Financial Data

(1) Results of operations and Financial Condition

The outlook for the Japanese economy remained uncertain during the first half of the current fiscal year. One reason is worries about electricity shortages and interruptions of logistics activities due to the 2011 off the Pacific coast of Tohoku Earthquake. The excessive strength of the yen caused by financial instability in Europe along with other events also makes the economic outlook unclear.

In this difficult business climate, the GEO Group continued to open many stores during the fiscal year’s first half. As a result, the number of stores increased by 49 to 1,404 at the end of the first half.

The Group is working on enlarging the store network and strengthening management systems in order to become more profitable and reinforce its base of operations. Actions include a reexamination of all management systems to make improvements and measures to strengthen governance.

 

Net Sales

Due to the opening of many new stores during the first half, net sales increased 4,887 million yen, or 4.3%, from one year earlier to 119,072 million yen.

 

Operating Income and Ordinary Income

Earnings benefited from the growth in sales as well as from a continuation in the strong performance of rental operations and a review of all cost categories. Operating income increased 4,392 million yen, or 109.9%, to 8,391 million yen and ordinary income increased 3,964 million yen, or 90.0%, to 8,370 million yen.

Net Income

Net income increased mainly because of the growth in operating income. Another reason was the extraordinary loss in the previous fiscal year’s first half associated with the application of an accounting standard concerning asset retirement obligations. The result was net income of 4,164 million yen, an improvement of 2,701 million yen or 184.6% from one year earlier.

 

(2) Analysis of financial condition

Current assets were 127,029 million yen at the end of the first half of the fiscal year, 1,586 million yen more than at the end of the previous fiscal year.
Net assets were 51,612 million yen and the equity ratio was 38.2%.

(Analysis of Cash flows)
There was a net increase of 2,645 million yen in cash and cash equivalents from the end of the previous fiscal year to 26,992 million yen as of September 30, 2011.

A summary of cash flows is presented below.

 

Cash Flows from operating activities

Net cash provided by operating activities was 11,570 million yen compared with 4,767 million yen one year earlier. This was mainly because of payments of 8,362 million yen for the purchase of rental assets and cash provided by income before income taxes and minority interests of 8,054 million yen, depreciation of rental assets of 7,399 million yen and depreciation and amortization of 2,568 million yen.

 

Cash Flows from investing activities

Net cash used in investing activities was 2,674 million yen compared with 4,464 million yen one year earlier. The primary use of cash was payments of 2,134 million yen for the purchases of property, plant and equipment.

 

Cash Flows from financing activities

Net cash used in financing activities was 6,250 million yen compared with cash provided of 3,600 million yen one year earlier. There were proceeds of 3,600 million yen from short-term loans payable and 1,150 million yen from long-term loans payable and repayments of 2,113 million yen for short-term loans and 6,397 million yen for long-term loans and repayments of 1,301 million yen for finance lease obligations.

 

(3) Outlook for the fiscal year ending March 31, 2012
In the retail business, rental operations are expected to continue performing well as in the first half. However, recent trends in consumer spending indicate that the operating environment will remain challenging for sales of used products, primarily video games and associated products.
In addition, the number of stores opened during the first half was smaller than initially planned and expenses associated with opening these stores are expected in the second half. Consequently, as was announced on October 27, 2011, GEO forecasts a 2.7% increase in sales to 260,000 million yen, a 20.6% increase in operating income to 17,000 million yen, a 16.3% increase in ordinary income to 16,800 million yen and a 14.5% increase in net income to 8,600 million yen in the fiscal year ending in March 2012.