 75% to ¥1,362,855 million compared to ¥779,544 million during the same period of the previous fiscal year. In line with the abovementioned revenue increases, costs of operating leases, life insurance costs, costs of goods and real estate sold and services expense also increased. Selling, general and administrative expenses also increased due in part to an increase in the number of consolidated subsidiaries and strong performance of fee business in the United States. Meanwhile, interest expense decreased compared to the same period of the previous fiscal year due to a decrease in funding costs.

Gains on sales of subsidiaries and affiliates and liquidation losses, net increased compared to the same period of the previous fiscal year primarily due to the recognition of a gain on sale of partial shares of STX Energy Co., Ltd. (presently GS E&R Corp., hereinafter, “STX Energy”), which as a result of the sale became an equity method affiliate from a consolidated subsidiary. In addition, the HLIKK consolidation resulted in a bargain purchase gain in an amount representing the excess of fair value of the net assets acquired over the fair value of the consideration transferred.

 

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As a result of the foregoing, income before income taxes and discontinued operations for the third consolidated period increased 57% to ¥281,667 million compared to ¥179,111 million during the same period of the previous fiscal year, and net income attributable to ORIX Corporation shareholders increased 58% to ¥186,724 million compared to ¥118,177 million during the same period of the previous fiscal year.

Starting from the third consolidated period, we have made changes in line items presented in the consolidated balance sheets and the consolidated statements of income. These changes aim to reflect fairly the changing revenues structure of the company, namely the increasing proportion of revenues from non-finance business, which has resulted from continued diversification in our business activities and also an increase in the number of consolidated subsidiaries acquired in recent years. For instance, in the consolidated statements of income, revenues from transactions previously classified under “other operating revenues” and “revenues from asset management and servicing” have been reclassified into “services income,” a new line item that reflects the actual business transaction more accurately. In the consolidated balance sheets, while there are no major changes, “other operating assets” has been changed to “property under facility operations.” The consolidated financial statements in the previous fiscal year have been adjusted retrospectively to reflect these changes.

Going forward, considering the expected further growth of our non-finance business and further expansion of our investments both in Japan and abroad, we have decided to implement the aforementioned changes in certain line items presented in the consolidated financial statements beginning from the third consolidated period in order to increase usefulness of the consolidated financial statements for users. For details of the changes made to the consolidated financial statements, refer to the note in page 11.

Segment Information

Total segment profits for the third consolidated period increased 50% to ¥279,315 million compared to ¥185,824 million during the same period of the previous fiscal year. The Retail, Overseas Business, and Real Estate segments made significant profit contributions and the Maintenance Leasing and the Corporate Financial Services segments also displayed strong performance, while profits from the Investment and Operation segment decreased compared to the same period of the previous fiscal year.

Historically, when presenting operating results by segments, revenues from inter-segment transactions have not been included in the revenues of each segment. However, in line with the aforementioned changes in line items presented in the consolidated balance sheets and the consolidated statements of income, beginning from the third consolidated period we have decided to include revenues from inter-segment transactions into the revenues of each segment. Same changes have been made to the nine-month period ended December 31, 2013 retrospectively. Such revenues are insignificant in amount for all periods presented.

Segment information for the third consolidated period is as follows:

Corporate Financial Services Segment: Lending, leasing and fee business

 

         Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change      Year on
Year
Change
 

Segment Profits

   (millions of yen)     17,974         18,661         687         4
         As of
March 31,
2014
     As of
December 31,
2014
     Change      Year on
Year
Change
 

Segment Assets

   (millions of yen)     992,078         1,083,163         91,085         9

In Japan, despite the negative impact on consumer spending and housing investment from the consumption tax hike that went into effect in April 2014, capital expenditures are expected to increase due to continued improvement in corporate revenues. We are also seeing an increase in lending by financial institutions to small and medium enterprises (hereinafter, “SMEs”) in addition to large corporations, while the competition in the lending business continues to intensify.

While finance revenues decreased due to decreased average installment loan balances, the contribution from services income increased due primarily to robust fee business including solar panel and life insurance sales to domestic SMEs. As a result, segment profits increased compared to the same period of the previous fiscal year.

 

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Segment assets increased compared to the end of the previous fiscal year due primarily to the inclusion of goodwill and other intangible assets recorded following the consolidation of Yayoi Co., Ltd., which we acquired on December 22, 2014, despite a decrease in investment in direct financing leases and installment loans.

Maintenance Leasing Segment: Automobile leasing and rentals, car sharing and precision measuring equipment and IT-related equipment rentals and leasing

 

        Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change      Year on
Year
Change
 

Segment Profits

  (millions of yen)     30,261         31,578         1,317         4
        As of
March 31,
2014
     As of
December 31,
2014
     Change      Year on
Year
Change
 

Segment Assets

  (millions of yen)     622,009         675,839         53,830         9

The Japanese automobile leasing industry has been experiencing steady recovery in the number of new auto leases in line with Japan’s gradual economic recovery, despite the temporary negative impact of the consumption tax hike that went into effect in April 2014.

Operating leases revenues and finance revenues increased in line with the steady expansion of assets in the auto-business, and costs of operating leases and selling, general and administrative expenses increased in line with such increase in revenues. Segment profits increased compared to the same period of the previous fiscal year with an increase in profits driven by asset growth.

Segment assets increased compared to the end of the previous fiscal year due to steady increases in investment in operating leases and investment in direct financing leases primarily in the auto-business.

Real Estate Segment: Real estate development, rental and financing; facility operation; REIT asset management; and real estate investment and advisory services

 

        Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change     Year on
Year
Change
 

Segment Profits

  (millions of yen)     15,748         22,481         6,733        43
        As of
March 31,
2014
     As of
December 31,
2014
     Change     Year on
Year
Change
 

Segment Assets

  (millions of yen)     962,404         877,763         (84,641     (9 %) 

Office rents and vacancy rates in the Japanese office building market are continuing to show signs of improvement. In the J-REIT market, property acquisitions are increasing, and we are also seeing sales of large-scale real estate and rising sales prices due to increased competition among buyers. Furthermore, large-scale real estate transactions by foreign investors are increasing.

Rental revenues, which are included in operating leases revenues and finance revenues decreased due to a decrease in asset balance. On the other hand, gains on sales of real estate under operating leases, which are included in operating leases revenues, increased. Segment profits increased compared to the same period of the previous fiscal year due to an increase in services income primarily due to solid performance by the facility operation business and increased fees from asset management.

Segment assets decreased compared to the end of the previous fiscal year primarily as a result of sales of rental properties.

 

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Investment and Operation Segment: Environment and energy-related business, principal investment, and loan servicing (asset recovery)

 

         Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change     Year on
Year
Change
 

Segment Profits

   (millions of yen)     29,855         25,239         (4,616     (15 %) 
         As of
March 31,
2014
     As of
December 31,
2014
     Change     Year on
Year
Change
 

Segment Assets

   (millions of yen)     565,740         604,856         39,116        7

In the Japanese environment and energy-related business, even though the government is reassessing the renewable energy purchase program, the significance of renewable energy in the mid-long term is on the rise, with investment targets expanding beyond solar power generation projects to include wind and geothermal power generation projects. In the capital markets, the fiscal year ended March 31, 2014 marked the fourth consecutive year of increase in the number of initial public offerings. This favorable capital markets environment is continuing into this fiscal year.

Segment profits decreased compared to the same period of the previous fiscal year due to a decrease in profit contribution from the loan servicing business and from DAIKYO. This decrease offsets increases in services income and sales of goods and real estate, both resulted from solid profit contributions from the newly acquired subsidiaries, the environment and energy-related business, and consolidation of DAIKYO.

Segment assets increased compared to the end of the previous fiscal year due to an increase in assets contributed by the newly acquired subsidiaries and also expansion in the environment and energy-related business, offsetting a decrease in installment loans in the loan servicing business.

Retail Segment: Life insurance, banking and the card loan business

 

         Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change      Year on
Year
Change
 

Segment Profits

   (millions of yen)     39,622         96,570         56,948         144
         As of
March 31,
2014
     As of
December 31,
2014
     Change      Year on
Year
Change
 

Segment Assets

   (millions of yen)     2,166,986         3,771,020         1,604,034         74

Although the life insurance business is being affected by macroeconomic factors such as domestic population decline, we are seeing increasing numbers of companies developing new products in response to the rising demand for medical insurance. In the consumer finance sector, loan demand is increasing due to improved consumer confidence resulting from Japan’s economic recovery, and consumer finance providers are enhancing their marketing activities accordingly.

Segment profits increased significantly compared to the same period of the previous fiscal year due to the recognition of gain on sale of shares of Monex Group Inc. and a bargain purchase gain resulting from the acquisition of HLIKK on July 1, 2014. In addition, an increase in finance revenues in the banking business and an increase in revenues driven by growth in the number of policies in force in the life insurance business also contributed to higher segment profits.

Segment assets increased significantly compared to the end of the previous fiscal year as a result of an increase in investment in securities being held by HLIKK which was acquired on July 1, 2014 in addition to an increase in assets in the banking business.

 

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Overseas Business Segment: Leasing, lending, investment in bonds, investment banking, asset management and ship- and aircraft-related operations

 

         Nine-month
period ended
December 31,
2013
     Nine-month
period ended
December 31,
2014
     Change      Year on
Year
Change
 

Segment Profits

   (millions of yen)     52,364         84,786         32,422         62
         As of
March 31,
2014
     As of
December 31,
2014
     Change      Year on
Year
Change
 

Segment Assets

   (millions of yen)     1,972,138         2,268,578         296,440         15

In the United States, with recovery in consumer spending and improvement in the job market, quantitative easing has ended, and uncertainty now centers on the timing of the Fed’s interest rate increase. Meanwhile, with new monetary easing measures being introduced in Europe, we are seeing dissimilarities among different countries’ monetary policies. Furthermore, with impacts of the Chinese economy slowing down and the sharp decline in oil prices, economic environments in each country are exhibiting signs of increased instability and imbalance.

Services income increased due to fee revenues contributed by business operations in the United States and by the asset management business of Robeco, which we acquired on July 1, 2013. Furthermore, we recognized a gain on sale of partial shares of STX Energy, which as a result of the sale became an equity method affiliate from a consolidated subsidiary. Segment profits increased significantly compared to the same period of the previous fiscal year, offsetting an increase in selling, general, and administrative expenses in line with the increase in revenues.

Segment assets increased compared to the end of the previous fiscal year due to increases in installment loans and investment in securities in the United States despite a decrease in property under facility operations due to sale of partial shares of STX Energy, which as a result of the sale became an equity method affiliate from a consolidated subsidiary.

(2) Qualitative Information Regarding Consolidated Financial Condition

Financial Condition

 

          As of
March 31,
2014
     As of
December 31,
2014
     Change      Year on
Year
Change
 

Total Assets

   (millions of yen)      9,069,392         11,379,485         2,310,093         25

(Segment Assets)

        7,281,355         9,281,219         1,999,864         27

Total Liabilities

   (millions of yen)      6,921,037         9,010,737         2,089,700         30

(Long- and Short-term Debt)

        4,168,465         4,293,914         125,449         3

(Deposits)

        1,206,413         1,250,073         43,660         4

Shareholders’ Equity

   (millions of yen)      1,918,740         2,106,393         187,653         10

Shareholders’ Equity Per Share

   (yen)      1,465.31         1,609.68         144.37         10

 

Note:   Shareholders’ Equity refers to ORIX Corporation Shareholders’ Equity based on US-GAAP. Shareholders’ Equity Per Share is calculated using total ORIX Corporation Shareholders’ Equity.

Total assets increased 25% to ¥11,379,485 million compared to ¥9,069,392 million at the end of the previous fiscal year. Investment in securities and other assets increased in conjunction with the acquisition of HLIKK. In addition, installment loans increased primarily in the United States. Meanwhile, investment in operating leases decreased due to sales of rental properties and aircraft and property under facility operations decreased as a result of STX Energy changing from a consolidated subsidiary to an equity-method affiliate. Segment assets increased 27% compared to the end of the previous fiscal year to ¥9,281,219 million.

We manage the balance of interest-bearing liabilities at an appropriate level taking into account the condition of assets and liquidity on-hand as well as the domestic and overseas financial environment. As a result, long-term debt and deposits increased compared to the end of the previous fiscal year. In addition, policy liabilities and policy account balances for variable annuity and variable life insurance contracts increased in connection with the consolidation of HLIKK.

Shareholders’ equity increased 10% to ¥2,106,393 million compared to the end of the previous fiscal year primarily due to an increase in retained earnings.

 

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(3) Qualitative Information Regarding Targets for Consolidated Financial Results

Financial Highlights for the Fiscal Year Ending March 31, 2015

In the third consolidated period, considering the significant increases in total revenues and net income attributable to ORIX Corporation shareholders compared to the same period in the previous fiscal year, and both of which have reached over 80% progress towards the annual targets, we have decided to revise the consolidated full year target for the fiscal year ending March 31, 2015.

The initial target for total revenues of ¥1,800,000 million (up 36.5% year on year) announced at the beginning of this fiscal year is revised upward by ¥300,000 million to ¥2,100,000 million. The initial target for net income attributable to ORIX Corporation shareholders of ¥210,000 million (up 12.4 % year on year) announced at the beginning of this fiscal year is revised upward by ¥5,000 million to ¥215,000 million.

The reasons for the upward revision of full year targets are primarily attributed to the greater than expected revenue contributions from Robeco, HLIKK, and other consolidated subsidiaries newly acquired. Other factors include the large gains on sales of securities resulted during the second consolidated period, bargain purchase gains resulted in the consolidation of HLIKK, and also solid performances by each segment in the third consolidated period.

The Corporate Financial Services segment aims to further expand its customer base and increase small-sized quality assets by strengthening cooperation with the Group companies. At the same time, the segment aims to accelerate the “Finance + Services” strategy through the expansion of fee revenues by providing products and services that meet customer needs, including environment and energy-related demands. Furthermore, we anticipate the Japanese government’s growth strategy will open up business opportunities in new areas, and the segment aims to actively embrace any such opportunities.

The Maintenance Leasing segment aims to increase new business volume and expand high value-added services in the automobile business and capture demand in growth areas and expand peripheral services in the rental business. The segment aims to achieve stable profits from its existing businesses, and at the same time, aims to further expand its market share and develop new markets in both the automobile and rental businesses.

The Real Estate segment aims to enhance its stable revenue base by promoting its facility operation and asset management businesses while continuing to turnover assets by taking advantage of the favorable business environment.

The Investment and Operation segment aims to grow profits through the expansion of its environment and energy-related business, promotion of principal investments both in Japan and overseas, and pursuit of revenue opportunities by capitalizing on its loan servicing expertise. In particular, in the renewable energy field, the segment is considering expanding its investment targets to include businesses, including geothermal and wind power generation in addition to continuing its focus on sales of solar panels and mega-solar business.

The Retail segment aims to increase card loan balances via the consolidated management of ORIX Bank and ORIX Credit. Additionally, the segment aims to expand the scale of the life insurance business by enhancing the agency network and increasing sales of first sector products in addition to the third sector products.

The Overseas Business segment aims to grow profits through enhancement of its fee business in the United States and expansion of its leasing asset balance and further business diversification in Asia. In addition, the segment seeks to strengthen global business base and to increase the Group’s services income by expanding Robeco’s AUM.

Although forward-looking statements in this document such as forecasts are attributable to current information available to ORIX Corporation and are based on assumptions deemed rational by ORIX Corporation, actual financial results may differ materially due to various factors. Therefore, readers are urged not to place undue reliance on these figures and predictions.

Various factors that could cause these figures and predictions to differ materially include, but are not limited to, those described under “Risk Factors” in ORIX Corporation’s annual report on the Form 20-F for the fiscal year ended March 31, 2014, submitted to the U.S. Securities and Exchange Commission.

 

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2. Others

(1) Changes in Significant Consolidated Subsidiaries

On July 1, 2014, ORIX Life Insurance Corporation (hereinafter, “ORIX Life Insurance”), a wholly owned subsidiary of the Company, completed the acquisition of the entire issued shares of Hartford Life Insurance K.K. (Head office: Minato-ku, Tokyo, Japan, Business description: Life insurance business and reinsurance business, etc.), from The Hartford Life, Inc. (Head office: Simsbury, Connecticut, U.S.A.), a wholly owned second-tier subsidiary of The Hartford Financial Services Group, Inc. in order to enhance ORIX Life Insurance’s capital strength and improve the soundness of its operations with the aim of accelerating its future growth. As a result, HLIKK has become a consolidated subsidiary of the Company.

(2) Adoption of Simplified Accounting Method

There is no corresponding item.

(3) Changes in Accounting Principles, Procedures and Disclosures

In April 2014, Accounting Standards Update 2014-08 (“Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”—ASC 205 (“Presentation of Financial Statements”) and ASC 360 (“Property, Plant, and Equipment”)) was issued. This Update requires an entity to report a disposal or a classification as held for sale of a component of an entity or a group of components of an entity in discontinued operations if it represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The Company and its subsidiaries early adopted this Update on April 1, 2014.

In accordance with this Update, the Company and its subsidiaries report a disposal of a component or a group of components of the Company and its subsidiaries in discontinued operations if the disposal represents a strategic shift which has (or will have) a major effect on the company and its subsidiaries’ operations and financial results when the component or group of components is disposed by sale or classified as held for sale on or after April 1, 2014. The adoption did not have a material effect on the Company and its subsidiaries’ results of operations or financial position.

This Update does not apply to a disposal or a classification as held for sale of a component or a group of components of the Company and its subsidiaries which have previously been reported in the financial statements. Accordingly, during the nine months ended December 31, 2014, the Company and its subsidiaries continue to report gains on sales and the results of operations of subsidiaries and business units, which was classified as held for sale at March 31, 2014, as income from discontinued operations in the accompanying consolidated statements of income in accordance with ASC 205-20 prior to the early adoption of the amendments.

 

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3. Financial Information

(1) Condensed Consolidated Balance Sheets

(As of March 31, 2014 and December 31, 2014)

(Unaudited)

 

           (millions of yen)  

Assets

   March 31,
2014
    December 31,
2014
 

Cash and Cash Equivalents

     827,299        784,208   

Restricted Cash

     86,690        100,041   

Investment in Direct Financing Leases

     1,094,073        1,189,905   

Installment Loans

     2,315,555        2,443,419   

(The amounts of ¥12,631 million as of March 31, 2014 and ¥8,958 million as of December 31, 2014 are measured at fair value by electing the fair value option under ASC 825.)

    

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

     (84,796     (80,286

Investment in Operating Leases

     1,375,686        1,347,493   

Investment in Securities

     1,214,576        2,891,647   

(The amounts of ¥11,433 million as of March 31, 2014 and ¥19,400 million as of December 31, 2014 are measured at fair value by electing the fair value option under ASC 825.)

    

Property under Facility Operations

     295,863        259,850   

Investment in Affiliates

     314,300        397,102   

Trade Notes, Accounts and Other Receivable

     180,466        243,861   

Inventories

     136,105        131,971   

Office Facilities

     126,397        128,837   

Other Assets

     1,187,178        1,541,437   

(The amount of ¥44,715 million as of December 31, 2014 is measured at fair value by electing the fair value option under ASC 825.)

    
  

 

 

   

 

 

 

Total Assets

     9,069,392        11,379,485   
  

 

 

   

 

 

 

Liabilities and Equity

            

Short-Term Debt

     309,591        308,061   

Deposits

     1,206,413        1,250,073   

Trade Notes, Accounts and Other Payable

     275,451        278,570   

Policy Liabilities and Policy Account Balances

     454,436        2,256,297   

(The amount of ¥1,439,345 million as of December 31, 2014 is measured at fair value by electing the fair value option under ASC 825.)

    

Current and Deferred Income Taxes

     299,509        346,642   

Long-Term Debt

     3,858,874        3,985,853   

Other Liabilities

     516,763        585,241   
  

 

 

   

 

 

 

Total Liabilities

     6,921,037        9,010,737   
  

 

 

   

 

 

 

Redeemable Noncontrolling Interests

     53,177        66,104   
  

 

 

   

 

 

 

Commitments and Contingent Liabilities

    

Common Stock

     219,546        220,051   

Additional Paid-in Capital

     255,449        254,810   

Retained Earnings

     1,467,602        1,623,764   

Accumulated Other Comprehensive Income

     2        34,283   

Treasury Stock, at Cost

     (23,859     (26,515
  

 

 

   

 

 

 

Total ORIX Corporation Shareholders’ Equity

     1,918,740        2,106,393   
  

 

 

   

 

 

 

Noncontrolling Interests

     176,438        196,251   
  

 

 

   

 

 

 

Total Equity

     2,095,178        2,302,644   
  

 

 

   

 

 

 

Total Liabilities and Equity

     9,069,392        11,379,485   
  

 

 

   

 

 

 
     March 31,
2014
    December 31,
2014
 

Accumulated Other Comprehensive Income (Loss)

    

Net unrealized gains on investment in securities

     38,651        44,277   

Defined benefit pension plans

     (6,228     (18,308

Foreign currency translation adjustments

     (31,987     9,575   

Net unrealized losses on derivative instruments

     (434     (1,261
  

 

 

   

 

 

 
     2        34,283   
  

 

 

   

 

 

 

 

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(2) Condensed Consolidated Statements of Income

(For the Nine Months Ended December 31, 2013 and 2014)

(Unaudited)

 

     (millions of yen)  
     Nine Months
ended December 31,
2013
    Nine Months
ended December 31,
2014
 

Revenues :

    

Finance revenues

     146,750        139,328   

Gains on investment securities and dividends

     19,431        37,955   

Operating leases

     248,937        278,224   

Life insurance premiums and related investment income

     112,954        276,112   

Sales of goods and real estate

     82,755        294,676   

Services income

     328,059        547,725   
  

 

 

   

 

 

 

Total Revenues

     938,886        1,574,020   
  

 

 

   

 

 

 

Expenses :

    

Interest expense

     63,391        54,856   

Costs of operating leases

     161,352        177,693   

Life insurance costs

     77,618        225,299   

Costs of goods and real estate sold

     76,358        264,439   

Services expense

     166,843        299,644   

Other (income) and expense, net

     (19,508     8,646   

Selling, general and administrative expenses

     224,511        304,186   

Provision for doubtful receivables and probable loan losses

     9,506        6,264   

Write-downs of long-lived assets

     17,104        15,512   

Write-downs of securities

     2,369        6,316   
  

 

 

   

 

 

 

Total Expenses

     779,544        1,362,855   
  

 

 

   

 

 

 

Operating Income

     159,342        211,165   
  

 

 

   

 

 

 

Equity in Net Income of Affiliates

     15,133        14,194   

Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, Net

     4,636        20,226   

Bargain Purchase Gain

     0        36,082   
  

 

 

   

 

 

 

Income before Income Taxes and Discontinued Operations

     179,111        281,667   
  

 

 

   

 

 

 

Provision for Income Taxes

     62,322        85,504   
  

 

 

   

 

 

 

Income from Continuing Operations

     116,789        196,163   
  

 

 

   

 

 

 

Discontinued Operations:

    

Income from discontinued operations, net

     11,636        463   

Provision for income taxes

     (4,496     (166
  

 

 

   

 

 

 

Discontinued operations, net of applicable tax effect

     7,140        297   
  

 

 

   

 

 

 

Net Income

     123,929        196,460   
  

 

 

   

 

 

 

Net Income Attributable to the Noncontrolling Interests

     3,050        6,392   
  

 

 

   

 

 

 

Net Income Attributable to the Redeemable Noncontrolling Interests

     2,702        3,344   
  

 

 

   

 

 

 

Net Income Attributable to ORIX Corporation Shareholders

     118,177        186,724   
  

 

 

   

 

 

 

 

Note : 1: Pursuant to ASC 205-20 (“Presentation of Financial Statements—Discontinued Operations”), the results of operations which meet the criteria for discontinued operations are reported as a separate component of income, and those related amounts that had been previously reported are reclassified.

 

            2: Pursuant to Accounting Standards Update 2014-08 (“Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”—ASC 205 (“Presentation of Financial Statements”) and ASC 360 (“Property, Plant, and Equipment”)) which was early adopted on April 1, 2014, the results of operations for the nine months ended December 31, 2014 have reflected the adoption of this Update. This Update does not apply to a component or a group of components, which was disposed or classified as held for sale before the adoption date. Therefore in accordance with previous ASC205-20, the results of these operation of subsidiaries and businesses, which were classified as held for sale as of March 31, 2014 are reported as discontinued operations for the nine months ended December 31, 2014.

 

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            3: Certain line items presented in the condensed consolidated balance sheets and the condensed consolidated statements of income have been changed as follows starting from the three months ended December 31, 2014. Corresponding to these changes, the presented amounts in the condensed consolidated balance sheets and the condensed consolidated statements of income for the previous fiscal year have also been reclassified retrospectively to conform to the presentation for the third consolidated period of this fiscal year.

 

     (Condensed Consolidated Balance Sheets)

 

   

“Other Operating Assets” has been changed to “Property under Facility Operations.” Along with this change, a part of the assets has been reclassified into “Other Assets.”

 

   

“Trade Notes, Accounts and Other Receivable” previously included in “Other Receivables” has separately been presented.

 

   

“Time Deposits,” a part of assets previously included in “Other Operating Assets,” a part of assets previously included in “Other Receivables” and “Prepaid Expenses” have been presented as “Other Assets.”

 

   

“Trade Notes, Accounts and Other Payable” previously included in “Trade Notes, Accounts Payable and Other Liabilities” has separately been presented.

 

   

“Accrued Expenses,” “Security Deposits” and certain liabilities previously classified as “Trade Notes, Accounts Payable and Other Liabilities” have been presented as “Other Liabilities.”

 

     (Condensed Consolidated Statements of Income)

 

   

“Direct financing leases” and “Interest on loans and investment securities” have been presented as “Finance revenues.” Certain finance-related revenues previously included in “Other operating revenues” have been included in “Finance revenues.”

 

   

“Brokerage commissions and net gains on investment securities” has been changed to “Gains on investment securities and dividends.”

 

   

“Gains (losses) on sales of real estate under operating leases” has been reclassified and combined into “Operating leases.”

 

   

“Real estate sales” and “Sales of goods” have been reclassified and combined into “Sales of goods and real estate”. “Costs of real estate sales” and “Costs of goods sold” have been reclassified and combined into “Costs of goods and real estate sold.”

 

   

“Revenues from asset management and servicing” and part of the service-related revenues previously classified under “Other operating revenues” have been reclassified into “Services income.” “Expenses from asset management and servicing” and part of service-related expenses previously classified under “Other operating expenses” have been reclassified into “Services expense.”

 

   

“Foreign currency transaction loss (gain), net” and revenues and expenses other than service-related those were previously classified under “Other operating revenues” and “Other operating expenses,” as well as part of expenses previously classified under “Selling, general and administrative expenses,” have been reclassified and combined into “Other (income) and expense, net.”

 

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(3) Condensed Consolidated Statements of Comprehensive Income

(For the Nine Months Ended December 31, 2013 and 2014)

(Unaudited)

 

           (millions of yen)  
     Nine Months
ended December 31,
2013
    Nine Months
ended December 31,
2014
 

Net Income :

     123,929        196,460   
  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax:

    

Net change of unrealized gains on investment in securities

     9,865        6,603   

Net change of defined benefit pension plans

     (492     (13,277

Net change of foreign currency translation adjustments

     39,209        55,877   

Net change of unrealized gains (losses) on derivative instruments

     1,657        (890

Total other comprehensive income

     50,239        48,313   
  

 

 

   

 

 

 

Comprehensive Income

     174,168        244,773   
  

 

 

   

 

 

 

Comprehensive Income Attributable to the Noncontrolling Interests

     13,116        11,139   
  

 

 

   

 

 

 

Comprehensive Income Attributable to the Redeemable Noncontrolling Interests

     7,871        12,725   
  

 

 

   

 

 

 

Comprehensive Income Attributable to ORIX Corporation Shareholders

     153,181        220,909   
  

 

 

   

 

 

 

 

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(4) Assumptions for Going Concern

There is no corresponding item.

(5) Segment Information (Unaudited)

1. Segment Information by Sector

 

                              (millions of yen)  
     Nine Months ended
December 31, 2013
    Nine Months ended
December 31, 2014
     March 31,
2014
     December 31,
2014
 
     Segment
Revenues
    Segment
Profits
    Segment
Revenues
    Segment
Profits
     Segment
Assets
     Segment
Assets
 

Corporate Financial Services

     57,732        17,974        61,069        18,661         992,078         1,083,163   

Maintenance Leasing

     188,759        30,261        198,246        31,578         622,009         675,839   

Real Estate

     153,594        15,748        147,208        22,481         962,404         877,763   

Investment and Operation

     121,356        29,855        428,816        25,239         565,740         604,856   

Retail

     155,429        39,622        335,252        96,570         2,166,986         3,771,020   

Overseas Business

     274,934        52,364        406,545        84,786         1,972,138         2,268,578   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Segment Total

     951,804        185,824        1,577,136        279,315         7,281,355         9,281,219   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Difference between Segment Total and Consolidated Amounts

     (12,918     (6,713     (3,116     2,352         1,788,037         2,098,266   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Consolidated Amounts

     938,886        179,111        1,574,020        281,667         9,069,392         11,379,485   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

Note 1: The Company evaluates the performance of segments based on income before income taxes and discontinued operations, adjusted for results of discontinued operations, net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests before applicable tax effect. Tax expenses are not included in segment profits.

 

Note 2: For certain VIEs that are used for securitization and are consolidated in accordance with ASC 810-10 (“Consolidations”), for which the VIE’s assets can be used only to settle related obligations of those VIEs and the creditors (or beneficial interest holders) do not have recourse to other assets of the Company or its subsidiaries, segment assets are measured based on the amount of the Company and its subsidiaries’ net investments in the VIEs, which is different from the amount of total assets of the VIEs, and accordingly, segment revenues are also measured at a net amount representing the revenues earned on the net investments in the VIEs. Certain gains or losses related to assets and liabilities of consolidated VIEs, which are not ultimately attributable to the Company and its subsidiaries, are excluded from segment profits.

 

Note 3: From the three-month period ended December 31, 2014, inter-segment transactions have been included in segment revenues, and eliminations of inter-segment transactions have been included in difference between segment total and consolidated amounts. As a result of the foregoing, we have reclassified the segment information for the previous third consolidated period.

2. Geographic Information

 

                         (millions of yen)  
     Nine Months Ended December 31, 2013  
     Japan      Americas*2      Other*3      Difference between
Geographic Total and
Consolidated Amounts
    Consolidated
Amounts
 

Total Revenues

     675,129         95,824         189,253         (21,320     938,886   

Income before Income Taxes*1

     120,826         37,702         32,219         (11,636     179,111   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
                                (millions of yen)  
     Nine Months Ended December 31, 2014  
     Japan      Americas*2      Other*3      Difference between
Geographic Total and
Consolidated Amounts
    Consolidated
Amounts
 

Total Revenues

     1,163,635         148,719         263,880         (2,214     1,574,020   

Income before Income Taxes*1

     193,951         24,393         63,786         (463     281,667   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

*Note 1: Results of discontinued operations, pre-tax are included in each amount attributed to each geographic area.
*Note 2: Mainly United States
*Note 3: Mainly Asia, Europe, Australasia and Middle East
  Note 4: Robeco, one of the Company’s subsidiaries domiciled in the Netherlands, conducts principally an asset management business. Due to the integrated nature of such business with its customer base spread across the world, “Other” locations include the total revenues and the income before income taxes of Robeco, respectively, for the nine months ended December 31, 2013 and the nine months ended December 31, 2014. The revenues of Robeco aggregated on a legal entity basis were ¥39,163 million in Americas and ¥33,854 million in Other for the nine months ended December 31, 2013, and ¥73,418 million in Americas and ¥72,361 million in Other for the nine months ended December 31, 2014.

 

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(6) Significant Changes in Shareholders’ Equity

There is no corresponding item.

(7) Subsequent Events

There is no corresponding item.

 

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