UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
20-F
(Mark One)
| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, |
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from |
OR
| ☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report: |
Commission file number:
001-14856
ORIX KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)
ORIX CORPORATION
(Translation of Registrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
World Trade Center Building
,
SOUTH TOWER,
2-4-1
,
Minato-ku
Tokyo105-6135,105-5135,Japan
(Address of principal executive offices)
Hiroya Goto
World Trade Center Building
,
SOUTH TOWER,
2-4-1
,
Minato-ku
Tokyo105-6135,105-5135,Japan
Telephone:
+81-3-3435-1274
Facsimile:
+81-3-3435-1276
(Name, telephone,
e-mail
and/or facsimile number and address of company contact person)Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbols(s) | Name of each exchange on which registered | ||||
(1) | American depository shares (the “ADSs”), each of which represents five shares | IX | New York Stock Exchange | |||
(2) | Common stock without par value (the “Shares”)* |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
As of March 31, 2020, 1,324,629,128 2021, 1,285,724,480Shares were outstanding, including Shares that were represented by 4,703,180
4,
ADSs.661
,728
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒
Yes ☐ No
If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐
Yes ☒ No
Note—Checking the box above will not relieve any Registrant required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.
Indicate by check mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
:
☒
Yes Indicate by check mark whether the Registrant submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).☒
☐ No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or an emerging growth company. See definition of “large accelerated filer” , “accelerated filer”, and “emerging growth company” in Rule12b-2
of the Exchange Act.☒
Large accelerated filer ☐
Accelerated filer ☐Non-accelerated
filer ☐
Emerging growth companyIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing.
☒
U.S. GAAP ☐
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow.
☐
Item 17 ☐
Item 18If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).☐
Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐
Yes ☐
No| * | Not for trading, but only for technical purposes in connection with the registration of the ADSs. |
TABLE OF CONTENTS
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ii | |||||||||
| 1 | |||||||||
Item 1. | |||||||||
1 | |||||||||
Item 2. | 1 | ||||||||
Item 3. | 1 | ||||||||
Item 4. | |||||||||
Item 4A. | |||||||||
Item 5. | |||||||||
Item 6. | |||||||||
Item 7. | |||||||||
Item 8. | |||||||||
Item 9. | |||||||||
Item 10. | |||||||||
Item 11. | |||||||||
Item 12. | |||||||||
Item 13. | |||||||||
Item 14. | |||||||||
Item 15. | |||||||||
Item 16A. | |||||||||
Item 16B. | |||||||||
Item 16C. | |||||||||
Item 16D. | |||||||||
Item 16E. | |||||||||
Item 16F. | |||||||||
Item 16G. | |||||||||
Item 17. | |||||||||
Item 18. | |||||||||
Item 19. | |||||||||
i
CERTAIN DEFINED TERMS, CONVENTIONS AND
PRESENTATION OF FINANCIAL INFORMATION
As used in this annual report, unless the context otherwise requires, the “Company” and “ORIX” refer to ORIX Corporation, and “ORIX Group,” “Group,” “we,” “us,” “our” and similar terms refer to ORIX Corporation and its subsidiaries.
In this annual report, “subsidiary” and “subsidiaries” refer to consolidated subsidiaries of ORIX, generally companies in which ORIX owns more than 50% of the outstanding voting stock and exercises effective control over the companies’ operations; and “affiliate” and “affiliates” refer to all of our affiliates accounted for by the equity method, generally companies in which ORIX has the ability to exercise significant influence over their operations by way of
20-50%
ownership of the outstanding voting stock or other means.The consolidated financial statements of ORIX have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). For certain entities where we hold majority voting interests but noncontrolling shareholders have substantive participating rights to decisions that occur as part of the ordinary course of the business, the equity method is applied. In addition, the consolidated financial statements also include variable interest entities (“VIEs”) of which the Company and its subsidiaries are primary beneficiaries. Unless otherwise stated or the context otherwise requires, all amounts in such financial statements are expressed in Japanese yen.
References in this annual report to “¥” or “yen” are to Japanese yen and references to “US$,” “$” or “dollars” are to United States dollars.
Certain monetary amounts and percentage data included in this annual report have been subject to rounding adjustments for the convenience of the reader. Accordingly, figures shown as totals in tables may not be equal to the arithmetic sums of the figures that precede them.
The Company’s fiscal year ends on March 31. The fiscal year ended March 31, 20202021 is referred to throughout this annual report as “fiscal 2020,2021,” and other fiscal years are referred to in a corresponding manner. References to years not specified as being fiscal years are to calendar years.
FORWARD-LOOKING STATEMENTS
This annual report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. When included in this annual report, the words “will,” “should,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions, among others, identify forward looking statements. Such statements, which include, but are not limited to, statements contained in “Item 3. Key Information—Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk,” inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. These forward-looking statements are made only as of the filing date of this annual report. The Company expressly disclaims any obligation or undertaking to release any update or revision to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.
ii
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
SELECTED FINANCIAL DATA
The following selected consolidated financial information has been derived from our consolidated financial statements as of each of the dates and for each of the periods indicated below except for “Number of employees.” This information should be read in conjunction with and is qualified in its entirety by reference to our consolidated financial statements, including the notes thereto, included in this annual report in Item 18, which have been audited by KPMG AZSA LLC.
Year ended March 31, | ||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Income statement data* 1 : | ||||||||||||||||||||
Total revenues* 2 | ¥ | 2,369,202 | ¥ | 2,678,659 | ¥ | 2,862,771 | ¥ | 2,434,864 | ¥ | 2,280,329 | ||||||||||
Total expenses | 2,081,461 | 2,349,435 | 2,526,576 | 2,105,426 | 2,010,648 | |||||||||||||||
Operating income | 287,741 | 329,224 | 336,195 | 329,438 | 269,681 | |||||||||||||||
Equity in net income of affiliates | 45,694 | 26,520 | 50,103 | 32,978 | 67,924 | |||||||||||||||
Gains on sales of subsidiaries and affiliates and liquidation losses, net | 57,867 | 63,419 | 49,203 | 33,314 | 74,001 | |||||||||||||||
Bargain purchase gain | 0 | 5,802 | 0 | 0 | 955 | |||||||||||||||
Income before income taxes | 391,302 | 424,965 | 435,501 | 395,730 | 412,561 | |||||||||||||||
Net income | 270,990 | 280,926 | 321,589 | 327,039 | 306,724 | |||||||||||||||
Net income attributable to the noncontrolling interests | 10,002 | 7,255 | 8,002 | 2,890 | 3,640 | |||||||||||||||
Net income attributable to the redeemable noncontrolling interests | 819 | 432 | 452 | 404 | 384 | |||||||||||||||
Net income attributable to ORIX Corporation shareholders | 260,169 | 273,239 | 313,135 | 323,745 | 302,700 | |||||||||||||||
Year ended March 31, | ||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Income statement data* 1 : | ||||||||||||||||||||
Total revenues* 2 | ¥ | 2,678,659 | ¥ | 2,862,771 | ¥ | 2,434,864 | ¥ | 2,280,329 | ¥ | 2,292,708 | ||||||||||
Total expenses | 2,349,435 | 2,526,576 | 2,105,426 | 2,010,648 | 2,033,894 | |||||||||||||||
Operating income | 329,224 | 336,195 | 329,438 | 269,681 | 258,814 | |||||||||||||||
Equity in net income of affiliates | 26,520 | 50,103 | 32,978 | 67,924 | 481 | |||||||||||||||
Gains on sales of subsidiaries and affiliates and liquidation losses, net | 63,419 | 49,203 | 33,314 | 74,001 | 23,300 | |||||||||||||||
Bargain purchase gain | 5,802 | 0 | 0 | 955 | 4,966 | |||||||||||||||
Income before income taxes | 424,965 | 435,501 | 395,730 | 412,561 | 287,561 | |||||||||||||||
Net Income | 280,926 | 321,589 | 327,039 | 306,724 | 196,814 | |||||||||||||||
Net income attributable to the noncontrolling interests | 7,255 | 8,002 | 2,890 | 3,640 | 4,453 | |||||||||||||||
Net income (loss) attributable to the redeemable noncontrolling interests | 432 | 452 | 404 | 384 | (23 | ) | ||||||||||||||
Net income attributable to ORIX Corporation shareholders | 273,239 | 313,135 | 323,745 | 302,700 | 192,384 | |||||||||||||||
1
As of March 31, | ||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||
(Millions of yen, except number of shares) | ||||||||||||||||||||
Balance sheet data* 1 : | ||||||||||||||||||||
Investment in Direct Financing Leases* 3 | ¥ | 1,190,136 | ¥ | 1,204,024 | ¥ | 1,194,888 | ¥ | 1,155,632 | ¥ | 0 | ||||||||||
Net Investment in Leases* 3 | 0 | 0 | 0 | 0 | 1,080,964 | |||||||||||||||
Installment Loans* 3 | 2,592,233 | 2,815,706 | 2,823,769 | 3,277,670 | 3,740,486 | |||||||||||||||
Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses | (60,071 | ) | (59,227 | ) | (54,672 | ) | (58,011 | ) | (56,836 | ) | ||||||||||
Investment in Operating Leases | 1,349,199 | 1,313,164 | 1,344,926 | 1,335,959 | 1,400,001 | |||||||||||||||
Investment in Securities | 2,344,792 | 2,026,512 | 1,729,455 | 1,928,916 | 2,245,323 | |||||||||||||||
Property under Facility Operations | 327,016 | 398,936 | 434,786 | 441,632 | 562,485 | |||||||||||||||
Others* 4 | 3,249,613 | 3,532,780 | 3,952,830 | 4,093,119 | 4,095,105 | |||||||||||||||
Total Assets | ¥ | 10,992,918 | ¥ | 11,231,895 | ¥ | 11,425,982 | ¥ | 12,174,917 | ¥ | 13,067,528 | ||||||||||
Short-term Debt, Long-term Debt and Deposits* 4 | ¥ | 5,685,014 | ¥ | 5,753,059 | ¥ | 5,890,720 | ¥ | 6,423,512 | ¥ | 6,847,889 | ||||||||||
Policy Liabilities and Policy Account Balances | 1,668,636 | 1,564,758 | 1,511,246 | 1,521,355 | 1,591,475 | |||||||||||||||
Common Stock | 220,469 | 220,524 | 220,961 | 221,111 | 221,111 | |||||||||||||||
Additional Paid-in Capital | 257,629 | 268,138 | 267,291 | 257,625 | 257,638 | |||||||||||||||
ORIX Corporation Shareholders’ Equity | 2,310,431 | 2,507,698 | 2,682,424 | 2,897,074 | 2,993,608 | |||||||||||||||
Number of Issued Shares | 1,324,058,828 | 1,324,107,328 | 1,324,495,728 | 1,324,629,128 | 1,324,629,128 | |||||||||||||||
Number of Outstanding Shares* 5 | 1,309,514,020 | 1,302,587,061 | 1,280,000,872 | 1,279,961,352 | 1,254,471,656 | |||||||||||||||
As of and for the Year Ended March 31, | ||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||
(Yen and dollars, except ratios and number of employees) | ||||||||||||||||||||
Key ratios (%)* 6 : | ||||||||||||||||||||
Return on ORIX Corporation shareholders’ equity (“ROE”) | 11.7 | 11.3 | 12.1 | 11.6 | 10.3 | |||||||||||||||
Return on assets (“ROA”) | 2.32 | 2.46 | 2.76 | 2.74 | 2.40 | |||||||||||||||
ORIX Corporation shareholders’ equity ratio | 21.0 | 22.3 | 23.5 | 23.8 | 22.9 | |||||||||||||||
Allowance/investment in direct financing leases and installment loans | 1.6 | 1.5 | 1.4 | 1.3 | 0 | |||||||||||||||
Allowance/net investment in leases and installment loans | 0 | 0 | 0 | 0 | 1.2 | |||||||||||||||
Per share data and employees: | ||||||||||||||||||||
ORIX Corporation shareholders’ equity per share* 7 | ¥ | 1,764.34 | ¥ | 1,925.17 | ¥ | 2,095.64 | ¥ | 2,263.41 | ¥ | 2,386.35 | ||||||||||
Basic earnings per share for net income attributable to ORIX Corporation shareholders | 198.73 | 208.88 | 244.40 | 252.92 | 237.38 | |||||||||||||||
Diluted earnings per share for net income attributable to ORIX Corporation shareholders | 198.52 | 208.68 | 244.15 | 252.70 | 237.17 | |||||||||||||||
Dividends applicable to fiscal year per share | 45.75 | 52.25 | 66.00 | 76.00 | 76.00 | |||||||||||||||
Dividends applicable to fiscal year per share* 8 | $ | 0.40 | $ | 0.48 | $ | 0.60 | $ | 0.69 | $ | 0.71 | ||||||||||
Number of employees | 33,333 | 34,835 | 31,890 | 32,411 | 31,233 | |||||||||||||||
As of March 31, | ||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||
(Millions of yen, except number of shares) | ||||||||||||||||||||
Balance sheet data* 1 : | ||||||||||||||||||||
Investment in Direct Financing Leases* 3 | ¥ | 1,204,024 | ¥ | 1,194,888 | ¥ | 1,155,632 | ¥ | 0 | ¥ | 0 | ||||||||||
Net Investment in Leases* 3 | 0 | 0 | 0 | 1,080,964 | 1,029,518 | |||||||||||||||
Installment Loans* 3 | 2,815,706 | 2,823,769 | 3,277,670 | 3,740,486 | 3,670,784 | |||||||||||||||
Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses* 4 | (59,227 | ) | (54,672 | ) | (58,011 | ) | (56,836 | ) | 0 | |||||||||||
Allowance for Credit Losses* 4 | 0 | 0 | 0 | 0 | (78,945 | ) | ||||||||||||||
Investment in Operating Leases | 1,313,164 | 1,344,926 | 1,335,959 | 1,400,001 | 1,408,189 | |||||||||||||||
Investment in Securities | 2,026,512 | 1,729,455 | 1,928,916 | 2,245,323 | 2,660,443 | |||||||||||||||
Property under Facility Operations | 398,936 | 434,786 | 441,632 | 562,485 | 491,855 | |||||||||||||||
Others | 3,532,780 | 3,952,830 | 4,093,119 | 4,095,105 | 4,381,238 | |||||||||||||||
Total Assets | ¥ | 11,231,895 | ¥ | 11,425,982 | ¥ | 12,174,917 | ¥ | 13,067,528 | ¥ | 13,563,082 | ||||||||||
Short-term Debt, Long-term Debt and Deposits | ¥ | 5,753,059 | ¥ | 5,890,720 | ¥ | 6,423,512 | ¥ | 6,847,889 | ¥ | 7,041,887 | ||||||||||
Policy Liabilities and Policy Account Balances | 1,564,758 | 1,511,246 | 1,521,355 | 1,591,475 | 1,822,422 | |||||||||||||||
Common Stock | 220,524 | 220,961 | 221,111 | 221,111 | 221,111 | |||||||||||||||
Additional Paid-in Capital | 268,138 | 267,291 | 257,625 | 257,638 | 259,361 | |||||||||||||||
ORIX Corporation Shareholders’ Equity | 2,507,698 | 2,682,424 | 2,897,074 | 2,993,608 | 3,028,456 | |||||||||||||||
Number of Issued Shares | 1,324,107,328 | 1,324,495,728 | 1,324,629,128 | 1,324,629,128 | 1,285,724,480 | |||||||||||||||
Number of Outstanding Shares* 5 | 1,302,587,061 | 1,280,000,872 | 1,279,961,352 | 1,254,471,656 | 1,217,338,316 | |||||||||||||||
As of and for the Year Ended March 31, | ||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||
(Yen and dollars, except ratios and number of employees) | ||||||||||||||||||||
Key ratios (%)* 6 : | ||||||||||||||||||||
Return on ORIX Corporation shareholders’ equity (“ROE”) | 11.3 | 12.1 | 11.6 | 10.3 | 6.4 | |||||||||||||||
Return on assets (“ROA”) | 2.46 | 2.76 | 2.74 | 2.40 | 1.44 | |||||||||||||||
ORIX Corporation shareholders’ equity ratio | 22.3 | 23.5 | 23.8 | 22.9 | 22.3 | |||||||||||||||
Allowance/investment in direct financing leases and installment loans | 1.5 | 1.4 | 1.3 | 0 | 0 | |||||||||||||||
Allowance/net investment in leases and installment loans | 0 | 0 | 0 | 1.2 | 0 | |||||||||||||||
Allowance for credit losses/net investment in leases and installment loans | 0 | 0 | 0 | 0 | 1.7 | |||||||||||||||
Per share data and employees: | ||||||||||||||||||||
ORIX Corporation shareholders’ equity per share* 7 | ¥ | 1,925.17 | ¥ | 2,095.64 | ¥ | 2,263.41 | ¥ | 2,386.35 | ¥ | 2,487.77 | ||||||||||
Basic earnings per share for net income attributable to ORIX Corporation shareholders | 208.88 | 244.40 | 252.92 | 237.38 | 155.54 | |||||||||||||||
Diluted earnings per share for net income attributable to ORIX Corporation shareholders | 208.68 | 244.15 | 252.70 | 237.17 | 155.39 | |||||||||||||||
Dividends applicable to fiscal year per share | 52.25 | 66.00 | 76.00 | 76.00 | 78.00 | |||||||||||||||
Dividends applicable to fiscal year per share* 8 | $ | 0.48 | $ | 0.60 | $ | 0.69 | $ | 0.71 | $ | 0.73 | ||||||||||
Number of employees | 34,835 | 31,890 | 32,411 | 31,233 | 33,153 | |||||||||||||||
| * 1 | Accounting Standards Update 2014-09 (“Revenue from Contracts with Customers”—ASC 606 (“Revenue from Contracts with Customers”)), Accounting Standards Update2016-01 (“Recognition and Measurement of Financial Assets and Financial Liabilities”—ASC825-10 (“Financial Instruments—Overall”)) and Accounting Standards Update2016-16 (“Intra-Entity Transfers of Assets Other Than Inventory”—ASC 740 (“Income Taxes”)) 2016-02 (ASC 842 (“Leases”)) (hereinafter, “New Lease Standard”) |
2
| * 2 | Consumption tax is excluded from the stated amount of total revenues. |
| * 3 | The sum of assets considered 90 days or more past due and loans individually evaluated for impairment amounted to non-performing amounted to ¥106,863 million as of March 31, 2021. This sum included: (i) net investment in leases considerednon-performing of ¥18,925 million as of March 31, 2021 and (ii) installment loans considerednon-performing of ¥87,938 million as of March 31, 2021. See “Item 5. Operating and Financial Review and Prospects—Results of Operations—Year Ended March 31, |
| * 4 | Accounting Standards Update |
| * 5 | The Company’s shares held through the Board Incentive Plan Trust, which was established in July 2014 to provide shares at the time of retirement as compensation, are included in the number of treasury stock and excluded from the number of outstanding shares. The Board Incentive Plan Trust held |
| * 6 | Return on ORIX Corporation shareholders’ equity is the ratio of net income attributable to ORIX Corporation shareholders for the period to average ORIX Corporation shareholders’ equity based on fiscal year beginning and ending balances for the period. Return on assets is the ratio of net income attributable to ORIX Corporation shareholders for the period to average total assets based on fiscal year beginning and ending balances for the period. ORIX Corporation shareholders’ equity ratio is the ratio as of the period end of ORIX Corporation shareholders’ equity to total assets. Allowance/investment in direct financing leases and installment loans is the ratio as of the period end of the allowance for doubtful receivables on direct financing leases and probable loan losses to the sum of investment in direct financing leases and installment loans. Allowance/net investment in leases and installment loans is the ratio as of the period end of the allowance for doubtful receivables on finance leases and probable loan losses to the sum of net investment in leases and installment loans. |
| * 7 | ORIX Corporation shareholders’ equity per share is the amount derived by dividing ORIX Corporation shareholders’ equity by the number of outstanding shares. |
| * 8 | The U.S. dollar amounts represent translations of the Japanese yen amounts using noon buying rates for Japanese yen per $1.00 in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York in effect on the respective dividend payment dates. |
3
RISK FACTORS
Investing in our securities involves risks. You should carefully consider the risks described below as well as all the other information in this annual report, including, but not limited to, our consolidated financial statements and related notes and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” Our business activities, financial condition and results of operations and the trading prices of our securities could be adversely affected by any of the factors discussed below or other factors. Even if we do not incur direct financial loss as a result of these risks, our reputation may be adversely affected. This annual report also contains forward-looking statements that involve uncertainties. Our actual results could differ from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the risks faced by us described below and elsewhere in this annual report. See “Forward-Looking Statements.” Forward-looking statements in this section are made only as of the filing date of this annual report.
For information about our management of the principal risks we face, see “Item 5. Risk Management—Management of Principal Risks.”
1. Effects of
COVID-19
Since the beginning of this year,2020, the novel coronavirus disease 2019orders and limitations on travel and immigration, and requests and orders limitingto limit the operations of, , or mandating the closure of,to close, certain public and private facilities and businesses. In particular, these measures have significantly impacted businesses in industries that rely on consumer spending, such as those relating to travel and recreation, passenger transport,lodging.lodging industries, have been significantly impacted and the global economy experienced a significant downturn. Although some countries have been showing some signs of recovery since the second half of 2020, many countries, including Japan, have continued to experience increases inWe expectCOVID-19.Although vaccines forleadbe able to significant global economic downturn and thatcontain the spread ofwill continuecontinues to be difficult to predict when the situationeconomic and business activity will return to normal.levels seen before the
(“COVID-19”)
has spread worldwide and the world economy and business activity have been adversely impacted by preventative measures instituted by governments across the globe, including restrictions on people’s movement and gatherings, such asstay-at-home
in-store
dining and COVID-19
cases, which has resulted in the imposition by some countries of additional restrictive measures. New variants of coronavirus have also been reported in many countries around the world, including Japan, which could lead to further spread ofCOVID-19
have been developed and approved for use, and it appears the implementation of vaccination programs and economic stimulus may both help prevent the spread ofCOVID-19
and encourage economic activity, in many countries it is not yet clear to what extent the vaccines will COVID-19.
Accordingly, it COVID-19
pandemic.As of the filing date of this annual report, the spread ofcases is significantly impacting various business in the ORIX Group, including the following ones.Group. In our Real Estate segment, demands from nationalJapanlocal governmental organizationsdeclarations of state of emergencies within Japan leading to closeclosings of facilities and otherfactors are adversely impacting operating revenue of our businesses that operate hotels and Japanese-styleJapanese inns and other recreational facilities. In our PE Investment and OperationConcession segment, decreases in the number of flights and passengers due to reduced demand for air travel is adversely impacting operating revenue from our operation of airports in our concession business.airports. In our Overseas BusinessAircraft and Ships segment, reduced demand for aircraft is adversely impacting our aircraft leasing business and may continue to do so over the long term as airline companies continue to request forbearance on lease fees leading to decreased revenue, among other effects.
COVID-19
in-bound
travel restrictions and COVID-19-related
In addition, other businesses in the ORIX Group are experiencing decreased profits resulting from reduced revenue due to economic slowdown, increasing credit costs due to deterioration of borrowers’ business performance, ,negativenegative impact on asset values due to market volatility and increasing costs related to efforts to prevent the spread of
COVID-19.
In order to prevent the spread ofmeetings and domestic and overseas business trips. The implementation of these and other measures may adversely impact our business activities and efficiency.
COVID-19,
the ORIX Group has implemented various measures, including policies on working remotely and restrictions onface-to-face
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The ORIX Group operateshas expanded its various businesses in itsinto a global network that spans 3731 countries and regions around the globe. For this and other reasons, if the global spread of
COVID-19
continues, we expect it could have a multi-faceted and adverse impact on all businesses we operate.If theandsuch as increased funding costs and a heightening of the various risks described above and elsewhere in this annual report. In addition, it is
COVID-19
pandemic is prolonged, it is possible that the businesses described above and others in the ORIX Group may experience increases in credit costs due to the deterioration of borrowers’ business performance and declines in assets under management, as well as decreased revenue and increased costs. Depending on developments in the spread ofCOVID-19,
there may be increases in liquidity risk, possible that the“Item4.“Item 4. Information on the Company—Strategy—Operating Environment,” “Item4.“Item 4. Information on the Company—Business Segments,” “Item5.“Item 5. Operating and Financial Review and Prospects—Overview—Results Overview” and “Item5.“Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
COVID-19
pandemic will adversely affect our business, management and financial results in ways that are currently unexpected or unknown to us. For further information, see 2. Risks Related to our External Environment (Risk Related to Unpredictable Events)
(1) Global economic weakness and instability or political turmoil could adversely affect our business activities, financial condition and results of operations.
We conduct business operations in Japan and other areas of Asia, as well as in the Americas, Europe, Oceania and the Middle East. Our business is affected by general economic conditions and financial conditions in these countries and regions. These conditions are affected by changes in various factors including, for example, changes in fiscal and monetary policies.policies and trade and technology frictions between the United States and China. Fluctuations or shifts in commodity market prices and consumer demand, trade disputes, political, social or economic instability in these countries and regions could also adversely affect our business activities, financial condition and results of operations.
Despite our attempts to minimize the adverse effects of such factors through, for example, improving our risk management procedures, global economic weakness and instability, or political turmoil could adversely affect our business activities, financial condition and results of operations.
(2) Competition could affect market share and profitabilityour business
We compete on the basis of pricing, transaction structure, service quality and other terms. It is possible that our competitors may seek to compete aggressively on the basis of pricing and other terms through their advantageous funding costs or without regard to their profitability. As a result of such aggressive competition by our competitors, our market share or our profitability may decline.
(3) Negative rumorspublicity could affect our business activities, financial condition, results of operations and share price
Our business is built upon the confidence of our customers and market participants. Whether based on facts or not, negative rumorspublicity about our activities, our industries or the parties with whom we do business could harm our reputation and diminish confidence in our business. In such an event, we may lose customers or business opportunities, which could adversely affect our business activities, financial condition and results of operations, as well as our share price.
(4) Our business activities, financial condition and results of operations may be adversely affected by natural disasters and other unpredictable events
Our business activities, financial condition and results of operations may be adversely affected by unpredictable events or any continuing effects caused by such events. Unpredictable events include extreme
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weather due to the effects of climate change, and natural events, such as earthquakes, storms, tsunamis, floods, fires and outbreaks of infectious diseases, and
man-made
events, such as accidents, war, terrorism, and insurgency. If any such event occurs, it may, among other things, cause unexpectedly large market price movements or unanticipated deterioration of economic conditions in a country or region, or cause major injuries to our personnel or damage to our facilities, equipment and other property, which could adversely affect our business activities, financial condition and results of operations.(5) Dispositions of Shares may adversely affect market prices for our Shares
Between June 26, 2019,30, 2020, and June 29, 2020, two2021, one of our shareholders filed a large shareholder report pursuant to the Financial Instruments and Exchange Act (“FIEA”) indicating, at the time of filing, beneficial ownership, as
that term is used in the FIEA, of more than five percent of the total number of our outstanding Shares by each relevant reporting shareholder. ThisSuch shareholder or other of our shareholders may, for strategic, investment or other reasons, decide to reduce their shareholdings in ORIX. Dispositions of Shares, particularly dispositions of large numbers of Shares by major shareholders, may adversely affect market prices for our Shares. For information on major shareholders, see “Item 7. Major Shareholders and Related Party Transactions.”
If foreign investors reduce their investment in Japanese stocks due to changes in global or domestic economic or political conditions, market prices for our Shares could be adversely affected because a large percentage of our Shares are owned by investors outside of Japan.
3. Credit Risk
We maintain an allowance for doubtful receivablescredit losses on finance leases and probable loan losses. However, we cannot be sure that the allowance will be adequate to cover future credit losses. This allowance may be inadequate due to unexpected adverse changes in the Japanese and overseas economies in which we operate, whether due to in the conditions of specific industries, markets or customers.customers’ business performance. While we constantly strive to mitigate risk through portfolio management, we may be required to make additional provisions in the future depending on economic trends and other factors.
COVID-19
or otherwise, or deteriorationFurthermore, if adverse economic or market conditions affect the value of underlying collateral, secondhand equipment, or guarantees, our credit-related costs other than the allowance might increase. If any such event occurs, our business activities, financial condition and results of operations could be adversely affected.
4. Business Risk
(1) We are exposed to risks from expansion of our diverse and expanding range of products and services,businesses, acquisitions of companies and assets, entry into joint ventures and alliances with other companies and similar activities with uncertain outcomes
We are engaged in a broad range of businesses in Japan and overseas and continue to expand such range, including through acquisitions of companies and businesses. The breadth of our business and continued expansion may expose us to new and complex risks that we may be unable to fully control or foresee, and, as a result, we may incur unexpected and potentially substantial costs or losses. Such unexpected costs and losses, which may result from regulatory, technological or other factors, may be particularly acute when we expand our business through acquisitions. In addition, we may not achieve targeted results if our business or business opportunities do not develop as expected or if competitive pressures undermine profitability. Furthermore, when we acquire companies or businesses to expand our business, we could be required to make large write-downs of goodwill or other assets if the results of operations of an acquired company or business are lower than what we expected at the time we made such acquisition.acquisition, or if they encounter other financial or operational difficulties.
We have a wide range of investments in business operations, including operations that are very different from our financial services business. If we fail to manage our investee companies effectively, we may experience
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financial losses as well as losses of future business opportunities. In addition, we may not be able to sell or otherwise dispose of investments at the times or prices we initially expected or at all. We may also need to provide financial support, including credit support or equity investments, to some investee companies if their financial condition deteriorates.
From time to time we also enter into joint ventures and other alliances, and the success of these alliances is often dependent upon the operational capabilities, the financial stability and the legal environment of our counterparties. If an alliance suffers a decline in its financial condition or is subject to operational instability because of a change in applicable laws or regulations, we may be required to pay in additional capital, reduce our investment at a loss, or terminate the alliance.
If any such events occur, our business activities, financial condition and results of operations and reputation may be adversely affected.
(2) We are exposed to risks related to asset value volatility
In the management of our businesses, we hold various classes of assets and investments, including real estate, aircraft, ships and other assets in Japan and overseas, which we may hold for our own use or lease to our customers. The market values of these assets and investments may be volatile and may decline substantially in the future.
Asset valuation losses are recorded based on the fair market values at the time when revaluation is conducted in accordance with applicable accounting principles. However, losses from the sale of these assets, including as a result of a sudden need for liquidity or to mitigate an adverse credit event at one of our customers, may exceed the amount of recorded valuation losses.
We estimate the residual value for certain operating leases at the time of contract. Our estimates of the residual value of equipment are based on current market values of used equipment and assumptions about when and to what extent the equipment will become obsolete; however, we may need to recognize additional valuation losses if our estimates differ from actual trends in equipment valuation and the secondhand market, and we may incur losses if we are unable to collect such estimated residual amounts.
In addition, due to our operation of asset management businesses, if there are changes in the market value of asset such as shares and other securities, it could affect the results of our asset management services, which could lead to reductions in our assets under management and related fees and negatively impact our revenue.
If any event described above occurs, our business activities, financial condition and results of operations may be adversely affected.
(3) Risks related to our other businesses
We operate a wide range of businesses in Japan and overseas, including financial services businesses.
Entry into new businesses, and the results of operations following such entry, are accompanied by various uncertainties, and if any unanticipated risk does occur, it may adversely affect our business activities, financial condition and results of operations.
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5. Market Risk
(1) Changes in market interest rates and currency exchange rates could adversely affect our assets and our business activities, financial condition and results of operations
Our business activities are subject to risks relating to changes in market interest rates and currency exchange rates in Japan and overseas. Although we conduct asset-liability management (“ALM”), changes in the yield curve and currency exchange rates could adversely affect our results of operations.
When fund procurementfunding costs increase due to actual or perceived increases in market interest rates, financing lease terms and loan interest rates for new transactions may diverge from the trend in market interest rates.
Changes in market interest rates could have an adverse effect on the credit quality of our assets and our asset structure. For example, with respect to floating-rate loan assets, if market interest rates increase, the repayment burdens of our customers may also increase, which could adversely affect the financial condition of such
customers and their ability to repay their obligations to us. Alternatively, a decline in interest rates could result in increased prepaymentsan increase in early repayment of loans and a corresponding decrease in our assets, which could adversely impact our revenue generation capabilities.
(2) Our risk management strategy of using derivatives for hedging purposes may not be effective
We may use derivative instruments to reduce fluctuations in the value of our investments and to hedge against interest rate and currency risks. However, it is possible that this risk management strategy may not be fully effective in all circumstances due to our failure to appraise the value of assets being hedged or execute such derivative instruments properly or at all, or our failure to achieve the intended results of such hedging due to the unavailability of offsetting or roll-over transactions in the event of sudden turbulence in the market or otherwise. Furthermore, our derivatives counterparties could fail to honor the terms of their contracts with us. Our existing derivative contracts and new derivative transactions may also be adversely affected if our credit ratings are downgraded.
In such instances, our business activities, financial condition and results of operations could be adversely affected.
(3) Fluctuations in market prices of stocks and bonds may adversely affect our business activities, financial condition and results of operations
We hold investments in shares of private and public company stock, including shares of our equity method affiliates, and corporate and government bonds in Japan and overseas. The market values of our investment assets are volatile and may fluctuate substantially in the future. A significant decline in the value of our investment assets could adversely affect our business activities, financial condition and results of operations.
(4) The transition away from and discontinuation of LIBOR and other interest rate benchmarks could have a negative impact on our results of operations.
The UK Financial Conduct Authority, which regulates LIBOR, is expected to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. However, this date has been extended by 18 months for certain U.S. dollar LIBOR settings. We are continuing to identify certain assets and liabilities linked to LIBOR and other interest rate benchmarks across our businesses that will require transition to alternative reference rates as a result.
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The transition away from and discontinuation of LIBOR and other interest rate benchmarks, uncertainty as to the availability and/or suitability of alternative reference rates, and differences between LIBOR and other interest rate benchmarks and alternative reference rates may affect financial markets and market participants, including us. In response, we have taken, and are continuing to take, necessary steps to proactively address the transition, including monitoring external developments, negotiating successor reference rates with relevant counterparties, planning for the circumstances where the transition results in a mismatch with the fallback reference rates used (particularly in the case of derivatives contracts used for hedging purposes), and evaluating the potential impact on our financial results and condition. However, we remain subject to the risks that our actions to address the transition may be delayed or may not be successful, which could adversely affect our financial condition and the results of our business.
6. Liquidity Risk
Our primary sources of financing include: borrowings from banks and other institutional lenders, funding from capital markets (such as through issuances of bonds, medium-term notes or commercial paper (“CP”) and securitization of leases,, loans receivables and other assets) and deposits. Such sources include a significant amount of short-term debt, such as CP and other short-term borrowings from various institutional lenders and the portion of our long-term debt maturing in the current fiscal year. Some of our committed credit lines require us to comply with financial covenants.
Adverse economic conditions or financial market instability, among other things, may adversely affect our ability to raise new funds or to renew existing funding sources, and may subject us to increased funding costs. If our access to liquidity is restricted, or if we are unable to obtain our required funding at acceptable costs, our business activities, financial condition and results of operations may be significantly and adversely affected.
We obtain credit ratings from ratings agencies. Downgrades of our credit ratings due to reasons such as market turmoil or the worsening of our financial condition could result in increases in our interest expenses and could have an adverse effect on our fund-raising ability by increasing costs of issuing CP and corporate debt securities and borrowing from banks and other financial institutions, reducing the amount of bank credit available to us or decreasing the attractiveness of our equity securities to investors. As a result, our business activities, financial condition and results of operations may be significantly and adversely affected.
7. Compliance Risk
Our efforts to implement and maintain thorough internal controls for appropriate compliance and legal risk management, as well as compliance education programs for our staff, in order to prevent violations of applicable laws, regulations and internal rules may not be fully effective in preventing all violations. In addition, we engage in a wide range of businesses, and our expansion into new businesses through acquisitions may cause our current internal controls to not be fully effective. If we are unable to implement and maintain robust internal controls to prevent any such violations and adjust such controls in response to expansion of our business, we may be subject to sanctions, or penalties, which could also apply to our officers or employees. Such events could adversely affect our business activities, financial condition, results of operations and reputation.
In addition, we are also indirectly exposed to compliance risk through our joint venture and alliance partners, investee companies and other business partners or counterparties, whom we may not be able to control. If any of those parties engage in violations of applicable laws or regulations, our business activities, financial condition, results of operations and reputation may be adversely affected.
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8. Legal Risk
(1) We are subject to various laws and regulations in Japan and overseas whichthat affect may restrict our business activities, subject us to legal liability or otherwise put us at a disadvantage
Our businesses and employees are subject to domestic and international laws, as well as regulatory oversight by government authorities who implement those laws, relating to the various sectors in which we operate and to our business operations generally. These include laws and regulations applicable to specific businesses and industries, such as moneylending, financial instruments exchange moneylending, installment sales, insurance, banking, trust services,construction, real estate transactions, hotels, insurance, banking and construction,trust services, as well as laws applicable more generally, such as the Companies Act of Japan, laws and regulations applicable due to our registration with the SEC, such as U.S. securities laws, and laws and regulations on antitrust, and personal data protection, anti-money laundering and anti-bribery.
Regardless of whether we have violated any laws, if we become the subject of a governmental investigation, litigation or other proceeding in connection with our businesses, our business activities, financial condition and results of operations may be adversely affected.
For information on the regulations that apply to our businesses, see “Item 4. Information on the Company—Business Regulation.”
(2) Enactment of, or changes in, laws, regulations and accounting standards may affect our business activities, financial condition and results of operations
Enactment of, or changes in, laws and regulations may adversely affect the way that we conduct our business and the products or services that we may offer, as well as limit the activities of our customers, borrowers, invested companies and funding sources. Such enactment or changes may increase our compliance costs. In recent years, foreign laws and regulations on subject matters such as personal data protection, anti-corruptionanti-money laundering, anti-bribery and antitrust have been enacted and strengthened such that they may directly apply to the activities of our domestic businesses.businesses, even if conducted outside the relevant jurisdiction. If such pattern continues and it becomes necessary for us to comply with different countries’ regulations, in addition to significantly increasing the number of laws and regulations that we need to comply with, it may also significantly increase our compliance costs.
If accounting standards are changed, even if such changes do not directly affect our profitability or financial soundness, industries related to our businesses, our clients or the financial market may be negatively affected. As a result of such enactments or changes, our business activities, financial condition and results of operations could be adversely affected.
(3) Contractual deficiencies may affect our business and other initiatives
When engaging in business and other initiatives,transactions, deficiencies, including our failure to take steps such as executingexecute legally required or binding agreements or reflecting our understandingexecution of agreements that do not reflect our intentions regarding parties’ contractual obligations, accurately in relevant agreements may lead to adverse events such as our being the target of infringement, breach of contract and other legal claims by contractual counterparties and third parties or disruption of our ability to obtain rights we expected as part of such initiatives.transactions. Such events may adversely affect our business activities, financial condition and results of operations.
9. Information Risk
(1) Risks relating to loss, damage or leakage of information
We maintain various information such as customer information including information on individuals, accounting information and personnel information. We have implemented internal rules and training programs to properly manage such information. We also implement technical measures such as vulnerability countermeasures
10
for our information systems and maintenance of various network security measures to protect against or mitigate cyber-attacks. However, in spite of such efforts, our measures may not be always effective and it is possible that our information may be lost, damaged or leaked.
In such event, we could be subject to governmental investigation, litigation or other proceedings in connection with potential violations of applicable data protection laws and regulations, such as the Act on the Protection of Personal Information of Japan and the General Data Protection Regulation adopted in the EU, and may be sued for damages. In addition, ourOur business activities, financial condition, results of operations financial standing and performancereputation may be adversely affected due to but not limited to, loss of customerthese and market confidence in us and deterioration of our reputation.similar events.
(2) Failures in our computer and other information systems could interfere with our operations and damage our business activities, financial condition and result
results of operations
We use information systems for financial transactions, personal information management, business monitoring and processing and as part of our business decision-making and risk management activities. Some of these information systems may be outsourced.
System shutdowns, malfunctions or failures, the mishandling of data or fraudulent acts by employees, vendors or other third parties, cyber or ransomware attack by a computer virus, hacking, unauthorized access, business interruption or other types of cyber-terrorism, or a large-scale natural disaster, could have adverse effects on our operations, by causing, for example, delays in the receipt and payment of funds, the loss, damage or leakage of confidential or personal information of our customers or employees, the generation of errors in information used by our management for business decision-making and risk management evaluation and planning, the suspension of certain products or services we provide to our customers or other interruptions of our business activities. In such event, our liquidity or the liquidity of customers who rely on us for financing or payment could be adversely affected. We may also incur substantial costs to recover our business functionality or be penalizedsanctioned by regulatory authorities in the jurisdictions in which we operate for violating applicable laws and regulations and may be sued for damages.
As a result of the above, our business activities, financial condition, results of operations financial standing and performancereputation may be adversely affected.
10. Operational Risk
(1) If our internal control over financial reporting is identified as being insufficient, our share price, reputation and business activities may be adversely affected
We have established and assessed our internal control over financial reporting in a manner intended to ensure compliance with the requirements of various laws and regulations. However, in future periods weour management or our independent registered public accounting firm may identify material weaknesses inor deficiencies through the respective evaluations and audits of our internal control over financial reporting, that they conduct and such finding may cause us and our accountants to disclose that our internal control over financial reporting is ineffective, which could cause a loss of investor confidence in the reliability of our financial statements and cause our share price to fall. As a result, our business activities, financial condition, and results of operations and reputation may be adversely affected.
(2) Our risk management may not be effective
We continuously seek to improve our risk management function. However, due to the rapid expansion of our business or significant changes in the business environment, our risk management may not always be
effective. As a result, our business activities, financial condition and results of operations may be adversely affected. For a detailed discussion of our risk management system, see “Item5.“Item 5. Operating and Financial Review and Prospects—Risk Management.”
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(3) We may not be able to hire or retain qualified personnel
Our businesses require a considerable investment in human resources and the retention of qualified personnel in order to successfully compete in markets in Japan and overseas. If we cannot develop, hire or retain the necessary qualified personnel, we may incur additional costs to hire specialists or the quality of our products and services may decline, which could prevent us from continuing our business operation in a stable manner and adversely affect our business activities, financial condition and results of operations.
(4) Other operational risks
Our business entails many types of operational risks. Examples include inappropriate sales practices; inadequate handling of client and customer complaints; inadequate internal communication of necessary information; misconduct of officers, employees, agents, franchisees, trading associates, vendors or other third parties; errors in the settlement of accounts and conflicts with employees concerning labor and workplace management.
When we offer new products or services, we must ensure that we have the capacity to properly undertake and perform such operations. If we lack such capacity or fail to perform such operations successfully, we may lose the confidence of the market and our customers, which may cause us to suffer decreased profitability or force us to withdraw from such operations.
Our management attempts to manage operational risk and maintain it at a level that we believe is appropriate. However, operational risk is part of the business environment in which we operate, and despite our control measures, our business activities, financial condition and results of operations and reputation may be adversely affected at any time due to this risk.
11. Risks Related to Holding or Trading our Shares and ADRs
(1) Rights of shareholders under Japanese law may be different from those under the laws of other jurisdictions
Our Articles of Incorporation, the regulations of our board of directors and the Companies Act govern our corporate affairs. Legal principles relating to matters such as the validity of corporate procedures, directors’ and officers’ fiduciary duties and shareholders’ rights are different from those that would apply if we were incorporated elsewhere. Shareholders’ rights under Japanese law are different in some respects from shareholders’ rights under the laws of jurisdictions within the United States and other countries. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in a jurisdiction outside Japan. For a detailed discussion of the relevant provisions of the Companies Act and our Articles of Incorporation, see “Item 10. Additional Information—Memorandum and Articles of Incorporation.”
(2) It may not be possible for investors to effect service of process within the United States upon ORIX or ORIX’s directors or executive officers, or to enforce against ORIX or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States
ORIX is a joint stock corporation formed in Japan. Almost all of ORIX’s directors and executive officers are residents of countries other than the United States. Although some of ORIX’s subsidiaries have substantial assets in the United States, substantially all of ORIX’s assets and the assets of ORIX’s directors and executive
officers are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon ORIX or ORIX’s directors and executive officers or to enforce against ORIX or those persons, in U.S. courts, judgments of U.S. courts predicated upon the civil liability provisions of U.S. securities laws. ORIX has been advised by its Japanese counsel that there is doubt, in original actions or in actions to enforce judgments of U.S. courts, as to the enforceability in Japan of civil liabilities based solely on U.S. securities laws. A Japanese court may refuse to allow an original action based on U.S. securities laws.
12
The United States and Japan do not currently have a treaty providing for reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil or commercial matters. Therefore, if you obtain a civil judgment by a U.S. court, you will not necessarily be able to enforce such judgment directly in Japan.
(3) We may be a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. investors
We believe that we may have been a passive foreign investment company (a “PFIC”) under the U.S. Internal Revenue Code of 1986, as amended, for the year to which this report relates because of the composition of our assets and the nature of our income. In addition, we may be a PFIC in the foreseeable future. Assuming this is the case, U.S. investors in our Shares or ADSs will be subject to special rules of taxation in respect of certain dividends or gains on such Shares or ADSs, including the treatment of gains realized on the disposition of, and certain dividends received on, the Shares or ADSs as ordinary income earned pro rata over a U.S. investor’s holding period for such Shares or ADSs, taxed at the maximum rate applicable during the years in which such income is treated as earned, with the resulting tax liability subject to interest charges for a deemed deferral benefit. In addition, in the case of any dividends that are not subject to the foregoing rule, the favorable rates of tax applicable to certain dividends received by certain
non-corporate
U.S. investors would not be available. See “Item 10. Additional Information—Taxation—United States Taxation.” Investors are urged to consult their own tax advisors regarding all aspects of the income tax consequences of investing in our Shares or ADSs.(4) If you hold fewer than 100 Shares, you will not have all the rights of shareholders with 100 or more Shares
One “unit” of our Shares is comprised of one hundred Shares. Each unit of the Shares has one vote. A holder who owns Shares other than in multiples of one hundred will own less than a whole unit (i.e., for the portion constituting of fewer than one hundred Shares.) The Companies Act imposes significant restrictions on the rights of holders of shares constituting less than a whole unit, which include restrictions on the right to vote. Under the unit share system, a holder of Shares constituting less than a unit has the right to require ORIX to purchase its Shares and the right to require ORIX to sell it additional Shares to create a whole unit. However, a holder of ADRs is not permitted to withdraw underlying Shares representing less than one unit, which is equivalent to 20 ADSs, and, as a practical matter, is unable to require ORIX to purchase those underlying Shares. The unit share system, however, does not affect the transferability of ADSs, which may be transferred in lots of any number of whole ADSs.
(5) Foreign exchange fluctuations may affect the value of our securities and dividends
Market prices for our ADSs may decline if the value of the yen declines against the dollar. In addition, the dollar amount of cash dividends or other cash payments made to holders of ADSs will decline if the value of the yen declines against the dollar.
(6) A holder of ADRs has fewer rights than a shareholder and must act through the depositary to exercise those rights
The rights of shareholders under Japanese law to take various actions, including voting shares, receiving dividends and distributions, bringing derivative actions, examining a company’s accounting books and records
and exercising dissenters’ rights, are available only to holders of record on a company’s register of shareholders. The Shares represented by our ADSs are registered in the name of a nominee of the depositary, through its custodian agent. Only the depositary is able to exercise those rights in connection with the deposited Shares. The depositary will make efforts to vote the Shares represented by our ADSs as instructed by the holders of the ADRs representing such ADSs and will pay to those holders the dividends and distributions collected from us. However, a holder of ADRs will not be able to directly bring a derivative action, examine our accounting books and exercise dissenters’ rights through the depositary unless the depositary specifically undertakes to exercise those rights and is indemnified to its satisfaction by the holder for doing so.
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Item 4. Information on the Company
GENERAL
ORIX is a joint stock corporationformed under Japanese law. Our principal place of business is at World Trade Center Building, SOUTH TOWER,105-6135,105-5135,Japan, and our phone number is: +81 3 3435 3000. Our general contact URL is https://ssl.orix-form.jp/ir/inquiry_e/ and our corporate website URL is: https://www.orix.co.jp/grp/en. The information on our website is not incorporated by reference into this annual report. ORIX Corporation USA (“ORIX USA”) is ORIX’s agent in the United States, and its principal place of business is at 1717 Main Street, Suite 1100, Dallas, Texas 75201, USA.
(kabushiki kaisha)
2-4-1
Hamamatsu-cho,
Minato-ku,
TokyoCORPORATE HISTORY
ORIX was established in April, 1964 in Osaka, Japan as Orient Leasing Co., Ltd. by three trading companies and five banks that included Nichimen Corporation, Nissho Corporation and Iwai Corporation (presently Sojitz Corporation), the Sanwa Bank (presently The Bank of Mitsubishi UFJ, Ltd.), Toyo Trust & Banking (presently Mitsubishi UFJ Trust and Banking Corporation), the Industrial Bank of Japan and Nippon Kangyo Bank (presently Mizuho Bank, Ltd.), and the Bank of Kobe (presently Sumitomo Mitsui Banking Corporation).
Our initial development occurred during the period of sustained economic growth in Japan during the 1960s and the early 1970s. We capitalized on the growing demand in this period by expanding our portfolio of leasing assets.
During this time, our marketing strategy shifted from a focus on using the established networks of the trading companies and other initial shareholders to one that concentrated on independent marketing as the number of our branches expanded. In April 1970, we listed our Shares on the second section of the Osaka Securities Exchange. Since February 1973, our Shares have been listed on the first sections of the Tokyo Stock Exchange and the Osaka Securities Exchange (which was integrated into Tokyo Stock Exchange in 2013). ORIX was also listed on the first section of the Nagoya Stock Exchange from February 1973 to October 2004.
ORIX set up a number of specialized leasing companies to tap new market potential, starting with the establishment of Orient Auto Leasing Corporation (presently ORIX Auto Corporation) in 1973 and Orient Instrument Rentals Corporation (presently ORIX Rentec Corporation), Japan’s first electric measuring equipment rental company, in 1976. With the establishment of the credit company Family Consumer Credit Corporation (presently ORIX Credit Corporation, concentrating on card loans) in 1979, ORIX began to move into the retail market by offering financing services to individuals.
It was also during this time that ORIX began expanding overseas, commencing with the establishment of its first overseas office in Hong Kong in 1971, followed by Singapore (1972), Malaysia (1973), Indonesia (1975), the Philippines (1977) and Thailand (1978).
In the 1980s and early 1990s, ORIX established offices in the United States (1981), Australia (1986), Pakistan (1986) and Taiwan (1991). The Japanese company Budget(presently ORIX Auto Corporation) was also established in 1985.
Rent-a-Car
In 1989, we introduced a corporate identity program and changed our name to ORIX Corporation from Orient Leasing Co., Ltd. to reflect our increasingly international profile and diversification into financial services other than leasing.
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In 1991, ORIX established ORIX Aviation Systems Limited in Ireland. In the same year, ORIX established ORIX Omaha Life Insurance Corporation (presently ORIX Life Insurance Corporation) and entered the life insurance business. In 1998, ORIX purchased Yamaichi Trust & Bank, Ltd. (presently ORIX Bank Corporation). In 1998, ORIX listed on the New York Stock Exchange (Ticker Symbol: IX) and, through registration with the U.S. Securities and Exchange Commission (“SEC”), has worked to further strengthen its corporate governance regulations. ORIX Real Estate Corporation was established in 1999 to concentrate on condominium development that was first begun in 1993 as well as develop office buildings in pursuit of improved real estate expertise. In 1999, we established ORIX Asset Management and Loan Services Corporation.
Since 2000, we have actively expanded our automobile-related operations by acquiring companies and assets. We combined seven automobile-related companies into ORIX Auto Corporation in 2005.
We have also continued our overseas expansion. In China, we established a rental company in Tianjin in 2004 and in 2005 established a leasing company in Shanghai. In 2009, we established a Chinese Headquarters in Dalian. We also set up local subsidiaries in Saudi Arabia (2001), and the United Arab Emirates (2002).
In 2006, we entered the investment banking field in the United States with the acquisition of Houlihan Lokey, Inc. (“Houlihan Lokey”) (All shares sold through a wholly-owned subsidiary ORIX USA in July 2019). In 2010, we acquired RED Capital Group (presently ORIX Real Estate Capital Holdings, LLC), a U.S.-based company that provides financing for multi-family, senior living and healthcare-related real estate development projects in the United States. In 2010, we also acquired Mariner Investment Group LLC, a leading independentmanager.manager (All shares sold through a wholly-owned subsidiary ORIX USA in July 2020).
SEC-registered
hedge fund We managed ORIX Credit Corporation (“ORIX Credit”) over a continuous three-year period jointly with Sumitomo Mitsui Banking Corporation pursuant to an alliance established in July 2009. In June 2012, ORIX purchased all the shares of ORIX Credit, making ORIX Credit a wholly-owned subsidiary of ORIX.
In July 2013, ORIX acquired Robeco Groep N.V. (presently ORIX Corporation Europe N.V.), a holding company of global asset management companies based in the Netherlands, to pursue a new business model by combining finance with related services. In October 2016, ORIX purchased all the shares of Robeco, making Robeco a wholly-owned subsidiary of ORIX.
In July 2014, we acquired Hartford Life Insurance K.K. (“HLIKK”) (presently ORIX Life Insurance Corporation). In December 2014, we acquired Yayoi Co., Ltd. (“Yayoi”), a software service provider targeting small businesses.
In December 2015, ORIX and VINCI Airports S.A.S., an airport concession holder and operator based in France, established Kansai Airports to operate and manage Kansai International Airport and Osaka International Airport.
In November 2018, ORIX acquired 30% shareholding of Avolon Holdings Limited (“Avolon”), a leading global aircraft leasing company located in Ireland.
In January 2019, ORIX made DAIKYO INCORPORATED (“DAIKYO”) a wholly-owned subsidiary due to the acquisition of common shares of DAIKYO through a tender offer.
STRATEGY
Operating Environment
COVID-19
continued worldwide, as did the various countermeasures and In the future, it is hoped that vaccination programs and economic policy will balance the prevention of the pandemic and a potential sustained economic downturn. On the other hand, in response to the sharp deterioration in employment and the deterioration in corporate funding, caused by theCOVID-19outbreak and the measures taken in response thereto, monetary easing by monetary authorities in each country and bold fiscal policies undertaken by various governments around the world resulted in the prices of risk assets stabilizing moderately toward the end of fiscal 2020. Due to thefurther spread ofthe global economy is expected to deviate greatly downward, andwith economic recovery. However, the situation is expected to remainremains unpredictable for the foreseeable future.
COVID-19
COVID-19
on Progress on Target Performance Indicators
In its pursuit of sustainable growth, ORIX Group uses the following performance indicators: Net income attributable to ORIX Corporation shareholders to indicate profitability, ROE to indicate capital efficiency and credit ratings to indicate financial soundness. In October 2019, we revised our target for the three-year period from fiscal 2019 to fiscal 2021. Our net income target was ¥300 billion in fiscal 2020, our ROE target was 11% or more in the medium term, and we made every effort to maintain our credit rating of A grade.
In fiscal 2020,2021, although certain of our businesses were adversely affected by the¥302.7 billion, achieving the target of
COVID-19
pandemic, the impact to the ORIX group was limited because of the diversified nature of our businesses. As a result, net income attributable to ORIX Corporation shareholders was Three- year trends in performance indicators are as follows.
As of March 31, | ||||||||||||||||
2018 | 2019 | 2020 | ||||||||||||||
Net income attributable to ORIX Corporation shareholders | (Millions of yen | ) | ¥ | 313,135 | ¥ | 323,745 | ¥ | 302,700 | ||||||||
ROE (1) | (%) | 12.1 | 11.6 | 10.3 | ||||||||||||
As of March 31, | ||||||||||||||||
2019 | 2020 | 2021 | ||||||||||||||
Net income attributable to ORIX Corporation shareholders | (Millions of yen | ) | 323,745 | 302,700 | 192,384 | |||||||||||
ROE (1) | (%) | 11.6 | 10.3 | 6.4 | ||||||||||||
| (1) | ROE is the ratio of Net income attributable to ORIX Corporation shareholders for the period to average ORIX Corporation shareholders’ equity based on fiscal year beginning and ending balances. |
Corporate Challenges to be Addressed
ORIX Group believes itthat providing new value to society and being a company that is important to constantly maintain and evolveneeded by society is what enables a corporate structure that can adapt flexibly and quickly to the business environment. We are pursuing the following initiativescompany to achieve sustainable growth. To this end, ORIX Group believes that it must strengthen its management base through the following initiatives.
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became a supporter of the recommendations of “TCFD” (the Task Force on Climate-related Financial Disclosures) which is aiming to assess and disclose the financial impact of risks and opportunities brought by climate change.
Enhance integrated risk management: TheWe established the ERM Headquarters which was established in June 2017, promoted more sophisticated management ofnon-financialrisks in addition to internal controls. In fiscal 2020, we expanded the scope of2017. We are formulating Group-wide risk management by incorporatingnon-financialrisk checks intopolicies and standards necessary for ORIX Group to achieve its management strategy and are creating mechanisms to continuously improve the processeffectiveness of screeningstructures and monitoring investment projects.internal control systems for that purpose. In addition, we established Risk Management Department in the ERM Headquarters in August 2020 and we are making ongoing efforts to develop and enhance the operation of the system that can appropriately identify, evaluate, control and manage risks.
Strengthen information security and promote digital transformation: In order to respond to cyber attack risks, which are becoming serious management risks, weWe established the Information Security DivisionControl Department in June 2018. The purpose2018 and Technology Planning and Governance Department in January 2020. We are solidifying the ORIX Group’s IT infrastructure, promoting digitalization of operations and strengthening the security of digitized management information. In the next step, we are considering an effective use of the division ismassive transactional data accumulated over the years, leveraging information technology to enhance security measures generally and to respond to changes in the business environment and to situations in which new technologies around the world threatenexpand existing businesses. We are working to effectively utilize the vast amount of transaction data we have accumulated so far and to resolve issues through the use of artificial intelligence (AI) in order to develop new businesses and improve the profitability of existing businesses.launch new ones.
PROFILE OF BUSINESS BY SEGMENT
For a discussion of the basis for the breakdown of segments, see Note 34 of “Item 18. Financial Statements.” The following table shows a breakdown of profits by segment for fiscal 2018, 2019, 2020 and 2020.2021. Since April 1, 2020, the reporting segments have been changed to the aforementioned segments. As a result of this change for fiscal 2021, segment data as of the end of and for the previous fiscal year has been retrospectively restated.
Years ended March 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
(Millions of yen) | ||||||||||||
Corporate Financial Services | ¥ | 49,275 | ¥ | 25,482 | ¥ | 14,611 | ||||||
Maintenance Leasing | 40,162 | 38,841 | 33,724 | |||||||||
Real Estate | 74,395 | 89,247 | 76,857 | |||||||||
Investment and Operation | 84,097 | 38,170 | 55,715 | |||||||||
Retail | 74,527 | 84,211 | 80,387 | |||||||||
Overseas Business | 106,622 | 125,444 | 156,433 | |||||||||
Total segment profits | 429,078 | 401,395 | 417,727 | |||||||||
Difference between segment total and consolidated amounts | 6,423 | (5,665 | ) | (5,166 | ) | |||||||
Total Consolidated Amounts | ¥ | 435,501 | ¥ | 395,730 | ¥ | 412,561 | ||||||
Years ended March 31, | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
(Millions of yen) | ||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 78,310 | ¥ | 62,978 | ¥ | 59,149 | ||||||
Real Estate | 93,748 | 80,182 | 24,684 | |||||||||
PE Investment and Concession | 23,061 | 44,110 | 3,431 | |||||||||
Environment and Energy | 12,144 | 11,625 | 28,563 | |||||||||
Insurance | 51,544 | 44,833 | 55,119 | |||||||||
Banking and Credit | 36,434 | 39,096 | 48,030 | |||||||||
Aircraft and Ships | 36,422 | 45,287 | 3,755 | |||||||||
ORIX USA | 50,056 | 56,690 | 43,614 | |||||||||
ORIX Europe | 35,629 | 43,778 | 37,886 | |||||||||
Asia and Australia | 7,521 | 14,673 | 14,660 | |||||||||
Total segment profits | 424,869 | 443,252 | 318,891 | |||||||||
Difference between segment total and consolidated amounts | (29,139 | ) | (30,691 | ) | (31,330 | ) | ||||||
Total Consolidated Amounts | ¥ | 395,730 | ¥ | 412,561 | ¥ | 287,561 | ||||||
Each of our segments is briefly described below.
BUSINESS SEGMENTS
ORIX Group organizes its businesses into sixten segments to facilitate strategy formulation, resource allocation and portfolio balancing at the segment level. These sixten business segments are: Corporate Financial Services and
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Maintenance Leasing, Real Estate, PE Investment and Operation, RetailConcession, Environment and Overseas Business.Energy, Insurance, Banking and Credit, Aircraft and Ships, ORIX USA, ORIX Europe, Asia and Australia. Management believes that organizing our business into large, strategic units allows us to maximize our corporate value by identifying and cultivating strategic advantages vis-à-vis anticipated competitors in each area and by helping ORIX Group achieve competitive advantage overall.
An overview of operations, operating environment and operating strategy for each of the sixten segments follows. However, the operating strategy of each business may change in the future due to developments relating to the spread of
COVID-19,
including the duration and extent to which preventative measures are maintained across the globe.Corporate Financial Services Segmentand Maintenance Leasing
This segment is involved in finance and fee business; leasing and rental of automobiles, electronic measuring instruments and
IT-related
equipment; and Yayoi.In corporate financial services, we are engaged in leasing and lending businesses with a focus on profitability. We also focus on fee businesses by providing life insurance and environment and energy-related products and services to domestic small and
medium-sized
enterprise customers, as well as business succession support in domestic regions. In the automobile-related businesses, we aim to increase market share in small andmedium-sized
enterprises and individual customers, as well as large corporate customers by enhancing our competitive advantages stemming from our industry-leading number of fleets under management andone-stop
automobile-related services. In the rental business operated by ORIX Rentec Corporation, we are strengthening our engineering solution businesses by not only providing electronic measuring instruments andIT-related
equipment leasing and lending, but also developing new services relating to robots and drones.This segment has its origin in the leasing business developed at the time of ORIX’s establishment in 1964. Even today, this segment serves as the foundation for the entire ORIX Group’s sales activities.
In our real estate business, we aim to promote portfolio rebalancing by selling rental properties in favorable market conditions while investing in real estate development projects that can generate added value. We are also building a revenue base that is less affected by volatility in the real estate development, rental andmarket by expanding the scale of our asset management business, ORIX Group is involved not only in developing and leasing properties such as office buildings, commercial properties, logistics centersREIT and residences but also in asset management, where ORIX Group has a high level of expertise.
aim to gain stable profits by accumulating expertise through the operation of various facilities such as hotels and Japanese inns. We aim to enhance mutually complementary aspects of the DAIKYO INCORPORATED and its subsidiaries (hereinafter, “DAIKYO”) with ORIX real estate businesses through integration, and to take advantage of our value chain of real estate development and rental, businessesasset management, facility operations, residential management, office building management, construction contracting, and facility operation businesses. We also develop technologically advanced logistic facilities that leverage the expansion ofe-commerceby utilizing the land information acquired through the sales network and grasping customers’ needs. In the real estate rental business, we intend to enhance our portfolio by selling properties at appropriate times and by regularly evaluating and promoting new investments in properties. In the real estate management business, we aim to receive new orders from a broad range of real estate categories in addition to condominiums.
PE Investment and Operation SegmentConcession
In the private equity business, we will leverageaim to earn stable profits from investees and sustainable gains on sales by rebalancing our track recordportfolio. We aim to carefully selectexpand investment in focused industries and actively investincrease value through rollups and alliances with existing investees as a starting point. At the same time, we seek business opportunities created by changes in foreignthe industrial structure and domestic business operations. After investing, we will providehands-onsupport backed by specialists, use our business platform ofexplore diversified investment methods. In the Group to develop a base of customers and business partners and implement other measures to improve the corporate value of investees in a manner unique to ORIX. We will seek opportunistic investments without limiting the industries we invest in.
Environment and Energy
This segment consists of domestic and overseas renewable energy, electric power retailing, ESCO services, sales of solar panels and electricity storage system, and recycling and waste management.
In the environment and energy business, we aim to increase services revenue as a comprehensive energy service provider by promoting our renewable energy business and electric power retailing business. In our solar power generation business, we have secured top solar power production capacity in Japan and we are gradually proceeding with operations. In the renewable energy business and electricity storage system business, we aim to design new business models based on the anticipated future business environment. In the recycling and waste management business, we are making new investments in facilities, with the aim of further expansion of business. We intend to accelerate our renewable energy business overseas by capitalizing the expertise we have gained in the domestic market.
Insurance
This segment consists of life insurance.
In the life insurance business, we sell life insurance through agents, banks and other financial institutions,sales through our own consulting services, and online sales. Withand “providing reasonable guarantee at reasonable price” as the concepts of product development, we aim to expand the number of new life insurance contracts and increase life insurance premium income by constantly incorporating our customer needs while expanding the product lineup.
face-to-face
“simple-to-understand”
Banking and Credit
This segment consists of banking and consumer finance.
In the banking business, we aim to increase finance revenues by increasing the balance of outstanding real estate investment loans, which is the core of our banking business. In the consumer finance business, we aim to increase finance revenues by providing loans directly to our customers with our expertise in credit screening. We also aim to increase guarantee fees income by expanding guarantees against loans disbursed by other financial institutions. In the mortgage bank business, we aim to expand our market share by expanding our agency network and strengthening our product lineup.
Aircraft and Ships
This segment consists of aircraft leasing and management, and ship-related finance and investment.
In the aircraft-related operations, we are focusing on a wide range of profit opportunities, including operating leases of owned aircraft, sale of aircraft to investors, and asset management services for aircraft owned by domestic and overseas investors. We aim for medium- and long-term growth by further enhancing our presence in the global aircraft-leasing market through mutually complementary relationships with Avolon. In the ship-related business, we flexibly replace assets while closely monitoring the market environment, and aim to achieve goals such as increasing commission income by arranging investment in ships for domestic corporate investors. In the future, we aim to expand our business by collaborating with excellent partners based on our expertise in finance and investment.
ORIX USA
This segment consists of finance, investment and asset management in the Americas.
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ORIX Corporation USA provides various types of services such as corporate finance, real estate finance, private equity investment, and investment in bonds to our clients in response to their needs. We aim to expand such asset businesses by utilizing our expertise in them. We are also engaged in expanding the function of our asset management and servicing platform to increase stable fee revenues. With the expansion of both principle investments and assets under management, we aim for profit growth along with capital efficiency improvement.
ORIX Europe
This segment consists of equity and fixed income asset management.
Under ORIX Corporation Europe N.V. (hereinafter, “OCE”) as the holding company, Robeco Institutional Asset Management B.V. (hereinafter, “Robeco”) and Transtrend B.V. headquartered in the Netherlands, Boston Partners Global Investors, Inc. and Harbor Capital Advisors, Inc. headquartered in the United States are engaged in the asset management business through investments in stocks, bonds, etc. In addition to the sustained growthfocus on expanding the existing businesses by leveraging the expertise of Robeco, a pioneer in sustainable investment, we aim to increase assets under management with expanding products and investment strategies through M&A activities. ORIX Europe is also engaged in capturing a wide range of business opportunities as the strategic business location of ORIX Europe, weGroup in Europe.
Asia and Australia
This segment consists of finance and investment businesses in Asia and Australia.
Our overseas subsidiaries are well-versed in business practices and laws and regulations that vary from region to region, and are engaged in financial services such as leasing and lending. Our overseas subsidiaries also invest in private equity in Asian countries, particularly in China. We will endeavorfurther enhance the functions of our overseas subsidiaries and further invest in targeted markets in order to expand the asset managementour business and also consider new investments.
DIVISIONS, MAJOR SUBSIDIARIES AND AFFILIATES
A list of major subsidiaries and affiliates can be found in Exhibit 8.1.
CAPITAL PRINCIPAL EXPENDITURES AND DIVESTITURES
We are a financial services company with significant leasing, lending, real estate development and other operations based on investment in tangible assets. As such, we are continually acquiring and developing such assets as part of our business. A detailed discussion of these activities is presented elsewhere in this annual report, including in other parts of “Item 4. Information on the Company” and in “Item 5. Operating and Financial Review and Prospects.”
In general, we seek to expand and deepen our product and service offerings and enhance our financial performance through acquisitions of businesses or assets. We continually review acquisition opportunities, and selectively pursue such opportunities. We have in the past deployed a significant amount of capital for acquisition activities and expect to continue to make investments, on a selective basis. For a discussion of certain of our past acquisitions, see “Item 4. Information on the Company—Corporate History.”
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PROPERTY, PLANT AND EQUIPMENT
The following table shows the book values of the primary facilities we own, which include three office buildings, two thermal power stations, three solar power stations and one hotel.two hotels.
As of March 31, 2020 | ||||||||
Book Value (1) | Land Space (2) | |||||||
(Millions of yen) | (Thousands of m²) | |||||||
Office building (Tachikawa, Tokyo) | ¥ | 14,750 | 3 | |||||
Office building (Shiba, Minato-ku, Tokyo) | 30,862 | 2 | ||||||
Office building (Osaka, Osaka) | 9,679 | 2 | ||||||
Thermal power station (Kitakyushu, Fukuoka) | 31,141 | 37 | ||||||
Thermal power station (Soma, Fukushima) | 35,477 | 63 | ||||||
Solar power station (Tsu, Mie) | 13,909 | 1,193 | ||||||
Solar power station (Niigata, Niigata) | 13,256 | 251 | ||||||
Solar power station (Tomakomai, Hokkaido) | 11,943 | — | ||||||
Hotel (Beppu, Oita) (3) | 13,199 | 166 | ||||||
As of March 31, 2021 | ||||||||
Book Value (1) | Land Space (2) | |||||||
(Millions of yen) | (Thousands of m²) | |||||||
Office building (Tachikawa, Tokyo) | ¥ | 11,499 | 2 | |||||
Office building (Shiba, Minato-ku, Tokyo) | 30,962 | 2 | ||||||
Office building (Osaka, Osaka) | 9,484 | 2 | ||||||
Thermal power station (Kitakyushu, Fukuoka) | 29,168 | 37 | ||||||
Thermal power station (Soma, Fukushima) | 33,278 | 63 | ||||||
Solar power station (Tsu, Mie) | 13,113 | 1,193 | ||||||
Solar power station (Niigata, Niigata) | 12,576 | 251 | ||||||
Solar power station (Tomakomai, Hokkaido) | 11,193 | — | ||||||
Hotel (Beppu, Oita) (3) | 21,077 | 166 | ||||||
Hotel (Kanazawa, Ishikawa) | 11,207 | 2 | ||||||
| (1) | Right-of-use |
| (2) | Land space is provided only for those facilities where we own the land. |
| (3) | Book value of hotel (Beppu, Oita) includes advances for property under facility operations of |
We plan to make capital expenditures totaling approximately ¥683,100¥578,178 million to support the growth and development of our operating lease business and power generation business during fiscal 2021.2022. The following table shows a breakdown of planned capital expenditures and includes the estimated investment amounts and expected methods of financing the expenditures.
Fiscal 2022 | ||||||
Estimated investment amounts | Expected methods of financing | |||||
(Millions of yen) | ||||||
Operating lease equipment and property | ¥ | Funds on hand, bank borrowings, etc. | ||||
Power generation equipment | 148,178 | Funds on hand, bank borrowings, etc. | ||||
Total | ¥ | 578,178 | — | |||
Our operations are generally conducted in leased office space in cities throughout Japan and in other countries in which we operate. We believe our leased office space is suitable and adequate for our needs. We utilize, or expect to utilize in the near future, substantially all of our leased office space.
We own office buildings, apartment buildings and recreational facilities for our employees and others with an aggregate book value of ¥203,930¥246,399 million as of March 31, 2020.2021.
As of March 31, 2020,2021, the acquisition cost of equipment we held for operating leases amounted to ¥1,931,309¥2,006,993 million, consisting of ¥1,305,908¥1,364,559 million of transportation equipment, ¥287,301¥307,010 million of measuring
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and information-related equipment, ¥305,981¥291,917 million of real estate and ¥32,119¥43,507 million of others, before accumulated depreciation. Accumulated depreciation on equipment held for operating leases was ¥678,245¥741,022 million. We also recognized ¥121,553¥114,268 million of ROU assets of operating leases, and ¥25,384¥28,259 million of accrued rental receivables and ¥(309) million of allowance for doubtful receivables on operating leases as of the same date.
SEASONALITY
Our business is not materially affected by seasonality.
RAW MATERIALS
Our business does not materially depend on the supply of raw materials.
PATENTS, LICENSES AND CONTRACTS
Our business and profitability are not materially dependent on any patents or licenses, industrial, commercial or financial contracts, or new manufacturing processes.
BUSINESS REGULATION
ORIX and its group companies in Japan are incorporated under, and our corporate activities are primarily governed by, the Companies Act.Act and other Japanese laws. However, because certain of ORIX’s group companies are organized in jurisdictions other than Japan, and ORIX and its group companies are involved in diverse businesses, joint ventures and acquisitions in overseas jurisdictions, including in the United States, Europe, Asia and Oceania, andwe are therefore subject to various
The next section describes the main laws and regulations applicable to each of our business in Japan and the United States and Europe, our major areas of operation outside Japan.segments.
ORIX and certain of our group companies are engaged in the moneylending business in Japan. The moneylending business is regulated by the Interest Rate Restriction Act, the Act Regulating the Receipt of Contributions, the Receipt of Deposits and Interest Rates and the Moneylending Business Act. The Moneylending Business Act requires that all companies engaged in moneylending business register with the Prime Minister or the relevant prefectural governors. Moneylenders permitted to register are regulated by the Financial Services Agency (“FSA”), and are required to file various notifications and provide documents such as
22
their annual business reports. Further, moneylenders are required to comply with applicable laws and to establish an internal management system to ensure the appropriate management of money lending operations. These obligations are supervised by the FSA. Accordingly, pursuant to the Moneylending Business Act, ORIX and certain of our group companies have registered with the Prime Minister or various prefectural governors, established the necessary internal systems, and provide the necessary reporting and notification to the FSA. The FSA has the power to issue business improvement orders, suspend all or part of a money lender’s activities, or to revoke the registration of a moneylender that has violated the law, depending on the severity of the violation.
Certain businesses conducted by ORIX and our group companies in Japan are governed by the Financial Instruments and Exchange Act,Act. The act was established to regulate activities such as the main purposeissuance, sale and purchase of which isstocks and other securities in order to establish comprehensiveprotect investors and cross-sectional protection for investors. “The financialfacilitate finance, and requires that any person conducting such activities register with the Prime Minister as a “financial instruments business” as defined in thetraders.” Financial Instruments and Exchange Act hasinstruments traders are divided among four classifications depending on the type of business: (1) First Class Financial Instruments Exchange Business, (2) Second Class Financial Instruments Exchange Business, (3) Investment Management Business, and (4) Investment Advisory and Agency Business. AllBusiness, and companies engaged in the Corporate Financial Services and Maintenance Leasing segment conducting such businessesactivities are required to registerregistered with the Prime Minister after which they designated “registered financial instruments traders.”as Second Class Financial Instruments Exchange Businesses. Registered financial instruments traders are regulated by the FSAobligated to establish an internal management system to ensure compliance with relevant laws and obligedregulations and appropriate management of its business, as well as to provide and deliver material information and explain risks to their customers, and in case of a violation,customers. The relevant supervisory authority, the contract may be cancelled, and administrative penalties may be imposed. AFSA, monitors registered financial instruments trader must establish an internal management system to ensure the compliance with the relevant lawstraders and regulations, and the appropriate management of its operations. These obligations are supervised by the FSA. The FSA has the power to order improvement of a business, or suspension of a part or the whole of a business, or to revoke the registration of such a trader that has violated the law, depending on the severity of the violation. Business regulations applicable toviolation:
While the ORIX and our group companies are as follows:
Group includes a life insurance company engaged in the insurance business, ORIX and certain of our group companies are also separately registered with the Prime Minister underas insurance agencies for life insurance and/orFinancial Instrumentscompanies are obligated to establish certain systems and Exchange Actprovide and deliver material information and explain risks to conduct second class financial instruments exchange business.their customers. In the event an insurance agency violates such obligations, the FSA has the power to order improvement of a business, or suspension of a part or the whole of a business, or to revoke the registration of the insurance agency that has violated the law, depending on the severity of the violation. For information on regulations applicable to our insurance business other than our insurance agencies, see “—” below.
non-life
insurance and are subject to Insurance Business Act. As insurance agencies, the 5.
Insurance
car-sharing
business is subject to licensing by the Minister of the Ministry of Land, Infrastructure and Transport (“MoLIT”). In addition, the leasing or renting of some types of goods may require compliance with regulations that specify reporting or notification obligations based on certain characteristics of the goods.2. Real Estate
While it is unnecessary for a company to obtain a license to become a real estate developer, there are various regulations that apply to real estate activities. Certain of our group companies have obtained Construction Business Licenses from MoLIT for constructing buildings and conducting interior finishing work. Furthermore, ORIX Asset Management Corporation (“OAM”),and certain of our group companies, including ORIX Real Estate Investment Advisors Corporation (“ORIA”), wholly owned subsidiaries, and RobecoDAIKYO, are required to be licensed by MoLIT or relevant prefectural governors under the Building Lots and Buildings Transaction Business Act to engage in activities such as the buying and selling land and buildings in Japan, Company Limited (“Robeco Japan”), a subsidiaryand their operations are regulated by such laws, including the maintenance of registered real estate transaction managers on staff and the duty to provide and deliver material information to counterparties.
In addition, lodging facilities, such as Japanese inns and hotels, operated by ORIX Hotel Management Corporation have licenses from relevant prefectural governors under the Inns and Hotels Act, etc.
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ORIX’s wholly owned subsidiaries ORIX Europe,Asset Management Corporation (“OAM”) and ORIX Real Estate Investment Advisors Corporation (“ORIA”) are each registered with the Prime Minister under the Financial Instruments and Exchange Act as an investment manager. OAM is responsible for the asset management of a real estate investment corporation, ORIX JREIT Inc., which is listed on the Tokyo Stock Exchange. Under the Financial Instruments and Exchange Act, any entity possessing voting rights in an investment manager at or above a specified threshold is considered a major shareholder and must report its shareholding to the Prime Minister. ORIX has filed such report as a major shareholder of OAM ORIA and Robeco Japan.
ORIA and Mariner Japan Inc., an affiliate of Mariner Investment Group LLC, areis registered with the Prime Minister under the Financial Instruments and Exchange Act to engage in the investment advisory and agency business and regulated by the FSA.
3. PE Investment and Concession
ORIX conducts investment activities in a broad range of fields without regard for the specific industry. Due to this, we are subject to a wide variety of regulations, including those that are applicable to our investment activities and those that apply due to the type of business conducted by our investees. ORIX generally does not directly involve itself in the management of its investees, but it is necessary for us to pay attention to regulations that apply to our investees so that we can monitor their management.
4. Environment and Energy
The businesses that comprise our renewable energy business, such as our solar power generation business, are subject to and must comply with various requirements and regulations in the jurisdictions where they operate, including the Electricity Business Act, Environmental Impact Assessment Act and Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities in Japan and similar laws and regulations in other jurisdictions, when setting up a power generation facility, including business notification requirements, regulations relating to the facility location, and other various regulations, such as those designed to protect the environment and visual landscape and ensure safety from the perspective of disaster prevention.
5. Insurance
In order to engage in the life insurance business, ORIX Life Insurance has obtained and maintains a license from the Prime Minister under the Insurance Business Act. The relevant supervisory authority, the FSA, has the power to conduct broad supervision and guidance of the life insurance industry and to issue business improvement orders, suspend all or part of an insurance company’s activities, or to revoke the license of an insurance company that has violated the law or that has been determined to have an insufficient internal management system, depending on the severity of the violation or insufficiency. It is also generally necessary to receive FSA approval for the sale of new products and to revise pricing terms for existing products.
Any entity attempting to acquire voting rights in an insurance company at or above a specified threshold must receive permission from the Prime Minister in accordance with the Insurance Business Act. ORIX has received such permission as a major shareholder of ORIX Life Insurance.
6. Banking and Trust Business
CreditORIX Bank is licensed by the Prime Minister to engage in the banking and trust business and is regulated under the Banking Act and the Act on Engagement in Trust Business by Financial Institutions. The Banking Act governs the general banking business and the Act on Engagement in Trust Business by Financial Institutions and the Trust Business Act govern the trust business. A bank must establish a system for the protection of customers’ interests, which is supervised by the FSA.
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In addition, any entity that attempts to obtain voting rights in a bank at or above a specified threshold must receive permission from the Prime Minister in accordance with the Banking Act. ORIX has received such permission as a major shareholder of ORIX Bank. A bank must establish a system for the protection of customers’ interests, which is supervised by the FSA.
ORIX Asset Management & Loan Services Corporation (“OAMLS”)Credit is engaged in the loan servicing business and the business of managing and collecting certain assets. All companies engaged in such business are regulated under the Act on Special Measures Concerning Business of Management and Collection of Claimsproviding moneylending services to consumers and licensed byas a moneylender. For information on regulations applicable to moneylenders, see “—” above.
1.
Corporate Financial Services and Maintenance Leasing
7. Aircraft and Ships
The business of leasing aircraft and ships generally does not require a license, however it is necessary to register the Ministerownership of Justiceaircraft and ships. In most jurisdictions, the lessee under an aircraft lease is responsible for registering the aircraft, while the lessor under a ship lease registers the ship with the appropriate flag state. In the case of ship leases, there are certain regulations that we must comply with because they apply directly not just to the lessee but also the lessor, such law.environmental regulations.
8. ORIX Environmental Resources Management Corporation and ORIX Eco Services Corporation provide waste management services. All companies engaged in such business are regulated by the Waste Management and Public Cleansing Act and licensed by the relevant prefectural governors.
Certain activitiesof our businesses in our ORIX USA segment are subject to extensive regulation in the United States and Brazil. Certain subsidiaries of ORIX Corporation USA manage investment funds and our group companiesseparately managed accounts and are regulated byregistered as investment advisers with the Foreign ExchangeSEC under the U.S. Investment Advisers Act of 1940, as amended (“Advisers Act”) and Foreign Trade Law of Japanare subject to the requirements and regulations promulgated thereunder (the “Foreign Exchange Regulations”).of the Advisers Act. Such requirements relate to, among other things, fiduciary duties to advisory clients, maintaining an effective compliance program and code of ethics, operational and marketing requirements, recordkeeping and reporting requirements, disclosure obligations and general anti-fraud prohibitions.
By virtue of their involvement in the Equal Credit Opportunity Actmultifamily and Regulation B thereunder, and state usury laws. Real estate transactions are also governed by state real property and foreclosure laws. ORIX USA’s secured finance transactions are governed by the Uniform Commercial Code, as adopted by the various states. ORIX USA is registered with or has obtained licenses from the various state agencies that regulate the activity of commercial lenders in such states. For example, its consolidated subsidiary, ORIX Corporate Capital Inc., is a Delaware Licensed Lender,seniors housing mortgage lending business, Lument and its consolidated subsidiaries ORIX Capital Markets, LLC, and ORIX Growth Capital, LLC are licensed California Finance Lenders.
Certain of ORIX Corporation (“Freddie Mac”). ORIX Real Estate Capital, LLC and OREC Structured Finance Co., LLC, both wholly-ownedUSA’s subsidiaries of ORECH, are licensed California Finance Lenders. As noted above, OREC Investment Management, LLC is a registered investment adviser regulated by the SEC, and OREC Securities, LLC is a registered broker-dealer, municipal advisor and municipal securities broker dealer regulated by the SEC and FINRA.
Low-Income
Low-Income
Housing Tax Credits property is typically regulated at the Day-to-day
25
property resides with a third party general partner, who in addition to directing the agent that manages the property, has responsibility for compliance with applicable laws and regulations. As the general partner of a limited partnership, BFIM monitors such compliance on behalf of the other limited partners.
9. ORIX Europe
Certain of our businesses in our ORIX Corporation Europe N.V.segment, which includes entities and businesses that are organized in or operating in jurisdictions outside of Europe, are subject to extensive regulation in various jurisdictions across Europe, the United States and Asia.
Dutch subsidiaries of OCE are subject to European financial supervisory regulation, including, amongst others and as the case may be, the Alternative Investment Fund Managers Directive, the Undertakings for Collective Investment in Transferable Securities (“ORIX Europe”UCITS”), Directive, the ultimate holding companyMarkets in Financial Instruments Directive, the European Market Infrastructure Regulation, the Market Abuse Regulation, the 5th Anti-Money Laundering Directive, the Benchmark Regulation, the Securities Financing Transactions Regulation and the Shareholder Rights Directive II.ORIX Europe Group. On October 21, 2016, ORIX acquired the remaining 9.99% (10% minus one share)Comptroller of the total voting shares (equity interests)Currency, FINRA, National Futures Association (“NFA”), Department of ORIX Europe. The ORIX Europe Group consists ofJustice, Commodity Futures Trading Commission (“CFTC”) and New Hampshire Banking Commission (“NHBC”), as well as being subject to the following regulated entities:Advisers Act.
UK-regulated
subsidiaries of OCE are subject to the UK FCA Conduct of Business Sourcebook. U.S. subsidiaries of OCE are subject to regulation, primarily at the federal level, by, as the case may be, the SEC, Department of Labor, Federal Reserve, Office of the Robeco Institutional Asset Management B.V. (“RIAM”), an indirecta subsidiary of ORIX Europe,OCE, is authorizedregistered as an alternative investment fund manager (“AIFM”) and fund manager of UCITS in the Netherlands and regulated byThe Netherlands the Dutch Authority for the Financial Markets(Autoriteit Financiële Markten(“AFM”)) andThe the Dutch Central Bank(De Nederlandsche Bank(“DNB”)) in the Netherlands,inter alia, to offer certain investment services.. RIAM has branches and representative offices worldwide, including in Dubai, Germany, Spain, Italy and the United Kingdom, each of which either benefits from RIAM’s European passport or is subject to local regulatory supervision.
Robeco Schweiz AG, a subsidiary of OCE, is authorized and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”). Robeco Schweiz is subject to Swiss legislation, including amongst others, the Federal Act on Collective Investment Schemes, the Federal Ordinance on Collective Investment Schemes , the Financial Services Act , the Financial Institutions Act, the FINMA Collective Investment Schemes Ordinance, the Anti-Money Laundering Act , the FINMA Anti-Money Laundering Ordinance, the FINMA Circular Outsourcing 18/3, the FINMA Circular 2013/08 Market Conduct Rules, the FINMA Circular 2010/1 on Remuneration Principles, the Code of Conduct from the Swiss Asset Management Association and their respective industry Guidelines, which are currently under review.
Certain other subsidiaries of OCE located across Europe, the United States and Asia that are affiliated with the Robeco group are registered, licensed or approved, as the case may be, by regulators in the jurisdictions in which they operate and subject to local regulations regarding their businesses. Such regulators include the AFM, SEC, Securities & Futures Commission of Hong Kong, Financial Services Commission of Korea (“FSC”), Australian Securities and Investments Commission, Asset Management Association of China and Monetary Authority of Singapore.
Transtrend B.V., an indirecta wholly owned subsidiary of ORIX EuropeOCE that offers asset management and commodity trading advisory services, is also authorized and regulated by AFM and DNB, and is registered with the National Futures Associationas an AIFM in the United States (“NFA”)Netherlands and regulated by the NFAAFM and the Commodity Futures Trading Commission in the United States (“CFTC”).
Boston Partners Global Investors, Inc. (“Boston Partners”) is alsoa subsidiary of OCE and registered with theFinancial Services Commission(“FSC”) in Korea. Furthermore, SEC as an investment adviser. Boston Partners Global Investors, Inc.is also a member of the NFA and is registered as a commodity pool operator and as a commodity trading adviser and a commodity pool operator with the CFTCCFTC. Furthermore, Boston Partners is registered with the FSC. Certain subsidiaries of Boston Partners located in the United States and the United Kingdom are also registered with the SEC, NHBC and the UK Financial Conduct Authority (“FCA”).
Harbor Capital Advisors, Inc. (“Harbor”) is a subsidiary of OCE and is a memberregistered with the SEC as an investment adviser. Certain subsidiaries of the NFA.
Gravis Capital Management Limited (“Gravis”) is a wholly owned subsidiary of Boston Partners Global Investors, IncUK asset manager and is registered as an investment adviser with the UKFinancial Conduct AuthorityFCA. OCE acquired 70% of the shares in Gravis in January 2021.(“FCA”).
10. Asia and Australia
Our group companies in our Asia and Australia segment are subject to the laws and regulations of the various jurisdictions across Asia and Oceania in which they operate. Many of the businesses are also subject to oversight by regulatory authorities in those jurisdictions due to the industries in which they operate, particularly those businesses that offer of financial services, such as leasing, lending and banking. Regulatory authorities in these jurisdictions have authority with respect to financial services and can grant, suspend or cancel licenses or registrations that are necessary for our businesses to conduct certain of their operations.
Among group companies in the segment, ORIX Asia Limited is registered with the Hong Kong Monetary Authority as a restricted license bank. A wholly owned subsidiary of Boston Partners Global Investors, Inc.ORIX Leasing Malaysia Berhad has a money lending license from the Malaysia Ministry of Housing and Local Government, and is registered with the NHBC.
LEGAL PROCEEDINGS
We are a plaintiff or a defendant in various lawsuits arising in the ordinary course of our business. We aggressively manage our pending litigation and assess appropriate responses to lawsuits in light of a number of factors, including the potential impact of the actions on the conduct of our operations. In the opinion of management, none of the pending legal matters is expected to have a material adverse effect on our financial condition or results of operations. However, there can be no assurance that an adverse decision in one or more of these lawsuits will not have a material adverse effect.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
Table of Contents for Item 5
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OVERVIEW
The following discussion provides management’s explanation of factors and events that have significantly affected our financial condition and results of operations. Also included is management’s assessment of factors and trends which are anticipated to have a material effect on our financial condition and results of operations in the future. However, please be advised that our financial condition and results of operations in the future may also be affected by factors other than those discussed here. This discussion should be read in conjunction with “Item 3. Key Information—Risk Factors” and “Item 18. Financial Statements” included in this annual report.
Basic approach to financial and capital strategy
Regarding funding activities, we strive to maintain a high ratio of long-term funds procured and staggerstaggered repayment periods, keeping in mind the diversification and balance of fund procurement methods and sources. We strive to ensure that liquidity on hand is at an appropriate level through stress testing and other means.
With regard to shareholders’ equity, we measure risk in all assets using our own method, and strive to controlmonitor the ratio of use of shareholders’ equity at an appropriate level while considering the balance between flexibility and financial soundness for new investments.
The issuer ratings (or counterparty ratings) that the ORIX Group has obtained from rating agencies as of the filing date of this annual report are
“A-”
for S&P Global Ratings Japan,“A-”
for Fitch Ratings Japan, “A3” for Moody’s Investors Service, and“AA-”
for Rating and Investment Information, Inc. (R&I).Major Use of funding
The ORIX Group’s major uses of funding include purchases of leased assets, such as office equipment, automobiles, IT equipment, measuring equipment, real estate, and aircraft, loans to customers, investments in affiliates, acquisition of subsidiaries, purchases of investment securities, and purchases of business assets.
28
Results Overview
In fiscal 2020,2021, net income attributable to ORIX corporation shareholders was ¥302.7 billion, reaching our target of net income attributabledecreased 36% to ORIX corporation shareholders of ¥300 billion and ROE was 10.3%.
COVID-19
The following is a summary of the main factors behind the consolidated business results for fiscal 2020.2021.
The segment profit in fiscal 2021 decreased 28% to ¥318.9 billion to compared to the previous fiscal year due to a decrease in segment profit in Corporate Financial Services and Maintenance Leasing, Real Estate, PE Investment and Concession, Aircraft and Ships, ORIX USA, ORIX Europe, and Asia and Australia, despite an increase in segment profit in Environment and Energy, Insurance, and Banking and Credit.
Corporate Financial Services and Maintenance Leasing Segment’s profit decreased.
Real Estate Segment’s profit decreased due to a declinedecrease in theservices income from our facility operations business resulting from temporary closure and low occupancy rate of hotels, inns, and other operating facilities, as well as to the discontinuation of those facilities,rates due to the impact of
COVID-19.
PE Investment and Concession Segment’s profit decreased due to a decrease in equity in net income of affiliates resulting from a substantial decrease in the spreadnumber of passengers and flights at our three airports in Kansai due to the impact of
COVID-19
and due to the absence of gains on the sale of a subsidiary in our private equity business, which had been recorded during the previous fiscal year.Environment and Energy Segment’s profit increased mainly due to the recording of gains on sales of an investee involved in wind power generation business in India.
Insurance Segment’s profit increased due to the recording of reversals of policy liability reserves related to variable life insurance contracts.
Banking and Credit Segment’s profit increased due to a decrease in provision for credit losses, which was primarily due to the impacts of a decrease in Consumer loans and Consumer loans guarantee as well as low default rates in ORIX Credit.
Aircraft and Ships Segment’s profit decreased due to a decrease in operating leases revenues, fee income, and equity in net income of affiliates from Avolon due to the impact of
COVID-19.
ORIX USA Segment’s profit decreased due to the absence of gains on sales of equity interests of Houlihan Lokey, Inc., etc., which had been recorded during the previous fiscal year.
Asia and Australia Segment’s profit remained substantially unchanged compared to the previous fiscal year despite the absence of losses on valuation of investment securities of an investee in Asia which had been recorded during the previous fiscal year, as well as the recognition of gains on sales of subsidiaries and affiliates in Asia, due to the decrease in equity in net income of affiliates due to the recording of an impairment loss on an investment in an affiliate.
29
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Accounting estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Note 1 of “Item 18. Financial Statements” includes a summary of the significant accounting policies used in the preparation of our consolidated financial statements. Certain accounting estimates are particularly sensitive because of their significance to the consolidated financial statements and the possibility that future events affecting the estimates may differ significantly from management’s current judgments. We consider the accounting estimates discussed in this section to be critical for us for two reasons. First, the estimates require us to make assumptions about matters that are highly uncertain at the time the accounting estimates are made. Second, different estimates that we reasonably could have used in the relevant period, or changes in the accounting estimates that are reasonably likely to occur from period to period, could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. We believe the following represent our critical accounting policies and estimates.
In addition, we carefully considered the future outlook regarding the spread of the2020,2021, there was no significant impact on our accounting estimates. However, the outlook for future outbreaks of
COVID-19.
As of March 31, COVID-19
and the resulting global economic slowdown is uncertain and it may change rapidly. Therefore our accounting estimates may change over time.FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, a number of significant judgments, assumptions and estimates may be required. If observable market prices are not available, we use internally-developed valuation techniques, such as discounted cash flow methodologies, to measure fair value. These valuation techniques involve determination of assumptions that market participants would use in
pricing the asset or liability. This determination involves significant judgment, and the use of different assumptions and/or valuation techniques could have a material impact on our financial condition or results of operations. Significant assumptions used in measuring fair values have a pervasive effect on various estimates, such as estimates of the allowance for real estate collateral-dependent loans, measurement of impairment of investments in securities, measurement of impairment of goodwill and indefinite-lived intangible assets, measurement of impairment of long-lived assets and recurring measurements of loans held for sale, investments in securities and derivative instruments.
The Company and its subsidiaries classify and prioritize inputs used in valuation techniques to measure fair value into the following three levels:
Level 1—Inputs of quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3—Unobservable inputs for the assets or liabilities.
The Company and its subsidiaries differentiate between those assets and liabilities required to be carried at fair value at every reporting period (recurring) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (nonrecurring). We mainly measure certain loans held for sale, trading debt securities,debt securities, certain equity securities, derivatives, certain reinsurance recoverables in other assets and variable annuity and variable life insurance contracts in policy liabilities and policy account balances at fair value on a recurring basis. Certain subsidiaries measure certain loans held for sale, certain foreign government bond securities and foreign corporate debt securities included indebt securities, certain investment funds included in equity securities, certain reinsurance contracts, and variable annuity and variable life insurance contracts at fair value on a recurring basis as they elected the fair value option.
available-for-sale
available-for-sale
30
The following table presents recorded amounts of major financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020:2021:
March 31, 2020 | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
(Millions of yen) | ||||||||||||||||
Financial Assets: | ||||||||||||||||
Loans held for sale | ¥ | 90,893 | ¥ | 0 | ¥ | 90,893 | ¥ | 0 | ||||||||
Trading debt securities | 7,431 | 0 | 7,431 | 0 | ||||||||||||
Available-for-sale debt securities | 1,631,185 | 21,490 | 1,521,342 | 88,353 | ||||||||||||
Equity securities | 375,174 | 58,400 | 232,873 | 83,901 | ||||||||||||
Derivative assets | 39,690 | 202 | 20,258 | 19,230 | ||||||||||||
Other assets | 18,206 | 0 | 0 | 18,206 | ||||||||||||
Total | ¥ | 2,162,579 | ¥ | 80,092 | ¥ | 1,872,797 | ¥ | 209,690 | ||||||||
Financial Liabilities: | ||||||||||||||||
Derivative liabilities | ¥ | 73,649 | ¥ | 2,471 | ¥ | 71,178 | ¥ | 0 | ||||||||
Policy Liabilities and Policy Account Balances | 300,739 | 0 | 0 | 300,739 | ||||||||||||
Total | ¥ | 374,388 | ¥ | 2,471 | ¥ | 71,178 | ¥ | 300,739 | ||||||||
March 31, 2021 | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
(Millions of yen) | ||||||||||||||||
Financial Assets: | ||||||||||||||||
Loans held for sale | ¥ | 63,272 | ¥ | 0 | ¥ | 63,272 | ¥ | 0 | ||||||||
Trading debt securities | 2,654 | 0 | 2,654 | 0 | ||||||||||||
Available-for-sale | 2,003,917 | 6,012 | 1,864,448 | 133,457 | ||||||||||||
Equity securities | 396,465 | 82,039 | 223,016 | 91,410 | ||||||||||||
Derivative assets | 22,696 | 352 | 8,521 | 13,823 | ||||||||||||
Other assets | 6,297 | 0 | 0 | 6,297 | ||||||||||||
Total | ¥ | 2,495,301 | ¥ | 88,403 | ¥ | 2,161,911 | ¥ | 244,987 | ||||||||
Financial Liabilities: | ||||||||||||||||
Derivative liabilities | ¥ | 71,034 | ¥ | 475 | ¥ | 70,526 | ¥ | 33 | ||||||||
Policy Liabilities and Policy Account Balances | 266,422 | 0 | 0 | 266,422 | ||||||||||||
Total | ¥ | 337,456 | ¥ | 475 | ¥ | 70,526 | ¥ | 266,455 | ||||||||
Compared to financial assets classified as Level 1 and Level 2, measurements of financial assets classified as Level 3 are particularly sensitive because of their significance to the financial statements and the possibility that future events affecting the fair value measurements may differ significantly from management’s current measurements.
As of March 31, 2020,2021, financial assets measured at fair value on a recurring basis and classified as Level 3 and the percentages of total assets are as follows:
March 31, 2020 | ||||||||
Significant Unobservable Inputs (Level 3) | Percentage of Total Assets (%) | |||||||
(Millions of yen, except percentage data) | ||||||||
Level 3 Assets: | ||||||||
Available-for-sale debt securities | ¥ | 88,353 | 1 | |||||
Japanese prefectural and foreign municipal bond securities | 2,832 | 0 | ||||||
Corporate debt securities | 3,994 | 0 | ||||||
Other asset-backed securities and debt securities | 81,527 | 1 | ||||||
Equity securities | 83,901 | 1 | ||||||
Investment funds | 83,901 | 1 | ||||||
Derivative assets | 19,230 | 0 | ||||||
Options held/written and other | 19,230 | 0 | ||||||
Other assets | 18,206 | 0 | ||||||
Reinsurance recoverables | 18,206 | 0 | ||||||
Total Level 3 financial assets | ¥ | 209,690 | 2 | |||||
Total assets | ¥ | 13,067,528 | 100 | |||||
March 31, 2021 | ||||||||
Significant Unobservable Inputs (Level 3) | Percentage of Total Assets (%) | |||||||
(Millions of yen, except percentage data) | ||||||||
Level 3 Assets: | ||||||||
Available-for-sale | ¥ | 133,457 | 1 | |||||
Japanese prefectural and foreign municipal bond securities | 2,761 | 0 | ||||||
Corporate debt securities | 1,021 | 0 | ||||||
Other asset-backed securities and debt securities | 129,675 | 1 | ||||||
Equity securities | 91,410 | 1 | ||||||
Investment funds | 91,410 | 1 | ||||||
Derivative assets | 13,823 | 0 | ||||||
Options held/written and other | 13,823 | 0 | ||||||
Other assets | 6,297 | 0 | ||||||
Reinsurance recoverables | 6,297 | 0 | ||||||
Total Level 3 financial assets | ¥ | 244,987 | 2 | |||||
Total assets | ¥ | 13,563,082 | 100 | |||||
31
As of March 31, 2020,2021, the amount of financial assets classified as Level 3 was ¥209,690¥244,987 million, among financial assets that we measured at fair value on a recurring basis. Level 3 assets represent 2% of our total assets.
Investment funds classified as Level 3 are investments held by the investment companies which are owned by a certain overseasAmericas subsidiary, and certain investments in investment funds for which certain subsidiaries elected the fair value option. With respect to investments held by the investment companies which are owned by a certain overseasAmericas subsidiary, fair value measurement is based on the combination of discounted cash flow methodologies and market multiple valuation methods, andor broker quotes. Discounted cash flow methodologies use future cash flows to be generated from investees, weighted average cost of capital (WACC) and others. Market multiple valuation methods use earnings before interest, taxes, depreciation and amortization (EBITDA) multiples based on actual and projected cash flows, comparable peer companies, and comparable precedent transactions and others. With respect to certain investments in investment funds for which certain subsidiaries elected the fair value option, the subsidiaries measure their fair value using discounting to net asset value based on inputs that are unobservable in the market.market, or broker quotes.
With respect to the other asset-backed securities, we determined that due to the lack of observable trades for older vintage and below investment grade securities, we continue to limit the reliance on independent pricing service vendors and brokers. As a result, we established internally developed pricing models using valuation
techniques such as discounted cash flow methodologies using Level 3 inputs in order to estimate fair value of these debt securities and classified them as Level 3. Under the models, we use anticipated cash flows of the security discounted at a risk-adjusted discount rate that incorporates our estimate of credit risk and liquidity risk that a market participant would consider. The cash flows are estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security. An increase (decrease) in the discount rate or default rate would result in a decrease (increase) in the fair value of other asset-backed securities.
In determining whether the inputs are observable or unobservable, we evaluate various factors such as the lack of recent transactions, price quotations that are not based on current information or vary substantially over time or among market makers, a significant increase in implied risk premium, a widemarket) and other factors.
bid-ask
spread, significant decline in new issuances, little or no public information (e.g., aprincipal-to-principal
For more discussion, see Note 2 of “Item 18. Financial Statements.”
ALLOWANCE FOR DOUBTFUL RECEIVABLES ON NET INVESTMENT IN LEASES AND PROBABLE LOANCREDIT LOSSES
In developing the allowance for doubtful receivables on net investment in leases and probable loancredit losses, we consider, among other things, the following factors:
business characteristics and financial conditions of obligors;
prior
charge-off
experience;current delinquencies and delinquency trends; and
value of underlying collateral and guarantees.guarantees; and
current economic conditions and trends and expected outlook in future.
32
There are two methods for estimating the allowance for credit losses; collective evaluation and individual evaluation. We also recognize allowances for
off-balance
sheet credit exposures.Collective evaluation
When certain financial assets have similar risk characteristics to other financial assets, we collectively evaluate these financial assets as a pool. The forecasted future economic indicators correlated with the prior
charge-off
experience are reflected to the estimate of the allowance for credit losses. Economic indicators correlated with priorcharge-off
experience are determined over the reasonable and supportable forecasted period. Economic indicators include GDP growth rates, consumer price indices, unemployment rates, and government bond interest rates. We also consider forward-looking scenarios of how the selected economic indicators will change in the future. We use the latest economic forecasts available from the economic reports published by the government and the Financial Services Agency, the Bank of Japan and third-party information providers as economic indicators.Individual evaluation
When financial assets do not have similar risk characteristics to other financial assets, we evaluate individually developthe financial assets. In the individual assessment the allowance for credit losses for impaired loans. Fornon-impairedloans, including loans that are notis estimated individually evaluated for impairment, and net investment in leases, we evaluate priorcharge-offexperience as segmented by debtor’s industry and the purpose of the loans and develop the allowance for credit losses based on such priorcharge-offexperience as well as current economic conditions.
For
non-recourse
loans and purchased loans, in principle, the estimated collectible amount is determined based on the fair value of the collateral securing the loans as they are collateral-dependent. Further for certainnon-recourse
loans and purchased loans the estimated collectible amount is determined based on the present value of expected future cash flows.The fair value of the real estate collateral securing the loans is determined using appraisals prepared by independent third-party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. We generally obtain a new appraisal once a fiscal year. In addition, we periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a significant change in economic and/or physical conditions which may materially affect its fair value. For impaired purchased loans, we develop the allowance for credit losses based on the difference between the book value and the estimated collectible amount of such loans.
We charge off doubtful receivables when the likelihood of any future collection is believed to be minimal considering debtor’s creditworthiness and the liquidation status of collateral.
Allowance for
off-balance
sheet credit exposuresIf the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable by the entity, credit losses related the loan commitments of card loans and installment loans and financial guarantees are in the scope of the allowance for credit losses.
For loan commitments of card loans and installment loans, credit losses are recognized on the loan commitments for the portion expected to be drawn.
For financial guarantees, the allowance is recognized for the contingent obligation which generates credit risk exposures.
These allowance for
off-balance
sheet credit exposures is measured using the same measurement objectives as the allowance for loans and net investment leases, considering quantitative and qualitative factors including historical loss experience, current conditions and reasonable and supportable forecasts.33
The allowance for these
off-balance
sheet credit exposures is recorded in other liabilities on the consolidated balance sheets.While management considers the allowance is adequate based on the currently available information, additional provisions may be required due to future uncertain events and factors.
IMPAIRMENT OF INVESTMENT IN SECURITIES
We make decisions about impairment of investment in debt securities other than trading and investment in equity securities elected for the measurement alternative as follows.
available-for-sale
non-credit
losses component. Impairment related to credit losses is recognized in earnings through an allowance for credit losses. Impairment related to other factors than credit losses is recognized in other comprehensive income (loss), net of applicable income taxes. In estimating an allowance for credit losses, we consider In assessing whetherdebt securities are other-than-temporarily impaired, we consider all available information relevant to the collectability of the debt security, including but not limited to the following factors:
available-for-sale
the extent to which the fair value has beenis less than the amortized cost basis;
continuing analysis of the underlying collateral, age of the collateral, business climate, economic conditions and geographical considerations;
trends in delinquencies and charge-offs;
payment structure and subordination levels of the debt security; and
changes to the rating of the security by a rating agency; andagency.
Held-to-maturity
Credit Losses Standard, see Note 1 “Significant Accounting and Reporting Policies (h) Allowance for credit losses” of “Item 18. Financial Statements.”
For equity securities elected for the measurement alternative, we determine that the investment shall be written down to its fair value with losses included in income if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying value.
In assessing whether equity securities elected for the measurement alternative are impaired, we make a qualitative assessment considering impairment indicators, including but not limited to the following factors:
a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee;
a significant adverse change in the regulatory, economic, or technological environment of the investee;
a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates;
34
a bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment; and
factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants.
Determinations of whether investments in securities are impaired often involve estimating the outcome of future events that are highly uncertain at the time the estimates are made. Management judges whether there are any facts that an impairment loss should be recognized, based primarily on objective factors.
If the financial condition of an investee deteriorates, its forecasted performance is not met or actual market conditions are less favorable than those projected by management, we may charge against income additional losses on investment in securities.
The accounting estimates relating to impairment of investment in securities could affect all segments.
IMPAIRMENT OF GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS
We perform an impairment test for goodwill and any indefinite-lived intangible assets at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, we test for impairment whenwhenever such events or changes occur.
Accounting Standard Updatefirst step of thetwo-stepgoodwill impairment test. If,We perform the qualitative assessment for some goodwill but bypass the qualitative assessment and proceed directly to the impairment test for other goodwill. For the goodwill for which the qualitative assessment is performed, if, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then we do not perform thetwo-stepimpairment test. However, if we conclude otherwise or determine to bypass the qualitative assessment, we proceed to perform the first step of thetwo-stepimpairment test. The first step of goodwill impairment test used to identify potential impairment, calculates the fair value of the reporting unit and compares the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit falls below its carrying amount, the second step of the goodwill impairment test is performed to measure the amount of impairment loss. The second step of the goodwill impairment test compares implied fair value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner used to determine the amount of goodwill recognized in a business combination.difference. We test the goodwill either at the operating segment level or one level below the operating segments. We perform the qualitative assessment for some goodwill but bypass the qualitative assessment and proceed directly to the first step of thetwo-stepimpairment test for other goodwill.
2017-04
(“Simplifying the Test for Goodwill Impairment”—ASC 350 (“Intangible—Goodwill and Other”)) has been adopted since April 1, 2020. We have the option to perform a qualitative assessment to determine whether to calculate the fair value of a reporting unit under the We have the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If,We perform the qualitative assessment for some indefinite-lived intangible assets but bypass the qualitative assessment and perform the quantitative assessment for other indefinite-lived intangible assets. For those indefinite-lived intangible assets for which the qualitative assessment is performed, if, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then we do not perform the quantitative impairment test. However, if we conclude otherwise, we calculate the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We perform the qualitative assessment for some indefinite-lived intangible assets but bypass the qualitative assessment and perform the quantitative assessment for other indefinite-lived intangible assets.
The fair value of a reporting unit under the first step and the second stepgoodwill impairment test is determined by estimating the outcome of future events and assumptions made by management. Similarly, estimates and assumptions are used
in determining the fair value of any indefinite-lived intangible assets. When necessary, we refer to an evaluation by a third party in determining the fair value of a reporting unit; however, such determinations are often made by
35
using discounted cash flows analyses performed by us. This approach uses numerous estimates and assumptions, including projected future cash flows of a reporting unit, discount rates reflecting the inherent risk, and growth rate.rates. For example, determining the fair value of an asset management contract included in any indefinite-lived intangible assets involves the estimated balances of assets under management of the underlying investment funds that provides the asset management service, and estimates and assumptions regarding the weighted average cost of capital (WACC).WACC. Management believes that the assumptions used in estimating fair value used to determine impairment are reasonable, but we may charge additional losses to income if actual cash flows or any items which affect a fair value are less favorable than those projected by management due to economic conditions or our own risk in the reporting unit.
The accounting estimates relating to impairment of goodwill and any indefinite-lived intangible assets could affect all segments.
IMPAIRMENT OF LONG-LIVED ASSETS
We periodically perform an impairment review for long-lived assets held and used in operations, including tangible assets and intangible assets being depreciated or amortized, consisting primarily of office buildings, condominiums, aircraft, ships, mega solar facilities and real estate development projects.other properties under facility operations. The assets are tested for recoverability whenever events or changes in circumstances indicate that those assets might be impaired, including, but not limited to, the following:
significant decline in the market value of an asset;
significant deterioration in the usage range and method, or physical condition, of an asset;
significant deterioration of legal regulatory or business environments, including an adverse action or assessment by a relevant regulator;
acquisition and construction costs substantially exceeding estimates;
continued operating loss or actual or potential loss of cash flows; or
potential loss on a planned sale.
When we determine that assets might be impaired based upon the existence of one or more of the above factors or other factors, we estimate the future cash flows expected to be generated by those assets. For example, we estimate the future cash flows expected to be generated by aircraft mainly based on the underlying operating lease contracts and the appraisals obtained from independent third-party appraisers. Our estimates of the future cash flows are based upon historical trends adjusted to reflect our best estimate of future market and operating conditions. Our estimates also include the expected future periods in which future cash flows are expected. As a result of the recoverability test, when the sum of the estimated future undiscounted cash flows expected to be generated by those assets is less than its carrying amount, and when its fair value is less than its carrying amount, we determine the amount of impairment based on the fair value of those assets.
If the asset is considered impaired, an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds fair value. We determine the fair value using appraisals prepared by independent third-party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques, as appropriate. Although management believes that the expected future cash flows and the calculations of fair value used to determine impairment are reasonable, if actual market and operating conditions under which assets are operated are less favorable than those projected by management, resulting in lower expected future cash flows or shorter expected future periods to generate such cash flows, additional impairment charges may be required. In addition, changes in estimates resulting in lower fair values due to unanticipated changes in business or operating assumptions could adversely affect the valuations of long-lived assets.
The accounting estimates relating to impairment of long-lived assets could affect all segments.
UNGUARANTEED RESIDUAL VALUE FOR FINANCE LEASES AND OPERATING LEASES
We estimate unguaranteed residual values of leased equipment except real estate, which is explained in “Impairment of Long-lived Assets” described above,(such as automobiles, office equipment, etc.) when we calculate unearned lease income to be recognized as income over the lease term for finance leases and when we calculate depreciation amounts for operating leases that carry inherently higher obsolescence and resale risks. Our estimates are based upon current market values of used equipment and estimates of when and how much equipment will become obsolete, and actual recovery being experienced for similar used equipment. If actual demand for
re-lease
or actual market conditions of used equipment is less favorable than that projected by management, write-downs of unguaranteed residual value may be required.The accounting estimates relating to unguaranteed residual value for finance leases and operating leases affect mainly Corporate Financial Services segment,and Maintenance Leasing segment, and Overseas BusinessAsia and Australia segment.
INSURANCE POLICY LIABILITIES AND DEFERRED POLICY ACQUISITION COSTS
A certain subsidiary writes life insurance policies to customers. Policy liabilities and policy account balances for future policy benefits are measured using the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. The policies are characterized as long-duration policies and mainly consist of whole life, term life, endowments, medical insurance and individual annuity insurance contracts. For policies other than individual annuity insurance contracts, computation of policy liabilities necessarily includes assumptions about mortality, morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. The subsidiary continually evaluates the potential for changes in the estimates and assumptions applied in determining policy liabilities, both positive and negative, and uses the results of these evaluations to adjust recorded liabilities as well as underwriting criteria and product offerings. If actual assumption data, such as mortality, morbidity, lapse rates, investment returns and other factors, do not properly reflect future policyholder benefits, we may establish a premium deficiency reserve.
A certain subsidiary elected the fair value option for the entire variable annuity and variable life insurance contracts with changes in the fair value recognized in earnings. The changes in fair value of the variable annuity and variable life insurance contracts are linked to the fair value of the investment in securities managed on behalf of variable annuity and variable life policyholders. Additionally, the subsidiary provides minimum guarantees to variable annuity and variable life policyholders under which it is exposed to the risk of compensating losses incurred by the policyholders to the extent contractually required. Therefore, the subsidiary adjusts the fair value of the underlying investments by incorporating changes in fair value of the minimum guarantee risk in the evaluation of the fair value of the entire variable annuity and variable life insurance contracts. The fair value of the minimum guarantee risk is measured using discounted cash flow methodologies based on discount rates, mortality, lapse rates, annuitization rates and other factors.
Certain subsidiaries ceded a portion of its minimum guarantee risk related to variable annuity and variable life insurance contracts to reinsurance companies in order to mitigate the risk and elected the fair value option for the reinsurance contracts with the remaining risk economically hedged through derivative contracts. The reinsurance contracts do not relieve the subsidiary from the obligation as the primary obligor to compensate certain losses incurred by the policyholders, and the default of the reinsurance companies may impose additional losses on the subsidiary.
Policy liabilities and policy account balances for fixed annuity insurance contracts are measured based on the single-premiums plus interest based on expected rate and fair value adjustments relating to the acquisition of a subsidiary, less withdrawals, expenses and other charges.
Certain costs related directly to the successful acquisition of new or renewal insurance contracts, or deferred policy acquisition costs, are deferred and amortized over the respective policy periods in proportion to
anticipated premium revenue. These deferred policy acquisition costs consist primarily of first-year commissions,
37
except for recurring policy maintenance costs and certain variable costs and expenses for underwriting policies. Periodically, deferred policy acquisition costs are reviewed to determine whether relevant insurance and investment income are expected to recover the unamortized balance of the deferred acquisition costs. When such costs are expected to be unrecoverable, they are charged to income in that period. If the historical data, such as lapse rates, investment returns, mortality, morbidity and expense margins, , which we use to calculate these assumptions, do not properly reflect future profitability, additional amortization may be required.
The accounting estimates relating to insurance policy liabilities and deferred policy acquisition costs affect RetailInsurance segment.
ASSESSING HEDGE EFFECTIVENESS
We use foreign currency swap agreements, interest rate swap agreements and foreign exchange contracts for hedging purposes and apply fair value hedge, cash flow hedge or net investment hedge accounting to measure and account for subsequent changes in their fair value.
To qualify for hedge accounting, details of the hedging relationship are formally documented at the inception of the arrangement, including the risk management objective, hedging strategy, hedged item, specific risks that are to be hedged, the derivative instrument and how effectiveness is being assessed. Derivatives for hedging purposes must be highly effective in offsetting either changes in fair value or cash flows, as appropriate, for the risk being hedged and effectiveness needs to be assessed at the inception of the relationship.
Hedge effectiveness is assessed quarterly on a retrospective and prospective basis. If specified criteria for the assumption of effectiveness are not met at hedge inception or upon quarterly testing, then hedge accounting is discontinued. To assess effectiveness, we use techniques including regression analysis and the cumulative dollar offset method.
The accounting estimates used to assess hedge effectiveness could affect mainly Overseas BusinessInsurance segment and RetailAsia and Australia segment.
PENSION PLANS
The determination of our projected benefit obligation and expense for our employee pension benefits is mainly dependent on the size of the employee population, actuarial assumptions, expected long-term rate of return on plan assets and the discount rate used in the accounting.
Pension expense is directly related to the number of employees covered by the plans. Increased employment through internal growth or acquisition would result in increased pension expense.
In estimating the projected benefit obligation, actuaries make assumptions regarding mortality rates, turnover rates, retirement rates and rates of compensation increase. Actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, affect expense in future periods.
We determine the expected long-term rate of return on plan assets annually based on the composition of the pension asset portfolios and the expected long-term rate of return on these portfolios. The expected long-term rate of return is designed to approximate the long-term rate of return actually earned on the plans’ assets over time to ensure that funds are available to meet the pension obligations that result from the services provided by employees. We use a number of factors to determine the reasonableness of the expected rate of return, including actual historical returns on the asset classes of the plans’ portfolios and independent projections of returns of the various asset classes.
We use March 31 as a measurement date for our pension assets and projected benefit obligation balances under all of our material plans. If we were to assume a 1% increase or decrease in the expected long-term rate of return, holding the discount rate and other actuarial assumptions constant, pension expense for fiscal 20202021 would decrease or increase, respectively, by approximately ¥2,198¥2,543 million.
Discount rates are used to determine the present value of our future pension obligations. The discount rates are reflective of rates available on long-term, high-quality fixed-income debt instruments with maturities that closely correspond to the timing of defined benefit payments. Discount rates are determined annually on the measurement date.
If we were to assume a 1% increase in the discount rate, and keep the expected long-term rate of return and other actuarial assumptions constant, pension expense for fiscal 20202021 would decrease by approximately ¥2,482¥1,976 million. If we were to assume a 1% decrease in the discount rate, and keep other assumptions constant, pension expense for fiscal 20202021 would increase by approximately ¥2,369¥2,799 million.
While we believe the estimates and assumptions used in our pension accounting are appropriate, differences in actual results or changes in these assumptions or estimates could adversely affect our pension obligations and future expenses.
INCOME TAXES
In preparing the consolidated financial statements, we make estimates relating to income taxes of the Company and its subsidiaries in each of the jurisdictions in which we operate. The process involves estimating our actual current income tax position together with assessing temporary differences resulting from different treatment of items for income tax reporting and financial reporting purposes. Such differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. We must then assess the likelihood of whether our deferred tax assets will be recovered from future taxable income, and, to the extent we believe that realizability is not more likely than not, we must establish a valuation allowance. When we establish a valuation allowance or increase this allowance during a period, we must include an expense within the provision for income taxes in the consolidated statements of income.
Significant management judgments are required in determining our provision for income taxes, current income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. We file tax returns in Japan and certain foreign tax jurisdictions and recognize the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, and measure tax positions that meet the recognition threshold at the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement with the taxing authority. Management judgments, including the interpretations about the application of the complex tax laws of Japan and certain foreign tax jurisdictions, are required in the process of evaluating tax positions; therefore, these judgments may differ from the actual results. We have recorded a valuation allowance due to uncertainties about our ability to utilize certain deferred tax assets, primarily certain tax loss carryforwards, before they expire. The valuation allowance is primarily recognized for deferred tax assets of consolidated subsidiaries with tax loss carryforwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and tax loss carryforwards are utilizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax-planning
strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that all of the deferred tax assets, net of the valuation allowance, will be realized. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period overwhich our deferred tax assets will be recoverable. If actual results differ from these estimates or if we adjust these estimates in future periods, we may need to establish additional valuation allowances, which could materially impact the consolidated financial position and results of operations.
DISCUSSION WITH AND REVIEW BY THE AUDIT COMMITTEE
Our management discussed the development and selection of each critical accounting estimate with our Audit Committee in June 2020.Committee.
FAIR VALUE OF INVESTMENT AND RENTAL PROPERTY
We own real estate such as rental office buildings, rental logistics centers, rental commercial facilities other than office buildings, rental condominiums and land which is utilized for development as operating leases. A large portion of our real estate held for investment and rental is located around major cities in Japan such as Tokyo. The following table sets forth the carrying amount of investment and rental property as of the beginning and end of fiscal 2020,2021, as well as the fair value as of the end of fiscal 2020.2021.
Year ended March 31, 2021 | ||||||||||||||
Carrying amount* 1 | ||||||||||||||
April 1, 2020 | ||||||||||||||
March 31, 2021 | March 31, 2 | |||||||||||||
(Millions of yen) | ||||||||||||||
| ¥309,343 | ¥41,456 | ¥350,799 | ¥410,858 | |||||||||||
| * 1 | Carrying amounts are stated as cost less accumulated |
| * 2 | Fair value is either obtained from appraisal reports by external qualified appraisers, calculated by internal appraisal department in accordance with “Real estate appraisal standards,” or calculated by other reasonable internal calculation utilizing similar methods. |
Investment and rental property revenue and expense for fiscal 20202021 were as follows:
Year Ended March 31, 2021 | ||||||||
Revenue* 1 | Expense* 2 | Net | ||||||
(Millions of yen) | ||||||||
| ¥52,200 | ¥ | 31,710 | ¥ | 20,490 | ||||
| * 1 | Revenue consists of revenue from leases and gains on sales of real estate under operating leases. Revenue from leases is composed of real estate-related revenues from “Operating leases” and “Life insurance premiums and related investment income.” |
| * 2 | Expense consists of costs related to the above revenue such as rental payment, depreciation expense, repair cost, insurance cost, tax and duty which are included in “Costs of operating leases,” and “Write-downs of long-lived assets.” |
RESULTS OF OPERATIONS
GUIDE TO OUR CONSOLIDATED STATEMENT OF INCOME
The following discussion and analysis provide information that management believes to be relevant to an understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, included in this annual report. See “Item 18. Financial Statements.”
Our consolidated results of operations are presented in the accompanying financial statements with
sub-categorization
of revenues and expenses designed to enable the reader to better understand the diversified operating activities contributing to our overall operating performance.As further described in “Item 4. Information on the Company,” after developing the Japanese leasing market in 1964, we extended the scope of our operations into various types of businesses which have become significant contributors to our consolidated operating results. Our initial leasing business has expanded into the provision of broader financial services, including direct lending to our lessees and other customers. Initial direct lending broadened into diversified finance such as real estate loans for consumers, loans secured by real estate, unsecured loans and
non-recourse
loans. Through our lending experience, we developed a loan servicing business and a loan securitization business. Through experience gained by our focusing on real estate as collateral for loans, we also developed our real estate leasing, development and management operations.Furthermore, we also expanded our business by adding securities-related operations, to generate capital gains. Thereafter, we established and acquired a number of subsidiaries and affiliates in Japan and overseas to expand our operations into businesses such as banking, life insurance, real estate and asset management. Investment and Operation Headquarters selectively invests in companies and actively seeks to fulfill the needs of companies involved in or considering M&A activity, including, among other things, management buyouts, privatization or carve-outs of subsidiaries or business units and business succession.
The diversified nature of our operations is reflected in our presentation of operating results through the categorization of our revenues and expenses to align with operating activities. We categorize our revenues into finance revenues, gains on investment securities and dividends, operating leases, life insurance premiums and related investment income, sales of goods and real estate and services income, and these revenues are summarized into a subtotal of “Total revenues” consisting of our “Operating Income” on our consolidated statements of income.
The following provides supplemental explanation of certain account captions on our consolidated statements of income:
Finance revenues include primarily finance leases, interest on loans and interest on investment securities because we believe that capital we deploy is fungible and, whether used to provide financing in the form of loans and leases or through investment in debt securities, the decision to deploy the capital is a banking-type operation that shares the common objective of managing earning assets to generate a positive spread over our cost of borrowings. In addition, revenues from guarantees, which are from commission income by guarantees against loans disbursed by other financial institutions, are also included in finance revenues.
Securities investment activities originated by the Company were extended to certain group companies, including our subsidiaries operating in the Americas.
Sales of goods and real estate consists of revenues from sales of real estate and various types of goods, including precious metals and jewels.
Services income consists of revenues derived from various operations that are considered a part of our recurring operating activities, such as asset management and servicing, automobile related services, facilities operation, environment and energy services, real estate management, brokerage and contract work, maintenance services of software, measurement equipment and other, and fee business.
Similar to our revenues, we categorize our expenses based on our diversified operating activities. “Total expenses” includes mainly interest expense, costs of operating leases, life insurance costs, costs of goods and real estate sold, services expense and selling, general and administrative expenses.
Services expense is directly associated with the sales and revenues separately reported within services income. Interest expense is based on monies borrowed mainly to fund revenue-generating assets, including to purchase equipment for leases, extend loans and invest in securities and real estate operations. We also consider the principal part of selling, general and administrative expenses to be directly related to the generation of revenues. Therefore, they have been included within “Total expenses” deducted to derive “Operating Income.” We similarly view the provision for doubtful receivables and probable loan losses and provision for credit losses to be directly related to our finance activities and accordingly have included it within “Total expenses.” As our principal operations consist of providing financial products and/or finance-related services to our customers, these expenses are directly related to the potential risks and changes in these products and services. See “Year Ended March 31, 2021 Compared to Year Ended March 31, 2020” and “Year Ended March 31, 2020 Compared to Year Ended March 31, 2019” and “Year Ended March 31, 2019 Compared to Year Ended March 31, 2018.2019.”
We have historically reflected write-downs of long-lived assets under “Operating Income” as related assets, primarily real estate assets, representing significant operating assets under management or development. Accordingly, the write-downs were considered to represent an appropriate component of “Operating Income” derived from the related real estate investment activities. Similarly, as we have identified investment in securities to represent an operating component of our financing activities, write-downs of securities are presented under “Operating Income.”
We believe that our financial statement presentation, as explained above, with the expanded presentation of revenues and expenses, aids in the comprehension of our diversified operating activities in Japan and overseas and supports the fair presentation of our consolidated statements of income.
YEAR ENDED MARCH 31, 20202021 COMPARED TO YEAR ENDED MARCH 31, 20192020
Performance Summary
Financial Results
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except ratios, per Share data and percentages) | ||||||||||||||||
Total revenues | ¥ | 2,434,864 | ¥ | 2,280,329 | ¥ | (154,535 | ) | (6 | ) | |||||||
Total expenses | 2,105,426 | 2,010,648 | (94,778 | ) | (5 | ) | ||||||||||
Income before Income Taxes | 395,730 | 412,561 | 16,831 | 4 | ||||||||||||
Net Income Attributable to ORIX Corporation Shareholders | 323,745 | 302,700 | (21,045 | ) | (7 | ) | ||||||||||
Earnings per Share (Basic) | 252.92 | 237.38 | (15.54 | ) | (6 | ) | ||||||||||
(Diluted) | 252.70 | 237.17 | (15.53 | ) | (6 | ) | ||||||||||
ROE* 1 | 11.6 | 10.3 | (1.3 | ) | — | |||||||||||
ROA* 2 | 2.74 | 2.40 | (0.34 | ) | — | |||||||||||
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except ratios, per Share data and percentages) | ||||||||||||||||
Total revenues | ¥ | 2,280,329 | ¥ | 2,292,708 | ¥ | 12,379 | 1 | |||||||||
Total expenses | 2,010,648 | 2,033,894 | 23,246 | 1 | ||||||||||||
Income before Income Taxes | 412,561 | 287,561 | (125,000 | ) | (30 | ) | ||||||||||
Net Income Attributable to ORIX Corporation Shareholders | 302,700 | 192,384 | (110,316 | ) | (36 | ) | ||||||||||
Earnings per Share (Basic) | 237.38 | 155.54 | (81.84 | ) | (34 | ) | ||||||||||
(Diluted) | 237.17 | 155.39 | (81.78 | ) | (34 | ) | ||||||||||
ROE* 1 | 10.3 | 6.4 | (3.9 | ) | — | |||||||||||
ROA* 2 | 2.40 | 1.44 | (0.96 | ) | — | |||||||||||
| * 1 | ROE is the ratio of Net Income Attributable to ORIX Corporation Shareholders for the period to average ORIX Corporation Shareholders’ Equity based on fiscal year beginning and ending balances. |
| * 2 | ROA is the ratio of Net Income Attributable to ORIX Corporation Shareholders for the period to average Total Assets based on fiscal year beginning and ending balances. |
Total revenues for fiscal 2021 increased 1% to ¥2,292,708 million compared to fiscal 2020 due to increases in life insurance premiums and related investment income, and gains on investment securities and dividends despite decreases in services income, and operating leases revenues.
Total expenses for fiscal 2021 increased 1% to ¥2,033,894 million compared to fiscal 2020 due to an increase in life insurance costs despite decreases in interest expense, and services expense.
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On the other hand, equity in net income of affiliates for fiscal 2021 decreased 99% to ¥481 million compared to fiscal 2020 and gains on sales of subsidiaries and affiliates and liquidation losses, net for fiscal 2021 decreased 69% to ¥23,300 million compared to fiscal 2020.
Due to the above results and the impact of
COVID-19,
income before income taxes for fiscal 2021 decreased 30% to ¥287,561 million compared to fiscal 2020 and net income attributable to ORIX Corporation shareholders decreased 36% to ¥192,384 million compared to fiscal 2020.Balance Sheet data
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen except ratios, per share and percentages) | ||||||||||||||||
Total Assets | ¥ | 13,067,528 | ¥ | 13,563,082 | ¥ | 495,554 | 4 | |||||||||
(Segment assets) | 10,883,545 | 11,341,789 | 458,244 | 4 | ||||||||||||
Total Liabilities | 9,991,362 | 10,459,938 | 468,576 | 5 | ||||||||||||
(Short-term and Long-term debt) | 4,616,186 | 4,724,102 | 107,916 | 2 | ||||||||||||
(Deposits) | 2,231,703 | 2,317,785 | 86,082 | 4 | ||||||||||||
ORIX Corporation Shareholders’ Equity | 2,993,608 | 3,028,456 | 34,848 | 1 | ||||||||||||
ORIX Corporation Shareholders’ Equity per share | 2,386.35 | 2,487.77 | 101.42 | 4 | ||||||||||||
ORIX Corporation Shareholders’ Equity ratio* | 22.9 | % | 22.3 | % | (0.6 | )% | — | |||||||||
D/E ratio (Debt-to-equity | 1.5 | x | 1.6 | x | 0.1 | x | — | |||||||||
| * | ORIX Corporation Shareholders’ Equity ratio is the ratio as of the period end of ORIX Corporation Shareholder’s Equity to total assets. |
Total assets increased 4% to ¥13,563,082 million compared to the balance as of March 31, 2020 due to an increase in investment in securities despite decreases in net investment in leases, installment loans and property under facility operations, and furthermore, an increase in allowance for credit losses compared to allowance for doubtful receivables on finance leases and probable loan losses as of March 31, 2020 as a result of the adoption the Credit Losses Standard. In addition, segment assets increased 4% to ¥11,341,789 million compared to the balance as of March 31, 2020.
Total liabilities increased 5% to ¥10,459,938 million compared to the balance as of March 31, 2020 due to increases in deposits, long-term debt, and policy liabilities and policy account balances despite decreases in short-term debt and trade notes, accounts and other payable.
Shareholders’ equity increased 1% to ¥3,028,456 million compared to the balance as of March 31, 2020.
Details of Operating Results
The following is a discussion of certain items in the consolidated statements of income, operating assets in the consolidated balance sheets and other selected financial information, including on a segment by segment basis.
Segment Information
Our operating segments used by the chief operating decision maker to make decisions about resource allocations and assess performance are organized into ten segments based on our business management organization which is classified by the nature of major products and services, customer base, regulations, and
43
business areas. The ten segments are Corporate Financial Services and Maintenance Leasing, Real Estate, PE Investment and Concession, Environment and Energy, Insurance, Banking and Credit, Aircraft and Ships, ORIX USA, ORIX Europe, and Asia and Australia. Since April 1, 2020, the reporting segments have been changed to the aforementioned segments. As a result of this change for fiscal 2021, segment data as of the end of and for fiscal 2020 has been retrospectively restated.
Financial information about the operating segments reported below is that which is available by segment and regularly reviewed by the chief operating decision maker to make decisions about resource allocations and assess performance. The chief operating decision maker evaluates the performance of the segments based on income before income taxes, net income attributable to noncontrolling interests and net income attributable to redeemable noncontrolling interests before applicable tax effect. Tax expenses are excluded from the segment profits.
Since April 1, 2020, the selling, general and administrative expenses that should be borne by ORIX Group as a whole, which were initially charged directly to its respective segments, have been included in the difference between segment total profits and consolidated amounts for fiscal 2021. As a result of this change, segment data for fiscal 2020 has been retrospectively restated.
Since April 1, 2020, Credit Losses Standard has been adopted, and the amounts of provision for doubtful receivables and probable loan losses have been reclassified to provision for credit losses. For further information, see Note 1 of “Item 18. Financial Statements.”
For a description of the business activities of our segments, see “Item 4. Information on the Company—Business Segments.” See Note 34 of “Item 18. Financial Statements” for additional segment information, a discussion of how we prepare our segment information and the reconciliation of segment totals to consolidated financial statement amounts.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 428,036 | ¥ | 429,799 | ¥ | 1,763 | 0 | |||||||||
Real Estate | 468,086 | 359,798 | (108,288 | ) | (23 | ) | ||||||||||
PE Investment and Concession | 296,365 | 331,222 | 34,857 | 12 | ||||||||||||
Environment and Energy | 148,423 | 143,187 | (5,236 | ) | (4 | ) | ||||||||||
Insurance | 371,387 | 491,894 | 120,507 | 32 | ||||||||||||
Banking and Credit | 84,355 | 83,724 | (631 | ) | (1 | ) | ||||||||||
Aircraft and Ships | 64,650 | 31,617 | (33,033 | ) | (51 | ) | ||||||||||
ORIX USA | 135,709 | 138,017 | 2,308 | 2 | ||||||||||||
ORIX Europe | 148,524 | 160,798 | 12,274 | 8 | ||||||||||||
Asia and Australia | 137,797 | 128,309 | (9,488 | ) | (7 | ) | ||||||||||
Segment Total | 2,283,332 | 2,298,365 | 15,033 | 1 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | (3,003 | ) | (5,657 | ) | (2,654 | ) | — | |||||||||
Consolidated Amounts | ¥ | 2,280,329 | ¥ | 2,292,708 | ¥ | 12,379 | 1 | |||||||||
44
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Profits: | ||||||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 62,978 | ¥ | 59,149 | ¥ | (3,829 | ) | (6 | ) | |||||||
Real Estate | 80,182 | 24,684 | (55,498 | ) | (69 | ) | ||||||||||
PE Investment and Concession | 44,110 | 3,431 | (40,679 | ) | (92 | ) | ||||||||||
Environment and Energy | 11,625 | 28,563 | 16,938 | 146 | ||||||||||||
Insurance | 44,833 | 55,119 | 10,286 | 23 | ||||||||||||
Banking and Credit | 39,096 | 48,030 | 8,934 | 23 | ||||||||||||
Aircraft and Ships | 45,287 | 3,755 | (41,532 | ) | (92 | ) | ||||||||||
ORIX USA | 56,690 | 43,614 | (13,076 | ) | (23 | ) | ||||||||||
ORIX Europe | 43,778 | 37,886 | (5,892 | ) | (13 | ) | ||||||||||
Asia and Australia | 14,673 | 14,660 | (13 | ) | (0 | ) | ||||||||||
Segment Total | 443,252 | 318,891 | (124,361 | ) | (28 | ) | ||||||||||
Difference between Segment Total and Consolidated Amounts | (30,691 | ) | (31,330 | ) | (639 | ) | — | |||||||||
Consolidated Amounts | ¥ | 412,561 | ¥ | 287,561 | ¥ | (125,000 | ) | (30 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Assets: | ||||||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 1,789,693 | ¥ | 1,658,571 | ¥ | (131,122 | ) | (7 | ) | |||||||
Real Estate | 821,194 | 872,095 | 50,901 | 6 | ||||||||||||
PE Investment and Concession | 322,522 | 378,698 | 56,176 | 17 | ||||||||||||
Environment and Energy | 478,796 | 506,666 | 27,870 | 6 | ||||||||||||
Insurance | 1,580,158 | 1,959,521 | 379,363 | 24 | ||||||||||||
Banking and Credit | 2,603,736 | 2,690,627 | 86,891 | 3 | ||||||||||||
Aircraft and Ships | 585,304 | 601,762 | 16,458 | 3 | ||||||||||||
ORIX USA | 1,374,027 | 1,220,081 | (153,946 | ) | (11 | ) | ||||||||||
ORIX Europe | 317,847 | 369,546 | 51,699 | 16 | ||||||||||||
Asia and Australia | 1,010,268 | 1,084,222 | 73,954 | 7 | ||||||||||||
Segment Total | 10,883,545 | 11,341,789 | 458,244 | 4 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | 2,183,983 | 2,221,293 | 37,310 | 2 | ||||||||||||
Consolidated Amounts | ¥ | 13,067,528 | ¥ | 13,563,082 | ¥ | 495,554 | 4 | |||||||||
Corporate Financial Services and Maintenance Leasing
Segment revenues totaled ¥429,799 million, remaining substantially unchanged from fiscal 2020. This was due to an increase in operating leases revenues from the rental of
IT-related
equipment, mostly offset by lower finance revenues resulting from a decrease in financial assets and lower sales of goods.Segment profits decreased 6% to ¥59,149 million due to an increase in costs of operating leases and services expense, and the absence of bargain purchase gains recorded in relation to companies acquired in our corporate financial services business during fiscal 2020.
45
Segment assets decreased 7% to ¥1,658,571 million compared to the end of fiscal 2020. This decrease was mainly due to decreases in net investment in leases, installment loans, and investment in operating leases.
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 61,402 | ¥ | 57,780 | ¥ | (3,622 | ) | (6 | ) | |||||||
Gains on investment securities and dividends | 111 | 1,616 | 1,505 | — | ||||||||||||
Operating leases | 243,977 | 247,190 | 3,213 | 1 | ||||||||||||
Sales of goods and real estate | 11,536 | 10,348 | (1,188 | ) | (10 | ) | ||||||||||
Services income | 111,010 | 112,865 | 1,855 | 2 | ||||||||||||
Total Segment Revenues | 428,036 | 429,799 | 1,763 | 0 | ||||||||||||
Interest expense | 6,203 | 5,594 | (609 | ) | (10 | ) | ||||||||||
Costs of operating leases | 194,162 | 199,774 | 5,612 | 3 | ||||||||||||
Costs of goods and real estate sold | 6,814 | 6,832 | 18 | 0 | ||||||||||||
Services expense | 53,020 | 56,447 | 3,427 | 6 | ||||||||||||
Selling, general and administrative expenses | 87,333 | 85,662 | (1,671 | ) | (2 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,189 | 0 | (1,189 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 1,405 | 1,405 | — | ||||||||||||
Other | 17,648 | 16,129 | (1,519 | ) | (9 | ) | ||||||||||
Total Segment Expenses | 366,369 | 371,843 | 5,474 | 1 | ||||||||||||
Segment Operating Income | 61,667 | 57,956 | (3,711 | ) | (6 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 1,311 | 1,193 | (118 | ) | (9 | ) | ||||||||||
Segment Profits | ¥ | 62,978 | ¥ | 59,149 | ¥ | (3,829 | ) | (6 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 648,627 | ¥ | 592,874 | ¥ | (55,753 | ) | (9 | ) | |||||||
Installment loans | 379,541 | 330,917 | (48,624 | ) | (13 | ) | ||||||||||
Investment in operating leases | 572,492 | 548,677 | (23,815 | ) | (4 | ) | ||||||||||
Investment in securities | 28,616 | 30,318 | 1,702 | 6 | ||||||||||||
Property under facility operations | 19,992 | 18,726 | (1,266 | ) | (6 | ) | ||||||||||
Inventories | 736 | 630 | (106 | ) | (14 | ) | ||||||||||
Advances for finance lease and operating lease | 293 | 500 | 207 | 71 | ||||||||||||
Investment in affiliates | 18,347 | 18,049 | (298 | ) | (2 | ) | ||||||||||
Advances for property under facility operations | 760 | 0 | (760 | ) | — | |||||||||||
Goodwill, intangible assets acquired in business combinations | 120,289 | 117,880 | (2,409 | ) | (2 | ) | ||||||||||
Total Segment Assets | ¥ | 1,789,693 | ¥ | 1,658,571 | ¥ | (131,122 | ) | (7 | ) | |||||||
46
Real Estate
Our operating facilities have experienced temporary closure and low occupancy rates during fiscal 2021 due to the impact of
COVID-19.
Consequently, services income from our facility operations business decreased. Also, DAIKYO experienced a decrease in services income from real estate contract work due to the dissipation of increased last-minute demand before the consumption tax hike in Japan during fiscal 2020, as well as a decrease in sales of real estate. In addition, there was a decrease in gains on sales of real estate under operating leases. As a result, segment revenues decreased 23% to ¥359,798 million compared to fiscal 2020.Due to the above-mentioned reasons as well as the absence of gains on the sale of a subsidiary which operates senior housings, which had been recorded during fiscal 2020, segment profits decreased 69% to ¥24,684 million compared to fiscal 2020 despite a decrease in services expense and costs of goods and real estate sold.
Investment in operating leases decreased due to the sales of real estate under operating leases. However, this decrease was offset by increases in inventories and advances for finance lease and operating lease. As a result, segment assets increased 6% to ¥872,095 million compared to the end of fiscal 2020.
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 6,723 | ¥ | 6,206 | ¥ | (517 | ) | (8 | ) | |||||||
Operating leases | 63,149 | 46,022 | (17,127 | ) | (27 | ) | ||||||||||
Sales of goods and real estate | 122,230 | 91,348 | (30,882 | ) | (25 | ) | ||||||||||
Services income | 276,123 | 215,805 | (60,318 | ) | (22 | ) | ||||||||||
Other | (139 | ) | 417 | 556 | — | |||||||||||
Total Segment Revenues | 468,086 | 359,798 | (108,288 | ) | (23 | ) | ||||||||||
Interest expense | 1,849 | 2,441 | 592 | 32 | ||||||||||||
Costs of operating leases | 26,654 | 24,929 | (1,725 | ) | (6 | ) | ||||||||||
Costs of goods and real estate sold | 108,637 | 76,071 | (32,566 | ) | (30 | ) | ||||||||||
Services expense | 239,096 | 202,269 | (36,827 | ) | (15 | ) | ||||||||||
Selling, general and administrative expenses | 38,590 | 35,701 | (2,889 | ) | (7 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 545 | 0 | (545 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 1,994 | 1,994 | — | ||||||||||||
Other | 1,267 | (2,170 | ) | (3,437 | ) | — | ||||||||||
Total Segment Expenses | 416,638 | 341,235 | (75,403 | ) | (18 | ) | ||||||||||
Segment Operating Income | 51,448 | 18,563 | (32,885 | ) | (64 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 28,734 | 6,121 | (22,613 | ) | (79 | ) | ||||||||||
Segment Profits | ¥ | 80,182 | ¥ | 24,684 | ¥ | (55,498 | ) | (69 | ) | |||||||
47
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 73,279 | ¥ | 66,371 | ¥ | (6,908 | ) | (9 | ) | |||||||
Investment in operating leases | 319,550 | 291,877 | (27,673 | ) | (9 | ) | ||||||||||
Investment in securities | 7,274 | 8,543 | 1,269 | 17 | ||||||||||||
Property under facility operations | 140,416 | 149,479 | 9,063 | 6 | ||||||||||||
Inventories | 82,762 | 94,429 | 11,667 | 14 | ||||||||||||
Advances for finance lease and operating lease | 37,272 | 98,820 | 61,548 | 165 | ||||||||||||
Investment in affiliates | 91,835 | 99,105 | 7,270 | 8 | ||||||||||||
Advances for property under facility operations | 7,327 | 4,089 | (3,238 | ) | (44 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 61,479 | 59,382 | (2,097 | ) | (3 | ) | ||||||||||
Total Segment Assets | ¥ | 821,194 | ¥ | 872,095 | ¥ | 50,901 | 6 | |||||||||
PE Investment and Concession
Segment revenues increased 12% to ¥331,222 million compared to fiscal 2020. This increase was primarily due to the increase in sales of goods by our investees, despite a decrease in services income resulting from the sale of a subsidiary during fiscal 2020.
Due to the impact of
COVID-19,
the number of passengers and flights at our three airports in Kansai decreased substantially, resulting in a decrease in equity in net income of affiliates in our concession business. Also, due to the absence of gains on the sale of a subsidiary in our private equity business, which had been recorded during fiscal 2020, segment profits decreased 92% to ¥3,431 million compared to fiscal 2020.Segment assets increased 17% to ¥378,698 million compared to the end of fiscal 2020. This increase was mainly due to increases in goodwill and investment in operating leases associated with the acquisition of subsidiaries during fiscal 2021.
48
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 124 | ¥ | 152 | ¥ | 28 | 23 | |||||||||
Gains on investment securities and dividends | 585 | 846 | 261 | 45 | ||||||||||||
Sales of goods and real estate | 261,475 | 301,732 | 40,257 | 15 | ||||||||||||
Services income | 32,465 | 22,030 | (10,435 | ) | (32 | ) | ||||||||||
Other | 1,716 | 6,462 | 4,746 | 277 | ||||||||||||
Total Segment Revenues | 296,365 | 331,222 | 34,857 | 12 | ||||||||||||
Interest expense | 1,187 | 1,736 | 549 | 46 | ||||||||||||
Costs of goods and real estate sold | 229,905 | 259,740 | 29,835 | 13 | ||||||||||||
Services expense | 22,021 | 15,947 | (6,074 | ) | (28 | ) | ||||||||||
Selling, general and administrative expenses | 33,517 | 35,454 | 1,937 | 6 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 98 | 0 | (98 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 3,622 | 3,622 | — | ||||||||||||
Other | 802 | 3,365 | 2,563 | 320 | ||||||||||||
Total Segment Expenses | 287,530 | 319,864 | 32,334 | 11 | ||||||||||||
Segment Operating Income | 8,835 | 11,358 | 2,523 | 29 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 35,275 | (7,927 | ) | (43,202 | ) | — | ||||||||||
Segment Profits | ¥ | 44,110 | ¥ | 3,431 | ¥ | (40,679 | ) | (92 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 141 | ¥ | 1,541 | ¥ | 1,400 | 993 | |||||||||
Investment in operating leases | 9,367 | 23,455 | 14,088 | 150 | ||||||||||||
Investment in securities | 17,916 | 12,918 | (4,998 | ) | (28 | ) | ||||||||||
Property under facility operations | 43,735 | 43,972 | 237 | 1 | ||||||||||||
Inventories | 40,263 | 45,597 | 5,334 | 13 | ||||||||||||
Investment in affiliates | 68,603 | 55,421 | (13,182 | ) | (19 | ) | ||||||||||
Advances for property under facility operations | 245 | 6,732 | 6,487 | — | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 142,252 | 189,062 | 46,810 | 33 | ||||||||||||
Total Segment Assets | ¥ | 322,522 | ¥ | 378,698 | ¥ | 56,176 | 17 | |||||||||
Environment and Energy
Segment revenues decreased 4% to ¥143,187 million compared to fiscal 2020 due to a decrease in services income resulting from a decrease in electricity sales.
Segment profits increased 146% to ¥28,563 million compared to fiscal 2020. This increase was mainly due to the recording of gains of sales of an investee involved in wind power generation business in India.
49
Segment assets increased 6% to ¥506,666 million compared to the end of fiscal 2020. This increase was due to an increase in investments in affiliates, despite a decrease in business assets.
Asset efficiency improved compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 1,959 | ¥ | 2,531 | ¥ | 572 | 29 | |||||||||
Services income | 141,714 | 136,360 | (5,354 | ) | (4 | ) | ||||||||||
Other | 4,750 | 4,296 | (454 | ) | (10 | ) | ||||||||||
Total Segment Revenues | 148,423 | 143,187 | (5,236 | ) | (4 | ) | ||||||||||
Interest expense | 7,732 | 10,423 | 2,691 | 35 | ||||||||||||
Services expense | 111,143 | 106,299 | (4,844 | ) | (4 | ) | ||||||||||
Selling, general and administrative expenses | 11,807 | 11,929 | 122 | 1 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 2,081 | 0 | (2,081 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 567 | 567 | — | ||||||||||||
Other | 3,047 | 1,009 | (2,038 | ) | (67 | ) | ||||||||||
Total Segment Expenses | 135,810 | 130,227 | (5,583 | ) | (4 | ) | ||||||||||
Segment Operating Income | 12,613 | 12,960 | 347 | 3 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | (988 | ) | 15,603 | 16,591 | — | |||||||||||
Segment Profits | ¥ | 11,625 | ¥ | 28,563 | ¥ | 16,938 | 146 | |||||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 25,355 | ¥ | 26,470 | ¥ | 1,115 | 4 | |||||||||
Investment in operating leases | 1,958 | 2,051 | 93 | 5 | ||||||||||||
Investment in securities | 191 | 814 | 623 | 326 | ||||||||||||
Property under facility operations | 338,695 | 262,016 | (76,679 | ) | (23 | ) | ||||||||||
Inventories | 394 | 396 | 2 | 1 | ||||||||||||
Advances for finance lease and operating lease | 1,861 | 1,392 | (469 | ) | (25 | ) | ||||||||||
Investment in affiliates | 82,253 | 180,492 | 98,239 | 119 | ||||||||||||
Advances for property under facility operations | 12,229 | 19,963 | 7,734 | 63 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 15,860 | 13,072 | (2,788 | ) | (18 | ) | ||||||||||
Total Segment Assets | ¥ | 478,796 | ¥ | 506,666 | ¥ | 27,870 | 6 | |||||||||
Insurance
Segment revenues increased 32% to ¥491,894 million compared to fiscal 2020. This increase was due to an increase in life insurance premiums in line with an increase in new insurance contracts, as well as an increase in life insurance related investment income from variable life insurance contracts.
50
Due to the above-mentioned reasons as well as the recording of reversals of policy liability reserves related to variable life insurance contracts, etc., segment profits increased 23% to ¥55,119 million compared to fiscal 2020.
Segment assets increased 24% to ¥1,959,521 million compared to the end of fiscal 2020 due to an increase in investment in securities.
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 220 | ¥ | 242 | ¥ | 22 | 10 | |||||||||
Life insurance premiums and related investment income | 370,144 | 489,985 | 119,841 | 32 | ||||||||||||
Other | 1,023 | 1,667 | 644 | 63 | ||||||||||||
Total Segment Revenues | 371,387 | 491,894 | 120,507 | 32 | ||||||||||||
Interest expense | 1 | 6 | 5 | 500 | ||||||||||||
Life insurance costs | 271,943 | 374,394 | 102,451 | 38 | ||||||||||||
Selling, general and administrative expenses | 54,216 | 62,193 | 7,977 | 15 | ||||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 7 | 7 | — | ||||||||||||
Other | 408 | 184 | (224 | ) | (55 | ) | ||||||||||
Total Segment Expenses | 326,568 | 436,784 | 110,216 | 34 | ||||||||||||
Segment Operating Income | 44,819 | 55,110 | 10,291 | 23 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 14 | 9 | (5 | ) | (36 | ) | ||||||||||
Segment Profits | ¥ | 44,833 | ¥ | 55,119 | ¥ | 10,286 | 23 | |||||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans | ¥ | 17,720 | ¥ | 17,315 | ¥ | (405 | ) | (2 | ) | |||||||
Investment in operating leases | 29,271 | 28,909 | (362 | ) | (1 | ) | ||||||||||
Investment in securities | 1,528,042 | 1,908,148 | 380,106 | 25 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 5,125 | 5,149 | 24 | 0 | ||||||||||||
Total Segment Assets | ¥ | 1,580,158 | ¥ | 1,959,521 | ¥ | 379,363 | 24 | |||||||||
Banking and Credit
Segment revenues decreased 1% to ¥83,724 million compared to fiscal 2020. This decrease was primarily due to a decrease in finance income due to a decrease in installment loans in ORIX Credit notwithstanding increases in services income generated from the mortgage bank business of ORIX Credit and finance revenues derived from real estate investment loans in our banking business.
Segment profits increased 23% to ¥48,030 million compared to fiscal 2020 resulting from a decrease in provision for credit losses during fiscal 2021, which was primarily due to the impacts of a decrease in new loan executions as well as low default rates in ORIX Credit.
51
Segment assets increased 3% to ¥2,690,627 million compared to the end of fiscal 2020 due to an increase in the balance of real estate investment loans in our banking business.
Asset efficiency improved compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 80,868 | ¥ | 78,071 | ¥ | (2,797 | ) | (3 | ) | |||||||
Other | 3,487 | 5,653 | 2,166 | 62 | ||||||||||||
Total Segment Revenues | 84,355 | 83,724 | (631 | ) | (1 | ) | ||||||||||
Interest expense | 4,488 | 4,931 | 443 | 10 | ||||||||||||
Selling, general and administrative expenses | 23,639 | 24,504 | 865 | 4 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 11,971 | 0 | (11,971 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 508 | 508 | — | ||||||||||||
Other | 5,164 | 5,754 | 590 | 11 | ||||||||||||
Total Segment Expenses | 45,262 | 35,697 | (9,565 | ) | (21 | ) | ||||||||||
Segment Operating Income | 39,093 | 48,027 | 8,934 | 23 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 3 | 3 | 0 | — | ||||||||||||
Segment Profits | ¥ | 39,096 | ¥ | 48,030 | ¥ | 8,934 | 23 | |||||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans | ¥ | 2,318,347 | ¥ | 2,402,916 | ¥ | 84,569 | 4 | |||||||||
Investment in securities | 273,218 | 275,740 | 2,522 | 1 | ||||||||||||
Investment in affiliates | 400 | 200 | (200 | ) | (50 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 11,771 | 11,771 | 0 | — | ||||||||||||
Total Segment Assets | ¥ | 2,603,736 | ¥ | 2,690,627 | ¥ | 86,891 | 3 | |||||||||
Aircraft and Ships
Segment revenues decreased 51% to ¥31,617 million compared to fiscal 2020. This was due to a decrease in operating leases revenues resulting from decreases in both the number of aircraft owned and the number of aircraft sold, a decrease in fee income resulting from the decrease in the number of aircraft sold to investors in our aircraft leasing business, and the absence of gains on sales of ships, which had been recorded during fiscal 2020.
Due to the above-mentioned decrease in revenues and a decrease in equity in net income of affiliates from Avolon, segment profits decreased 92% to ¥3,755 million compared to fiscal 2020.
Segment assets increased 3% to ¥601,762 million compared to the end of fiscal 2020. This increase was mainly due to an increase in installment loans and investment in operating leases in our ship-related business, as well as an increase in investment in affiliates.
52
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 2,478 | ¥ | 1,172 | ¥ | (1,306 | ) | (53 | ) | |||||||
Operating leases | 49,271 | 27,105 | (22,166 | ) | (45 | ) | ||||||||||
Services income | 10,216 | 3,340 | (6,876 | ) | (67 | ) | ||||||||||
Other | 2,685 | 0 | (2,685 | ) | — | |||||||||||
Total Segment Revenues | 64,650 | 31,617 | (33,033 | ) | (51 | ) | ||||||||||
Interest expense | 18,402 | 14,292 | (4,110 | ) | (22 | ) | ||||||||||
Costs of operating leases | 15,070 | 14,188 | (882 | ) | (6 | ) | ||||||||||
Services expense | 4,379 | 655 | (3,724 | ) | (85 | ) | ||||||||||
Selling, general and administrative expenses | 9,399 | 6,863 | (2,536 | ) | (27 | ) | ||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | (159 | ) | (159 | ) | — | ||||||||||
Other | 789 | 372 | (417 | ) | (53 | ) | ||||||||||
Total Segment Expenses | 48,039 | 36,211 | (11,828 | ) | (25 | ) | ||||||||||
Segment Operating Income | 16,611 | (4,594 | ) | (21,205 | ) | — | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 28,676 | 8,349 | (20,327 | ) | (71 | ) | ||||||||||
Segment Profits | ¥ | 45,287 | ¥ | 3,755 | ¥ | (41,532 | ) | (92 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 1,839 | ¥ | 2,994 | ¥ | 1,155 | 63 | |||||||||
Installment loans | 24,088 | 30,757 | 6,669 | 28 | ||||||||||||
Investment in operating leases | 253,717 | 262,482 | 8,765 | 3 | ||||||||||||
Advances for finance lease and operating lease | 4,990 | 578 | (4,412 | ) | (88 | ) | ||||||||||
Investment in affiliates | 284,453 | 293,469 | 9,016 | 3 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 16,217 | 11,482 | (4,735 | ) | (29 | ) | ||||||||||
Total Segment Assets | ¥ | 585,304 | ¥ | 601,762 | ¥ | 16,458 | 3 | |||||||||
ORIX USA
Segment revenues increased 2% to ¥138,017 million compared to fiscal 2020. This increase was due to an increase in finance revenues from an increase in the number of new executions in our real estate loan origination and servicing business and an increase in gains on investment securities and dividends in our private equity investing business in the Americas, despite a decrease in services income resulting from a sale of an asset management-related business.
Due to the absence of gains on sales of equity interests of Houlihan Lokey, etc., which had been recorded during fiscal 2020, segment profits decreased 23% to ¥43,614 million compared to fiscal 2020.
Segment assets decreased 11% to ¥1,220,081 million compared to the end of fiscal 2020 due to a decrease in installment loans.
53
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 79,973 | ¥ | 87,172 | ¥ | 7,199 | 9 | |||||||||
Gains on investment securities and dividends | 15,956 | 24,510 | 8,554 | 54 | ||||||||||||
Services income | 37,116 | 22,546 | (14,570 | ) | (39 | ) | ||||||||||
Other | 2,664 | 3,789 | 1,125 | 42 | ||||||||||||
Total Segment Revenues | 135,709 | 138,017 | 2,308 | 2 | ||||||||||||
Interest expense | 25,143 | 16,280 | (8,863 | ) | (35 | ) | ||||||||||
Services expense | 3,235 | 2,765 | (470 | ) | (15 | ) | ||||||||||
Selling, general and administrative expenses | 66,931 | 68,081 | 1,150 | 2 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 8,251 | 0 | (8,251 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 13,480 | 13,480 | — | ||||||||||||
Other | (219 | ) | 1,496 | 1,715 | — | |||||||||||
Total Segment Expenses | 103,341 | 102,102 | (1,239 | ) | (1 | ) | ||||||||||
Segment Operating Income | 32,368 | 35,915 | 3,547 | 11 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 24,322 | 7,699 | (16,623 | ) | (68 | ) | ||||||||||
Segment Profits | ¥ | 56,690 | ¥ | 43,614 | ¥ | (13,076 | ) | (23 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 1,172 | ¥ | 458 | ¥ | (714 | ) | (61 | ) | |||||||
Installment loans | 778,249 | 617,822 | (160,427 | ) | (21 | ) | ||||||||||
Investment in operating leases | 9,148 | 5,317 | (3,831 | ) | (42 | ) | ||||||||||
Investment in securities | 320,217 | 342,631 | 22,414 | 7 | ||||||||||||
Property under facility operations and servicing assets | 66,416 | 72,094 | 5,678 | 9 | ||||||||||||
Inventories | 1,442 | 603 | (839 | ) | (58 | ) | ||||||||||
Advances for finance lease and operating lease | 1,259 | 378 | (881 | ) | (70 | ) | ||||||||||
Investment in affiliates | 52,361 | 43,816 | (8,545 | ) | (16 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 143,763 | 136,962 | (6,801 | ) | (5 | ) | ||||||||||
Total Segment Assets | ¥ | 1,374,027 | ¥ | 1,220,081 | ¥ | (153,946 | ) | (11 | ) | |||||||
ORIX Europe
Segment revenues increased 8% to ¥160,798 million compared to fiscal 2020. This increase was due to an increase in gains on investment securities and dividends.
Segment profits decreased 13% to ¥37,886 million due to the absence of gains on sale of some business unit which had been recorded during fiscal 2020, despite a decrease in selling, general and administrative expenses.
54
Segment assets increased 16% to ¥369,546 million compared to the end of fiscal 2020. This was mainly due to an increase in investment in securities, as well as increases in goodwill, intangible assets acquired in business combinations due to the effect of changes in foreign exchange rates.
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 559 | ¥ | 171 | ¥ | (388 | ) | (69 | ) | |||||||
Gains on investment securities and dividends | (2,079 | ) | 10,239 | 12,318 | — | |||||||||||
Services income | 150,044 | 150,388 | 344 | 0 | ||||||||||||
Total Segment Revenues | 148,524 | 160,798 | 12,274 | 8 | ||||||||||||
Interest expense | 1,136 | 1,125 | (11 | ) | (1 | ) | ||||||||||
Services expense | 35,624 | 39,877 | 4,253 | 12 | ||||||||||||
Selling, general and administrative expenses | 81,383 | 73,526 | (7,857 | ) | (10 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | (17 | ) | 0 | 17 | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 34 | 34 | — | ||||||||||||
Other | (62 | ) | 6,836 | 6,898 | — | |||||||||||
Total Segment Expenses | 118,064 | 121,398 | 3,334 | 3 | ||||||||||||
Segment Operating Income | 30,460 | 39,400 | 8,940 | 29 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 13,318 | (1,514 | ) | (14,832 | ) | — | ||||||||||
Segment Profits | ¥ | 43,778 | ¥ | 37,886 | ¥ | (5,892 | ) | (13 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities | ¥ | 38,057 | ¥ | 45,540 | ¥ | 7,483 | 20 | |||||||||
Investment in affiliates | 1,495 | 1,770 | 275 | 18 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 278,295 | 322,236 | 43,941 | 16 | ||||||||||||
Total Segment Assets | ¥ | 317,847 | ¥ | 369,546 | ¥ | 51,699 | 16 | |||||||||
Asia and Australia
Segment revenues decreased 7% to ¥128,309 million compared to fiscal 2020. The decrease was due to decreases in services income and finance revenues, as well as the absence of gains on investment securities of an investee in Asia which had been recorded during fiscal 2020.
In addition to the above-mentioned reasons, despite the absence of losses on valuation of investment securities of an investee in Asia which had been recorded during fiscal 2020, as well as the recognition of gains on sales of subsidiaries and affiliates in Asia, due to the decrease in equity in net income of affiliates due to the recording of an impairment loss on an investment in an affiliate, segment profits remained substantially unchanged compared to fiscal 2020 at ¥14,660 million.
Segment assets increased 7% to ¥1,084,222 million compared to the end of fiscal 2020. The increase was mainly due to an increase in installment loans and investment in operating leases.
55
Asset efficiency declined compared to fiscal 2020.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 43,694 | ¥ | 39,931 | ¥ | (3,763 | ) | (9 | ) | |||||||
Gains on investment securities and dividends | 8,971 | 7,578 | (1,393 | ) | (16 | ) | ||||||||||
Operating leases | 66,322 | 68,104 | 1,782 | 3 | ||||||||||||
Services income | 18,323 | 12,631 | (5,692 | ) | (31 | ) | ||||||||||
Other | 487 | 65 | (422 | ) | (87 | ) | ||||||||||
Total Segment Revenues | 137,797 | 128,309 | (9,488 | ) | (7 | ) | ||||||||||
Interest expense | 23,329 | 18,043 | (5,286 | ) | (23 | ) | ||||||||||
Costs of operating leases | 49,529 | 50,954 | 1,425 | 3 | ||||||||||||
Services expense | 13,082 | 8,881 | (4,201 | ) | (32 | ) | ||||||||||
Selling, general and administrative expenses | 27,012 | 25,854 | (1,158 | ) | (4 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 15,318 | 0 | (15,318 | ) | — | |||||||||||
Provision for credit losses and write-downs of long-lived assets and securities | 0 | 3,514 | 3,514 | — | ||||||||||||
Other | 1,986 | 1,003 | (983 | ) | (49 | ) | ||||||||||
Total Segment Expenses | 130,256 | 108,249 | (22,007 | ) | (17 | ) | ||||||||||
Segment Operating Income | 7,541 | 20,060 | 12,519 | 166 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 7,132 | (5,400 | ) | (12,532 | ) | — | ||||||||||
Segment Profits | ¥ | 14,673 | ¥ | 14,660 | ¥ | (13 | ) | (0 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases | ¥ | 330,346 | ¥ | 338,603 | ¥ | 8,257 | 2 | |||||||||
Installment loans | 222,465 | 271,038 | 48,573 | 22 | ||||||||||||
Investment in operating leases | 195,660 | 235,182 | 39,522 | 20 | ||||||||||||
Investment in securities | 29,248 | 32,804 | 3,556 | 12 | ||||||||||||
Property under facility operations | 2,600 | 1,284 | (1,316 | ) | (51 | ) | ||||||||||
Inventories | 242 | 377 | 135 | 56 | ||||||||||||
Advances for finance lease and operating lease | 1,742 | 3,064 | 1,322 | 76 | ||||||||||||
Investment in affiliates | 221,853 | 195,413 | (26,440 | ) | (12 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 6,112 | 6,457 | 345 | 6 | ||||||||||||
Total Segment Assets | ¥ | 1,010,268 | ¥ | 1,084,222 | ¥ | 73,954 | 7 | |||||||||
Revenues, New Business Volumes and Investments Finance revenues | ||||||||||||||||
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues: | ||||||||||||||||
Finance revenues | ¥ | 276,864 | ¥ | 271,194 | ¥ | (5,670 | ) | (2 | ) | |||||||
56
Finance revenues decreased 2% to ¥271,194 million for fiscal 2021 compared to fiscal 2020 primarily due to a decrease in the average balance of installment loans and net investment in leases.
Net investment in leases
As of and for the year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases: | ||||||||||||||||
New equipment acquisitions | ¥ | 444,841 | ¥ | 346,518 | ¥ | (98,323 | ) | (22 | ) | |||||||
Japan | 244,087 | 192,708 | (51,379 | ) | (21 | ) | ||||||||||
Overseas | 200,754 | 153,810 | (46,944 | ) | (23 | ) | ||||||||||
Net investment in leases | 1,080,964 | 1,029,518 | (51,446 | ) | (5 | ) | ||||||||||
New equipment acquisitions related to net investment in leases decreased 22% to ¥346,518 million compared to fiscal 2020. In Japan, new equipment acquisitions decreased 21% in fiscal 2021 compared to fiscal 2020 due to a decreasing trend in new acquisition including auto leases. In overseas, new equipment acquisitions decreased 23% in fiscal 2021 compared to fiscal 2020 due to decreases in Asia.
Net investment in leases as of March 31, 2021 decreased 5% to ¥1,029,518 million compared to March 31, 2020 mainly due to decreases in assets in Japan.
As of March 31, 2021, no single lessee represented more than 1% of the balance of net investment in leases. As of March 31, 2021, 67% of our net investment in leases were to lessees in Japan, while 33% were to overseas lessees. 7% and 5% of our net investment in leases were to lessees in China and Malaysia, respectively. No other overseas country represented more than 5% of our total portfolio of net investment in leases.
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 457,405 | ¥ | 437,759 | ¥ | (19,646 | ) | (4 | ) | |||||||
Industrial equipment | 210,248 | 212,655 | 2,407 | 1 | ||||||||||||
Electronics | 134,775 | 121,021 | (13,754 | ) | (10 | ) | ||||||||||
Information-related and office equipment | 104,218 | 95,708 | (8,510 | ) | (8 | ) | ||||||||||
Commercial services equipment | 45,062 | 42,339 | (2,723 | ) | (6 | ) | ||||||||||
Other | 129,256 | 120,036 | (9,220 | ) | (7 | ) | ||||||||||
Total | ¥ | 1,080,964 | ¥ | 1,029,518 | ¥ | (51,446 | ) | (5 | ) | |||||||
For further information, see Note 6 and 7 of “Item 18. Financial Statements.”
57
Installment loans
As of and for the year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
New loans added | ¥ | 1,529,175 | ¥ | 1,198,028 | ¥ | (331,147 | ) | (22 | ) | |||||||
Japan | 1,134,586 | 862,930 | (271,656 | ) | (24 | ) | ||||||||||
Overseas | 394,589 | 335,098 | (59,491 | ) | (15 | ) | ||||||||||
Installment loans | 3,740,486 | 3,670,784 | (69,702 | ) | (2 | ) | ||||||||||
| Note: | The balance of installment loans related to our life insurance operations is included in installment loans in our consolidated balance sheets; however, income and losses on these loans are recorded in life insurance premiums and related investment income in our consolidated statements of income. |
New loans added decreased 22% to ¥1,198,028 million compared to fiscal 2020. In Japan, new loans added decreased 24% to ¥862,930 million in fiscal 2021 compared to fiscal 2020. In Overseas, new loans added decreased 15% to ¥335,098 million compared to fiscal 2020 mainly due to decreased lending activity in the Americas.
The balance of installment loans as of March 31, 2021 decreased 2% to ¥3,670,784 million compared to March 31, 2020, mainly due to the collection amount exceeded the new loans added.
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
Consumer borrowers in Japan | ||||||||||||||||
Real estate loans | ¥ | 1,842,131 | ¥ | 1,995,031 | ¥ | 152,900 | 8 | |||||||||
Card loans | 223,651 | 188,547 | (35,104 | ) | (16 | ) | ||||||||||
Other | 32,618 | 27,698 | (4,920 | ) | (15 | ) | ||||||||||
Subtotal | 2,098,400 | 2,211,276 | 112,876 | 5 | ||||||||||||
Corporate borrowers in Japan | ||||||||||||||||
Real estate companies | 300,984 | 279,046 | (21,938 | ) | (7 | ) | ||||||||||
Non-recourse loans | 48,566 | 47,956 | (610 | ) | (1 | ) | ||||||||||
Commercial, industrial and other companies | 255,309 | 203,890 | (51,419 | ) | (20 | ) | ||||||||||
Subtotal | 604,859 | 530,892 | (73,967 | ) | (12 | ) | ||||||||||
Overseas | ||||||||||||||||
Real estate companies | 250,195 | 197,074 | (53,121 | ) | (21 | ) | ||||||||||
Non-recourse loans | 83,515 | 113,129 | 29,614 | 35 | ||||||||||||
Commercial, industrial companies and other | 690,299 | 606,062 | (84,237 | ) | (12 | ) | ||||||||||
Subtotal | 1,024,009 | 916,265 | (107,744 | ) | (11 | ) | ||||||||||
Purchased loans* | 13,218 | 12,351 | (867 | ) | (7 | ) | ||||||||||
Total | ¥ | 3,740,486 | ¥ | 3,670,784 | ¥ | (69,702 | ) | (2 | ) | |||||||
| * | Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely. |
As of March 31, 2021, ¥17,315 million, or 0.6%, of our portfolio of installment loans to consumer and corporate borrowers in Japan related to our life insurance operations. We reflect income from these loans as life insurance premiums and related investment income in our consolidated statements of income.
58
As of March 31, 2021, ¥476,120 million, or 13%, of the balance of installment loans were to real estate companies in Japan and overseas.
The balance of installment loans to consumer borrowers in Japan as of March 31, 2021 increased 5% to ¥2,211,276 million compared to the balance as of March 31, 2020, primarily due to an increase in the balance of real estate loans for consumer. The balance of installment loans to corporate borrowers in Japan as of March 31, 2021 decreased 12% to ¥530,892 million compared to the balance as of March 31, 2020, mainly due to the collection amount exceeded the new loans added. The balance of installment loans in Overseas as of March 31, 2021 decreased 11% to ¥916,265 million compared to the balance as of March 31, 2020 in line with the aforementioned increase in the Americas.
For further information, see Note 9 of “Item 18. Financial Statements.”
Asset quality
Net investment in leases
As of March 31, | ||||||||
2020 | 2021 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due net investment inleases/Non-performing net investment in leases and allowances for doubtful receivables/credit losses on net investment in leases: | ||||||||
90+ days past-due net investment inleases/Non-performing net investment in leases | ¥ | 15,346 | ¥ | 18,925 | ||||
90+ days past-due net investment inleases/Non-performing net investment in leases as a percentage of the balance of net investment in leases | 1.42 | % | 1.84 | % | ||||
Provision for doubtful receivables/credit losses as a percentage of the average balance of net investment in leases* | 0.29 | % | 0.31 | % | ||||
Allowance for doubtful receivables/credit losses on net investment in leases | ¥ | 11,692 | ¥ | 16,522 | ||||
Allowance for doubtful receivables/credit losses on net investment in leases as a percentage of the balance of net investment in leases | 1.08 | % | 1.60 | % | ||||
The ratio of charge-offs as a percentage of the average balance of net investment in leases* | 0.25 | % | 0.25 | % | ||||
| Notes: | Credit Losses Standard has been adopted since April 1, 2020, and the amounts of allowance for doubtful receivables on finance leases have been reclassified to allowance for credit losses on net investment in leases. In addition, 90+ days past-due net investment in leases have been changed toNon-performing net investment in leases. |
| * | Average balances are calculated on the basis of fiscal year’s beginning balance and fiscal quarter-end balances. |
The balance of
non-performing
net investment in leases as of March 31, 2021 increased ¥3,579 million to ¥18,925 million compared to the balance of 90+ dayspast-due
net investment in leases as of March 31, 2020. As a result, thenon-performing
net investment in leases as a percentage of net investment in leases as of March 31, 2021 increased 0.42% to 1.84% from the 90+ dayspast-due
net investment in leases as a percentage of net investment in leases as of March 31, 2020. Due to the change in the method of estimation of allowance for credit losses due to application of the Credit Losses Standard, the balance of allowance for credit losses on net investment in leases as of March 31, 2021 was ¥16,522 million, and as a percentage of the balance of net investment in leases as of March 31, 2021 increase 1.60% from allowance for doubtful receivables on net investment in leases as a percentage of the balance of net investment in leases as of March 31, 2020.59
We believe that the ratio of allowance for credit losses to the balance of investment in net investment in leases provides a reasonable indication that our allowance for credit losses was appropriate as of March 31, 2021 for the following reasons:
lease receivables are generally diversified and the amount of realized loss on any particular contract is likely to be relatively small; and
all lease contracts are secured by collateral consisting of the underlying leased assets, and we can expect to recover at least a portion of the outstanding lease receivables by selling the collateral.
Loans not individually assessed for credit losses
As of March 31, | ||||||||
2020 | 2021 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due loans not individually evaluated forimpairment/Non-performing loans not individually assessed for credit losses and allowance for probable loan losses/credit losses on installment loans not individually assessed for credit losses: | ||||||||
90+ days past-due loans not individually evaluated forimpairment/Non-performing loans not individually assessed for credit losses | ¥ | 10,264 | ¥ | 28,181 | ||||
90+ days past-due loans not individually evaluated forimpairment/Non-performing loans not individually assessed for credit losses as a percentage of the balance of installment loans not individually assessed for credit losses | 0.28 | % | 0.78 | % | ||||
Provision for probable loan losses/credit losses as a percentage of the average balance of installment loans not individually assessed for credit losses* | 0.43 | % | 0.02 | % | ||||
Allowance for probable loan losses/credit losses on installment loans not individually assessed for credit losses | ¥ | 31,697 | ¥ | 44,064 | ||||
Allowance for probable loan losses/credit losses on installment loans not individually assessed for credit losses as a percentage of the balance of installment loans not individually assessed for credit losses | 0.87 | % | 1.22 | % | ||||
The ratio of charge-offs as a percentage of the average balance of loans not individually assessed for credit losses* | 0.43 | % | 0.37 | % | ||||
| Notes: | Credit Losses Standard has been adopted since April 1, 2020, and the amounts of allowance for probable loan losses have been reclassified to allowance for credit losses. In addition, 90+ days past-due loans not individually evaluated for impairment have been changed toNon-performing loans not individually assessed for credit losses. |
| * | Average balances are calculated on the basis of fiscal year’s beginning balance and fiscal quarter-end balances. |
The provision as a percentage of the average balance of installment loans not individually assessed for credit losses in fiscal 2021 compared to fiscal 2020 decreased due to the reversal occurred in fiscal 2021, mainly because of the improvement of forecasted future economic indicators such as GDP growth rates and unemployment rates in the Americas compared to the beginning of the year.
60
The balance of
non-performing
loans not individually assessed that are estimated for credit losses by using installment loans with similar risk characteristics as one pool was ¥28,181 million as of March 31, 2021.As of March 31, | ||||||||
2020 | 2021 | |||||||
(Millions of yen) | ||||||||
90+ days past-due loans not individually evaluated forimpairment/Non-performing loans not individually assessed for credit losses: | ||||||||
Consumer borrowers | ||||||||
Real estate loans | ¥ | 1,370 | ¥ | 1,633 | ||||
Card loans | 1,708 | 1,132 | ||||||
Other | 7,025 | 6,823 | ||||||
Subtotal | 10,103 | 9,588 | ||||||
Corporate borrowers in Japan | ||||||||
Real estate companies | 0 | 31 | ||||||
Subtotal | 0 | 31 | ||||||
Consumer borrowers in Overseas | ||||||||
Real estate companies | 0 | 14,505 | ||||||
Non-recourse loans | 0 | 542 | ||||||
Commercial, industrial and other companies | 161 | 3,515 | ||||||
Subtotal | 161 | 18,562 | ||||||
Total | ¥ | 10,264 | ¥ | 28,181 | ||||
Due to the application of Credit Losses Standard, certain installment loans have been changed to not individually assessed for credit losses from individually evaluated, mainly in the Americas and Asia.
We recognize allowances for real estate loans, card loans and other loans to individual borrowers after careful evaluation of the value of collateral underlying the loans, past loss experience and any economic conditions that we believe may affect the default rate. We determine the allowance for our other items on the basis of past loss experience, general economic conditions and the current portfolio composition.
Loans individually assessed for credit losses
As of March 31, | ||||||||
2020 | 2021 | |||||||
(Millions of yen) | ||||||||
Non-performing loans individually assessed for credit losses and allowance for probable loan losses/credit losses on installment loans individually assessed for credit losses: | ||||||||
Non-performing installment loans individually assessed for credit losses | ¥ | 85,820 | ¥ | 59,757 | ||||
Allowance for probable loan losses/credit losses on installment loans individually assessed for credit losses* | 13,447 | 13,404 | ||||||
| * | The allowance is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral dependent. |
The provision for probable loan losses/credit losses on installment loans individually assesses for credit losses was ¥6,201 million and ¥15,248 million, respectively, in fiscal 2020 and fiscal 2021. The
charge-off
of impaired loans individually assessed for credit losses was ¥6,478 million and ¥16,356 million, respectively, in61
fiscal 2020 and fiscal 2021. The provision of probable loan losses/credit losses for installment loans individual assessed for credit losses increased ¥9,047 million compared to fiscal 2020.
Charge-off
of installment loans individual assessed for credit losses increased ¥9,878 million compared to fiscal 2020.The table below sets forth the outstanding balance of
non-performing
loans individually assessed for credit losses by region and type of borrower as of the dates indicated. Consumer loans in Japan primarily consist of restructured smaller-balance homogeneous loans individually assessed for credit losses. The balance of individually assessednon-performing
loans of real estate companies and commercial, industrial and other companies in Overseas decreased due to a decrease in the Americas.As of March 31, | ||||||||
2020 | 2021 | |||||||
(Millions of yen) | ||||||||
Non-performing loans individually assessed for credit losses: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 5,758 | ¥ | 8,006 | ||||
Card loans | 3,932 | 3,693 | ||||||
Other | 16,426 | 16,963 | ||||||
Subtotal | 26,116 | 28,662 | ||||||
Corporate borrowers in Japan | ||||||||
Real estate companies | 3,501 | 1,711 | ||||||
Commercial, industrial and other companies | 12,480 | 7,263 | ||||||
Subtotal | 15,981 | 8,974 | ||||||
Overseas | ||||||||
Real estate companies | 12,491 | 0 | ||||||
Non-recourse loans | 2,466 | 774 | ||||||
Commercial, industrial companies and other | 27,161 | 19,524 | ||||||
Subtotal | 42,118 | 20,298 | ||||||
Purchased loans | 1,605 | 1,823 | ||||||
Total | ¥ | 85,820 | ¥ | 59,757 | ||||
Due to the application of Credit Losses Standard, certain installment loans have been changed to not individually assessed for credit losses from individually evaluated, mainly in the Americas and Asia.
Troubled debt restructuring
A troubled debt restructuring is defined as a restructuring of a financing receivable in which the creditor grants a concession to the debtor for economic or other reasons related to the debtor’s financial difficulties. The balance of
pre-modification
outstanding recorded investment of troubled debt restructurings for financing receivables occurred during fiscal 2020 and 2021 were ¥16,826 million and ¥24,002 million, respectively. And the balance of post-modification outstanding recorded investment were ¥13,804 million and ¥19,776 million for fiscal 2020 and 2021, respectively.While there were certain other payment deferral requests for financing receivables which we accepted, due to the spread of the
COVID-19,
those receivables are not included in the troubled debt restructuring as we determined those deferrals did not meet the definition of troubled debt restructuring.For further information, see Note 10 and 11 of “Item 18. Financial Statements.”
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Allowance for doubtful receivables and probable loan losses and allowance for credit losses
We recognize allowances for doubtful receivables and probable loan losses and allowances for credit losses.
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Allowance for doubtful receivables on net investment in leases and probable loan losses on installment loans and allowance for credit losses: | ||||||||||||||||
Beginning balance | ¥ | 58,011 | ¥ | 55,687 | ¥ | (2,324 | ) | (4 | ) | |||||||
Cumulative Effect of Adopting Accounting Standards Update 2016-13 | 0 | 30,376 | 30,376 | — | ||||||||||||
(Adjusted) Beginning balance | 58,011 | 86,063 | 28,052 | 48 | ||||||||||||
Net investment in leases | 12,049 | 15,242 | 3,193 | 27 | ||||||||||||
Loans not individually assessed for credit losses | 32,231 | 57,685 | 25,454 | 79 | ||||||||||||
Loans individually assessed for credit losses | 13,731 | 13,136 | (595 | ) | (4 | ) | ||||||||||
Provision (Reversal) | 24,425 | 19,113 | (5,312 | ) | (22 | ) | ||||||||||
Net investment in leases | 3,304 | 3,285 | (19 | ) | (1 | ) | ||||||||||
Loans not individually assessed for credit losses | 14,920 | 580 | (14,340 | ) | (96 | ) | ||||||||||
Loans individually assessed for credit losses | 6,201 | 15,248 | 9,047 | 146 | ||||||||||||
Charge-offs (net) | (24,132 | ) | (32,395 | ) | (8,263 | ) | 34 | |||||||||
Net investment in leases | (2,835 | ) | (2,658 | ) | 177 | (6 | ) | |||||||||
Loans not individually assessed for credit losses | (14,819 | ) | (13,381 | ) | 1,438 | (10 | ) | |||||||||
Loans individually assessed for credit losses | (6,478 | ) | (16,356 | ) | (9,878 | ) | 152 | |||||||||
Other* | (1,468 | ) | 1,209 | 2,677 | — | |||||||||||
Net investment in leases | (826 | ) | 653 | 1,479 | — | |||||||||||
Loans not individually assessed for credit losses | (635 | ) | (820 | ) | (185 | ) | 29 | |||||||||
Loans individually assessed for credit losses | (7 | ) | 1,376 | 1,383 | — | |||||||||||
Ending balance | 56,836 | 73,990 | 17,154 | 30 | ||||||||||||
Net investment in leases | 11,692 | 16,522 | 4,830 | 41 | ||||||||||||
Loans not individually assessed for credit losses | 31,697 | 44,064 | 12,367 | 39 | ||||||||||||
Loans individually assessed for credit losses | 13,447 | 13,404 | (43 | ) | (0 | ) | ||||||||||
| Notes: | Credit Losses Standard has been adopted since April 1, 2020, and the amounts of both allowance for doubtful receivables on net investment in leases and allowance for probable loan losses on installment loans have been reclassified to allowance for credit losses. |
| * | Other mainly includes foreign currency translation adjustments and a decrease in allowance related to a sale of a subsidiary. |
Credit Losses Standard has been adopted since April 1, 2020, and the allowance for credit losses is estimated for all credit losses expected to occur in future over the remaining life of net investment in leases and installment loans, and is recognized adequately based on management judgement. We adopted Credit Losses Standard through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.
The provision for probable loan losses on installment loans not individually assessed for credit losses was ¥14,920 million in fiscal 2020 while the provision for credit losses on installment loans not individually assessed for credit losses was ¥580 million in fiscal 2021. The provision in fiscal 2021 compared to fiscal 2020 decreased due to the reversal occurred in fiscal 2021, mainly because of the improvement of forecasted future economic indicators such as GDP growth rates and unemployment rates in the Americas compared to the beginning of the year.
For further information, see Note 10 and 11 of “Item 18. Financial Statements.”
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Investment in Securities
As of and for the year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities: | ||||||||||||||||
New securities added | ¥ | 765,589 | ¥ | 765,663 | ¥ | 74 | 0 | |||||||||
Japan | 653,228 | 698,555 | 45,327 | 7 | ||||||||||||
Overseas | 112,361 | 67,108 | (45,253 | ) | (40 | ) | ||||||||||
Investment in securities | 2,245,323 | 2,660,443 | 415,120 | 18 | ||||||||||||
| Note: | The balance of investment in securities related to our life insurance operations are included in investment in securities in our consolidated balance sheets; however, income and losses on these investment in securities are recorded in life insurance premiums and related investment income in our consolidated statements of income. |
New securities added increased to ¥765,663 million in fiscal 2021 compared to fiscal 2020. New securities added in Japan increased 7% in fiscal 2021 compared to fiscal 2020 primarily due to an increase in investments in government bond securities, municipal bond securities and corporate debt securities. New securities added overseas decreased 40% in fiscal 2021 compared to fiscal 2020 primarily due to a decrease in investments in municipal bond securities and CMBS and RMBS in the Americas.
The balance of our investment in securities as of March 31, 2021 increased 18% to ¥2,660,443 million compared to March 31, 2020.
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities by security type: | ||||||||||||||||
Equity securities | ¥ | 492,902 | ¥ | 540,082 | ¥ | 47,180 | 10 | |||||||||
Trading debt securities | 7,431 | 2,654 | (4,777 | ) | (64 | ) | ||||||||||
Available-for-sale | 1,631,185 | 2,003,917 | 372,732 | 23 | ||||||||||||
Held-to-maturity | 113,805 | 113,790 | (15 | ) | (0 | ) | ||||||||||
Total | ¥ | 2,245,323 | ¥ | 2,660,443 | ¥ | 415,120 | 18 | |||||||||
Investments in equity securities as of March 31, 2021 increased 10% to ¥540,082 million compared to March 31, 2020 primarily due to an increase in investment in equity securities with readily determinable fair value in the Europe and fund investment in the Americas. Investments in trading debt securities as of March 31, 2021 decreased 64% to ¥2,654 million compared to March 31, 2020 due to a decrease in investments in CMBS and RMBS in the Americas. Investments indebt securities as of March 31, 2021 increased 23% to ¥2,003,917 million compared to March 31, 2020 primarily due to an increase in investments in government bond securities, municipal bond securities and corporate debt securities in Japan.debt securities mainly consist of our life insurance business’s investment in Japanese government bonds.
available-for-sale
Held-to-maturity
For further information, see Note 12 of “Item 18. Financial Statements.”
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Gains on investment securities and dividends
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Gains on investment securities and dividends: | ||||||||||||||||
Net gains on investment securities | ¥ | 20,204 | ¥ | 44,622 | ¥ | 24,418 | 121 | |||||||||
Dividends income | 2,295 | 1,475 | (820 | ) | (36 | ) | ||||||||||
Total | ¥ | 22,499 | ¥ | 46,097 | ¥ | 23,598 | 105 | |||||||||
| Notes: | 1. | Income and losses on investment in securities related to our life insurance operations are recorded in life insurance premiums and related investment income in our consolidated statements of income. | ||
| 2. | Unrealized changes in fair value of investments in equity securities have been included in “Net gains on investment securities”. |
Net gains on investment securities increased 121% to ¥44,622 million in fiscal 2021 compared to fiscal 2020 due to an increase in net unrealized holding gains on equity securities. Dividends income decreased 36% to ¥1,475 million in fiscal 2021 compared to fiscal 2020. Gains on investment securities and dividends increased 105% to ¥46,097 million in fiscal 2021 compared to fiscal 2020 due to an increase in net unrealized holding gains on equity securities despite a decrease in dividends income.
As of March 31, 2021, gross unrealized gains ondebt securities, including those held in connection with our life insurance operations, were ¥25,291 million, compared to ¥36,017 million as of March 31, 2020. As of March 31, 2021, gross unrealized losses ondebt securities, including those held in connection with our life insurance operations, were ¥48,021 million, compared to ¥41,712 million as of March 31, 2020.
available-for-sale
available-for-sale
Operating leases
As of and for the year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Operating leases: | ||||||||||||||||
Operating lease revenues | ¥ | 430,665 | ¥ | 397,065 | ¥ | (33,600 | ) | (8 | ) | |||||||
Costs of operating leases | 289,604 | 295,628 | 6,024 | 2 | ||||||||||||
New equipment acquisitions | 493,666 | 302,835 | (190,831 | ) | (39 | ) | ||||||||||
Japan | 234,188 | 174,116 | (60,072 | ) | (26 | ) | ||||||||||
Overseas | 259,478 | 128,719 | (130,759 | ) | (50 | ) | ||||||||||
Investment in operating leases | 1,400,001 | 1,408,189 | 8,188 | 1 | ||||||||||||
Revenues from operating leases in fiscal 2021 decreased 8% to ¥397,065 million compared to fiscal 2020 primarily due to not only decreases in both the number of aircraft owned and the number of aircraft sold in the aircraft leasing business, but also a decrease in gains on sales of real estate under operating leases. In fiscal 2020 and 2021, gains from the disposition of operating lease assets were ¥51,072 million and ¥26,358 million, respectively.
Costs of operating leases increased 2% to ¥295,628 million in fiscal 2021 compared to fiscal 2020 primarily due to an increase in depreciation expenses resulting from a year on year increase in the average balance of investment in the rental business of electronic measuring instruments and
IT-related
equipment.New equipment acquisitions related to operating leases decreased 39% to ¥302,835 million in fiscal 2021 compared to fiscal 2020 primarily due to a decrease in purchases of aircraft overseas.
65
Investment in operating leases as of March 31, 2021 increased 1% to ¥1,408,189 million compared to March 31, 2020.
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in operating leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 847,376 | ¥ | 873,697 | ¥ | 26,321 | 3 | |||||||||
Measuring and information-related equipment | 125,897 | 118,758 | (7,139 | ) | (6 | ) | ||||||||||
Real estate | 269,483 | 249,225 | (20,258 | ) | (8 | ) | ||||||||||
Other | 10,308 | 24,291 | 13,983 | 136 | ||||||||||||
Right-of-use | 121,553 | 114,268 | (7,285 | ) | (6 | ) | ||||||||||
Accrued rental receivables | 25,384 | 28,259 | 2,875 | 11 | ||||||||||||
Allowance for doubtful receivables on operating leases* | 0 | (309 | ) | (309 | ) | — | ||||||||||
Total | ¥ | 1,400,001 | ¥ | 1,408,189 | ¥ | 8,188 | 1 | |||||||||
| * | Credit Losses Standard has been adopted since April 1, 2020, and the allowance for doubtful accrued rental receivables on operating leases, which was previously recorded in allowance for doubtful receivables on finance leases and probable loan losses, has been reclassified to the balance of investment in operating leases. |
Investment in transportation equipment operating leases as of March 31, 2021 increased 3% to ¥873,697 million compared to March 31, 2020 primarily due to an increase in new equipment acquisitions in the ship-related business, and an increase in investment in the automobile leasing business resulting from the effect of changes in foreign exchange rates. Investment in measuring and information-related equipment operating leases as of March 31, 2021 decreased 6% to ¥118,758 million compared to March 31, 2020 primarily due to depreciation of equipment held for operating leases in the rental business. Investment in real estate operating leases as of March 31, 2021 decreased 8% to ¥249,225 million compared to March 31, 2020 primarily due to continuous sales of real estate under operating leases in Japan. Investment in other operating leases as of March 31, 2021 increased 136% to ¥24,291 million compared to March 31, 2020 primarily due to an increase resulting from the acquisition of subsidiaries.
For further information, see Note 6 of “Item 18. Financial Statements.”
Life insurance
We reflect all income and losses (other than provision for doubtful receivables and probable loan losses and provision for credit losses) that we recognize on securities, installment loans, real estate under operating leases and other investments held in connection with our life insurance operations as life insurance premiums and related investment income in our consolidated statements of income.
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Life insurance premiums and related investment income and life insurance costs: | ||||||||||||||||
Life insurance premiums | ¥ | 360,583 | ¥ | 403,799 | ¥ | 43,216 | 12 | |||||||||
Life insurance-related investment income | 7,195 | 83,751 | 76,556 | — | ||||||||||||
Total | ¥ | 367,778 | ¥ | 487,550 | ¥ | 119,772 | 33 | |||||||||
Life insurance costs | ¥ | 269,425 | ¥ | 374,348 | ¥ | 104,923 | 39 | |||||||||
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Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Breakdown of life insurance-related investment income (loss): | ||||||||||||||||
Net income on investment securities | ¥ | 8,674 | ¥ | 94,029 | ¥ | 85,355 | 984 | |||||||||
Losses recognized in income on derivative | (1,910 | ) | (10,680 | ) | (8,770 | ) | 459 | |||||||||
Interest on loans, income on real estate under operating leases, and others | 431 | 402 | (29 | ) | (7 | ) | ||||||||||
Total | ¥ | 7,195 | ¥ | 83,751 | ¥ | 76,556 | — | |||||||||
Life insurance premiums and related investment income increased 33% to ¥487,550 million in fiscal 2021 compared to fiscal 2020.
Life insurance premiums increased 12% to ¥403,799 million in fiscal 2021 compared to fiscal 2020 due to an increase in the number of policies in force.
Life insurance-related investment income increased to ¥83,751 million in fiscal 2021 compared to ¥7,195 million in fiscal 2020. Net income on investment securities increased mainly due to an increase in investment income from assets under variable annuity and variable life insurance contracts.
Life insurance costs increased 39% to ¥374,348 million in fiscal 2021 compared to fiscal 2020 due to the aforementioned increase in the number of policies in force.
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investments by life insurance operations: | ||||||||||||||||
Equity securities | ¥ | 264,625 | ¥ | 269,167 | ¥ | 4,542 | 2 | |||||||||
Available-for-sale | 1,149,612 | 1,525,191 | 375,579 | 33 | ||||||||||||
Held-to-maturity | 113,805 | 113,790 | (15 | ) | (0 | ) | ||||||||||
Total investment in securities | 1,528,042 | 1,908,148 | 380,106 | 25 | ||||||||||||
Installment loans, real estate under operating leases and other investments | 46,991 | 46,224 | (767 | ) | (2 | ) | ||||||||||
Total | ¥ | 1,575,033 | ¥ | 1,954,372 | ¥ | 379,339 | 24 | |||||||||
Investment in securities as of March 31, 2021 increased 25% to ¥1,908,148 million compared to March 31, 2020 due to an increase indebt securities as a result of an increase in investments in government bond securities and corporate debt securities, as well as an increase in equity securities as a result of new investments.
available-for-sale
Installment loans, real estate under operating leases and other investments as of March 31, 2021 decreased 2% to ¥46,224 million compared to March 31, 2020.
For further information, see Note 26 of “Item 18. Financial Statements.”
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Sales of goods and real estate, Inventories
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Sales of goods and real estate, Inventories: | ||||||||||||||||
Sales of goods and real estate | ¥ | 406,511 | ¥ | 410,953 | ¥ | 4,442 | 1 | |||||||||
Costs of goods and real estate sold | 354,006 | 347,721 | (6,285 | ) | (2 | ) | ||||||||||
New real estate added | 82,442 | 81,854 | (588 | ) | (1 | ) | ||||||||||
Inventories | 126,013 | 142,156 | 16,143 | 13 | ||||||||||||
Sales of goods and real estate increased 1% to ¥410,953 million compared to fiscal 2020 mainly due to an increase in sales of goods of investees, partially offset by a decrease in sales of real estate.
Costs of goods and real estate sold decreased 2% to ¥347,721 million compared to fiscal 2020 due to a decrease in costs of real estate sold. We recognized ¥863 million and ¥2,510 million of write-downs for fiscal 2020 and 2021, respectively, which were included in costs of goods and real estate sold. Costs of goods and real estate sold include the upfront costs associated with advertising and creating model rooms.
New real estate added decreased 1% to ¥81,854 million in fiscal 2021 compared to fiscal 2020.
Inventories as of March 31, 2021 increased 13% to ¥142,156 million compared to March 31, 2020.
For further information, see Note 4 of “Item 18. Financial Statements.”
Services, Property under Facility Operations
As of and for the year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Services, Property under Facility Operations | ||||||||||||||||
Services income | ¥ | 776,012 | ¥ | 679,849 | ¥ | (96,163) | (12 | ) | ||||||||
Services expense | 483,914 | 439,233 | (44,681 | ) | (9 | ) | ||||||||||
New assets added | 34,181 | 30,143 | (4,038 | ) | (12 | ) | ||||||||||
Japan | 33,312 | 30,053 | (3,259 | ) | (10 | ) | ||||||||||
Overseas | 869 | 90 | (779 | ) | (90 | ) | ||||||||||
Property under Facility Operations | 562,485 | 491,855 | (70,630 | ) | (13 | ) | ||||||||||
Services income decreased 12% to ¥679,849 million in fiscal 2021 compared to fiscal 2020 mainly due to the temporary closure of operating facilities and the sales of a subsidiary and an asset management-related business in fiscal 2020.
Services expense decreased 9% to ¥439,233 million in fiscal 2021 compared to fiscal 2020 mainly due to the temporary closure of operating facilities and the sale of the subsidiary in fiscal 2020, similar to the aforementioned decrease in services income.
New assets added for property under facility operations decreased 12% to ¥30,143 million in fiscal 2021 compared to fiscal 2020 due to the decrease in investments in electric power facilities.
Property under facility operations as of March 31, 2021 decreased 13% to ¥491,855 million compared to March 31, 2020, largely attributed to the sales of investees involved in wind power generation business in India.
For further information, see Note 4 of “Item 18. Financial Statements.”
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Expenses
Interest expense
Interest expense decreased 21% to ¥78,068 million in fiscal 2021 compared to ¥99,138 million in fiscal 2020. Our total outstanding short-term debt, long-term debt and deposits as of March 31, 2021 increased 3% to ¥7,041,887 million compared to ¥6,847,889 million as of March 31, 2020.
The average interest rate on our short-term debt, long-term debt and deposits in domestic currency, calculated on the basis of average monthly balances, remained flat in fiscal 2021 at 0.4% compared to 0.4% in fiscal 2020. The average interest rate on our short-term debt, long-term debt and deposits in foreign currency, calculated on the basis of average monthly balances, decreased 0.8% to 2.5% in fiscal 2021 compared to 3.3% in fiscal 2020. For more information regarding our interest rate risk, see “Item 3. Key Information—Risk Factors.” For more information regarding our outstanding debt, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Short-term and long-term debt and deposits.”
Other (income) and expense
Other (income) and expense included a net expense of ¥14,925 million during fiscal 2020 and a net expense of ¥17,125 million during fiscal 2021. Foreign currency transaction losses (gains) included in other (income) and expense included gains of ¥1,805 million during fiscal 2021 compared to losses of ¥1,679 million during fiscal 2020. We recognized impairment losses on goodwill and other intangible assets included in other (income) and expense in the amount of ¥2,652 million during fiscal 2021 compared to no impairment losses on goodwill and other intangible assets during fiscal 2020. For further information on our goodwill and other intangible assets, see Note 16 of “Item 18. Financial Statements.”
Selling, general and administrative expenses
Year ended March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Selling, general and administrative expenses: | ||||||||||||||||
Personnel expenses | ¥ | 256,931 | ¥ | 263,026 | ¥ | 6,095 | 2 | |||||||||
Selling expenses | 75,860 | 64,749 | (11,111 | ) | (15 | ) | ||||||||||
Administrative expenses | 119,694 | 120,751 | 1,057 | 1 | ||||||||||||
Depreciation of office facilities | 7,714 | 8,269 | 555 | 7 | ||||||||||||
Total | ¥ | 460,199 | ¥ | 456,795 | ¥ | (3,404 | ) | (1 | ) | |||||||
Employee salaries and other personnel expenses accounted for 58% of selling, general and administrative expenses in fiscal 2021, and the remaining portion consists of other expenses, such as rent for office space, communication expenses and travel expenses. Selling, general and administrative expenses in fiscal 2021 decreased 1% year on year.
Write-downs of long-lived assets
As a result of impairment reviews we performed in fiscal 2021 for long-lived assets in Japan and overseas, such as office buildings, commercial facilities other than office buildings, condominiums, hotels, and land undeveloped or under construction, write-downs of long-lived assets decreased 1% to ¥3,020 million in fiscal 2021 compared to ¥3,043 million in fiscal 2020. These write-downs, which are reflected as write-downs of long-lived assets, consisted of impairment losses of ¥331 million on one office building, ¥1,256 million on six commercial facilities other than office buildings, ¥64 million on two condominiums, ¥98 million on two pieces of land undeveloped or under construction and ¥1,271 million on other long-lived assets, because the assets were
69
classified as held for sale or the carrying amount exceeded the estimated undiscounted future cash flows. In addition, write-downs of other long-lived assets in fiscal 2021 include a write-down of ¥1,099 million of three hotels. For further information, see Note 27 of “Item 18. Financial Statements.”
Write-downs of securities
Write-downs of securities in fiscal 2021 were mainly in connection with foreigndebt securities and
available-for-sale
non-marketable
equity securities. Write-downs of securities decreased to ¥5,935 million in fiscal 2021 compared to ¥11,969 million in fiscal 2020. For further information, see Note 12 of “Item 18. Financial Statements.”Equity in net income of affiliates
Equity in net income of affiliates decreased in fiscal 2021 to ¥481 million compared to ¥67,924 million in fiscal 2020 due to decreases in the number of passengers and flights at our three airports in Kansai, and equity in net income of affiliates from Avolon. For further information, see Note 15 of “Item 18. Financial Statements.”
Gains on sales of subsidiaries and affiliates and liquidation losses, net
Gains on sales of subsidiaries and affiliates and liquidation losses, net decreased to ¥23,300 million in fiscal 2021 compared to ¥74,001 million in fiscal 2020, due to the favorable profit from sales in Japan, the Americas and the Europe in fiscal 2020. For further information, see Note 3 of “Item 18. Financial Statements.”
Bargain Purchase Gain
In fiscal 2021, we recognized bargain purchase gains of ¥4,966 million associated with two of the acquisitions executed in fiscal 2020 compared to bargain purchase gains of ¥955 million in fiscal 2020. For further information, see Note 3 of “Item 18. Financial Statements.”
Provision for income taxes
Provision for income taxes decreased to ¥90,747 million in fiscal 2021 compared to ¥105,837 million in fiscal 2020 primarily due to lower income before income taxes. For further information, see Note 19 of “Item 18. Financial Statements.”
Net income attributable to the noncontrolling interests
Net income attributable to the noncontrolling interests was recorded as a result of the noncontrolling interests in earnings of certain of our subsidiaries. Net income attributable to the noncontrolling interests in fiscal 2021 was ¥4,453 million, compared to ¥3,640 million in fiscal 2020.
Net income attributable to the redeemable noncontrolling interests
Net income attributable to the redeemable noncontrolling interests was recorded as a result of the noncontrolling interests in the earnings of our subsidiaries that issued redeemable stock. Net income attributable to the redeemable noncontrolling interests in fiscal 2020 was ¥384 million. Net loss attributable to the redeemable noncontrolling interests in fiscal 2021 was ¥23 million. For further information, see Note 21 of “Item 18. Financial Statements.”
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YEAR ENDED MARCH 31, 2020 COMPARED TO YEAR ENDED MARCH 31, 2019
Performance Summary
Financial Results
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except ratios, per Share data and percentages) | ||||||||||||||||
Total revenues | ¥ | 2,434,864 | ¥ | 2,280,329 | ¥ | (154,535 | ) | (6 | ) | |||||||
Total expenses | 2,105,426 | 2,010,648 | (94,778 | ) | (5 | ) | ||||||||||
Income before Income Taxes | 395,730 | 412,561 | 16,831 | 4 | ||||||||||||
Net Income Attributable to ORIX Corporation Shareholders | 323,745 | 302,700 | (21,045 | ) | (7 | ) | ||||||||||
Earnings per Share (Basic) | 252.92 | 237.38 | (15.54 | ) | (6 | ) | ||||||||||
(Diluted) | 252.70 | 237.17 | (15.53 | ) | (6 | ) | ||||||||||
ROE* 1 | 11.6 | 10.3 | (1.3 | ) | — | |||||||||||
ROA* 2 | 2.74 | 2.40 | (0.34 | ) | — | |||||||||||
| * 1 | ROE is the ratio of Net Income Attributable to ORIX Corporation Shareholders for the period to average ORIX Corporation Shareholders’ Equity based on fiscal year beginning and ending balances. |
| * 2 | ROA is the ratio of Net Income Attributable to ORIX Corporation Shareholders for the period to average Total Assets based on fiscal year beginning and ending balances. |
Total revenues for fiscal 2020 decreased 6% to ¥2,280,329 million compared to fiscal 2019 as a result of a decrease in sales of goods and real estate due primarily to a decrease in related revenues from subsidiaries in the private equity business.
Total expenses for fiscal 2020 decreased 5% to ¥2,010,648 million compared to fiscal 2019 due primarily to a decrease in costs of goods and real estate sold in line with the aforementioned decrease in revenues.
Income before income taxes for fiscal 2020 increased 4% to ¥412,561 million compared to fiscal 2019 as a result of increases in equity in net income of affiliates and gains on sales of subsidiaries and affiliates and liquidation losses, net. On the other hand, net income attributable to ORIX Corporation shareholders decreased 7% to ¥302,700 million compared to fiscal 2019 as a result of a decrease in provision for income taxes during fiscal 2019 due to the reversal of the deferred tax liabilities previously recorded for undistributed earnings of DAIKYO.
There was no significant impact on the business performance for fiscal 2020 due to the spread of the
COVID-19.
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Balance Sheet data
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen except ratios, per share and percentages) | ||||||||||||||||
Total Assets | ¥ | 12,174,917 | ¥ | 13,067,528 | ¥ | 892,611 | 7 | |||||||||
(Segment assets) | 9,997,698 | 10,905,998 | 908,300 | 9 | ||||||||||||
Total Liabilities | 9,211,936 | 9,991,362 | 779,426 | 8 | ||||||||||||
(Long- and Short-term debt) | 4,495,771 | 4,616,186 | 120,415 | 3 | ||||||||||||
(Deposits) | 1,927,741 | 2,231,703 | 303,962 | 16 | ||||||||||||
ORIX Corporation Shareholders’ Equity | 2,897,074 | 2,993,608 | 96,534 | 3 | ||||||||||||
ORIX Corporation Shareholders’ Equity per share | 2,263.41 | 2,386.35 | 122.94 | 5 | ||||||||||||
ORIX Corporation Shareholders’ Equity ratio* | 23.8 | % | 22.9 | % | (0.9 | )% | — | |||||||||
D/E ratio (Debt-to-equity ratio) (Long- and Short-term debt (excluding deposits) / ORIX Corporation Shareholders’ Equity) | 1.6 | x | 1.5 | x | (0.1 | )x | — | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen except ratios, per share and percentages) | ||||||||||||||||
Total Assets | ¥ | 12,174,917 | ¥ | 13,067,528 | ¥ | 892,611 | 7 | |||||||||
(Segment assets) | 9,986,916 | 10,883,545 | 896,629 | 9 | ||||||||||||
Total Liabilities | 9,211,936 | 9,991,362 | 779,426 | 8 | ||||||||||||
(Short-term and Long-term debt) | 4,495,771 | 4,616,186 | 120,415 | 3 | ||||||||||||
(Deposits) | 1,927,741 | 2,231,703 | 303,962 | 16 | ||||||||||||
ORIX Corporation Shareholders’ Equity | 2,897,074 | 2,993,608 | 96,534 | 3 | ||||||||||||
ORIX Corporation Shareholders’ Equity per share | 2,263.41 | 2,386.35 | 122.94 | 5 | ||||||||||||
ORIX Corporation Shareholders’ Equity ratio* | 23.8 | % | 22.9 | % | (0.9 | )% | — | |||||||||
D/E ratio (Debt-to-equity | 1.6 | x | 1.5 | x | (0.1 | )x | — | |||||||||
| * | ORIX Corporation Shareholders’ Equity ratio is the ratio as of the period end of ORIX Corporation Shareholder’s Equity to total assets. |
Total assets increased 7% to ¥13,067,528 million compared to the balance as of March 31, 2019 due primarily to not only increases in installment loans and investment in securities, but also increases in investment in operating leases, property under facility operations and office facilities as a result of our adoption of the New Lease Standard. In addition, segment assets increased 9% to ¥10,905,998¥10,883,545 million compared to the balance as of March 31, 2019.
Total liabilities increased 8% to ¥9,991,362 million compared to the balance as of March 31, 2019 due primarily to not only increases in long-term debt and deposits, but also an increase in other liabilities as a result of our adoption of the New Lease Standard.
Shareholders’ equity increased 3% to ¥2,993,608 million compared to the balance as of March 31, 2019 due primarily to an increase in retained earnings.
Details of Operating Results
The following is a discussion of certain items in the consolidated statements of income, operating assets in the consolidated balance sheets and other selected financial information, including on a segment by segment basis.
Segment Information
Our business isoperating segments used by the chief operating decision maker to make decisions about resource allocations and assess performance are organized into sixten segments that are based on our business management organization which is classified by the nature of major products nature ofand services, customer base, regulations, and management organizations to facilitate strategy formulation, resource allocation and portfolio
Financial information about the operating segments reported below is that which is available by segment and regularly reviewed by the chief operating decision maker to make decisions about resource allocations and assess performance. The chief operating decision maker evaluates the performance of the segments based on
72
income before income taxes, net income attributable to noncontrolling interests and net income attributable to redeemable noncontrolling interests before applicable tax effect. Tax expenses are excluded from the segment profits.
The New Lease Standard has been adopted since April 1, 2019. This adoption has resulted in a gross up of ROU assets of investment in operating leases and property under facility operations related to operating leases of land, office and equipment, where the Company is the lessee, as segment assets in all of our segments except for Retail segment.Insurance, Banking and Credit, and ORIX Europe. In addition, segment revenues and segment expenses mainly in Corporate Financial Service segment and Maintenance Leasing segment increased as a result of a gross up of revenues and expenses of certain lessor costs. For further information, see Note 1 of “Item 18. Financial Statements.”
Since April 1, 2020, the selling, general and administrative expenses that should be borne by ORIX Group as a whole, which were initially charged directly to its respective segments, have been included in the difference between segment total profits and consolidated amounts for fiscal 2021. As a result of this change, segment data for fiscal 2019 and fiscal 2020 has been retrospectively restated.
For a description of the business activities of our segments, see “Item 4. Information on the Company—Business Segments.” See Note 34 of “Item 18. Financial Statements” for additional segment information, a discussion of how we prepare our segment information and the reconciliation of segment totals to consolidated financial statement amounts.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Corporate Financial Services | ¥ | 95,212 | ¥ | 97,007 | ¥ | 1,795 | 2 | |||||||||
Maintenance Leasing | 288,211 | 336,438 | 48,227 | 17 | ||||||||||||
Real Estate | 529,064 | 466,639 | (62,425 | ) | (12 | ) | ||||||||||
Investment and Operation | 615,151 | 451,197 | (163,954 | ) | (27 | ) | ||||||||||
Retail | 428,904 | 454,751 | 25,847 | 6 | ||||||||||||
Overseas Business | 490,730 | 486,328 | (4,402 | ) | (1 | ) | ||||||||||
Segment Total | 2,447,272 | 2,292,360 | (154,912 | ) | (6 | ) | ||||||||||
Difference between Segment Total and Consolidated Amounts | (12,408 | ) | (12,031 | ) | 377 | — | ||||||||||
Consolidated Amounts | ¥ | 2,434,864 | ¥ | 2,280,329 | ¥ | (154,535 | ) | (6 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 378,767 | ¥ | 428,036 | ¥ | 49,269 | 13 | |||||||||
Real Estate | 531,622 | 468,086 | (63,536 | ) | (12 | ) | ||||||||||
PE Investment and Concession | 467,042 | 296,365 | (170,677 | ) | (37 | ) | ||||||||||
Environment and Energy | 139,654 | 148,423 | 8,769 | 6 | ||||||||||||
Insurance | 350,954 | 371,387 | 20,433 | 6 | ||||||||||||
Banking and Credit | 78,904 | 84,355 | 5,451 | 7 | ||||||||||||
Aircraft and Ships | 71,062 | 64,650 | (6,412 | ) | (9 | ) | ||||||||||
ORIX USA | 122,064 | 135,709 | 13,645 | 11 | ||||||||||||
ORIX Europe | 169,889 | 148,524 | (21,365 | ) | (13 | ) | ||||||||||
Asia and Australia | 128,101 | 137,797 | 9,696 | 8 | ||||||||||||
Segment Total | 2,438,059 | 2,283,332 | (154,727 | ) | (6 | ) | ||||||||||
Difference between Segment Total and Consolidated Amounts | (3,195 | ) | (3,003 | ) | 192 | — | ||||||||||
Consolidated Amounts | ¥ | 2,434,864 | ¥ | 2,280,329 | ¥ | (154,535 | ) | (6 | ) | |||||||
73
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Profits: | ||||||||||||||||
Corporate Financial Services | ¥ | 25,482 | ¥ | 14,611 | ¥ | (10,871 | ) | (43 | ) | |||||||
Maintenance Leasing | 38,841 | 33,724 | (5,117 | ) | (13 | ) | ||||||||||
Real Estate | 89,247 | 76,857 | (12,390 | ) | (14 | ) | ||||||||||
Investment and Operation | 38,170 | 55,715 | 17,545 | 46 | ||||||||||||
Retail | 84,211 | 80,387 | (3,824 | ) | (5 | ) | ||||||||||
Overseas Business | 125,444 | 156,433 | 30,989 | 25 | ||||||||||||
Segment Total | 401,395 | 417,727 | 16,332 | 4 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | (5,665 | ) | (5,166 | ) | 499 | — | ||||||||||
Consolidated Amounts | ¥ | 395,730 | ¥ | 412,561 | ¥ | 16,831 | 4 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Assets: | ||||||||||||||||
Corporate Financial Services | ¥ | 959,725 | ¥ | 948,268 | ¥ | (11,457 | ) | (1 | ) | |||||||
Maintenance Leasing | 873,775 | 889,615 | 15,840 | 2 | ||||||||||||
Real Estate | 720,221 | 749,694 | 29,473 | 4 | ||||||||||||
Investment and Operation | 733,612 | 847,082 | 113,470 | 15 | ||||||||||||
Retail | 3,571,437 | 4,183,894 | 612,457 | 17 | ||||||||||||
Overseas Business | 3,138,928 | 3,287,445 | 148,517 | 5 | ||||||||||||
Segment Total | 9,997,698 | 10,905,998 | 908,300 | 9 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | 2,177,219 | 2,161,530 | (15,689 | ) | (1 | ) | ||||||||||
Consolidated Amounts | ¥ | 12,174,917 | ¥ | 13,067,528 | ¥ | 892,611 | 7 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Profits: | ||||||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 78,310 | ¥ | 62,978 | ¥ | (15,332 | ) | (20 | ) | |||||||
Real Estate | 93,748 | 80,182 | (13,566 | ) | (14 | ) | ||||||||||
PE Investment and Concession | 23,061 | 44,110 | 21,049 | 91 | ||||||||||||
Environment and Energy | 12,144 | 11,625 | (519 | ) | (4 | ) | ||||||||||
Insurance | 51,544 | 44,833 | (6,711 | ) | (13 | ) | ||||||||||
Banking and Credit | 36,434 | 39,096 | 2,662 | 7 | ||||||||||||
Aircraft and Ships | 36,422 | 45,287 | 8,865 | 24 | ||||||||||||
ORIX USA | 50,056 | 56,690 | 6,634 | 13 | ||||||||||||
ORIX Europe | 35,629 | 43,778 | 8,149 | 23 | ||||||||||||
Asia and Australia | 7,521 | 14,673 | 7,152 | 95 | ||||||||||||
Segment Total | 424,869 | 443,252 | 18,383 | 4 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | (29,139 | ) | (30,691 | ) | (1,552 | ) | — | |||||||||
Consolidated Amounts | ¥ | 395,730 | ¥ | 412,561 | ¥ | 16,831 | 4 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Assets: | ||||||||||||||||
Corporate Financial Services and Maintenance Leasing | ¥ | 1,841,791 | ¥ | 1,789,693 | ¥ | (52,098 | ) | (3 | ) | |||||||
Real Estate | 759,466 | 821,194 | 61,728 | 8 | ||||||||||||
PE Investment and Concession | 279,915 | 322,522 | 42,607 | 15 | ||||||||||||
Environment and Energy | 395,606 | 478,796 | 83,190 | 21 | ||||||||||||
Insurance | 1,254,471 | 1,580,158 | 325,687 | 26 | ||||||||||||
Banking and Credit | 2,316,738 | 2,603,736 | 286,998 | 12 | ||||||||||||
Aircraft and Ships | 646,284 | 585,304 | (60,980 | ) | (9 | ) | ||||||||||
ORIX USA | 1,152,891 | 1,374,027 | 221,136 | 19 | ||||||||||||
ORIX Europe | 343,080 | 317,847 | (25,233 | ) | (7 | ) | ||||||||||
Asia and Australia | 996,674 | 1,010,268 | 13,594 | 1 | ||||||||||||
Segment Total | 9,986,916 | 10,883,545 | 896,629 | 9 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | 2,188,001 | 2,183,983 | (4,018 | ) | (0 | ) | ||||||||||
Consolidated Amounts | ¥ | 12,174,917 | ¥ | 13,067,528 | ¥ | 892,611 | 7 | |||||||||
Corporate Financial Services Segmentand Maintenance Leasing
Segment revenues increased 2%13% to ¥97,007¥428,036 million compared to fiscal 2019 due to increases in operating leases revenues and finance leases revenues in our automobile-related business as a result of the previousadoption of the New Lease Standard.
Segment profits decreased 20% to ¥62,978 million compared to fiscal year2019 due to an increase in services incomethe cost of companies acquired in the previous fiscal year, an increase in revenues from financeoperating leases and other expenses as a result of ourthe adoption of the New Lease Standard and increasesmainly in both services income and sales of goods of Yayoi.
deferred amortization to expensing as they incurred in our automobile-related business and the acquisition of new investees in our corporate financial services business.
Despite there was an increase in investment in operating leases as a result of our adoption of the New Lease Standard, segment assets decreased 1%3% to ¥948,268¥1,789,693 million compared to the end of the previous fiscal year2019 due to decreases in netinstallment loans and investment in leases and installment loans.securities.
Asset efficiency declined compared to the previous fiscal year.2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 28,829 | ¥ | 28,522 | ¥ | (307 | ) | (1 | ) | |||||||
Gains on investment securities and dividends | (777 | ) | 121 | 898 | — | |||||||||||
Operating leases | 23,522 | 22,918 | (604 | ) | (3 | ) | ||||||||||
Sales of goods and real estate | 4,379 | 5,707 | 1,328 | 30 | ||||||||||||
Services income | 39,259 | 39,739 | 480 | 1 | ||||||||||||
Total Segment Revenues | 95,212 | 97,007 | 1,795 | 2 | ||||||||||||
Interest expense | 4,067 | 3,563 | (504 | ) | (12 | ) | ||||||||||
Costs of operating leases | 14,319 | 15,063 | 744 | 5 | ||||||||||||
Costs of goods and real estate sold | 1,655 | 2,056 | 401 | 24 | ||||||||||||
Services expense | 10,100 | 13,405 | 3,305 | 33 | ||||||||||||
Selling, general and administrative expenses | 37,896 | 44,817 | 6,921 | 18 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,106 | 1,126 | 20 | 2 | ||||||||||||
Other | (166 | ) | 3,690 | 3,856 | — | |||||||||||
Total Segment Expenses | 68,977 | 83,720 | 14,743 | 21 | ||||||||||||
Segment Operating Income | 26,235 | 13,287 | (12,948 | ) | (49 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | (753 | ) | 1,324 | 2,077 | — | |||||||||||
Segment Profits | ¥ | 25,482 | ¥ | 14,611 | ¥ | (10,871 | ) | (43 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 403,639 | ¥ | 0 | ¥ | (403,639 | ) | (100 | ) | |||||||
Net investment in leases | 0 | 367,117 | 367,117 | 100 | ||||||||||||
Installment loans | 364,818 | 343,090 | (21,728 | ) | (6 | ) | ||||||||||
Investment in operating leases | 24,143 | 73,382 | 49,239 | 204 | ||||||||||||
Investment in securities | 31,522 | 22,778 | (8,744 | ) | (28 | ) | ||||||||||
Property under facility operations | 16,973 | 18,928 | 1,955 | 12 | ||||||||||||
Inventories | 51 | 125 | 74 | 145 | ||||||||||||
Advances for finance lease and operating lease | 122 | 111 | (11 | ) | (9 | ) | ||||||||||
Investment in affiliates | 16,276 | 18,328 | 2,052 | 13 | ||||||||||||
Advances for property under facility operations | 0 | 760 | 760 | 100 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 102,181 | 103,649 | 1,468 | 1 | ||||||||||||
Total Segment Assets | ¥ | 959,725 | ¥ | 948,268 | ¥ | (11,457 | ) | (1 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 46,564 | ¥ | 61,402 | ¥ | 14,838 | 32 | |||||||||
Gains on investment securities and dividends | (744 | ) | 111 | 855 | — | |||||||||||
Operating leases | 213,403 | 243,977 | 30,574 | 14 | ||||||||||||
Sales of goods and real estate | 9,771 | 11,536 | 1,765 | 18 | ||||||||||||
Services income | 109,773 | 111,010 | 1,237 | 1 | ||||||||||||
Total Segment Revenues | 378,767 | 428,036 | 49,269 | 13 | ||||||||||||
Interest expense | 6,832 | 6,203 | (629 | ) | (9 | ) | ||||||||||
Costs of operating leases | 161,539 | 194,162 | 32,623 | 20 | ||||||||||||
Costs of goods and real estate sold | 6,115 | 6,814 | 699 | 11 | ||||||||||||
Services expense | 47,977 | 53,020 | 5,043 | 11 | ||||||||||||
Selling, general and administrative expenses | 76,282 | 87,333 | 11,051 | 14 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,760 | 1,189 | (571 | ) | (32 | ) | ||||||||||
Other | 271 | 17,648 | 17,377 | — | ||||||||||||
Total Segment Expenses | 300,776 | 366,369 | 65,593 | 22 | ||||||||||||
Segment Operating Income | 77,991 | 61,667 | (16,324 | ) | (21 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 319 | 1,311 | 992 | 311 | ||||||||||||
Segment Profits | ¥ | 78,310 | ¥ | 62,978 | ¥ | (15,332 | ) | (20 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 688,567 | ¥ | 0 | ¥ | (688,567 | ) | — | ||||||||
Net investment in leases | 0 | 648,627 | 648,627 | — | ||||||||||||
Installment loans | 412,363 | 379,541 | (32,822 | ) | (8 | ) | ||||||||||
Investment in operating leases | 546,563 | 572,492 | 25,929 | 5 | ||||||||||||
Investment in securities | 38,935 | 28,616 | (10,319 | ) | (27 | ) | ||||||||||
Property under facility operations | 17,974 | 19,992 | 2,018 | 11 | ||||||||||||
Inventories | 638 | 736 | 98 | 15 | ||||||||||||
Advances for finance lease and operating lease | 765 | 293 | (472 | ) | (62 | ) | ||||||||||
Investment in affiliates | 16,536 | 18,347 | 1,811 | 11 | ||||||||||||
Advances for property under facility operations | 0 | 760 | 760 | — | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 119,450 | 120,289 | 839 | 1 | ||||||||||||
Total Segment Assets | ¥ | 1,841,791 | ¥ | 1,789,693 | ¥ | (52,098 | ) | (3 | ) | |||||||
75
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 14,352 | ¥ | 30,820 | ¥ | 16,468 | 115 | |||||||||
Operating leases | 197,963 | 228,468 | 30,505 | 15 | ||||||||||||
Services income | 70,551 | 71,334 | 783 | 1 | ||||||||||||
Other | 5,345 | 5,816 | 471 | 9 | ||||||||||||
Total Segment Revenues | 288,211 | 336,438 | 48,227 | 17 | ||||||||||||
Interest expense | 3,026 | 2,837 | (189 | ) | (6 | ) | ||||||||||
Costs of operating leases | 154,410 | 186,174 | 31,764 | 21 | ||||||||||||
Services expense | 40,575 | 41,987 | 1,412 | 3 | ||||||||||||
Selling, general and administrative expenses | 46,514 | 51,963 | 5,449 | 12 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,048 | 360 | (688 | ) | (66 | ) | ||||||||||
Other | 4,891 | 19,379 | 14,488 | 296 | ||||||||||||
Total Segment Expenses | 250,464 | 302,700 | 52,236 | 21 | ||||||||||||
Segment Operating Income | 37,747 | 33,738 | (4,009 | ) | (11 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 1,094 | (14 | ) | (1,108 | ) | — | ||||||||||
Segment Profits | ¥ | 38,841 | ¥ | 33,724 | ¥ | (5,117 | ) | (13 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 328,424 | ¥ | 0 | ¥ | (328,424 | ) | (100 | ) | |||||||
Net investment in leases | 0 | 319,417 | 319,417 | 100 | ||||||||||||
Investment in operating leases | 525,392 | 551,289 | 25,897 | 5 | ||||||||||||
Investment in securities | 506 | 486 | (20 | ) | (4 | ) | ||||||||||
Property under facility operations | 988 | 1,064 | 76 | 8 | ||||||||||||
Inventories | 587 | 611 | 24 | 4 | ||||||||||||
Advances for finance lease and operating lease | 669 | 182 | (487 | ) | (73 | ) | ||||||||||
Investment in affiliates | 33 | 19 | (14 | ) | (42 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 17,176 | 16,547 | (629 | ) | (4 | ) | ||||||||||
Total Segment Assets | ¥ | 873,775 | ¥ | 889,615 | ¥ | 15,840 | 2 | |||||||||
Real Estate Segment
Segment revenues decreased 12% to ¥466,639¥468,086 million compared to the previous fiscal year2019 due to a decrease in services income, which is associated with a sale of a significant propertyproperties under facility operations during the previous fiscal year,2019, as well as a decrease in sales of real estate resulting from a decrease in condominium delivered by DAIKYO.
Although there was a recognition of gains on sales of shares of a subsidiary which operates senior housings, segment profits decreased 14% to ¥76,857¥80,182 million compared to the previous fiscal year2019 due to the above reasons.
Segment assets increased 4%8% to ¥749,694¥821,194 million compared to the end of the previous fiscal year2019 due to an increase in investment in operating leases resulting from the adoption of the New Lease Standard.
Asset efficiency declined compared to fiscal 2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 6,265 | ¥ | 6,723 | ¥ | 458 | 7 | |||||||||
Operating leases | 72,309 | 63,149 | (9,160 | ) | (13 | ) | ||||||||||
Sales of goods and real estate | 141,489 | 122,230 | (19,259 | ) | (14 | ) | ||||||||||
Services income | 311,590 | 276,123 | (35,467 | ) | (11 | ) | ||||||||||
Other | (31 | ) | (139 | ) | (108 | ) | — | |||||||||
Total Segment Revenues | 531,622 | 468,086 | (63,536 | ) | (12 | ) | ||||||||||
Interest expense | 2,633 | 1,849 | (784 | ) | (30 | ) | ||||||||||
Costs of operating leases | 27,676 | 26,654 | (1,022 | ) | (4 | ) | ||||||||||
Costs of goods and real estate sold | 121,414 | 108,637 | (12,777 | ) | (11 | ) | ||||||||||
Services expense | 262,749 | 239,096 | (23,653 | ) | (9 | ) | ||||||||||
Selling, general and administrative expenses | 38,367 | 38,590 | 223 | 1 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,662 | 545 | (1,117 | ) | (67 | ) | ||||||||||
Other | 723 | 1,267 | 544 | 75 | ||||||||||||
Total Segment Expenses | 455,224 | 416,638 | (38,586 | ) | (8 | ) | ||||||||||
Segment Operating Income | 76,398 | 51,448 | (24,950 | ) | (33 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 17,350 | 28,734 | 11,384 | 66 | ||||||||||||
Segment Profits | ¥ | 93,748 | ¥ | 80,182 | ¥ | (13,566 | ) | (14 | ) | |||||||
76
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 78,739 | ¥ | 0 | ¥ | (78,739 | ) | — | ||||||||
Net investment in leases | 0 | 73,279 | 73,279 | — | ||||||||||||
Installment loans | 316 | 0 | (316 | ) | — | |||||||||||
Investment in operating leases | 241,981 | 319,550 | 77,569 | 32 | ||||||||||||
Investment in securities | 8,039 | 7,274 | (765 | ) | (10 | ) | ||||||||||
Property under facility operations | 141,949 | 140,416 | (1,533 | ) | (1 | ) | ||||||||||
Inventories | 80,920 | 82,762 | 1,842 | 2 | ||||||||||||
Advances for finance lease and operating lease | 29,973 | 37,272 | 7,299 | 24 | ||||||||||||
Investment in affiliates | 107,072 | 91,835 | (15,237 | ) | (14 | ) | ||||||||||
Advances for property under facility operations | 6,790 | 7,327 | 537 | 8 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 63,687 | 61,479 | (2,208 | ) | (3 | ) | ||||||||||
Total Segment Assets | ¥ | 759,466 | ¥ | 821,194 | ¥ | 61,728 | 8 | |||||||||
PE Investment and Concession
Segment revenues decreased 37% to ¥296,365 million compared to fiscal 2019 primarily due to a decrease in sales of goods by an investee in our private equity business.
Segment profits increased 91% to ¥44,110 million compared to fiscal 2019 due to the recognition of gains on sales of investees in our private equity business.
Segment assets increased 15% to ¥322,522 million compared to the previousend of fiscal year.2019. This was primarily due to increases in property under facility operations and inventories resulting from the acquisition of a subsidiary, and an increase in investment in operating leases from an investee in our private equity business. In addition, there was an increase in investment in affiliates in our concession business.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 2,065 | ¥ | 3,249 | ¥ | 1,184 | 57 | |||||||||
Operating leases | 72,483 | 63,799 | (8,684 | ) | (12 | ) | ||||||||||
Sales of goods and real estate | 141,489 | 122,230 | (19,259 | ) | (14 | ) | ||||||||||
Services income | 313,059 | 277,501 | (35,558 | ) | (11 | ) | ||||||||||
Other | (32 | ) | (140 | ) | (108 | ) | — | |||||||||
Total Segment Revenues | 529,064 | 466,639 | (62,425 | ) | (12 | ) | ||||||||||
Interest expense | 2,249 | 1,557 | (692 | ) | (31 | ) | ||||||||||
Costs of operating leases | 25,950 | 24,895 | (1,055 | ) | (4 | ) | ||||||||||
Costs of goods and real estate sold | 121,414 | 108,637 | (12,777 | ) | (11 | ) | ||||||||||
Services expense | 261,064 | 237,973 | (23,091 | ) | (9 | ) | ||||||||||
Selling, general and administrative expenses | 43,982 | 44,344 | 362 | 1 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,576 | 317 | (1,259 | ) | (80 | ) | ||||||||||
Other | 753 | 606 | (147 | ) | (20 | ) | ||||||||||
Total Segment Expenses | 456,988 | 418,329 | (38,659 | ) | (8 | ) | ||||||||||
Segment Operating Income | 72,076 | 48,310 | (23,766 | ) | (33 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 17,171 | 28,547 | 11,376 | 66 | ||||||||||||
Segment Profits | ¥ | 89,247 | ¥ | 76,857 | ¥ | (12,390 | ) | (14 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 35,420 | ¥ | 0 | ¥ | (35,420 | ) | (100 | ) | |||||||
Net investment in leases | 0 | 35,523 | 35,523 | 100 | ||||||||||||
Installment loans | 316 | 0 | (316 | ) | (100 | ) | ||||||||||
Investment in operating leases | 242,022 | 277,587 | 35,565 | 15 | ||||||||||||
Investment in securities | 8,038 | 7,272 | (766 | ) | (10 | ) | ||||||||||
Property under facility operations | 146,100 | 148,724 | 2,624 | 2 | ||||||||||||
Inventories | 80,920 | 82,762 | 1,842 | 2 | ||||||||||||
Advances for finance lease and operating lease | 29,946 | 37,272 | 7,326 | 24 | ||||||||||||
Investment in affiliates | 107,072 | 91,835 | (15,237 | ) | (14 | ) | ||||||||||
Advances for property under facility operations | 6,790 | 7,327 | 537 | 8 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 63,597 | 61,392 | (2,205 | ) | (3 | ) | ||||||||||
Total Segment Assets | ¥ | 720,221 | ¥ | 749,694 | ¥ | 29,473 | 4 | |||||||||
77
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 116 | ¥ | 124 | ¥ | 8 | 7 | |||||||||
Gains on investment securities and dividends | 850 | 585 | (265 | ) | (31 | ) | ||||||||||
Sales of goods and real estate | 429,447 | 261,475 | (167,972 | ) | (39 | ) | ||||||||||
Services income | 36,629 | 32,465 | (4,164 | ) | (11 | ) | ||||||||||
Other | 0 | 1,716 | 1,716 | — | ||||||||||||
Total Segment Revenues | 467,042 | 296,365 | (170,677 | ) | (37 | ) | ||||||||||
Interest expense | 1,235 | 1,187 | (48 | ) | (4 | ) | ||||||||||
Costs of goods and real estate sold | 395,502 | 229,905 | (165,597 | ) | (42 | ) | ||||||||||
Services expense | 25,183 | 22,021 | (3,162 | ) | (13 | ) | ||||||||||
Selling, general and administrative expenses | 35,543 | 33,517 | (2,026 | ) | (6 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 154 | 98 | (56 | ) | (36 | ) | ||||||||||
Other | (163 | ) | 802 | 965 | — | |||||||||||
Total Segment Expenses | 457,454 | 287,530 | (169,924 | ) | (37 | ) | ||||||||||
Segment Operating Income | 9,588 | 8,835 | (753 | ) | (8 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 13,473 | 35,275 | 21,802 | 162 | ||||||||||||
Segment Profits | ¥ | 23,061 | ¥ | 44,110 | ¥ | 21,049 | 91 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 163 | ¥ | 0 | ¥ | (163 | ) | — | ||||||||
Net investment in leases | 0 | 141 | 141 | — | ||||||||||||
Installment loans | 23 | 0 | (23 | ) | — | |||||||||||
Investment in operating leases | 0 | 9,367 | 9,367 | — | ||||||||||||
Investment in securities | 17,798 | 17,916 | 118 | 1 | ||||||||||||
Property under facility operations | 25,568 | 43,735 | 18,167 | 71 | ||||||||||||
Inventories | 30,217 | 40,263 | 10,046 | 33 | ||||||||||||
Investment in affiliates | 59,913 | 68,603 | 8,690 | 15 | ||||||||||||
Advances for property under facility operations | 244 | 245 | 1 | 0 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 145,989 | 142,252 | (3,737 | ) | (3 | ) | ||||||||||
Total Segment Assets | ¥ | 279,915 | ¥ | 322,522 | ¥ | 42,607 | 15 | |||||||||
Environment and energy, private equity, and concession.Energy
Segment revenues decreased 27%increased 6% to ¥451,197¥148,423 million compared to the previous fiscal year2019 due to an increase in services income.
Segment profits decreased 4% to ¥11,625 million compared to fiscal 2019 due to a decrease in salesequity in net income of goods by a subsidiary in the private equity business.affiliates, and others.
78
Segment assets increased 15%21% to ¥847,082¥478,796 million compared to the end of the previous fiscal year2019 due to an increase in property under facility operations resulted from the acquisition of wind power generation companies as wholly-owned subsidiaries in the environment and energy business, the execution of new investments in the private equity business, and the adoption of the New Lease Standard.
Asset efficiency improveddeclined compared to the previous fiscal year.2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 9,063 | ¥ | 7,618 | ¥ | (1,445 | ) | (16 | ) | |||||||
Gains on investment securities and dividends | 78 | (31 | ) | (109 | ) | — | ||||||||||
Sales of goods and real estate | 436,044 | 266,271 | (169,773 | ) | (39 | ) | ||||||||||
Services income | 169,139 | 174,549 | 5,410 | 3 | ||||||||||||
Other | 827 | 2,790 | 1,963 | 237 | ||||||||||||
Total Segment Revenues | 615,151 | 451,197 | (163,954 | ) | (27 | ) | ||||||||||
Interest expense | 7,054 | 9,061 | 2,007 | 28 | ||||||||||||
Costs of goods and real estate sold | 400,625 | 233,092 | (167,533 | ) | (42 | ) | ||||||||||
Services expense | 131,688 | 133,324 | 1,636 | 1 | ||||||||||||
Selling, general and administrative expenses | 51,862 | 51,227 | (635 | ) | (1 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 8 | 2,111 | 2,103 | — | ||||||||||||
Other | 413 | 953 | 540 | 131 | ||||||||||||
Total Segment Expenses | 591,650 | 429,768 | (161,882 | ) | (27 | ) | ||||||||||
Segment Operating Income | 23,501 | 21,429 | (2,072 | ) | (9 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 14,669 | 34,286 | 19,617 | 134 | ||||||||||||
Segment Profits | ¥ | 38,170 | ¥ | 55,715 | ¥ | 17,545 | 46 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 25,696 | ¥ | 0 | ¥ | (25,696 | ) | (100 | ) | |||||||
Net investment in leases | 0 | 25,497 | 25,497 | 100 | ||||||||||||
Installment loans | 47,573 | 36,451 | (11,122 | ) | (23 | ) | ||||||||||
Investment in operating leases | 5,474 | 15,104 | 9,630 | 176 | ||||||||||||
Investment in securities | 25,786 | 23,460 | (2,326 | ) | (9 | ) | ||||||||||
Property under facility operations | 264,994 | 382,430 | 117,436 | 44 | ||||||||||||
Inventories | 30,776 | 40,657 | 9,881 | 32 | ||||||||||||
Advances for finance lease and operating lease | 1,340 | 1,861 | 521 | 39 | ||||||||||||
Investment in affiliates | 161,966 | 150,856 | (11,110 | ) | (7 | ) | ||||||||||
Advances for property under facility operations | 11,291 | 12,474 | 1,183 | 10 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 158,716 | 158,292 | (424 | ) | (0 | ) | ||||||||||
Total Segment Assets | ¥ | 733,612 | ¥ | 847,082 | ¥ | 113,470 | 15 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 1,362 | ¥ | 1,959 | ¥ | 597 | 44 | |||||||||
Services income | 132,108 | 141,714 | 9,606 | 7 | ||||||||||||
Other | 6,184 | 4,750 | (1,434 | ) | (23 | ) | ||||||||||
Total Segment Revenues | 139,654 | 148,423 | 8,769 | 6 | ||||||||||||
Interest expense | 5,651 | 7,732 | 2,081 | 37 | ||||||||||||
Services expense | 106,264 | 111,143 | 4,879 | 5 | ||||||||||||
Selling, general and administrative expenses | 11,172 | 11,807 | 635 | 6 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 162 | 2,081 | 1,919 | — | ||||||||||||
Other | 5,460 | 3,047 | (2,413 | ) | (44 | ) | ||||||||||
Total Segment Expenses | 128,709 | 135,810 | 7,101 | 6 | ||||||||||||
Segment Operating Income | 10,945 | 12,613 | 1,668 | 15 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 1,199 | (988 | ) | (2,187 | ) | — | ||||||||||
Segment Profits | ¥ | 12,144 | ¥ | 11,625 | ¥ | (519 | ) | (4 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 25,533 | ¥ | 0 | ¥ | (25,533 | ) | — | ||||||||
Net investment in leases | 0 | 25,355 | 25,355 | — | ||||||||||||
Installment loans | 5 | 0 | (5 | ) | — | |||||||||||
Investment in operating leases | 2,030 | 1,958 | (72 | ) | (4 | ) | ||||||||||
Investment in securities | 1,080 | 191 | (889 | ) | (82 | ) | ||||||||||
Property under facility operations | 239,413 | 338,695 | 99,282 | 41 | ||||||||||||
Inventories | 559 | 394 | (165 | ) | (30 | ) | ||||||||||
Advances for finance lease and operating lease | 1,340 | 1,861 | 521 | 39 | ||||||||||||
Investment in affiliates | 102,053 | 82,253 | (19,800 | ) | (19 | ) | ||||||||||
Advances for property under facility operations | 11,047 | 12,229 | 1,182 | 11 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 12,546 | 15,860 | 3,314 | 26 | ||||||||||||
Total Segment Assets | ¥ | 395,606 | ¥ | 478,796 | ¥ | 83,190 | 21 | |||||||||
Segment revenues increased 6% to ¥454,751¥371,387 million compared to the previous fiscal year2019 due to an increase in life insurance premiums in line with an increase in new insurance contracts, and an increase in the interest revenue from real estate investment loans in the banking business.contracts.
79
Segment profits decreased 5%13% to ¥80,387¥44,833 million compared to the previous fiscal year2019 due to an increase in life insurance costs, such as policy liability reserves and insurance payment, which are related to the increase in new insurance contracts, as well as a decrease in investment return, of our life insurance business, which is associated with significant gains recognized on a sale of real estate property during the previous fiscal year.2019.
Segment assets increased 17%26% to ¥4,183,894¥1,580,158 million compared to the end of the previous fiscal year2019 due to increases in investment in securities with the growth of the life insurance business and installment loans with the growth of the banking business.
Asset efficiency declined compared to the previous fiscal year.2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 76,693 | ¥ | 81,089 | ¥ | 4,396 | 6 | |||||||||
Life insurance premiums and related investment income | 348,255 | 369,154 | 20,899 | 6 | ||||||||||||
Other | 3,956 | 4,508 | 552 | 14 | ||||||||||||
Total Segment Revenues | 428,904 | 454,751 | 25,847 | 6 | ||||||||||||
Interest expense | 4,080 | 4,489 | 409 | 10 | ||||||||||||
Life insurance costs | 247,809 | 271,943 | 24,134 | 10 | ||||||||||||
Selling, general and administrative expenses | 78,655 | 81,396 | 2,741 | 3 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 11,541 | 11,971 | 430 | 4 | ||||||||||||
Other | 2,591 | 4,581 | 1,990 | 77 | ||||||||||||
Total Segment Expenses | 344,676 | 374,380 | 29,704 | 9 | ||||||||||||
Segment Operating Income | 84,228 | 80,371 | (3,857 | ) | (5 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | (17 | ) | 16 | 33 | — | |||||||||||
Segment Profits | ¥ | 84,211 | ¥ | 80,387 | ¥ | (3,824 | ) | (5 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 42 | ¥ | 0 | ¥ | (42 | ) | (100 | ) | |||||||
Installment loans | 2,049,980 | 2,336,067 | 286,087 | 14 | ||||||||||||
Investment in operating leases | 29,810 | 29,271 | (539 | ) | (2 | ) | ||||||||||
Investment in securities | 1,474,750 | 1,801,260 | 326,510 | 22 | ||||||||||||
Investment in affiliates | 631 | 400 | (231 | ) | (37 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 16,224 | 16,896 | 672 | 4 | ||||||||||||
Total Segment Assets | ¥ | 3,571,437 | ¥ | 4,183,894 | ¥ | 612,457 | 17 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 221 | ¥ | 220 | ¥ | (1 | ) | (0 | ) | |||||||
Life insurance premiums and related investment income | 349,207 | 370,144 | 20,937 | 6 | ||||||||||||
Other | 1,526 | 1,023 | (503 | ) | (33 | ) | ||||||||||
Total Segment Revenues | 350,954 | 371,387 | 20,433 | 6 | ||||||||||||
Interest expense | 1 | 1 | 0 | — | ||||||||||||
Life insurance costs | 247,809 | 271,943 | 24,134 | 10 | ||||||||||||
Selling, general and administrative expenses | 51,985 | 54,216 | 2,231 | 4 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 29 | 0 | (29 | ) | — | |||||||||||
Other | (414 | ) | 408 | 822 | — | |||||||||||
Total Segment Expenses | 299,410 | 326,568 | 27,158 | 9 | ||||||||||||
Segment Operating Income | 51,544 | 44,819 | (6,725 | ) | (13 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 0 | 14 | 14 | — | ||||||||||||
Segment Profits | ¥ | 51,544 | ¥ | 44,833 | ¥ | (6,711 | ) | (13 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 42 | ¥ | 0 | ¥ | (42 | ) | — | ||||||||
Installment loans | 11,778 | 17,720 | 5,942 | 50 | ||||||||||||
Investment in operating leases | 29,810 | 29,271 | (539 | ) | (2 | ) | ||||||||||
Investment in securities | 1,208,389 | 1,528,042 | 319,653 | 26 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 4,452 | 5,125 | 673 | 15 | ||||||||||||
Total Segment Assets | ¥ | 1,254,471 | ¥ | 1,580,158 | ¥ | 325,687 | 26 | |||||||||
Asset efficiency declined compared to fiscal 2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 76,473 | ¥ | 80,868 | ¥ | 4,395 | 6 | |||||||||
Other | 2,431 | 3,487 | 1,056 | 43 | ||||||||||||
Total Segment Revenues | 78,904 | 84,355 | 5,451 | 7 | ||||||||||||
Interest expense | 4,078 | 4,488 | 410 | 10 | ||||||||||||
Selling, general and administrative expenses | 22,924 | 23,639 | 715 | 3 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 11,512 | 11,971 | 459 | 4 | ||||||||||||
Other | 3,959 | 5,164 | 1,205 | 30 | ||||||||||||
Total Segment Expenses | 42,473 | 45,262 | 2,789 | 7 | ||||||||||||
Segment Operating Income | 36,431 | 39,093 | 2,662 | 7 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 3 | 3 | 0 | — | ||||||||||||
Segment Profits | ¥ | 36,434 | ¥ | 39,096 | ¥ | 2,662 | 7 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans | ¥ | 2,038,202 | ¥ | 2,318,347 | ¥ | 280,145 | 14 | |||||||||
Investment in securities | 266,361 | 273,218 | 6,857 | 3 | ||||||||||||
Investment in affiliates | 404 | 400 | (4 | ) | (1 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 11,771 | 11,771 | 0 | — | ||||||||||||
Total Segment Assets | ¥ | 2,316,738 | ¥ | 2,603,736 | ¥ | 286,998 | 12 | |||||||||
Aircraft and Ships
Segment revenues decreased 9% to ¥64,650 million compared to fiscal 2019. This was primarily due to a decrease in operating leases revenues resulting from decreases in both the number of aircraft owned and the number of aircraft sold, and a decrease in fee income resulting from the decrease in the number of aircraft sold to investors in our aircraft leasing business, despite an increase in operating leases revenues resulting from an increase in the number of ships delivered in the ship-related business.
Segment profits increased 25%24% to ¥156,433¥45,287 million compared to the previous fiscal year2019 due to an increase in equity in net income of affiliates from Avolon, Holdings Limited, a leading global aircraft leasing company located in Ireland whose shares were acquired in fiscal 2019.
Segment assets decreased 9% to ¥585,304 million compared to the previousend of fiscal year,2019. This is primarily due to a decrease in investment in operating leases resulting from the decrease in the number of aircraft owned.
81
Asset efficiency increased compared to fiscal 2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 3,095 | ¥ | 2,478 | ¥ | (617 | ) | (20 | ) | |||||||
Operating leases | 52,625 | 49,271 | (3,354 | ) | (6 | ) | ||||||||||
Services income | 12,406 | 10,216 | (2,190 | ) | (18 | ) | ||||||||||
Other | 2,936 | 2,685 | (251 | ) | (9 | ) | ||||||||||
Total Segment Revenues | 71,062 | 64,650 | (6,412 | ) | (9 | ) | ||||||||||
Interest expense | 13,848 | 18,402 | 4,554 | 33 | ||||||||||||
Costs of operating leases | 13,511 | 15,070 | 1,559 | 12 | ||||||||||||
Services expense | 4,178 | 4,379 | 201 | 5 | ||||||||||||
Selling, general and administrative expenses | 10,246 | 9,399 | (847 | ) | (8 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 323 | 0 | (323 | ) | — | |||||||||||
Other | 3,261 | 789 | (2,472 | ) | (76 | ) | ||||||||||
Total Segment Expenses | 45,367 | 48,039 | 2,672 | 6 | ||||||||||||
Segment Operating Income | 25,695 | 16,611 | (9,084 | ) | (35 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 10,727 | 28,676 | 17,949 | 167 | ||||||||||||
Segment Profits | ¥ | 36,422 | ¥ | 45,287 | ¥ | 8,865 | 24 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | (1 | ) | ¥ | 0 | ¥ | 1 | — | ||||||||
Net investment in leases | 0 | 1,839 | 1,839 | — | ||||||||||||
Installment loans | 33,868 | 24,088 | (9,780 | ) | (29 | ) | ||||||||||
Investment in operating leases | 295,982 | 253,717 | (42,265 | ) | (14 | ) | ||||||||||
Investment in securities | 134 | 0 | (134 | ) | — | |||||||||||
Inventories | 558 | 0 | (558 | ) | — | |||||||||||
Advances for finance lease and operating lease | 7,625 | 4,990 | (2,635 | ) | (35 | ) | ||||||||||
Investment in affiliates | 285,896 | 284,453 | (1,443 | ) | (1 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 22,222 | 16,217 | (6,005 | ) | (27 | ) | ||||||||||
Total Segment Assets | ¥ | 646,284 | ¥ | 585,304 | ¥ | (60,980 | ) | (9 | ) | |||||||
ORIX USA
Segment revenues increased 11% to ¥135,709 million compared to fiscal 2019. This is primary due to an increase in finance revenues derived from NXT Capital Group, LLC (hereinafter, “NXT Capital”) acquired in the fiscal 2019 and Hunt Real Estate Capital (hereinafter, “HREC”) acquired in this fiscal 2020.
Segment profits increased 13% to ¥56,690 million compared to fiscal 2019 due to an increase in gains on sales of shares of subsidiaries and affiliates and a decrease in the United States, as well as gains recognized on a sale of a portion of the businesses of ORIX Europe.other expenses.
Segment assets increased 5%19% to ¥3,287,445¥1,374,027 million compared to the end of fiscal 2019 due to an increase in installment loans in NXT Capital and HREC.
82
Asset efficiency declined compared to fiscal 2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 65,366 | ¥ | 79,973 | ¥ | 14,607 | 22 | |||||||||
Gains on investment securities and dividends | 16,013 | 15,956 | (57 | ) | (0 | ) | ||||||||||
Services income | 33,895 | 37,116 | 3,221 | 10 | ||||||||||||
Other | 6,790 | 2,664 | (4,126 | ) | (61 | ) | ||||||||||
Total Segment Revenues | 122,064 | 135,709 | 13,645 | 11 | ||||||||||||
Interest expense | 22,921 | 25,143 | 2,222 | 10 | ||||||||||||
Services expense | 6,156 | 3,235 | (2,921 | ) | (47 | ) | ||||||||||
Selling, general and administrative expenses | 55,425 | 66,931 | 11,506 | 21 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 5,761 | 8,251 | 2,490 | 43 | ||||||||||||
Other | 2,773 | (219 | ) | (2,992 | ) | — | ||||||||||
Total Segment Expenses | 93,036 | 103,341 | 10,305 | 11 | ||||||||||||
Segment Operating Income | 29,028 | 32,368 | 3,340 | 12 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 21,028 | 24,322 | 3,294 | 16 | ||||||||||||
Segment Profits | ¥ | 50,056 | ¥ | 56,690 | ¥ | 6,634 | 13 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 1,631 | ¥ | 0 | ¥ | (1,631 | ) | — | ||||||||
Net investment in leases | 0 | 1,172 | 1,172 | — | ||||||||||||
Installment loans | 594,264 | 778,249 | 183,985 | 31 | ||||||||||||
Investment in operating leases | 13,022 | 9,148 | (3,874 | ) | (30 | ) | ||||||||||
Investment in securities | 305,294 | 320,217 | 14,923 | 5 | ||||||||||||
Property under facility operations and servicing assets | 40,539 | 66,416 | 25,877 | 64 | ||||||||||||
Inventories | 2,487 | 1,442 | (1,045 | ) | (42 | ) | ||||||||||
Advances for finance lease and operating lease | 513 | 1,259 | 746 | 145 | ||||||||||||
Investment in affiliates | 69,750 | 52,361 | (17,389 | ) | (25 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 125,391 | 143,763 | 18,372 | 15 | ||||||||||||
Total Segment Assets | ¥ | 1,152,891 | ¥ | 1,374,027 | ¥ | 221,136 | 19 | |||||||||
ORIX Europe
Segment revenues decreased 13% to ¥148,524 million compared to fiscal 2019 due to a decrease in services income, which is associated with a decrease in the previousamount of assets under management, and a decrease in gains on investment securities and dividends due to the pervasive price decline in the equity market during the fourth quarter ended March 31, 2020.
Segment profits increased 23% to ¥43,778 million compared to fiscal year2019 due to the recognition of a gain of the sale of a portion of a business of Robeco, as well as a decrease in selling, general and administrative expenses.
83
Segment assets decreased 7% to ¥317,847 million compared to the end of fiscal 2019 due to the effect of changes in foreign exchange rates, as well as a decrease in goodwill, intangible assets acquired in business combinations due to the sale of a portion of a business of Robeco.
Asset efficiency increased compared to fiscal 2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 688 | ¥ | 559 | ¥ | (129 | ) | (19 | ) | |||||||
Gains on investment securities and dividends | 1,636 | (2,079 | ) | (3,715 | ) | — | ||||||||||
Services income | 167,565 | 150,044 | (17,521 | ) | (10 | ) | ||||||||||
Total Segment Revenues | 169,889 | 148,524 | (21,365 | ) | (13 | ) | ||||||||||
Interest expense | 2,046 | 1,136 | (910 | ) | (44 | ) | ||||||||||
Services expense | 41,694 | 35,624 | (6,070 | ) | (15 | ) | ||||||||||
Selling, general and administrative expenses | 87,845 | 81,383 | (6,462 | ) | (7 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | (93 | ) | (17 | ) | 76 | — | ||||||||||
Other | 2,380 | (62 | ) | (2,442 | ) | — | ||||||||||
Total Segment Expenses | 133,872 | 118,064 | (15,808 | ) | (12 | ) | ||||||||||
Segment Operating Income | 36,017 | 30,460 | (5,557 | ) | (15 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | (388 | ) | 13,318 | 13,706 | — | |||||||||||
Segment Profits | ¥ | 35,629 | ¥ | 43,778 | ¥ | 8,149 | 23 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities | ¥ | 43,661 | ¥ | 38,057 | ¥ | (5,604 | ) | (13 | ) | |||||||
Investment in affiliates | 1,636 | 1,495 | (141 | ) | (9 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 297,783 | 278,295 | (19,488 | ) | (7 | ) | ||||||||||
Total Segment Assets | ¥ | 343,080 | ¥ | 317,847 | ¥ | (25,233 | ) | (7 | ) | |||||||
Asia and Australia
Segment revenues increased 8% to ¥137,797 million compared to fiscal 2019 primarily due to gains on investment securities of an investee.
Despite an increase in provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities, segment profits increased 95% to ¥14,673 million compared to fiscal 2019 primarily due to an increase in equity in net income of affiliate of a subsidiary.
Segment assets increased 1% to ¥1,010,268 million compared to the end of fiscal 2019 due to an increase in investment in installment loans and investment in the United States by NXT Capital and HREC.affiliates.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 111,634 | ¥ | 126,352 | ¥ | 14,718 | 13 | |||||||||
Gains on investment securities and dividends | 16,565 | 22,854 | 6,289 | 38 | ||||||||||||
Operating leases | 121,913 | 116,309 | (5,604 | ) | (5 | ) | ||||||||||
Services income | 233,110 | 215,698 | (17,412 | ) | (7 | ) | ||||||||||
Other | 7,508 | 5,115 | (2,393 | ) | (32 | ) | ||||||||||
Total Segment Revenues | 490,730 | 486,328 | (4,402 | ) | (1 | ) | ||||||||||
Interest expense | 62,821 | 68,010 | 5,189 | 8 | ||||||||||||
Costs of operating leases | 62,529 | 65,152 | 2,623 | 4 | ||||||||||||
Services expense | 66,543 | 56,202 | (10,341 | ) | (16 | ) | ||||||||||
Selling, general and administrative expenses | 183,657 | 188,653 | 4,996 | 3 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 10,903 | 23,551 | 12,648 | 116 | ||||||||||||
Other | 8,610 | 1,775 | (6,835 | ) | (79 | ) | ||||||||||
Total Segment Expenses | 395,063 | 403,343 | 8,280 | 2 | ||||||||||||
Segment Operating Income | 95,667 | 82,985 | (12,682 | ) | (13 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 29,777 | 73,448 | 43,671 | 147 | ||||||||||||
Segment Profits | ¥ | 125,444 | ¥ | 156,433 | ¥ | 30,989 | 25 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 362,391 | ¥ | 0 | ¥ | (362,391 | ) | (100 | ) | |||||||
Net investment in leases | 0 | 333,356 | 333,356 | 100 | ||||||||||||
Installment loans | 814,847 | 1,024,801 | 209,954 | 26 | ||||||||||||
Investment in operating leases | 509,117 | 458,525 | (50,592 | ) | (10 | ) | ||||||||||
Investment in securities | 385,339 | 387,523 | 2,184 | 1 | ||||||||||||
Property under facility operations and servicing assets | 44,149 | 69,016 | 24,867 | 56 | ||||||||||||
Inventories | 3,161 | 1,684 | (1,477 | ) | (47 | ) | ||||||||||
Advances for finance lease and operating lease | 10,932 | 7,991 | (2,941 | ) | (27 | ) | ||||||||||
Investment in affiliates | 556,682 | 560,162 | 3,480 | 1 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 452,310 | 444,387 | (7,923 | ) | (2 | ) | ||||||||||
Total Segment Assets | ¥ | 3,138,928 | ¥ | 3,287,445 | ¥ | 148,517 | 5 | |||||||||
Asset efficiency increased compared to fiscal 2019.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 42,871 | ¥ | 43,694 | ¥ | 823 | 2 | |||||||||
Gains on investment securities and dividends | (1,216 | ) | 8,971 | 10,187 | — | |||||||||||
Operating leases | 67,080 | 66,322 | (758 | ) | (1 | ) | ||||||||||
Services income | 19,244 | 18,323 | (921 | ) | (5 | ) | ||||||||||
Other | 122 | 487 | 365 | 299 | ||||||||||||
Total Segment Revenues | 128,101 | 137,797 | 9,696 | 8 | ||||||||||||
Interest expense | 24,007 | 23,329 | (678 | ) | (3 | ) | ||||||||||
Costs of operating leases | 48,513 | 49,529 | 1,016 | 2 | ||||||||||||
Services expense | 14,620 | 13,082 | (1,538 | ) | (11 | ) | ||||||||||
Selling, general and administrative expenses | 26,240 | 27,012 | 772 | 3 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 4,913 | 15,318 | 10,405 | 212 | ||||||||||||
Other | 698 | 1,986 | 1,288 | 185 | ||||||||||||
Total Segment Expenses | 118,991 | 130,256 | 11,265 | 9 | ||||||||||||
Segment Operating Income | 9,110 | 7,541 | (1,569 | ) | (17 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | (1,589 | ) | 7,132 | 8,721 | — | |||||||||||
Segment Profits | ¥ | 7,521 | ¥ | 14,673 | ¥ | 7,152 | 95 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 360,761 | ¥ | 0 | ¥ | (360,761 | ) | — | ||||||||
Net investment in leases | 0 | 330,346 | 330,346 | — | ||||||||||||
Installment loans | 186,715 | 222,465 | 35,750 | 19 | ||||||||||||
Investment in operating leases | 200,114 | 195,660 | (4,454 | ) | (2 | ) | ||||||||||
Investment in securities | 36,252 | 29,248 | (7,004 | ) | (19 | ) | ||||||||||
Property under facility operations | 3,609 | 2,600 | (1,009 | ) | (28 | ) | ||||||||||
Inventories | 116 | 242 | 126 | 109 | ||||||||||||
Advances for finance lease and operating lease | 2,794 | 1,742 | (1,052 | ) | (38 | ) | ||||||||||
Investment in affiliates | 199,400 | 221,853 | 22,453 | 11 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 6,913 | 6,112 | (801 | ) | (12 | ) | ||||||||||
Total Segment Assets | ¥ | 996,674 | ¥ | 1,010,268 | ¥ | 13,594 | 1 | |||||||||
85
Revenues, New Business Volumes and Investments
Finance revenues
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues: | ||||||||||||||||
Finance revenues | ¥ | 242,893 | ¥ | 276,864 | ¥ | 33,971 | 14 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues: | ||||||||||||||||
Finance revenues | ¥ | 242,893 | ¥ | 276,864 | ¥ | 33,971 | 14 | |||||||||
| Note: | New Lease Standard has been adopted since April 1, 2019. Certain lessor costs of finance lease, such as property taxes and insurance costs, previously had been deducted from “Finance revenues”, have changed to be included in “Other (income) and expense.” |
Finance revenues increased 14% to ¥276,864 million for fiscal 2020 compared to fiscal 2019 primarily due to an increase in the average balance of installment loans and the above mentioned change in presentation.
Net investment in leases
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases: | ||||||||||||||||
New equipment acquisitions | ¥ | 439,252 | ¥ | 444,841 | ¥ | 5,589 | 1 | |||||||||
Japan | 254,613 | 244,087 | (10,526 | ) | (4 | ) | ||||||||||
Overseas | 184,639 | 200,754 | 16,115 | 9 | ||||||||||||
Net investment in leases | 1,155,632 | 1,080,964 | (74,668 | ) | (6 | ) | ||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases: | ||||||||||||||||
New equipment acquisitions | ¥ | 439,252 | ¥ | 444,841 | ¥ | 5,589 | 1 | |||||||||
Japan | 254,613 | 244,087 | (10,526) | (4 | ) | |||||||||||
Overseas | 184,639 | 200,754 | 16,115 | 9 | ||||||||||||
Net investment in leases | 1,155,632 | 1,080,964 | (74,668) | (6 | ) | |||||||||||
| Note: | New Lease Standard has been adopted since April 1, 2019, and the amounts of investment in direct financing leases have been reclassified to net investment in leases. |
New equipment acquisitions related to net investment in leases increased 1% to ¥444,841 million compared to fiscal 2019. In Japan, new equipment acquisitions decreased 4% in fiscal 2020 compared to fiscal 2019 due to a decreasing trend in new acquisition including for auto leases. In overseas, new equipment acquisitions increased 9% in fiscal 2020 compared to fiscal 2019 due to increases in Asia.
Net investment in leases as of March 31, 2020 decreased 6% to ¥1,080,964 million compared to March 31, 2019 mainly due to decreases in assets in Japan.
As of March 31, 2020, no single lessee represented more than 1% of the balance of net investment in leases. As of March 31, 2020, 69% of our net investment in leases were to lessees in Japan, while 31% were to overseas lessees. 6% of our net investment in leases were to lessees in Malaysia. No other overseas country represented more than 5% of our total portfolio of net investment in leases.
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 495,605 | ¥ | 457,405 | ¥ | (38,200 | ) | (8 | ) | |||||||
Industrial equipment | 222,049 | 210,248 | (11,801 | ) | (5 | ) | ||||||||||
Electronics | 143,209 | 134,775 | (8,434 | ) | (6 | ) | ||||||||||
Information-related and office equipment | 101,504 | 104,218 | 2,714 | 3 | ||||||||||||
Commercial services equipment | 51,671 | 45,062 | (6,609 | ) | (13 | ) | ||||||||||
Other | 141,594 | 129,256 | (12,338 | ) | (9 | ) | ||||||||||
Total | ¥ | 1,155,632 | ¥ | 1,080,964 | ¥ | (74,668 | ) | (6 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Net investment in leases by category: | �� | |||||||||||||||
Transportation equipment | ¥ | 495,605 | ¥ | 457,405 | ¥ | (38,200 | ) | (8 | ) | |||||||
Industrial equipment | 222,049 | 210,248 | (11,801 | ) | (5 | ) | ||||||||||
Electronics | 143,209 | 134,775 | (8,434 | ) | (6 | ) | ||||||||||
Information-related and office equipment | 101,504 | 104,218 | 2,714 | 3 | ||||||||||||
Commercial services equipment | 51,671 | 45,062 | (6,609 | ) | (13 | ) | ||||||||||
Other | 141,594 | 129,256 | (12,338 | ) | (9 | ) | ||||||||||
Total | ¥ | 1,155,632 | ¥ | 1,080,964 | ¥ | (74,668 | ) | (6 | ) | |||||||
86
For further information, see Note 76 and 87 of “Item 18. Financial Statements.”
Installment loans
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
New loans added | ¥ | 1,462,009 | ¥ | 1,529,175 | ¥ | 67,166 | 5 | |||||||||
Japan | 1,047,720 | 1,134,586 | 86,866 | 8 | ||||||||||||
Overseas | 414,289 | 394,589 | (19,700 | ) | (5 | ) | ||||||||||
Installment loans | 3,277,670 | 3,740,486 | 462,816 | 14 | ||||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
New loans added | ¥ | 1,462,009 | ¥ | 1,529,175 | ¥ | 67,166 | 5 | |||||||||
Japan | 1,047,720 | 1,134,586 | 86,866 | 8 | ||||||||||||
Overseas | 414,289 | 394,589 | (19,700 | ) | (5 | ) | ||||||||||
Installment loans | 3,277,670 | 3,740,486 | 462,816 | 14 | ||||||||||||
| Note: | The balance of installment loans related to our life insurance operations is included in installment loans in our consolidated balance sheets; however, income and losses on these loans are recorded in life insurance premiums and related investment income in our consolidated statements of income. |
New loans added increased 5% to ¥1,529,175 million compared to fiscal 2019. In Japan, new loans added increased 8% to ¥1,134,586 million in fiscal 2020 compared to fiscal 2019 mainly due to an increase in real estate loans for consumer. In Overseas, new loans added decreased 5% to ¥394,589 million compared to fiscal 2019 mainly due to decreased lending activity in Asia.
The balance of installment loans as of March 31, 2020 increased 14% to ¥3,740,486 million compared to March 31, 2019, mainly due to an increase of real estate loans in banking business and an increase in investment in installment loans in the United States by NXT Capital and HREC.
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
Consumer borrowers in Japan | ||||||||||||||||
Real estate loans | ¥ | 1,560,832 | ¥ | 1,842,131 | ¥ | 281,299 | 18 | |||||||||
Card loans | 245,139 | 223,651 | (21,488 | ) | (9 | ) | ||||||||||
Other | 32,962 | 32,618 | (344 | ) | (1 | ) | ||||||||||
Subtotal | 1,838,933 | 2,098,400 | 259,467 | 14 | ||||||||||||
Corporate borrowers in Japan | ||||||||||||||||
Real estate companies | 288,851 | 300,984 | 12,133 | 4 | ||||||||||||
Non-recourse loans | 53,067 | 48,566 | (4,501 | ) | (8 | ) | ||||||||||
Commercial, industrial and other companies | 266,675 | 255,309 | (11,366 | ) | (4 | ) | ||||||||||
Subtotal | 608,593 | 604,859 | (3,734 | ) | (1 | ) | ||||||||||
Overseas | ||||||||||||||||
Real estate companies | 104,883 | 250,195 | 145,312 | 139 | ||||||||||||
Non-recourse loans | 49,915 | 83,515 | 33,600 | 67 | ||||||||||||
Commercial, industrial companies and other | 658,930 | 690,299 | 31,369 | 5 | ||||||||||||
Subtotal | 813,728 | 1,024,009 | 210,281 | 26 | ||||||||||||
Purchased loans* | 16,416 | 13,218 | (3,198 | ) | (19 | ) | ||||||||||
Total | ¥ | 3,277,670 | ¥ | 3,740,486 | ¥ | 462,816 | 14 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
Consumer borrowers in Japan | ||||||||||||||||
Real estate loans | ¥ | 1,560,832 | ¥ | 1,842,131 | ¥ | 281,299 | 18 | |||||||||
Card loans | 245,139 | 223,651 | (21,488 | ) | (9 | ) | ||||||||||
Other | 32,962 | 32,618 | (344 | ) | (1 | ) | ||||||||||
Subtotal | 1,838,933 | 2,098,400 | 259,467 | 14 | ||||||||||||
Corporate borrowers in Japan | ||||||||||||||||
Real estate companies | 288,851 | 300,984 | 12,133 | 4 | ||||||||||||
Non-recourse loans | 53,067 | 48,566 | (4,501 | ) | (8 | ) | ||||||||||
Commercial, industrial and other companies | 266,675 | 255,309 | (11,366 | ) | (4 | ) | ||||||||||
Subtotal | 608,593 | 604,859 | (3,734 | ) | (1 | ) | ||||||||||
Overseas | ||||||||||||||||
Real estate companies | 104,883 | 250,195 | 145,312 | 139 | ||||||||||||
Non-recourse loans | 49,915 | 83,515 | 33,600 | 67 | ||||||||||||
Commercial, industrial companies and other | 658,930 | 690,299 | 31,369 | 5 | ||||||||||||
Subtotal | 813,728 | 1,024,009 | 210,281 | 26 | ||||||||||||
Purchased loans* | 16,416 | 13,218 | (3,198 | ) | (19 | ) | ||||||||||
Total | ¥ | 3,277,670 | ¥ | 3,740,486 | ¥ | 462,816 | 14 | |||||||||
| * | Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely. |
87
As of March 31, 2020, ¥17,720 million, or 0.7%, of our portfolio of installment loans to consumer and corporate borrowers in Japan related to our life insurance operations. We reflect income from these loans as life insurance premiums and related investment income in our consolidated statements of income.
As of March 31, 2020, ¥551,179 million, or 15%, of the balance of installment loans were to real estate companies in Japan and overseas. Among these amounts, ¥15,992 million, or 0.4% were loans individually evaluated for impairment. We recognized an allowance of ¥859 million on these impaired loans.
The balance of installment loans to consumer borrowers in Japan as of March 31, 2020 increased 14% to ¥2,098,400 million compared to the balance as of March 31, 2019, primarily due to an increase in the balance of real estate loans for consumer. The balance of installment loans to corporate borrowers in Japan as of March 31, 2020 decreased 1% to ¥604,859 million compared to the balance as of March 31, 2019. The balance of installment loans in Overseas as of March 31, 2020 increased 26% to ¥1,024,009 million compared to the balance as of March 31, 2019 in line with the aforementioned increase in the United States.Americas.
For further information, see Note 109 of “Item 18. Financial Statements.”
Asset quality
Net investment in leases
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due net investment in leases and allowances for net investment in leases: | ||||||||
90+ days past-due net investment in leases | ¥ | 14,807 | ¥ | 15,346 | ||||
90+ days past-due net investment in leases as a percentage of the balance of net investment in leases | 1.28 | % | 1.42 | % | ||||
Provision as a percentage of average balance of net investment in leases* | 0.37 | % | 0.29 | % | ||||
Allowance for net investment in leases | ¥ | 12,049 | ¥ | 11,692 | ||||
Allowance for net investment in leases as a percentage of the balance of net investment in leases | 1.04 | % | 1.08 | % | ||||
The ratio of charge-offs as a percentage of the average balance of net investment in leases* | 0.19 | % | 0.25 | % | ||||
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due net investment in leases and allowances for net investment in leases: | ||||||||
90+ days past-due net investment in leases | ¥ | 14,807 | ¥ | 15,346 | ||||
90+ days past-due net investment in leases as a percentage of the balance of net investment in leases | 1.28 | % | 1.42 | % | ||||
Provision as a percentage of average balance of net investment in leases* | 0.37 | % | 0.29 | % | ||||
Allowance for net investment leases | ¥ | 12,049 | ¥ | 11,692 | ||||
Allowance for net investment in leases as a percentage of the balance of net investment in leases | 1.04 | % | 1.08 | % | ||||
The ratio of charge-offs as a percentage of the average balance of net investment in leases* | 0.19 | % | 0.25 | % | ||||
| Note: | New Lease Standard has been adopted since April 1, 2019, and the amounts of investment in direct financing leases have been reclassified to net investment in leases. |
| * | Average balances are calculated on the basis of fiscal year’s beginning balance and fiscal quarter-end balances. |
The balance of 90+ days
past-due
net investment in leases increased ¥539 million to ¥15,346 million as of March 31, 2020 compared to March 31, 2019. As a result, the ratio of 90+ dayspast-due
net investment in leases increased 0.14% to 1.42% from March 31, 2019.We believe that the ratio of allowance for doubtful receivables to the balance of investment in net investment in leases provides a reasonable indication that our allowance for doubtful receivables was appropriate as of March 31, 2020 for the following reasons:
lease receivables are generally diversified and the amount of realized loss on any particular contract is likely to be relatively small; and
all lease contracts are secured by collateral consisting of the underlying leased equipment, and we can expect to recover at least a portion of the outstanding lease receivables by selling the collateral.
88
Loans not individually evaluated for impairment
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due loans and allowance for installment loans: | ||||||||
90+ days past-due loans not individually evaluated for impairment | ¥ | 12,412 | ¥ | 10,264 | ||||
90+ days past-due loans not individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment | 0.39 | % | 0.28 | % | ||||
Provision as a percentage of average balance of installment loans not individually evaluated for impairment* | 0.50 | % | 0.43 | % | ||||
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment | ¥ | 32,231 | ¥ | 31,697 | ||||
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment | 1.00 | % | 0.87 | % | ||||
The ratio of charge-offs as a percentage of the average balance of loans not individually evaluated for impairment* | 0.44 | % | 0.43 | % | ||||
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due loans and allowance for installment loans: | ||||||||
90+ days past-due loans not individually evaluated for impairment | ¥ | 12,412 | ¥ | 10,264 | ||||
90+ days past-due loans not individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment | 0.39 | % | 0.28 | % | ||||
Provision as a percentage of average balance of installment loans not individually evaluated for impairment* | 0.50 | % | 0.43 | % | ||||
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment | ¥ | 32,231 | ¥ | 31,697 | ||||
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment | 1.00 | % | 0.87 | % | ||||
The ratio of charge-offs as a percentage of the average balance of loans not individually evaluated for impairment* | 0.44 | % | 0.43 | % | ||||
| * | Average balances are calculated on the basis of fiscal year’s beginning balance and fiscal quarter-end balances. |
The balance of 90+ days
past-due
loans not individually evaluated and evaluated as a homogeneous group for impairment due to their individual significance decreased ¥2,148 million to ¥10,264 million as of March 31, 2020 compared to March 31, 2019.As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen) | ||||||||
90+ days past-due loans not individually evaluated for impairment: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 1,388 | ¥ | 1,370 | ||||
Card loans | 1,671 | 1,708 | ||||||
Other | 8,993 | 7,025 | ||||||
Subtotal | 12,052 | 10,103 | ||||||
Consumer borrowers in Overseas | ||||||||
Other | 360 | 161 | ||||||
Total | ¥ | 12,412 | ¥ | 10,264 | ||||
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen) | ||||||||
90+ days past-due loans not individually evaluated for impairment: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 1,388 | ¥ | 1,370 | ||||
Card loans | 1,671 | 1,708 | ||||||
Other | 8,993 | 7,025 | ||||||
Subtotal | 12,052 | 10,103 | ||||||
Overseas | ||||||||
Other | 360 | 161 | ||||||
Total | ¥ | 12,412 | ¥ | 10,264 | ||||
We recognize allowance for real estate loans, card loans and other loans in Japan after careful evaluation of the value of collateral underlying the loans, past loss experience and any economic conditions that we believe may affect the default rate. We determine the allowance for our other items on the basis of past loss experience, general economic conditions and the current portfolio composition.
Loans individually evaluated for impairment
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen) | ||||||||
Loans individually evaluated for impairment: | ||||||||
Impaired loans | ¥ | 58,827 | ¥ | 85,820 | ||||
Impaired loans requiring an allowance | 41,234 | 49,292 | ||||||
Allowance for loans individually evaluated for impairment* | 13,731 | 13,447 | ||||||
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen) | ||||||||
Loans individually evaluated for impairment: | ||||||||
Impaired loans | ¥ | 58,827 | ¥ | 85,820 | ||||
Impaired loans requiring an allowance | 41,234 | 49,292 | ||||||
Allowance for loans individually evaluated for impairment* | 13,731 | 13,447 | ||||||
| * | The allowance is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral dependent. |
New provision for probable loan losses was ¥3,201 million in fiscal 2019 and ¥6,201 million in fiscal 2020, and
charge-off
of impaired loans was ¥3,936 million in fiscal 2019 and ¥6,478 million in fiscal 2020. New provision for probable loan losses increased ¥3,000 million compared to fiscal 2019.Charge-off
of impaired loans increased ¥2,542 million compared to fiscal 2019.The table below sets forth the outstanding balance of impaired loans by region and type of borrower as of the dates indicated. Consumer loans in Japan primarily consist of restructured smaller-balance homogeneous loans individually evaluated for impairment. The balance of impaired loans of real estate companies and commercial, industrial companies and other in Overseas increased due to an increase in the United States.
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen) | ||||||||
Impaired loans: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 4,378 | ¥ | 5,758 | ||||
Card loans | 3,945 | 3,932 | ||||||
Other | 14,216 | 16,426 | ||||||
Subtotal | 22,539 | 26,116 | ||||||
Corporate borrowers in Japan | ||||||||
Real estate companies | 1,540 | 3,501 | ||||||
Non-recourse loans | 232 | 0 | ||||||
Commercial, industrial and other companies | 7,103 | 12,480 | ||||||
Subtotal | 8,875 | 15,981 | ||||||
Overseas | ||||||||
Real estate companies | 840 | 12,491 | ||||||
Non-recourse loans | 4,216 | 2,466 | ||||||
Commercial, industrial companies and other | 18,593 | 27,161 | ||||||
Subtotal | 23,649 | 42,118 | ||||||
Purchased loans | 3,764 | 1,605 | ||||||
Total | ¥ | 58,827 | ¥ | 85,820 | ||||
As of March 31, | ||||||||
2019 | 2020 | |||||||
(Millions of yen) | ||||||||
Impaired loans: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 4,378 | ¥ | 5,758 | ||||
Card loans | 3,945 | 3,932 | ||||||
Other | 14,216 | 16,426 | ||||||
Subtotal | 22,539 | 26,116 | ||||||
Corporate borrowers in Japan | ||||||||
Real estate companies | 1,540 | 3,501 | ||||||
Non-recourse loans | 232 | 0 | ||||||
Commercial, industrial and other companies | 7,103 | 12,480 | ||||||
Subtotal | 8,875 | 15,981 | ||||||
Overseas | ||||||||
Real estate companies | 840 | 12,491 | ||||||
Non-recourse loans | 4,216 | 2,466 | ||||||
Commercial, industrial companies and other | 18,593 | 27,161 | ||||||
Subtotal | 23,649 | 42,118 | ||||||
Purchased loans | 3,764 | 1,605 | ||||||
Total | ¥ | 58,827 | ¥ | 85,820 | ||||
Troubled debt restructuring
There were certain payment deferral requests of financing receivables, which we accepted due to the spread of the
COVID-19.
A troubled debt restructuring is determined based on the definition of troubled debtrestructuring. A troubled debt restructuring is defined as a restructuring of a financing receivable in which the creditor grants a concession to the debtor for economic or other reasons related to the debtor’s financial difficulties. As of March 31, 2020, although we accepted payment deferral requests for financing receivables for which payment was deferral request for 3 to 6 months due to
COVID-19,
those receivables are not included in the troubled debt restructuring as we determined those receivables based on the definition of troubled debt restructuring.For further information, see Note 1110 of “Item 18. Financial Statements.”
Provision for doubtful receivables on net investment in leases and probable loan losses
We recognize provision for doubtful receivables on net investment in leases and probable loan losses for net investment in leases and installment loans.
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Provision for doubtful receivables on net investment in leases and probable loan losses: | ||||||||||||||||
Beginning balance | ¥ | 54,672 | ¥ | 58,011 | ¥ | 3,339 | 6 | |||||||||
Net investment in leases | 10,089 | 12,049 | 1,960 | 19 | ||||||||||||
Loans not individually evaluated for impairment | 30,239 | 32,231 | 1,992 | 7 | ||||||||||||
Loans individually evaluated for impairment | 14,344 | 13,731 | (613 | ) | (4 | ) | ||||||||||
Provision (Reversal) | 22,525 | 24,425 | 1,900 | 8 | ||||||||||||
Net investment in leases | 4,324 | 3,304 | (1,020 | ) | (24 | ) | ||||||||||
Loans not individually evaluated for impairment | 15,000 | 14,920 | (80 | ) | (1 | ) | ||||||||||
Loans individually evaluated for impairment | 3,201 | 6,201 | 3,000 | 94 | ||||||||||||
Charge-offs (net) | (19,213 | ) | (24,132 | ) | (4,919 | ) | 26 | |||||||||
Net investment in leases | (2,255 | ) | (2,835 | ) | (580 | ) | 26 | |||||||||
Loans not individually evaluated for impairment | (13,022 | ) | (14,819 | ) | (1,797 | ) | 14 | |||||||||
Loans individually evaluated for impairment | (3,936 | ) | (6,478 | ) | (2,542 | ) | 65 | |||||||||
Other* | 27 | (1,468 | ) | (1,495 | ) | — | ||||||||||
Net investment in leases | (109 | ) | (826 | ) | (717 | ) | 658 | |||||||||
Loans not individually evaluated for impairment | 14 | (635 | ) | (649 | ) | — | ||||||||||
Loans individually evaluated for impairment | 122 | (7 | ) | (129 | ) | — | ||||||||||
Ending balance | 58,011 | 56,836 | (1,175 | ) | (2 | ) | ||||||||||
Net investment in leases | 12,049 | 11,692 | (357 | ) | (3 | ) | ||||||||||
Loans not individually evaluated for impairment | 32,231 | 31,697 | (534 | ) | (2 | ) | ||||||||||
Loans individually evaluated for impairment | 13,731 | 13,447 | (284 | ) | (2 | ) | ||||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Provision for doubtful receivables on net investment in leases and probable loan losses: | ||||||||||||||||
Beginning balance | ¥ | 54,672 | ¥ | 58,011 | ¥ | 3,339 | 6 | |||||||||
Net investment in leases | 10,089 | 12,049 | 1,960 | 19 | ||||||||||||
Loans not individually evaluated for impairment | 30,239 | 32,231 | 1,992 | 7 | ||||||||||||
Loans individually evaluated for impairment | 14,344 | 13,731 | (613 | ) | (4 | ) | ||||||||||
Provision (Reversal) | 22,525 | 24,425 | 1,900 | 8 | ||||||||||||
Net investment in leases | 4,324 | 3,304 | (1,020 | ) | (24 | ) | ||||||||||
Loans not individually evaluated for impairment | 15,000 | 14,920 | (80 | ) | (1 | ) | ||||||||||
Loans individually evaluated for impairment | 3,201 | 6,201 | 3,000 | 94 | ||||||||||||
Charge-offs (net) | (19,213 | ) | (24,132 | ) | (4,919 | ) | 26 | |||||||||
Net investment in leases | (2,255 | ) | (2,835 | ) | (580 | ) | 26 | |||||||||
Loans not individually evaluated for impairment | (13,022 | ) | (14,819 | ) | (1,797 | ) | 14 | |||||||||
Loans individually evaluated for impairment | (3,936 | ) | (6,478 | ) | (2,542 | ) | 65 | |||||||||
Other * | 27 | (1,468 | ) | (1,495 | ) | — | ||||||||||
Net investment in leases | (109 | ) | (826 | ) | (717 | ) | 658 | |||||||||
Loans not individually evaluated for impairment | 14 | (635 | ) | (649 | ) | — | ||||||||||
Loans individually evaluated for impairment | 122 | (7 | ) | (129 | ) | — | ||||||||||
Ending balance | 58,011 | 56,836 | (1,175 | ) | (2 | ) | ||||||||||
Net investment in leases | 12,049 | 11,692 | (357 | ) | (3 | ) | ||||||||||
Loans not individually evaluated for impairment | 32,231 | 31,697 | (534 | ) | (2 | ) | ||||||||||
Loans individually evaluated for impairment | 13,731 | 13,447 | (284 | ) | (2 | ) | ||||||||||
| * | Other mainly includes foreign currency translation adjustments and others. |
For further information, see Note 1110 of “Item 18. Financial Statements.”
Investment in Securities
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities: | ||||||||||||||||
New securities added | ¥ | 623,172 | ¥ | 765,589 | ¥ | 142,417 | 23 | |||||||||
Japan | 504,515 | 653,228 | 148,713 | 29 | ||||||||||||
Overseas | 118,657 | 112,361 | (6,296 | ) | (5 | ) | ||||||||||
Investment in securities | 1,928,916 | 2,245,323 | 316,407 | 16 | ||||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities: | ||||||||||||||||
New securities added | ¥ | 623,172 | ¥ | 765,589 | ¥ | 142,417 | 23 | |||||||||
Japan | 504,515 | 653,228 | 148,713 | 29 | ||||||||||||
Overseas | 118,657 | 112,361 | (6,296 | ) | (5 | ) | ||||||||||
Investment in securities | 1,928,916 | 2,245,323 | 316,407 | 16 | ||||||||||||
| Note: | The balance of investment in securities related to our life insurance operations are included in investment in securities in our consolidated balance sheets; however, income and losses on these investment in securities are recorded in life insurance premiums and related investment income in our consolidated statements of income. |
New securities added increased 23% to ¥765,589 million in fiscal 2020 compared to fiscal 2019. New securities added in Japan increased 29% in fiscal 2020 compared to fiscal 2019 primarily due to an increase in investments in government bond securities, municipal bond securities and corporate debt securities. New securities added overseas decreased 5% in fiscal 2020 compared to fiscal 2019.
The balance of our investment in securities as of March 31, 2020 increased 16% to ¥2,245,323 million compared to March 31, 2019.
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities by security type: | ||||||||||||||||
Equity securities | ¥ | 549,047 | ¥ | 492,902 | ¥ | (56,145 | ) | (10 | ) | |||||||
Trading debt securities | 1,564 | 7,431 | 5,867 | 375 | ||||||||||||
Available-for-sale debt securities | 1,264,244 | 1,631,185 | 366,941 | 29 | ||||||||||||
Held-to-maturity debt securities | 114,061 | 113,805 | (256 | ) | (0 | ) | ||||||||||
Total | ¥ | 1,928,916 | ¥ | 2,245,323 | ¥ | 316,407 | 16 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities by security type: | ||||||||||||||||
Equity securities | ¥ | 549,047 | ¥ | 492,902 | ¥ | (56,145 | ) | (10 | ) | |||||||
Trading debt securities | 1,564 | 7,431 | 5,867 | 375 | ||||||||||||
Available-for-sale | 1,264,244 | 1,631,185 | 366,941 | 29 | ||||||||||||
Held-to-maturity | 114,061 | 113,805 | (256 | ) | (0 | ) | ||||||||||
Total | ¥ | 1,928,916 | ¥ | 2,245,323 | ¥ | 316,407 | 16 | |||||||||
Investments in equity securities as of March 31, 2020 decreased 10% to ¥492,902 million compared to March 31, 2019 primarily due to a decrease in the assets under management of variable annuity and variable life insurance contracts. Investments in trading debt securities as of March 31, 2020 increased to ¥7,431 million compared to March 31, 2019 due to an increase in investments in CMBS and RMBS in the Americas. Investments indebt securities as of March 31, 2020 increased 29% to ¥1,631,185 million compared to March 31, 2019 primarily due to an increase in investments in government bond securities, municipal bond securities and corporate debt securities in Japan.debt securities mainly consist of our life insurance business’s investment in Japanese government bonds.
available-for-sale
Held-to-maturity
For further information, see Note 12 of “Item 18. Financial Statements.”
Gains on investment securities and dividends
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Gains on investment securities and dividends: | ||||||||||||||||
Net gains on investment securities | ¥ | 14,273 | ¥ | 20,204 | ¥ | 5,931 | 42 | |||||||||
Dividends income | 1,685 | 2,295 | 610 | 36 | ||||||||||||
Total | ¥ | 15,958 | ¥ | 22,499 | ¥ | 6,541 | 41 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Gains on investment securities and dividends: | ||||||||||||||||
Net gains on investment securities | ¥ | 14,273 | ¥ | 20,204 | ¥ | 5,931 | 42 | |||||||||
Dividends income | 1,685 | 2,295 | 610 | 36 | ||||||||||||
Total | ¥ | 15,958 | ¥ | 22,499 | ¥ | 6,541 | 41 | |||||||||
| Notes: | 1. | |||
Income and losses on investment in securities related to our life insurance operations are recorded in life insurance premiums and related investment income in our consolidated statements of income. | ||||
2. | Unrealized changes in fair value of investments in equity securities have been included in “Net gains on investment securities”. |
Gains on investment securities and dividends increased 41% to ¥22,499 million in fiscal 2020 compared to fiscal 2019 mainly due to an increase in net gains on investment securities. Net gains on investment securities increased 42% to ¥20,204 million in fiscal 2020 compared to fiscal 2019 due to a decrease in net unrealized holding gains on equity securities caused by declines in market prices of stocks, but an increase in gains on sales of shares. Dividends income increased 36% to ¥2,295 million in fiscal 2020 compared to fiscal 2019.
As of March 31, 2020, gross unrealized gains ondebt securities, including those held in connection with our life insurance operations, were ¥36,017 million, compared to ¥35,034 million as of March 31, 2019. As of March 31, 2020, gross unrealized losses ondebt securities, including those held in connection with our life insurance operations, were ¥41,712 million, compared to ¥10,530 million as of March 31, 2019.
available-for-sale
available-for-sale
Operating leases
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Operating leases: | ||||||||||||||||
Operating lease revenues | ¥ | 413,918 | ¥ | 430,665 | ¥ | 16,747 | 4 | |||||||||
Costs of operating leases | 257,321 | 289,604 | 32,283 | 13 | ||||||||||||
New equipment acquisitions | 544,715 | 493,666 | (51,049 | ) | (9 | ) | ||||||||||
Japan | 233,721 | 234,188 | 467 | 0 | ||||||||||||
Overseas | 310,994 | 259,478 | (51,516 | ) | (17 | ) | ||||||||||
Investment in operating leases | 1,335,959 | 1,400,001 | 64,042 | 5 | ||||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Operating leases: | ||||||||||||||||
Operating lease revenues | ¥ | 413,918 | ¥ | 430,665 | ¥ | 16,747 | 4 | |||||||||
Costs of operating leases | 257,321 | 289,604 | 32,283 | 13 | ||||||||||||
New equipment acquisitions | 544,715 | 493,666 | (51,049 | ) | (9 | ) | ||||||||||
Japan | 233,721 | 234,188 | 467 | 0 | ||||||||||||
Overseas | 310,994 | 259,478 | (51,516 | ) | (17 | ) | ||||||||||
Investment in operating leases | 1,335,959 | 1,400,001 | 64,042 | 5 | ||||||||||||
| Note: | New Lease Standard has been adopted since April 1, 2019. Certain lessor costs of operating lease, such as property taxes and insurance costs, previously had been deducted from “Operating lease revenues”, have changed to be included in “Costs of operating leases.” |
Revenues from operating leases in fiscal 2020 increased 4% to ¥430,665 million compared to fiscal 2019 primarily due to an increase resulting from the adoption of New Lease Standard. In fiscal 2019 and 2020, gains from the disposition of operating lease assets were ¥62,883 million and ¥51,072 million, respectively.
Costs of operating leases increased 13% to ¥289,604 million in fiscal 2020 compared to fiscal 2019 primarily due to an increase resulting from the adoption of New Lease Standard.
93
New equipment acquisitions related to operating leases decreased 9% to ¥493,666 million in fiscal 2020 compared to fiscal 2019 primarily due to a decrease in purchases of aircraft overseas.
Investment in operating leases as of March 31, 2020 increased 5% to ¥1,400,001 million compared to March 31, 2019.
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in operating leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 888,625 | ¥ | 847,376 | ¥ | (41,249 | ) | (5 | ) | |||||||
Measuring and information-related equipment | 105,179 | 125,897 | 20,718 | 20 | ||||||||||||
Real estate | 297,343 | 269,483 | (27,860 | ) | (9 | ) | ||||||||||
Other | 12,890 | 10,308 | (2,582 | ) | (20 | ) | ||||||||||
Right-of-use assets | 0 | 121,553 | 121,553 | — | ||||||||||||
Accrued rental receivables | 31,922 | 25,384 | (6,538 | ) | (20 | ) | ||||||||||
Total | ¥ | 1,335,959 | ¥ | 1,400,001 | ¥ | 64,042 | 5 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in operating leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 888,625 | ¥ | 847,376 | ¥ | (41,249 | ) | (5 | ) | |||||||
Measuring and information-related equipment | 105,179 | 125,897 | 20,718 | 20 | ||||||||||||
Real estate | 297,343 | 269,483 | (27,860 | ) | (9 | ) | ||||||||||
Other | 12,890 | 10,308 | (2,582 | ) | (20 | ) | ||||||||||
Right-of-use | 0 | 121,553 | 121,553 | — | ||||||||||||
Accrued rental receivables | 31,922 | 25,384 | (6,538 | ) | (20 | ) | ||||||||||
Total | ¥ | 1,335,959 | ¥ | 1,400,001 | ¥ | 64,042 | 5 | |||||||||
Investment in transportation equipment operating leases as of March 31, 2020 decreased 5% to ¥847,376 million compared to March 31, 2019 primarily due to a decrease in new equipment acquisitions in the automobile leasing business and aircraft-related operations and depreciation of equipment held for operating leases. Investment in measuring and information-related equipment operating leases as of March 31, 2020 increased 20% to ¥125,897 million compared to March 31, 2019 primarily due to an increase in new equipment acquisitions in the rental business. Investment in real estate operating leases as of March 31, 2020 decreased 9% to ¥269,483 million compared to March 31, 2019 primarily due to sales of real estate in Japan. We recognized ¥121,553 million of ROU assets of operating leases resulting from the adoption of the New Lease Standard.
For further information, see Note 76 and 98 of “Item 18. Financial Statements.”
Life insurance
We reflect all income and losses (other than provision for doubtful receivables and probable loan losses) that we recognize on securities, installment loans, real estate under operating leases and other investments held in connection with our life insurance operations as life insurance premiums and related investment income in our consolidated statements of income.
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Life insurance premiums and related investment income and life insurance costs: | ||||||||||||||||
Life insurance premiums | ¥ | 330,811 | ¥ | 360,583 | ¥ | 29,772 | 9 | |||||||||
Life insurance-related investment income | 16,325 | 7,195 | (9,130 | ) | (56 | ) | ||||||||||
Total | ¥ | 347,136 | ¥ | 367,778 | ¥ | 20,642 | 6 | |||||||||
Life insurance costs | ¥ | 246,533 | ¥ | 269,425 | ¥ | 22,892 | 9 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Life insurance premiums and related investment income and life insurance costs: | ||||||||||||||||
Life insurance premiums | ¥ | 330,811 | ¥ | 360,583 | ¥ | 29,772 | 9 | |||||||||
Life insurance-related investment income | 16,325 | 7,195 | (9,130 | ) | (56 | ) | ||||||||||
Total | ¥ | 347,136 | ¥ | 367,778 | ¥ | 20,642 | 6 | |||||||||
Life insurance costs | ¥ | 246,533 | ¥ | 269,425 | ¥ | 22,892 | 9 | |||||||||
94
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Breakdown of life insurance-related investment income (loss): | ||||||||||||||||
Net income on investment securities | ¥ | 10,756 | ¥ | 8,674 | ¥ | (2,082 | ) | (19 | ) | |||||||
Losses recognized in income on derivative | (1,348 | ) | (1,910 | ) | (562 | ) | 42 | |||||||||
Interest on loans, income on real estate under operating leases, and others | 6,917 | 431 | (6,486 | ) | (94 | ) | ||||||||||
Total | ¥ | 16,325 | ¥ | 7,195 | ¥ | (9,130 | ) | (56 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Breakdown of life insurance-related investment income (loss): | ||||||||||||||||
Net income on investment securities | ¥ | 10,756 | ¥ | 8,674 | ¥ | (2,082 | ) | (19 | ) | |||||||
Losses recognized in income on derivative | (1,348 | ) | (1,910 | ) | (562 | ) | 42 | |||||||||
Interest on loans, income on real estate under operating leases, and others | 6,917 | 431 | (6,486 | ) | (94 | ) | ||||||||||
Total | ¥ | 16,325 | ¥ | 7,195 | ¥ | (9,130 | ) | (56 | ) | |||||||
Life insurance premiums and related investment income increased 6% to ¥367,778 million in fiscal 2020 compared to fiscal 2019.
Life insurance premiums increased 9% to ¥360,583 million in fiscal 2020 compared to fiscal 2019 due to an increase in the number of policies in force.
Life insurance-related investment income decreased 56% to ¥7,195 million in fiscal 2020 compared to fiscal 2019. Net income on investment securities decreased due to a decrease in investment income from assets under variable annuity and variable life insurance contracts, caused by the deterioration in the markets, although gains on sales of government bonds increased. In addition, interest on loans, income on real estate under operating leases, and others decreased due to recognition of gains on sales of real estate under operating leases in fiscal 2019.
Life insurance costs increased 9% to ¥269,425 million in fiscal 2020 compared to fiscal 2019 due to the aforementioned increase in the number of policies in force.
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investments by life insurance operations: | ||||||||||||||||
Equity securities | ¥ | 327,497 | ¥ | 264,625 | ¥ | (62,872 | ) | (19 | ) | |||||||
Available-for-sale debt securities | 766,830 | 1,149,612 | 382,782 | 50 | ||||||||||||
Held-to-maturity debt securities | 114,061 | 113,805 | (256 | ) | (0 | ) | ||||||||||
Total investment in securities | 1,208,388 | 1,528,042 | 319,654 | 26 | ||||||||||||
Installment loans, real estate under operating leases and other investments | 41,630 | 46,991 | 5,361 | 13 | ||||||||||||
Total | ¥ | 1,250,018 | ¥ | 1,575,033 | ¥ | 325,015 | 26 | |||||||||
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investments by life insurance operations: | ||||||||||||||||
Equity securities | ¥ | 327,497 | ¥ | 264,625 | ¥ | (62,872 | ) | (19 | ) | |||||||
Available-for-sale | 766,830 | 1,149,612 | 382,782 | 50 | ||||||||||||
Held-to-maturity | 114,061 | 113,805 | (256 | ) | (0 | ) | ||||||||||
Total investment in securities | 1,208,388 | 1,528,042 | 319,654 | 26 | ||||||||||||
Installment loans, real estate under operating leases and other investments | 41,630 | 46,991 | 5,361 | 13 | ||||||||||||
Total | ¥ | 1,250,018 | ¥ | 1,575,033 | ¥ | 325,015 | 26 | |||||||||
Investment in securities as of March 31, 2020 increased 26% to ¥1,528,042 million compared to March 31, 2019 due to an increase indebt securities as a result of an increase in investments in government bond securities and corporate debt securities, although equity securities decreased due to a decrease in assets under variable annuity and variable life insurance contracts.
available-for-sale
Installment loans, real estate under operating leases and other investments as of March 31, 2020 increased 13% to ¥46,991 million compared to March 31, 2019 due to an increase in investment in installment loans.
For further information, see Note 26 of “Item 18. Financial Statements.”
Sales of goods and real estate, Inventories
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Sales of goods and real estate, Inventories: | ||||||||||||||||
Sales of goods and real estate | ¥ | 596,165 | ¥ | 406,511 | ¥ | (189,654 | ) | (32 | ) | |||||||
Costs of goods and real estate sold | 535,261 | 354,006 | (181,255 | ) | (34 | ) | ||||||||||
New real estate added | 97,397 | 82,442 | (14,955 | ) | (15 | ) | ||||||||||
Inventories | 115,695 | 126,013 | 10,318 | 9 | ||||||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Sales of goods and real estate, Inventories: | ||||||||||||||||
Sales of goods and real estate | ¥ | 596,165 | ¥ | 406,511 | ¥ | (189,654 | ) | (32 | ) | |||||||
Costs of goods and real estate sold | 535,261 | 354,006 | (181,255 | ) | (34 | ) | ||||||||||
New real estate added | 97,397 | 82,442 | (14,955 | ) | (15 | ) | ||||||||||
Inventories | 115,695 | 126,013 | 10,318 | 9 | ||||||||||||
Sales of goods and real estate decreased 32% to ¥406,511 million compared to fiscal 2019 due to a decrease in sales of goods.
Costs of goods and real estate sold decreased 34% to ¥354,006 million compared to fiscal 2019 due to a decrease in costs of goods sold. We recognized ¥703 million and ¥863 million of write-downs for fiscal 2019 and 2020, respectively, which were included in costs of goods and real estate sold. Costs of goods and real estate sold include the upfront costs associated with advertising and creating model rooms.
New real estate added decreased 15% to ¥82,442 million in fiscal 2020 compared to fiscal 2019.
Inventories as of March 31, 2020 increased 9% to ¥126,013 million compared to March 31, 2019.
For further information, see Note 4 of “Item 18. Financial Statements.”
Services, Property under Facility Operations
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Services, Property under Facility Operations | ||||||||||||||||
Services income | ¥ | 818,794 | ¥ | 776,012 | ¥ | (42,782) | (5 | ) | ||||||||
Services expense | 508,320 | 483,914 | (24,406 | ) | (5 | ) | ||||||||||
New assets added | 104,839 | 34,181 | (70,658 | ) | (67 | ) | ||||||||||
Japan | 103,939 | 33,312 | (70,627 | ) | (68 | ) | ||||||||||
Overseas | 900 | 869 | (31 | ) | (3 | ) | ||||||||||
Property under Facility Operations | 441,632 | 562,485 | 120,853 | 27 | ||||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Services, Property under Facility Operations | ||||||||||||||||
Services income | ¥ | 818,794 | ¥ | 776,012 | ¥ | (42,782) | (5 | ) | ||||||||
Services expense | 508,320 | 483,914 | (24,406 | ) | (5 | ) | ||||||||||
New assets added | 104,839 | 34,181 | (70,658 | ) | (67 | ) | ||||||||||
Japan | 103,939 | 33,312 | (70,627 | ) | (68 | ) | ||||||||||
Overseas | 900 | 869 | (31 | ) | (3 | ) | ||||||||||
Property under Facility Operations | 441,632 | 562,485 | 120,853 | 27 | ||||||||||||
Services income decreased 5% to ¥776,012 million in fiscal 2020 compared to fiscal 2019 due to sales of subsidiaries and recognition of a significant gain on a sale of property under facility operations in fiscal 2019, although there was service expansion in the environment and energy business.
Services expense decreased 5% to ¥483,914 million in fiscal 2020 compared to fiscal 2019 due to sales of subsidiaries, despite an increase of expenses related to the environment and energy business, similar to the aforementioned decrease in services income.
New assets added for property under facility operations decreased 67% to ¥34,181 million in fiscal 2020 compared to fiscal 2019 due to a decrease in investments in electric power facilities.
Property under facility operations as of March 31, 2020 increased 27% to ¥562,485 million compared to March 31, 2019 due to making investees engaged in wind power generation into our subsidiaries and recognition
of ROU assets of property under facility operations resulting from the adoption of the New Lease Standard, despite a decrease in property under facility operations through a sale of a subsidiary which operated a facility operation business.
For further information, see Note 4 of “Item 18. Financial Statements.”
Expenses
Interest expense
Interest expense increased 6% to ¥99,138 million in fiscal 2020 compared to ¥93,337 million in fiscal 2019. Our total outstanding short-term debt, long-term debt and deposits as of March 31, 2020 increased 7% to ¥6,847,889 million compared to ¥6,423,512 million as of March 31, 2019.
The average interest rate on our short-term debt, long-term debt and deposits in domestic currency, calculated on the basis of average monthly balances, remained flat in fiscal 2020 at 0.4% compared to 0.4% in fiscal 2019. The average interest rate on our short-term debt, long-term debt and deposits in foreign currency, calculated on the basis of average monthly balances, remained flat in fiscal 2020 at 3.3% compared to 3.3% in fiscal 2019. For more information regarding our interest rate risk, see “Item 3. Key Information—Risk Factors.” For more information regarding our outstanding debt, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Short-term and long-term debt and deposits.”
Other (income) and expense
Other (income) and expense included a net expense of ¥1,301 million during fiscal 2019 and a net expense of ¥14,925 million during fiscal 2020. Foreign currency transaction losses (gains) included in other (income) and expense included losses of ¥1,679 million during fiscal 2020 compared to losses of ¥3,220 million during fiscal 2019. We recognized no impairment losses on goodwill and other intangible assets included in other (income) and expense during fiscal 2020 compared to ¥606 million of impairment losses on goodwill and other intangible assets during fiscal 2019. For further information on our goodwill and other intangible assets, see Note 16 of “Item 18. Financial Statements.”
In addition, New Lease Standard has been adopted since April 1, 2019, and expenses of ¥19,952 million are included in other (income) and expense during fiscal 2020. The certain lessor costs of finance lease, such as the property taxes and insurance costs previously had been deducted from “Finance revenues”, but they have changed to be included in “Other (income) and expense.”
Selling, general and administrative expenses
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Selling, general and administrative expenses: | ||||||||||||||||
Personnel expenses | ¥ | 248,519 | ¥ | 256,931 | ¥ | 8,412 | 3 | |||||||||
Selling expenses | 79,015 | 75,860 | (3,155 | ) | (4 | ) | ||||||||||
Administrative expenses | 104,582 | 119,694 | 15,112 | 14 | ||||||||||||
Depreciation of office facilities | 4,912 | 7,714 | 2,802 | 57 | ||||||||||||
Total | ¥ | 437,028 | ¥ | 460,199 | ¥ | 23,171 | 5 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Selling, general and administrative expenses: | ||||||||||||||||
Personnel expenses | ¥ | 248,519 | ¥ | 256,931 | ¥ | 8,412 | 3 | |||||||||
Selling expenses | 79,015 | 75,860 | (3,155 | ) | (4 | ) | ||||||||||
Administrative expenses | 104,582 | 119,694 | 15,112 | 14 | ||||||||||||
Depreciation of office facilities | 4,912 | 7,714 | 2,802 | 57 | ||||||||||||
Total | ¥ | 437,028 | ¥ | 460,199 | ¥ | 23,171 | 5 | |||||||||
Employee salaries and other personnel expenses accounted for 56% of selling, general and administrative expenses in fiscal 2020, and the remaining portion consists of other expenses, such as rent for office space, communication expenses and travel expenses. Selling, general and administrative expenses in fiscal 2020 increased 5% year on year.
Write-downs of long-lived assets
As a result of impairment reviews we performed in fiscal 2020 for long-lived assets in Japan and overseas, such as office buildings, commercial facilities other than office buildings, condominiums, hotels, and land undeveloped or under construction, write-downs of long-lived assets increased 26% to ¥3,043 million in fiscal 2020 compared to ¥2,418 million in fiscal 2019. These write-downs, which are reflected as write-downs of long-lived assets, consisted of impairment losses of ¥529 million on two commercial facilities other than office buildings, ¥236 million on four condominiums, ¥2,083 million on two pieces of land undeveloped or under construction and ¥195 million on other long-lived assets, because the assets were classified as held for sale or the carrying amount exceeded the estimated undiscounted future cash flows. In addition, write-downs of other long-lived assets in fiscal 2020 include a write-down of ¥109 million of one hotel. For further information, see Note 27 of “Item 18. Financial Statements.”
Write-downs of securities
Write-downs of securities in fiscal 2020 were in connection with
non-marketable
equity securities. Write-downs of securities increased to ¥11,969 million in fiscal 2020 compared to ¥1,382 million in fiscal 2019. For further information, see Note 12 of “Item 18. Financial Statements.”Equity in net income of affiliates
Equity in net income of affiliates increased in fiscal 2020 to ¥67,924 million compared to ¥32,978 million in fiscal 2019 primarily due to the favorable profit in overseas affiliates. For further information, see Note 15 of “Item 18. Financial Statements.”
Gains on sales of subsidiaries and affiliates and liquidation losses, net
Gains on sales of subsidiaries and affiliates and liquidation losses, net increased to ¥74,001 million in fiscal 2020 compared to ¥33,314 million in fiscal 2019, due to the favorable profit from sales in Japan, the Americas and the Europe. For further information, see Note 3 of “Item 18. Financial Statements.”
Bargain Purchase Gain
In fiscal 2020, we recognized bargain purchase gains of ¥955 million associated with two of the acquisitions executed in fiscal 2019 compared to no bargain purchase gain in fiscal 2019. For further information, see Note 3 of “Item 18. Financial Statements.”
Provision for income taxes
Provision for income taxes increased to ¥105,837 million in fiscal 2020 compared to ¥68,691 million in fiscal 2019 primarily due to the reversal of the deferred tax liabilities previously recorded for undistributed earnings of DAIKYO. For further information, see Note 19 of “Item 18. Financial Statements.”
Net income attributable to the noncontrolling interests
Net income attributable to the noncontrolling interests was recorded as a result of the noncontrolling interests in earnings of certain of our subsidiaries. Net income attributable to the noncontrolling interests in fiscal 2020 was ¥3,640 million, compared to ¥2,890 million in fiscal 2019.
Net income attributable to the redeemable noncontrolling interests
Net income attributable to the redeemable noncontrolling interests was recorded as a result of the noncontrolling interests in the earnings of our subsidiaries that issued redeemable stock. Net income attributable
98
to the redeemable noncontrolling interests in fiscal 2020 was ¥384 million, compared to ¥404 million in fiscal 2019. For further information, see Note 21 of “Item 18. Financial Statements.”
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except ratios, per Share data and percentages) | ||||||||||||||||
Total revenues | ¥ | 2,862,771 | ¥ | 2,434,864 | ¥ | (427,907 | ) | (15 | ) | |||||||
Total expenses | 2,526,576 | 2,105,426 | (421,150 | ) | (17 | ) | ||||||||||
Income before Income Taxes | 435,501 | 395,730 | (39,771 | ) | (9 | ) | ||||||||||
Net Income Attributable to ORIX Corporation Shareholders | 313,135 | 323,745 | 10,610 | 3 | ||||||||||||
Earnings per Share (Basic) | 244.40 | 252.92 | 8.52 | 3 | ||||||||||||
(Diluted) | 244.15 | 252.70 | 8.55 | 4 | ||||||||||||
ROE* 1 | 12.1 | 11.6 | (0.5 | ) | — | |||||||||||
ROA* 2 | 2.76 | 2.74 | (0.02 | ) | — | |||||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen except ratios, per share and percentages) | ||||||||||||||||
Total Assets | ¥ | 11,425,982 | ¥ | 12,174,917 | ¥ | 748,935 | 7 | |||||||||
(Segment assets) | 9,098,918 | 9,997,698 | 898,780 | 10 | ||||||||||||
Total Liabilities | 8,619,688 | 9,211,936 | 592,248 | 7 | ||||||||||||
(Long- and Short-term Debt) | 4,133,258 | 4,495,771 | 362,513 | 9 | ||||||||||||
(Deposits) | 1,757,462 | 1,927,741 | 170,279 | 10 | ||||||||||||
ORIX Corporation Shareholders’ Equity | 2,682,424 | 2,897,074 | 214,650 | 8 | ||||||||||||
ORIX Corporation Shareholders’ Equity per share | 2,095.64 | 2,263.41 | 167.77 | 8 | ||||||||||||
ORIX Corporation Shareholders’ Equity ratio* | 23.5 | % | 23.8 | % | 0.3 | % | — | |||||||||
D/E ratio (Debt-to-equity ratio) (Long- and Short-term Debt (excluding deposits) / ORIX Corporation Shareholders’ Equity) | 1.5 | x | 1.6 | x | 0.1 | x | — | |||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Corporate Financial Services | ¥ | 115,837 | ¥ | 95,212 | ¥ | (20,625 | ) | (18 | ) | |||||||
Maintenance Leasing | 275,933 | 288,211 | 12,278 | 4 | ||||||||||||
Real Estate | 489,752 | 529,064 | 39,312 | 8 | ||||||||||||
Investment and Operation | 1,083,505 | 615,151 | (468,354 | ) | (43 | ) | ||||||||||
Retail | 428,697 | 428,904 | 207 | 0 | ||||||||||||
Overseas Business | 479,619 | 490,730 | 11,111 | 2 | ||||||||||||
Segment Total | 2,873,343 | 2,447,272 | (426,071 | ) | (15 | ) | ||||||||||
Difference between Segment Total and Consolidated Amounts | (10,572 | ) | (12,408 | ) | (1,836 | ) | — | |||||||||
Consolidated Amounts | ¥ | 2,862,771 | ¥ | 2,434,864 | ¥ | (427,907 | ) | (15 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Profits: | ||||||||||||||||
Corporate Financial Services | ¥ | 49,275 | ¥ | 25,482 | ¥ | (23,793 | ) | (48 | ) | |||||||
Maintenance Leasing | 40,162 | 38,841 | (1,321 | ) | (3 | ) | ||||||||||
Real Estate | 74,395 | 89,247 | 14,852 | 20 | ||||||||||||
Investment and Operation | 84,097 | 38,170 | (45,927 | ) | (55 | ) | ||||||||||
Retail | 74,527 | 84,211 | 9,684 | 13 | ||||||||||||
Overseas Business | 106,622 | 125,444 | 18,822 | 18 | ||||||||||||
Segment Total | 429,078 | 401,395 | (27,683 | ) | (6 | ) | ||||||||||
Difference between Segment Total and Consolidated Amounts | 6,423 | (5,665 | ) | (12,088 | ) | — | ||||||||||
Consolidated Amounts | ¥ | 435,501 | ¥ | 395,730 | ¥ | (39,771 | ) | (9 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Segment Assets: | ||||||||||||||||
Corporate Financial Services | ¥ | 991,818 | ¥ | 959,725 | ¥ | (32,093 | ) | (3 | ) | |||||||
Maintenance Leasing | 847,190 | 873,775 | 26,585 | 3 | ||||||||||||
Real Estate | 801,969 | 720,221 | (81,748 | ) | (10 | ) | ||||||||||
Investment and Operation | 674,617 | 733,612 | 58,995 | 9 | ||||||||||||
Retail | 3,174,505 | 3,571,437 | 396,932 | 13 | ||||||||||||
Overseas Business | 2,608,819 | 3,138,928 | 530,109 | 20 | ||||||||||||
Segment Total | 9,098,918 | 9,997,698 | 898,780 | 10 | ||||||||||||
Difference between Segment Total and Consolidated Amounts | 2,327,064 | 2,177,219 | (149,845 | ) | (6 | ) | ||||||||||
Consolidated Amounts | ¥ | 11,425,982 | ¥ | 12,174,917 | ¥ | 748,935 | 7 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 30,737 | ¥ | 28,829 | ¥ | (1,908 | ) | (6 | ) | |||||||
Gains on investment securities and dividends | 17,083 | (777 | ) | (17,860 | ) | — | ||||||||||
Operating leases | 23,355 | 23,522 | 167 | 1 | ||||||||||||
Sales of goods and real estate | 4,379 | 4,379 | 0 | — | ||||||||||||
Services income | 40,283 | 39,259 | (1,024 | ) | (3 | ) | ||||||||||
Total Segment Revenues | 115,837 | 95,212 | (20,625 | ) | (18 | ) | ||||||||||
Interest expense | 5,019 | 4,067 | (952 | ) | (19 | ) | ||||||||||
Costs of operating leases | 14,058 | 14,319 | 261 | 2 | ||||||||||||
Costs of goods and real estate sold | 1,409 | 1,655 | 246 | 17 | ||||||||||||
Services expense | 8,064 | 10,100 | 2,036 | 25 | ||||||||||||
Selling, general and administrative expenses | 39,085 | 37,896 | (1,189 | ) | (3 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 1,218 | 1,106 | (112 | ) | (9 | ) | ||||||||||
Other | (5 | ) | (166 | ) | (161 | ) | — | |||||||||
Total Segment Expenses | 68,848 | 68,977 | 129 | 0 | ||||||||||||
Segment Operating Income | 46,989 | 26,235 | (20,754 | ) | (44 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 2,286 | (753 | ) | (3,039 | ) | — | ||||||||||
Segment Profits | ¥ | 49,275 | ¥ | 25,482 | ¥ | (23,793 | ) | (48 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 439,329 | ¥ | 403,639 | ¥ | (35,690 | ) | (8 | ) | |||||||
Installment loans | 369,882 | 364,818 | (5,064 | ) | (1 | ) | ||||||||||
Investment in operating leases | 26,350 | 24,143 | (2,207 | ) | (8 | ) | ||||||||||
Investment in securities | 19,208 | 31,522 | 12,314 | 64 | ||||||||||||
Property under facility operations | 15,075 | 16,973 | 1,898 | 13 | ||||||||||||
Inventories | 49 | 51 | 2 | 4 | ||||||||||||
Advances for DFL and operating lease | 203 | 122 | (81 | ) | (40 | ) | ||||||||||
Investment in affiliates | 16,845 | 16,276 | (569 | ) | (3 | ) | ||||||||||
Advances for property under facility operations | 720 | 0 | (720 | ) | (100 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 104,157 | 102,181 | (1,976 | ) | (2 | ) | ||||||||||
Total Segment Assets | ¥ | 991,818 | ¥ | 959,725 | ¥ | (32,093 | ) | (3 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 14,247 | ¥ | 14,352 | ¥ | 105 | 1 | |||||||||
Operating leases | 189,655 | 197,963 | 8,308 | 4 | ||||||||||||
Services income | 67,752 | 70,551 | 2,799 | 4 | ||||||||||||
Other | 4,279 | 5,345 | 1,066 | 25 | ||||||||||||
Total Segment Revenues | 275,933 | 288,211 | 12,278 | 4 | ||||||||||||
Interest expense | 3,242 | 3,026 | (216 | ) | (7 | ) | ||||||||||
Costs of operating leases | 145,402 | 154,410 | 9,008 | 6 | ||||||||||||
Services expense | 40,096 | 40,575 | 479 | 1 | ||||||||||||
Selling, general and administrative expenses | 44,107 | 46,514 | 2,407 | 5 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 222 | 1,048 | 826 | 372 | ||||||||||||
Other | 2,499 | 4,891 | 2,392 | 96 | ||||||||||||
Total Segment Expenses | 235,568 | 250,464 | 14,896 | 6 | ||||||||||||
Segment Operating Income | 40,365 | 37,747 | (2,618 | ) | (6 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | (203 | ) | 1,094 | 1,297 | — | |||||||||||
Segment Profits | ¥ | 40,162 | ¥ | 38,841 | ¥ | (1,321 | ) | (3 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 319,927 | ¥ | 328,424 | ¥ | 8,497 | 3 | |||||||||
Investment in operating leases | 505,472 | 525,392 | 19,920 | 4 | ||||||||||||
Investment in securities | 560 | 506 | (54 | ) | (10 | ) | ||||||||||
Property under facility operations | 904 | 988 | 84 | 9 | ||||||||||||
Inventories | 461 | 587 | 126 | 27 | ||||||||||||
Advances for DFL and operating lease | 197 | 669 | 472 | 240 | ||||||||||||
Investment in affiliates | 1,996 | 33 | (1,963 | ) | (98 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 17,673 | 17,176 | (497 | ) | (3 | ) | ||||||||||
Total Segment Assets | ¥ | 847,190 | ¥ | 873,775 | ¥ | 26,585 | 3 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 2,072 | ¥ | 2,065 | ¥ | (7 | ) | (0 | ) | |||||||
Operating leases | 55,202 | 72,483 | 17,281 | 31 | ||||||||||||
Sales of goods and real estate | 131,829 | 141,489 | 9,660 | 7 | ||||||||||||
Services income | 300,092 | 313,059 | 12,967 | 4 | ||||||||||||
Other | 557 | (32 | ) | (589 | ) | — | ||||||||||
Total Segment Revenues | 489,752 | 529,064 | 39,312 | 8 | ||||||||||||
Interest expense | 2,285 | 2,249 | (36 | ) | (2 | ) | ||||||||||
Costs of operating leases | 27,642 | 25,950 | (1,692 | ) | (6 | ) | ||||||||||
Costs of goods and real estate sold | 112,204 | 121,414 | 9,210 | 8 | ||||||||||||
Services expense | 254,383 | 261,064 | 6,681 | 3 | ||||||||||||
Selling, general and administrative expenses | 43,170 | 43,982 | 812 | 2 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 4,180 | 1,576 | (2,604 | ) | (62 | ) | ||||||||||
Other | 124 | 753 | 629 | 507 | ||||||||||||
Total Segment Expenses | 443,988 | 456,988 | 13,000 | 3 | ||||||||||||
Segment Operating Income | 45,764 | 72,076 | 26,312 | 57 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 28,631 | 17,171 | (11,460 | ) | (40 | ) | ||||||||||
Segment Profits | ¥ | 74,395 | ¥ | 89,247 | ¥ | 14,852 | 20 | |||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 33,589 | ¥ | 35,420 | ¥ | 1,831 | 5 | |||||||||
Installment loans | 312 | 316 | 4 | 1 | ||||||||||||
Investment in operating leases | 273,036 | 242,022 | (31,014 | ) | (11 | ) | ||||||||||
Investment in securities | 4,354 | 8,038 | 3,684 | 85 | ||||||||||||
Property under facility operations | 195,463 | 146,100 | (49,363 | ) | (25 | ) | ||||||||||
Inventories | 80,108 | 80,920 | 812 | 1 | ||||||||||||
Advances for DFL and operating lease | 21,639 | 29,946 | 8,307 | 38 | ||||||||||||
Investment in affiliates | 100,219 | 107,072 | 6,853 | 7 | ||||||||||||
Advances for property under facility operations | 19,351 | 6,790 | (12,561 | ) | (65 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 73,898 | 63,597 | (10,301 | ) | (14 | ) | ||||||||||
Total Segment Assets | ¥ | 801,969 | ¥ | 720,221 | ¥ | (81,748 | ) | (10 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 9,274 | ¥ | 9,063 | ¥ | (211 | ) | (2 | ) | |||||||
Gains on investment securities and dividends | 7,598 | 78 | (7,520 | ) | (99 | ) | ||||||||||
Sales of goods and real estate | 924,220 | 436,044 | (488,176 | ) | (53 | ) | ||||||||||
Services income | 140,088 | 169,139 | 29,051 | 21 | ||||||||||||
Other | 2,325 | 827 | (1,498 | ) | (64 | ) | ||||||||||
Total Segment Revenues | 1,083,505 | 615,151 | (468,354 | ) | (43 | ) | ||||||||||
Interest expense | 5,670 | 7,054 | 1,384 | 24 | ||||||||||||
Costs of goods and real estate sold | 875,456 | 400,625 | (474,831 | ) | (54 | ) | ||||||||||
Services expense | 110,630 | 131,688 | 21,058 | 19 | ||||||||||||
Selling, general and administrative expenses | 55,467 | 51,862 | (3,605 | ) | (6 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | (836 | ) | 8 | 844 | — | |||||||||||
Other | 914 | 413 | (501 | ) | (55 | ) | ||||||||||
Total Segment Expenses | 1,047,301 | 591,650 | (455,651 | ) | (44 | ) | ||||||||||
Segment Operating Income | 36,204 | 23,501 | (12,703 | ) | (35 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 47,893 | 14,669 | (33,224 | ) | (69 | ) | ||||||||||
Segment Profits | ¥ | 84,097 | ¥ | 38,170 | ¥ | (45,927 | ) | (55 | ) | |||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 25,497 | ¥ | 25,696 | ¥ | 199 | 1 | |||||||||
Installment loans | 59,437 | 47,573 | (11,864 | ) | (20 | ) | ||||||||||
Investment in operating leases | 4,123 | 5,474 | 1,351 | 33 | ||||||||||||
Investment in securities | 28,562 | 25,786 | (2,776 | ) | (10 | ) | ||||||||||
Property under facility operations | 208,106 | 264,994 | 56,888 | 27 | ||||||||||||
Inventories | 24,260 | 30,776 | 6,516 | 27 | ||||||||||||
Advances for DFL and operating lease | 146 | 1,340 | 1,194 | 818 | ||||||||||||
Investment in affiliates | 156,896 | 161,966 | 5,070 | 3 | ||||||||||||
Advances for property under facility operations | 44,901 | 11,291 | (33,610 | ) | (75 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 122,689 | 158,716 | 36,027 | 29 | ||||||||||||
Total Segment Assets | ¥ | 674,617 | ¥ | 733,612 | ¥ | 58,995 | 9 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 72,929 | ¥ | 76,693 | ¥ | 3,764 | 5 | |||||||||
Life insurance premiums and related investment income | 352,974 | 348,255 | (4,719 | ) | (1 | ) | ||||||||||
Other | 2,794 | 3,956 | 1,162 | 42 | ||||||||||||
Total Segment Revenues | 428,697 | 428,904 | 207 | 0 | ||||||||||||
Interest expense | 4,026 | 4,080 | 54 | 1 | ||||||||||||
Life insurance costs | 256,309 | 247,809 | (8,500 | ) | (3 | ) | ||||||||||
Selling, general and administrative expenses | 79,177 | 78,655 | (522 | ) | (1 | ) | ||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 11,245 | 11,541 | 296 | 3 | ||||||||||||
Other | 3,420 | 2,591 | (829 | ) | (24 | ) | ||||||||||
Total Segment Expenses | 354,177 | 344,676 | (9,501 | ) | (3 | ) | ||||||||||
Segment Operating Income | 74,520 | 84,228 | 9,708 | 13 | ||||||||||||
Equity in Net income (Loss) of Affiliates, and others | 7 | (17 | ) | (24 | ) | — | ||||||||||
Segment Profits | ¥ | 74,527 | ¥ | 84,211 | ¥ | 9,684 | 13 | |||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 208 | ¥ | 42 | ¥ | (166 | ) | (80 | ) | |||||||
Installment loans | 1,852,761 | 2,049,980 | 197,219 | 11 | ||||||||||||
Investment in operating leases | 44,319 | 29,810 | (14,509 | ) | (33 | ) | ||||||||||
Investment in securities | 1,260,291 | 1,474,750 | 214,459 | 17 | ||||||||||||
Investment in affiliates | 702 | 631 | (71 | ) | (10 | ) | ||||||||||
Goodwill, intangible assets acquired in business combinations | 16,224 | 16,224 | 0 | — | ||||||||||||
Total Segment Assets | ¥ | 3,174,505 | ¥ | 3,571,437 | ¥ | 396,932 | 13 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues | ¥ | 98,426 | ¥ | 111,634 | ¥ | 13,208 | 13 | |||||||||
Gains on investment securities and dividends | 17,453 | 16,565 | (888 | ) | (5 | ) | ||||||||||
Operating leases | 111,569 | 121,913 | 10,344 | 9 | ||||||||||||
Services income | 238,615 | 233,110 | (5,505 | ) | (2 | ) | ||||||||||
Other | 13,556 | 7,508 | (6,048 | ) | (45 | ) | ||||||||||
Total Segment Revenues | 479,619 | 490,730 | 11,111 | 2 | ||||||||||||
Interest expense | 51,536 | 62,821 | 11,285 | 22 | ||||||||||||
Costs of operating leases | 64,363 | 62,529 | (1,834 | ) | (3 | ) | ||||||||||
Services expense | 70,419 | 66,543 | (3,876 | ) | (6 | ) | ||||||||||
Selling, general and administrative expenses | 177,852 | 183,657 | 5,805 | 3 | ||||||||||||
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities | 8,101 | 10,903 | 2,802 | 35 | ||||||||||||
Other | 10,675 | 8,610 | (2,065 | ) | (19 | ) | ||||||||||
Total Segment Expenses | 382,946 | 395,063 | 12,117 | 3 | ||||||||||||
Segment Operating Income | 96,673 | 95,667 | (1,006 | ) | (1 | ) | ||||||||||
Equity in Net income (Loss) of Affiliates, and others | 9,949 | 29,777 | 19,828 | 199 | ||||||||||||
Segment Profits | ¥ | 106,622 | ¥ | 125,444 | ¥ | 18,822 | 18 | |||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases | ¥ | 368,721 | ¥ | 362,391 | ¥ | (6,330 | ) | (2 | ) | |||||||
Installment loans | 534,586 | 814,847 | 280,261 | 52 | ||||||||||||
Investment in operating leases | 491,132 | 509,117 | 17,985 | 4 | ||||||||||||
Investment in securities | 413,440 | 385,339 | (28,101 | ) | (7 | ) | ||||||||||
Property under facility operations and servicing assets | 43,995 | 44,149 | 154 | 0 | ||||||||||||
Inventories | 5,923 | 3,161 | (2,762 | ) | (47 | ) | ||||||||||
Advances for DFL and operating lease | 9,487 | 10,932 | 1,445 | 15 | ||||||||||||
Investment in affiliates | 314,569 | 556,682 | 242,113 | 77 | ||||||||||||
Goodwill, intangible assets acquired in business combinations | 426,966 | 452,310 | 25,344 | 6 | ||||||||||||
Total Segment Assets | ¥ | 2,608,819 | ¥ | 3,138,928 | ¥ | 530,109 | 20 | |||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Finance revenues: | ||||||||||||||||
Finance revenues | ¥ | 228,252 | ¥ | 242,893 | ¥ | 14,641 | 6 | |||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Direct financing leases: | ||||||||||||||||
New equipment acquisitions | ¥ | 472,070 | ¥ | 439,252 | ¥ | (32,818) | (7 | ) | ||||||||
Japan | 264,953 | 254,613 | (10,340) | (4 | ) | |||||||||||
Overseas | 207,117 | 184,639 | (22,478) | (11 | ) | |||||||||||
Investment in direct financing leases | 1,194,888 | 1,155,632 | (39,256) | (3 | ) | |||||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in direct financing leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 489,687 | ¥ | 495,605 | ¥ | 5,918 | 1 | |||||||||
Industrial equipment | 240,646 | 222,049 | (18,597 | ) | (8 | ) | ||||||||||
Electronics | 154,522 | 143,209 | (11,313 | ) | (7 | ) | ||||||||||
Information-related and office equipment | 105,040 | 101,504 | (3,536 | ) | (3 | ) | ||||||||||
Commercial services equipment | 53,065 | 51,671 | (1,394 | ) | (3 | ) | ||||||||||
Other | 151,928 | 141,594 | (10,334 | ) | (7 | ) | ||||||||||
Total | ¥ | 1,194,888 | 1,155,632 | ¥ | (39,256 | ) | (3 | ) | ||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
New loans added | ¥ | 1,397,467 | ¥ | 1,462,009 | ¥ | 64,542 | 5 | |||||||||
Japan | 945,436 | 1,047,720 | 102,284 | 11 | ||||||||||||
Overseas | 452,031 | 414,289 | (37,742 | ) | (8 | ) | ||||||||||
Installment loans | 2,823,769 | 3,277,670 | 453,901 | 16 | ||||||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Installment loans: | ||||||||||||||||
Consumer borrowers in Japan | ||||||||||||||||
Real estate loans | ¥ | 1,375,380 | ¥ | 1,560,832 | ¥ | 185,452 | 13 | |||||||||
Card loans | 264,323 | 245,139 | (19,184 | ) | (7 | ) | ||||||||||
Other | 34,333 | 32,962 | (1,371 | ) | (4 | ) | ||||||||||
Subtotal | 1,674,036 | 1,838,933 | 164,897 | 10 | ||||||||||||
Corporate borrowers in Japan | ||||||||||||||||
Real estate companies | 278,076 | 288,851 | 10,775 | 4 | ||||||||||||
Non-recourse loans | 18,318 | 53,067 | 34,749 | 190 | ||||||||||||
Commercial, industrial and other companies | 301,083 | 266,675 | (34,408 | ) | (11 | ) | ||||||||||
Subtotal | 597,477 | 608,593 | 11,116 | 2 | ||||||||||||
Overseas | ||||||||||||||||
Non-recourse loans | 54,987 | 49,915 | (5,072 | ) | (9 | ) | ||||||||||
Commercial, industrial companies and other | 478,336 | 763,813 | 285,477 | 60 | ||||||||||||
Subtotal | 533,323 | 813,728 | 280,405 | 53 | ||||||||||||
Purchased loans* | 18,933 | 16,416 | (2,517 | ) | (13 | ) | ||||||||||
Total | ¥ | 2,823,769 | ¥ | 3,277,670 | ¥ | 453,901 | 16 | |||||||||
As of March 31, | ||||||||
2018 | 2019 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due direct financing leases and allowances for direct financing leases: | ||||||||
90+ days past-due direct financing leases | ¥ | 12,084 | ¥ | 14,807 | ||||
90+ days past-due direct financing leases as a percentage of the balance of investment in direct financing leases | 1.01 | % | 1.28 | % | ||||
Provision as a percentage of average balance of investment in direct financing leases* | 0.19 | % | 0.37 | % | ||||
Allowance for direct financing leases | ¥ | 10,089 | ¥ | 12,049 | ||||
Allowance for direct financing leases as a percentage of the balance of investment in direct financing leases | 0.84 | % | 1.04 | % | ||||
The ratio of charge-offs as a percentage of the average balance of investment in direct financing leases* | 0.22 | % | 0.19 | % | ||||
As of March 31, | ||||||||
2018 | 2019 | |||||||
(Millions of yen, except percentage data) | ||||||||
90+ days past-due loans and allowance for installment loans: | ||||||||
90+ days past-due loans not individually evaluated for impairment | ¥ | 12,748 | ¥ | 12,412 | ||||
90+ days past-due loans not individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment | 0.46 | % | 0.39 | % | ||||
Provision as a percentage of average balance of installment loans not individually evaluated for impairment* | 0.48 | % | 0.50 | % | ||||
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment | ¥ | 30,239 | ¥ | 32,231 | ||||
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment | 1.09 | % | 1.00 | % | ||||
The ratio of charge-offs as a percentage of the average balance of loans not individually evaluated for impairment* | 0.36 | % | 0.44 | % | ||||
As of March 31, | ||||||||
2018 | 2019 | |||||||
(Millions of yen) | ||||||||
90+ days past-due loans not individually evaluated for impairment: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 2,077 | ¥ | 1,388 | ||||
Card loans | 1,785 | 1,671 | ||||||
Other | 8,464 | 8,993 | ||||||
Subtotal | 12,326 | 12,052 | ||||||
Overseas | ||||||||
Other | 422 | 360 | ||||||
Total | ¥ | 12,748 | ¥ | 12,412 | ||||
As of March 31, | ||||||||
2018 | 2019 | |||||||
(Millions of yen) | ||||||||
Loans individually evaluated for impairment: | ||||||||
Impaired loans | ¥ | 47,142 | ¥ | 58,827 | ||||
Impaired loans requiring an allowance | 39,329 | 41,234 | ||||||
Allowance for loans individually evaluated for impairment* | 14,344 | 13,731 | ||||||
As of March 31, | ||||||||
2018 | 2019 | |||||||
(Millions of yen) | ||||||||
Impaired loans: | ||||||||
Consumer borrowers in Japan | ||||||||
Real estate loans | ¥ | 3,544 | ¥ | 4,378 | ||||
Card loans | 4,060 | 3,945 | ||||||
Other | 11,082 | 14,216 | ||||||
Subtotal | 18,686 | 22,539 | ||||||
Corporate borrowers in Japan | ||||||||
Real estate companies | 1,598 | 1,540 | ||||||
Non-recourse loans | 254 | 232 | ||||||
Commercial, industrial and other companies | 9,174 | 7,103 | ||||||
Subtotal | 11,026 | 8,875 | ||||||
Overseas | ||||||||
Non-recourse loans | 3,491 | 4,216 | ||||||
Commercial, industrial companies and other | 8,838 | 19,433 | ||||||
Subtotal | 12,329 | 23,649 | ||||||
Purchased loans | 5,101 | 3,764 | ||||||
Total | ¥ | 47,142 | ¥ | 58,827 | ||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Provision for doubtful receivables on direct financing leases and probable loan losses: | ||||||||||||||||
Beginning balance | ¥ | 59,227 | ¥ | 54,672 | ¥ | (4,555 | ) | (8 | ) | |||||||
Direct financing leases | 10,537 | 10,089 | (448 | ) | (4 | ) | ||||||||||
Loans not individually evaluated for impairment | 28,622 | 30,239 | 1,617 | 6 | ||||||||||||
Loans individually evaluated for impairment | 20,068 | 14,344 | (5,724 | ) | (29 | ) | ||||||||||
Provision | 17,265 | 22,525 | 5,260 | 30 | ||||||||||||
Direct financing leases | 2,241 | 4,324 | 2,083 | 93 | ||||||||||||
Loans not individually evaluated for impairment | 13,526 | 15,000 | 1,474 | 11 | ||||||||||||
Loans individually evaluated for impairment | 1,498 | 3,201 | 1,703 | 114 | ||||||||||||
Charge-offs (net) | (19,465 | ) | (19,213 | ) | 252 | (1 | ) | |||||||||
Direct financing leases | (2,701 | ) | (2,255 | ) | 446 | (17 | ) | |||||||||
Loans not individually evaluated for impairment | (9,979 | ) | (13,022 | ) | (3,043 | ) | 30 | |||||||||
Loans individually evaluated for impairment | (6,785 | ) | (3,936 | ) | 2,849 | (42 | ) | |||||||||
Other* | (2,355 | ) | 27 | 2,382 | — | |||||||||||
Direct financing leases | 12 | (109 | ) | (121 | ) | — | ||||||||||
Loans not individually evaluated for impairment | (1,930 | ) | 14 | 1,944 | — | |||||||||||
Loans individually evaluated for impairment | (437 | ) | 122 | 559 | — | |||||||||||
Ending balance | 54,672 | 58,011 | 3,339 | 6 | ||||||||||||
Direct financing leases | 10,089 | 12,049 | 1,960 | 19 | ||||||||||||
Loans not individually evaluated for impairment | 30,239 | 32,231 | 1,992 | 7 | ||||||||||||
Loans individually evaluated for impairment | 14,344 | 13,731 | (613 | ) | (4 | ) | ||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in securities: | ||||||||||||||||
New securities added | ¥ | 439,383 | ¥ | 623,172 | ¥ | 183,789 | 42 | |||||||||
Japan | 300,406 | 504,515 | 204,109 | 68 | ||||||||||||
Overseas | 138,977 | 118,657 | (20,320 | ) | (15 | ) | ||||||||||
Investment in securities | 1,729,455 | 1,928,916 | 199,461 | 12 | ||||||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Gains on investment securities and dividends: | ||||||||||||||||
Net gains on investment securities | ¥ | 39,139 | ¥ | 14,273 | ¥ | (24,866 | ) | (64 | ) | |||||||
Dividends income, other | 4,163 | 1,685 | (2,478 | ) | (60 | ) | ||||||||||
Total | ¥ | 43,302 | ¥ | 15,958 | ¥ | (27,344 | ) | (63 | ) | |||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Operating leases: | ||||||||||||||||
Operating lease revenues | ¥ | 379,665 | ¥ | 413,918 | ¥ | 34,253 | 9 | |||||||||
Costs of operating leases | 252,327 | 257,321 | 4,994 | 2 | ||||||||||||
New equipment acquisitions | 495,609 | 544,715 | 49,106 | 10 | ||||||||||||
Japan | 215,832 | 233,721 | 17,889 | 8 | ||||||||||||
Overseas | 279,777 | 310,994 | 31,217 | 11 | ||||||||||||
Investment in operating leases | 1,344,926 | 1,335,959 | (8,967 | ) | (1 | ) | ||||||||||
As of March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Investment in operating leases by category: | ||||||||||||||||
Transportation equipment | ¥ | 864,008 | ¥ | 888,625 | ¥ | 24,617 | 3 | |||||||||
Measuring and information-related equipment | 89,326 | 105,179 | 15,853 | 18 | ||||||||||||
Real estate | 348,867 | 297,343 | (51,524 | ) | (15 | ) | ||||||||||
Other | 12,210 | 12,890 | 680 | 6 | ||||||||||||
Accrued rental receivables | 30,515 | 31,922 | 1,407 | 5 | ||||||||||||
Total | ¥ | 1,344,926 | ¥ | 1,335,959 | ¥ | (8,967 | ) | (1 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Life insurance premiums and related investment income and life insurance costs: | ||||||||||||||||
Life insurance premiums | ¥ | 299,320 | ¥ | 330,811 | ¥ | 31,491 | 11 | |||||||||
Life insurance-related investment income | 52,270 | 16,325 | (35,945 | ) | (69 | ) | ||||||||||
Total | ¥ | 351,590 | ¥ | 347,136 | ¥ | (4,454 | ) | (1 | ) | |||||||
Life insurance costs | ¥ | 255,070 | ¥ | 246,533 | ¥ | (8,537 | ) | (3 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Breakdown of life insurance-related investment income (loss): | ||||||||||||||||
Net income on investment securities | ¥ | 58,921 | ¥ | 10,756 | ¥ | (48,165 | ) | (82 | ) | |||||||
Losses recognized in income on derivative | (7,332 | ) | (1,348 | ) | 5,984 | (82 | ) | |||||||||
Interest on loans, income on real estate under operating leases, and others | 681 | 6,917 | 6,236 | 916 | ||||||||||||
Total | ¥ | 52,270 | ¥ | 16,325 | ¥ | (35,945 | ) | (69 | ) | |||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Sales of goods and real estate, Inventories: | ||||||||||||||||
Sales of goods and real estate | ¥ | 1,079,052 | ¥ | 596,165 | ¥ | (482,887 | ) | (45 | ) | |||||||
Costs of goods and real estate sold | 1,003,509 | 535,261 | (468,248 | ) | (47 | ) | ||||||||||
New real estate added | 83,120 | 97,397 | 14,277 | 17 | ||||||||||||
Inventories | 111,001 | 115,695 | 4,694 | 4 | ||||||||||||
As of and for the year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Services, Property under Facility Operations | ||||||||||||||||
Services income | ¥ | 780,910 | ¥ | 818,794 | ¥ | 37,884 | 5 | |||||||||
Services expense | 482,796 | 508,320 | 25,524 | 5 | ||||||||||||
New assets added | 82,206 | 104,839 | 22,633 | 28 | ||||||||||||
Japan | 76,206 | 103,939 | 27,733 | 36 | ||||||||||||
Overseas | 6,000 | 900 | (5,100 | ) | (85 | ) | ||||||||||
Property under Facility Operations | 434,786 | 441,632 | 6,846 | 2 | ||||||||||||
Year ended March 31, | Change | |||||||||||||||
2018 | 2019 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Selling, general and administrative expenses: | ||||||||||||||||
Personnel expenses | ¥ | 241,508 | ¥ | 248,519 | ¥ | 7,011 | 3 | |||||||||
Selling expenses | 82,850 | 79,015 | (3,835 | ) | (5 | ) | ||||||||||
Administrative expenses | 102,105 | 104,582 | 2,477 | 2 | ||||||||||||
Depreciation of office facilities | 5,131 | 4,912 | (219 | ) | (4 | ) | ||||||||||
Total | ¥ | 431,594 | ¥ | 437,028 | ¥ | 5,434 | 1 | |||||||||
LIQUIDITY AND CAPITAL RESOURCES
Funding Activities
ORIX Group formulates funding policies that are designed to maintain and improve procurement efficiencystability and reduce liquidity risk. As a concrete measure to stabilizemaintain and improve procurement efficiencystability while engaging in activities such as borrowing, capital market procurement and securitization of assets, we are diversifying our procurement methods and our country and investor base. To reduce liquidity risk, we are prolonging our borrowings from financial
institutions and issuing long-term corporate bonds domestically and internationally with dispersed redemption periods. We are also holding cash and entering into committed credit facilities agreements. In order to maintain an appropriate level of liquidity at hand, we conduct stress tests from the perspective of both fundingprocurement stability and financial efficiency and review the necessary levels accordingly. Also, ORIX Group considers reducing procurement costs to be an important issue. For this reason, we place great importance on ratings by rating agencies and strive to maintain a certain level of rating. Furthermore, we believe that maintaining our ratings are effective not only in terms of minimizing procurement costs, but also facilitating capital market procurement when in unstable financial market conditions.
COVID-19
ORIX, Group, from the perspective of liquidity risk reduction and financial efficiency including procurement costs, is primarily responsible for accessing liquidity for the ORIX Group and for managing the allocation of liquidity to its subsidiaries. ORIX Bank and ORIX Life Insurance are regulated by Japanese financial authorities. They are our main regulated subsidiaries in terms of liquidity controls, although several other subsidiaries also operate under liquidity control related regulations. The impact of
COVID-19
will affect the funding of those group companies, but we believe that they are currently being managed properly.For more information regarding our liquidity risk management, see “Risk Management” under this Item 5.
Group Liquidity Management
ORIX is primarily responsible for accessing liquidity for ORIX Group and for managing the allocation of liquidity to domestic and overseas subsidiaries. In managing our capital resources and controlling liquidity risk, we employ various measures, including a cash management system for supplying funds to, and receiving funds from, our major domestic subsidiaries, other than regulated subsidiaries like ORIX Bank and ORIX Life Insurance. Our overseas subsidiaries rely primarily on local funding sources such as borrowings from local financial institutions and issuing bonds in local capital markets, but they may also obtain loans from ORIX. We also support liquidity levels of overseas subsidiaries by establishing local commitment lines and maintaining a multi-currency commitment linelines available to ORIX and certain of its overseas subsidiaries.
ORIX Bank obtains most of the funds it needs to operate its business through deposit taking. Although ORIX Bank provides loans to several companies in the ordinary course of its business, such loans are subject to a
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maximum limit set by the Japanese Banking Act. Under such regulations, ORIX Bank is restricted from making loans to other members of ORIX Group in an aggregate amount exceeding a regulatory limit. ORIX Life Insurance underwrites insurance, receives insurance premiums from policyholders, and conducts financing and investment activities, including lending. Lending from ORIX Life Insurance to other members of ORIX Group is subject to regulation, including under the Japanese Insurance Business Act. For these reasons, ORIX Group manages its liquidity separately from ORIX Bank and ORIX Life Insurance.
Sources of Liquidity
Borrowings from Financial Institutions
ORIX Group borrows from a variety of sources, including major banks, regional banks, foreign banks, life insurance companies, casualty insurance companies and financial institutions associated with agricultural
cooperatives. As of March 31, 2020,2021, the number of our lenders exceededwas about 200. We have promoted regularcommunications and established positive working relationships with financial institutions in Japan and overseas. The majority of our loan balances consists of borrowings from Japanese financial institutions. As of March 31, 20192020 and 2020,2021, short-term debt from Japanese and foreign financial institutions were ¥268,488¥319,122 million and ¥319,122¥291,578 million, respectively, while long-term debt from financial institutions were ¥3,010,880¥3,094,474 million and ¥3,094,474¥3,189,083 million, respectively.
face-to-face
Committed Credit Facilities
We regularly enter into committed credit facilities agreements, including syndicated agreements, with financial institutions to secure liquidity. The maturity dates of these committed credit facilities are staggered to prevent an overlap of contract renewal periods. The total amount of our committed credit facilities as of March 31, 20192020 and 20202021 were ¥497,882¥569,862 million and ¥569,862¥612,737 million, respectively. Of these figures, the unused amount as of March 31, 20192020 and 20202021 were ¥346,609¥427,564 million and ¥427,564¥524,451 million, respectively. A partportion of thethese facilities is arranged to be drawn down in foreign currencies by ORIX and certain of our subsidiaries.Theoverseas subsidiaries. The decision to enter into a committed credit facility is made based on factors including our balance of cash and cash equivalents and repayment schedules of short-term debt such as CP.
Debt from the Capital Markets
Our debt from capital markets is mainly composed of bonds, MTNs, CP, and securitization of leases, loans receivables and other assets. In fiscal 2020 and 2021, we issued unsecured subordinated bonds with interest payment deferrable clauses and optional early redemption conditions (hybrid bonds) in Japan.
Bonds and MTNs
We regularly issue straight bonds and MTNs domestically and internationally and, in fiscal 2020,2021, issued unsecured subordinated bonds with interest payment deferrable clauses and optional early redemption conditions (hybrid bonds), each to diversify our funding sources and maintain longer liability maturities.
The total balance of bonds and MTNs issued as of March 31, 20192020 and 20202021 were ¥997,542¥1,022,740 million and ¥1,022,740¥1,069,720 million, respectively, of which bonds and MTNs amounting to ¥62,699¥53,428 million and ¥53,428¥58,293 million, respectively, were issued by foreignoverseas subsidiaries.
As of March 31, 20192020 and 2020,2021, the balance of bonds issued by ORIX for domestic institutional investors were ¥214,510¥293,941 million and ¥293,941¥378,614 million, respectively, while the balance of bonds issued by ORIX for individual investors were ¥264,320¥234,564 million and ¥234,564¥159,747 million, respectively. The balancebalances of bonds and MTNs issued outside Japan were ¥453,973¥438,776 million and ¥438,776¥462,883 million as of March 31, 20192020 and 2020,2021, respectively.
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We plan to continue to issue bonds and MTNs in a balanced manner to institutional and individual investors both inside and outside Japan in line with our strategy of maintaining and improving procurement efficiencystability and reducing liquidity risk.
CP
We offer CP as a direct financing source, and have successfully obtained a diverse range of investors such as financial institutions and investment trusts, as well as private corporations. We consider our liquidity levels and stagger the dates of issuance and maturity over time so as to avoid significant overlap. The balancebalances of outstanding CP as of March 31, 20192020 and 20202021 were ¥41,061¥17,710 million and ¥17,710¥14,355 million, respectively.
Securitization
We securitize leases and loan receivables and other assets in Japan and securitize loan receivables outside Japan.assets. We recognize liabilities consolidated with such investments as our liabilities when required under applicable accounting standards. The total amountamounts of payables under securitized lease and loan receivables and other assets as of March 31, 20192020 and 20202021 were ¥177,800¥162,140 million and ¥162,140¥159,366 million, respectively.
Deposits
ORIX Bank and ORIX Asia Limited each accept deposits from customers. These deposits taking subsidiaries are regulated institutions, and loans from these subsidiaries to ORIX Group entities are subject to maximum regulatory limits.
The majority of deposits are attributable to ORIX Bank, which attracts both corporate and retail deposits, and which has seen sustained growth in deposits outstanding. Deposit balances of ORIX Bank as of March 31, 20192020 and 20202021 were ¥1,916,253¥2,221,930 million and ¥2,221,930¥2,303,552 million, respectively.
Short-term and long-term debt and deposits
Short-term Debt
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Short-term debt: | ||||||||||||||||
Borrowings from financial institutions | ¥ | 268,488 | ¥ | 319,122 | ¥ | 50,634 | 19 | |||||||||
Commercial paper | 41,061 | 17,710 | (23,351 | ) | (57 | ) | ||||||||||
Total short-term debt | ¥ | 309,549 | ¥ | 336,832 | ¥ | 27,283 | 9 | |||||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Short-term debt : | ||||||||||||||||
Borrowings from financial institutions | ¥ | 319,122 | ¥ | 291,578 | ¥ | (27,544 | ) | (9 | ) | |||||||
Medium-term notes | 0 | 1,336 | 1,336 | — | ||||||||||||
Commercial paper | 17,710 | 14,355 | (3,355 | ) | (19 | ) | ||||||||||
Total short-term debt | ¥ | 336,832 | ¥ | 307,269 | ¥ | (29,563 | ) | (9 | ) | |||||||
| Note: | The total amount includes liabilities of consolidated VIEs, for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company and subsidiaries. Such liabilities as of March 31, |
Short-term debt as of March 31, 20202021 was ¥336,832¥307,269 million. The ratio was 7% of total debt (excluding deposits) as of March 31, 20192020 and 2020.2021. As of March 31, 2020,2021, 95% of short-term debt was borrowings from financial institutions.
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Long-term debt
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Long-term debt: | ||||||||||||||||
Borrowings from financial institutions | ¥ | 3,010,880 | ¥ | 3,094,474 | ¥ | 83,594 | 3 | |||||||||
Bonds | 807,460 | 845,938 | 38,478 | 5 | ||||||||||||
Medium-term notes | 190,082 | 176,802 | (13,280 | ) | (7 | ) | ||||||||||
Payable under securitized lease and loan receivables and investment in securities | 177,800 | 162,140 | (15,660 | ) | (9 | ) | ||||||||||
Total long-term debt | ¥ | 4,186,222 | ¥ | 4,279,354 | ¥ | 93,132 | 2 | |||||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Long-term debt : | ||||||||||||||||
Borrowings from financial institutions | ¥ | 3,094,474 | ¥ | 3,189,083 | ¥ | 94,609 | 3 | |||||||||
Bonds | 845,938 | 927,088 | 81,150 | 10 | ||||||||||||
Medium-term notes | 176,802 | 141,296 | (35,506 | ) | (20 | ) | ||||||||||
Payable under securitized loan receivables and other assets | 162,140 | 159,366 | (2,774 | ) | (2 | ) | ||||||||||
Total long-term debt | ¥ | 4,279,354 | ¥ | 4,416,833 | ¥ | 137,479 | 3 | |||||||||
| Note: | The total amount includes liabilities of consolidated VIEs, for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company and subsidiaries. Such liabilities as of March 31, |
Long-term debt as of March 31, 20202021 was ¥4,279,354¥4,416,833 million. The ratio was 93% of total debt (excluding deposits) as of March 31, 20192020 and 2020.2021. Borrowings from financial institutions comprised 72% of the long-term debt as of March 31, 2020.2021.
For information regarding the repayment schedule of our long-term debt and interest rates for longshort-term and short-termlong-term debt, see Note 17 of “Item 18. Financial Statements.”
We have entered into interest rate swaps and other derivative contracts to manage risk associated with fluctuations in interest rates. For information with respect to derivative financial instruments and hedging, see Note 29 of “Item 18. Financial Statements.”
Deposits
As of March 31, | Change | |||||||||||||||
2019 | 2020 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Deposits | ¥ | 1,927,741 | ¥ | 2,231,703 | ¥ | 303,962 | 16 | |||||||||
As of March 31, | Change | |||||||||||||||
2020 | 2021 | Amount | Percent (%) | |||||||||||||
(Millions of yen, except percentage data) | ||||||||||||||||
Deposits | ¥ | 2,231,703 | ¥ | 2,317,785 | ¥ | 86,082 | 4 | |||||||||
| Note: | VIEs did not have any deposits as of March 31, |
For further information with respect to deposits, see Note 18 of “Item 18. Financial Statements.”
CASH FLOWS
Our cash flows are primarily generated from the followings:
cash outflows and inflows which are generated primarily from principal payments received under net investment in lease, costs of inventories and sales of inventories, and services income and services expense classified as cash flows from operating activities;
cash outflows and inflows which are generated primarily from purchases of lease equipment and proceeds from sales of lease equipment, purchases of securities and proceeds from sales of securities, and execution of installment loans to customers and principal payments received under installment loans classified as cash flows from investing activities; and
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cash outflows and inflows which are generated primarily from proceeds from short-term and long-term debt, repayment of short-term and long-term debt, and deposits due to customers classified as cash flows from financing activities.
The use of cash is heavily dependent on the volume of operating assets for new business. As new business volumes for assets such as leases and loans increase, we require more cash to meet the needs, while a decrease in new business volumes results in a less use of cash and an increase in debt repayment.
For cash flow information regarding interest and income tax payments, see Note 65 of “Item 18. Financial Statements.”
Year Ended March 31, 2021 Compared to Year Ended March 31, 2020
Cash, cash equivalents and restricted cash decreased by ¥55,709 million to ¥1,079,575 million compared to March 31, 2020.
Cash flows provided by operating activities were ¥1,095,676 million during fiscal 2021, up from ¥1,042,466 million during fiscal 2020. This change resulted primarily from an increase in life insurance premiums due to an increase in
in-force
life insurance contracts, partially offset by a decrease in services income.Cash flows used in investing activities were ¥1,203,252 million during fiscal 2021, down from ¥1,470,486 million during fiscal 2020. This change resulted primarily from a decrease in installment loans made to customers, partially offset by a decrease in proceeds from sales of operating lease assets.
Cash flows provided by financing activities were ¥39,884 million during fiscal 2021, down from ¥288,703 million during fiscal 2020. This change resulted primarily from a decrease in deposits due to customers, partially offset by an increase in proceeds from debt with maturities longer than three months.
Year Ended March 31, 2020 Compared to Year Ended March 31, 2019
Cash, cash equivalents and restricted cash decreased by ¥148,296 million to ¥1,135,284 million compared to March 31, 2019. New Lease Standard has been adopted since April 1, 2019. For further information, see Note 1 of “Item 18. Financial Statements.”
Cash flows provided by operating activities were ¥1,042,466 million during fiscal 2020, up from ¥587,678 million during fiscal 2019, primarily because the classification of cash flows from principal payments received under net investment in leases changed from cash flows from investing activities to cash flows from operating activities, starting from fiscal 2020.
Cash flows used in investing activities were ¥1,470,486 million during fiscal 2020, up from ¥873,951 million during fiscal 2019, primarily because the classification of cash flows from principal payments received under net investment in leases changed from cash flows from investing activities to cash flows from operating activities, starting from fiscal 2020.
Cash flows provided by financing activities were ¥288,703 million during fiscal 2020, up from ¥166,647 million during fiscal 2019. This change resulted primarily from an increase in deposit taking.
COMMITMENTS FOR CAPITAL EXPENDITURES
As of March 31, 2020,2021, we had commitments for the purchase of equipment to be leased in the amount of ¥3,027¥1,573 million. For information on commitments, guarantees and contingent liabilities, see Note 33 of “Item 18. Financial Statements.”
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OFF—BALANCE SHEET ARRANGEMENTS
USE OF SPECIAL PURPOSE ENTITIES
We periodically securitize various financial assets such as lease receivables and loan receivables. These securitizations allow us to access the capital markets, provide us with alternative sources of funding and diversify our investor base and help us to mitigate, to some extent, credit risk associated with our customers and risk associated with fluctuations in interest rates.
In the securitization process, the assets for securitization are sold to special purpose entities (hereinafter, “SPEs”), which issue asset-backed securities to investors.
We expect to continue to utilize special purpose entity (hereinafter, “SPE”) structures for securitization of assets. For further information on our transfer of financial assets, see Note 13 of “Item 18. Financial Statements.”
Investment Products
We provide investment products to our customers that employ a contractual mechanism known in Japan as a, which is in effect a type of SPE. We arrange and marketproducts to investors as a means to finance the purchase of aircraft, ships or other large-ticket items to be leased to third parties. A portion of the funds necessary to purchase the item is contributed by such investors, while the remainder is borrowed by thefrom one or more financial institutions in the form of ainvestors (and any lenders to the) retain all of the economic risks and rewards in connection with the purchase and leasing activities of the, and all related gains or losses are recorded on the financial statements of investors in the. We are responsible for the arrangement and marketing of these products, and may act as servicer or administrator intransactions. Fee income for arranging and administering these transactions is recognized in our consolidated financial statements. In mosttransactions, excluding someand SPE, we do not guarantee or otherwise have any financial commitments or exposure with respect to theor its related SPE and, accordingly, their assets are not reflected on our consolidated balance sheet.
kumiai
kumiai
kumiai
non-recourse
loan. Thekumiai
kumiai
kumiai
kumiai
kumiai
kumiai
kumiai
kumiai
Other Financial Transactions
We occasionally enter into loans, equity or other investments in SPEs in connection with finance transactions related to aircraft, ships and real estate, as well as transactions involving investment funds, in addition to real estate purchases and development projects. All transactions involving use of SPE structures are evaluated to determine whether we hold a variable interest that would result in our being defined as the primary beneficiary of the SPE. When we are considered to own the primary beneficial interest in the SPEs, the SPEs are fully consolidated into our consolidated financial statements. In all other circumstances our loan, equity or other investments are recorded on our consolidated balance sheets as appropriate.
See Note 14 of “Item 18. Financial Statements” for further information concerning our SPEs.
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
Not applicable.
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TREND INFORMATION
See the discussion under “—Results of Operations” and “—Liquidity and Capital Resources.”
COMMITMENTS
The table below sets forth the maturities of guarantees and other commitments as of March 31, 2020.2021.
Amount of commitment expiration per period | ||||||||||||||||||||
Total | Within 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Commitments: | ||||||||||||||||||||
Guarantees | ¥ | 704,170 | ¥ | 109,281 | ¥ | 211,631 | ¥ | 247,814 | ¥ | 135,444 | ||||||||||
Committed credit lines and other | 456,379 | 200,946 | 67,770 | 29,309 | 158,354 | |||||||||||||||
Total commercial commitments | ¥ | 1,160,549 | ¥ | 310,227 | ¥ | 279,401 | ¥ | 277,123 | ¥ | 293,798 | ||||||||||
Amount of commitment expiration per period | ||||||||||||||||||||
Total | Within 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Commitments: | ||||||||||||||||||||
Guarantees | ¥ | 809,227 | ¥ | 85,145 | ¥ | 205,864 | ¥ | 206,502 | ¥ | 311,716 | ||||||||||
Committed credit lines and other | 462,869 | 172,701 | 72,548 | 23,714 | 193,906 | |||||||||||||||
Total commercial commitments | ¥ | 1,272,096 | ¥ | 257,846 | ¥ | 278,412 | ¥ | 230,216 | ¥ | 505,622 | ||||||||||
A subsidiary in the United States is authorized to underwrite, originate, fund and service multi-family and senior housing loans without prior approval from Federal National Mortgage Association (“Fannie Mae”) under the Delegated Underwriting and Servicing program and Federal Home Loan Mortgage Corporation (“Freddie Mac”) under the Delegated Underwriting Initiative program. As part of these programs, Fannie Mae and Freddie Mac provide a commitment to purchase the loans.
Under these programs, the subsidiary guarantees the performance of the loans transferred to Fannie Mae and Freddie Mac and has the payment or performance risks of the guarantees to absorb some of the losses when losses arise from the transferred loans. The amount attributable to the guarantee included in the table above is ¥355,452¥365,546 million as of March 31, 2020.2021.
The subsidiary makes certain representations and warranties in connection with the sale of loans through Fannie Mae and Freddie Mac, including among others, that: the mortgage meets Fannie Mae and Freddie Mac requirements; there is a valid lien on the property; the relevant transaction documents are valid and enforceable; and title insurance is maintained on the property. If it is determined that a representation and warranty has been breached, the subsidiary may be required to repurchase the related loans or indemnify Fannie Mae and Freddie Mac for any related losses incurred. The subsidiary had no such repurchase claims during fiscal 2020.2021.
For a discussion of commitments, guarantee and contingent liabilities, see Note 33 of “Item 18. Financial Statements.”
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TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The table below sets forth the maturities of contractual cash obligations as of March 31, 2020.2021.
Payments due by period | ||||||||||||||||||||
Total | Within 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Contractual cash obligations: | ||||||||||||||||||||
Deposits | ¥ | 2,231,703 | ¥ | 1,472,739 | ¥ | 410,516 | ¥ | 348,448 | ¥ | 0 | ||||||||||
Long-term debt | 4,279,354 | 658,813 | 1,232,292 | 959,427 | 1,428,822 | |||||||||||||||
Unconditional purchase obligations of lease equipment | 3,027 | 7 | 3,020 | 0 | 0 | |||||||||||||||
Lease liabilities related to lessee leases | 287,556 | 45,788 | 58,551 | 46,460 | 136,757 | |||||||||||||||
Unconditional noncancelable contracts for computer systems | 5,911 | 3,183 | 2,344 | 383 | 1 | |||||||||||||||
Interest rate swaps: | ||||||||||||||||||||
Notional amount (floating to fixed) | 502,537 | 39,839 | 107,821 | 34,801 | 320,076 | |||||||||||||||
Total contractual cash obligations | ¥ | 7,310,088 | ¥ | 2,220,369 | ¥ | 1,814,544 | ¥ | 1,389,519 | ¥ | 1,885,656 | ||||||||||
Payments due by period | ||||||||||||||||||||
Total | Within 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
(Millions of yen) | ||||||||||||||||||||
Contractual cash obligations: | ||||||||||||||||||||
Deposits | ¥ | 2,317,785 | ¥ | 1,130,583 | ¥ | 652,063 | ¥ | 535,139 | ¥ | 0 | ||||||||||
Long-term debt | 4,416,833 | 704,742 | 1,300,987 | 884,985 | 1,526,119 | |||||||||||||||
Unconditional purchase obligations of lease equipment | 1,573 | 0 | 1,573 | 0 | 0 | |||||||||||||||
Lease liabilities related to lessee leases | 311,836 | 48,795 | 72,066 | 56,158 | 134,817 | |||||||||||||||
Unconditional noncancelable contracts for computer systems | 7,788 | 3,806 | 3,652 | 330 | 0 | |||||||||||||||
Interest rate swaps: | ||||||||||||||||||||
Notional amount (floating to fixed) | 538,380 | 49,866 | 125,434 | 88,505 | 274,575 | |||||||||||||||
Total contractual cash obligations | ¥ | 7,594,195 | ¥ | 1,937,792 | ¥ | 2,155,775 | ¥ | 1,565,117 | ¥ | 1,935,511 | ||||||||||
Items excluded from the above table include short-term debt of ¥336,832¥307,269 million, trade notes, accounts and other payable of ¥282,727¥260,712 million and policy liabilities and policy account balances of ¥1,591,475¥1,822,422 million as of March 31, 2020.2021.
For information on pension plans and derivatives, see Notes 20 and 29 of “Item 18. Financial Statements.” We expect to fund commitments and contractual obligations from one, some or all of our diversified funding sources depending on the amount to be funded, the time to maturity and other characteristics of the commitments and contractual obligations.
For a discussion of debt and deposit-related obligations, see Notes 17 and 18 of “Item 18. Financial Statements.”
For information on lease liabilities, see Notes 76 of “Item 18. Financial Statements.”
RECENT DEVELOPMENTS
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In August 2018, Accounting Standards Update defer the effective date by one year were issued thereafter. These updates change the recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. These updates require an insurance entity to review and, if there is a change, update cash flow assumptions at least annually and to update discount rate used for liability for future policy benefits at each reporting date for nonparticipating traditional long-duration and limited-payment contracts. The effect of updating the discount rate is recognized in other comprehensive income (loss). These updates also require market risk benefits to be measured at fair value, and simplify amortization of deferred acquisition costs. Furthermore, these updates require additional disclosures for long-duration contracts. These updates are effective for fiscal years beginning after December 15, 2021,2022, and interim periods within those fiscal years. Early application is permitted. For the
2018-12
(“Targeted Improvements to the Accounting for Long-Duration Contracts”—ASC 944 (“Financial Services—Insurance”)) was issued, and the original effective date was deferred by two years by related amendments whichliability for future policy benefits and deferred acquisition costs, these updates are applied to contracts in force as of beginning of the earliest period presented (hereinafter, “the transition date” of these updates) on a modified retrospective basis, and an insurance entity may elect to apply retrospectively. For the market risk benefits, these updates are applied retrospectively at the transition date, and the difference between
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fair value and carrying value requires an adjustment to retained earnings at the transition date. The cumulative effect of changes in the instrument-specific credit risk between contract inception date and the transition date should be recognized in accumulated other comprehensive income at the transition date. The Company and its subsidiaries will adopt these updates on April 1, 2022.2023. The Company and its subsidiaries are currently evaluating the effect that the adoption of these updates will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by these updates.
In December 2019, Accounting Standards Update
2019-12
(“Simplifying the Accounting for Income Taxes”—ASC 740 (“Income Taxes”)) was issued. This update removes the exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and other exceptions. This update also simplifies certain other elements of the accounting for the income taxes. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 and early adoption is permitted. The income tax simplifications related to changes in ownership of foreign equity method investments and foreign subsidiaries shall be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The other amendments in this update shall be applied on a retrospective basis to all periods presented, on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, or on a prospective basis. The Company and its subsidiaries will adopt this update on April 1, 2021. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this update.In January 2020, Accounting Standards Update—ASC —ASC 321 (“Investments—Equity Securities”), ASC 323 (“Investments—Equity Method and Joint Ventures), and ASC 815 (“Derivatives and Hedging)) was issued. This update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321 (“Investments—Equity Securities”) immediately before applying or upon discontinuing the equity method. This update also clarifies the scope of considerations for forward contracts and purchased options on certain securities that do not meet the definition of a derivative. This update is effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The Company and its subsidiaries will adopt this update on April 1, 2021. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this update.
2020-01 (“
(“Clarifying the Interactions between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging”In March 2020, Accounting Standards Updateissued. This update providesissued, and related amendments were issued thereafter. These updates provide companies with optional expedients and exceptions for applying generally accepted accounting principles to contract, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This update isThese updates are effective as of March 12, 2020 through December 31, 2022. We are currently in the process of identifying the potential effect on the Company and its subsidiaries’ results of operations or financial position by the adoption of this update.these updates.
2020-04
(“Facilitation of the Effects of Reference Rate Reform on Financial Reporting”—ASC 848 (“Reference Rate Reform”)) was 107
RISK MANAGEMENT
Group-Wide Risk Management System
Risk Management System
The allocation of management resources within ORIX Group is conducted taking into account group-wide risk preferences determined by management strategies and the business strategies of individual business units. We have established our risk management system to appropriately recognize risks relating to Group businesses on a global basis in order to realize allocations of management resources that are appropriate for the risks we face and report such risks to the board of directors, Audit Committee of the board of directors, Executive Committee and Investment and Credit Committee as the situation warrants. The board of directors and executive bodies comprehensively evaluate the performance of business units and the characteristics of suchthe risks they face and implement necessary measures.measures in response thereto. Through this process, we are able to both control our balance sheet and allocate additional management resources to business units with strong potential for growth. To adequately assess group-wide risk, we have established an Enterprise Risk Management Headquarters to control and manage risk throughout ORIX Group and facilitate centralized risk management, and the internal control-related functions work together to analyze and manage risks.
The risk management system has been adopted by the board of directors as a part of our internal control system. The status of the operation of such internal control system is examined and reported to the board of directors annually. For descriptions of our board of directors, Audit Committee, Investment and Credit Committee and other internal committees, see “Item 6. Directors, Senior Management and Employees—Corporate Governance System.”
Management of Principal Risks
We recognize that external environment-related risk, credit risk (risk relating to unpredictable events), business risk, market risk, liquidity risk (risk relating to funding), compliance risk, legal risk, information risk and operational risk external environment-related risk (risk relating to unpredictable events), are the principal risks we face, and we manage each of these risks according to its characteristics.
Credit Risk Management
We define credit risk as uncertainty regarding recovery of credit caused by the debtors’ default or deterioration in their credit standing.
To analyze credit risk, we evaluate factors such as the adequacy of collateral and guarantees, and diversification of the customer’s industry and business. A typical practice is to conduct a comprehensive customer credit evaluation based on the customer’s financial position, cash flow, underlying security interests, profitability and other factors of individual credit transactions.
Moreover, an analysis of our portfolio and measures to establish appropriate credit limits allow us to control exposure to potentially higher risk markets.
We recognize that certain assets that require extra monitoring, including credit extended to debtors who have petitioned for bankruptcy, civil rehabilitation or other insolvency proceedings, or whose bank transactions have been suspended, bills have been dishonored, or debts have not been collected for three months or more. The relevant business units, in cooperation with the credit department, take steps to secure collateral or other guarantees and to begin the collection process. TheWe consolidate accumulated collection knowhow ranging from sending an initial reminder to actively seizing collateral is consolidated in the credit department and is reflectedreflect it in our evaluation criteria for individual credit transactions and portfolio analysis.
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Business Risk Management
We define business risk as uncertainty regarding recovery of investments caused by businesses or investees, variability in market prices for the types of products or services we offer and potential degradation or obsolescence of the products or services we offer or a decline in their quality, and variability in market prices for the types of products or services we offer.quality.
To address new businesses and investments, we monitor business plans and operations using scenario analyses and stress tests when we first begin the business or investment. In addition to
on-going
monitoring, we also evaluate and verify the cost of withdrawal from a business, business area or investment.For products and services we offer, in addition to monitoring quality, we regularly review the content of our product and services line up in response to changes in the business environment and evolving customer needs and endeavor to maintain or improve their quality.
A principal risk relating to operating leases is fluctuation in the residual value of leased properties. To control this risk, we monitor our leased properties inventory, the relevant market environments and the overall business environment. We limit our operating leases to leased properties and other assets with high versatility, and evaluate the sale of such properties and other assets depending on changes in market conditions.
We endeavor to minimize the risk related to fluctuation in market prices for real estate by sufficiently taking into account declines in market prices based on
know-how
we have developed to date, including through our experiences during financial crises.Market Risk Management
We define market risk as the risk of changes in the fair value of assets and liabilities caused by changes in market variables, such as interest rates, exchange rates and stock prices.
We endeavor to comprehensively verify and understand market risks and have established and maintain Group-wide ALM rules to address such risks.
Interest rate risk is comprehensively evaluated based on factors such as the expected impact of interest rate changes on periodic profit and loss and/or the balance sheet, the assets and liabilities positions and the funding environment. The analysis methods we use are modified, as required, depending on the situation.
We generally manage exchange rate risk by using means such as foreign currency-denominated loans, foreign exchange contracts and currency swaps to hedge exchange rate volatility in our business transactions in foreign currencies and overseas investments. We monitor and manage exchange rate risk relating to unhedged foreign currency-denominated assets and retained earnings of foreign subsidiaries using indicators such as VaR (value at risk) and adjusting hedge positions as needed based on changes in the market environment at any given time.
We manage counterparty credit risk and other risks involved in hedging derivative transactions in accordance with internal rules on derivative transaction management.
In response to the transition away from and discontinuation of LIBOR and other interest rate benchmarks, we have taken, and are continuing to take, necessary steps to proactively address the transition, including monitoring external developments, negotiating successor reference rates with relevant counterparties, planning for the circumstances where the transition results in a mismatch with the fallback reference rates used (particularly in the case of derivatives contracts used for hedging purposes), and evaluating the potential impact on our financial results and condition.
For quantitative and qualitative analysis information on market risk, please see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
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Liquidity Risk Management
We define liquidity risk as the risk that we will be unable to obtain required funds or that we will be forced to procure funds at an unusually high rate of interest due to market turmoil, a sharp deterioration in the financial condition of ORIX Group or other reasons.
To reduce liquidity risk, we diversify fund procurement methods and sources and constantly monitor liquidity on hand. To manage liquidity on hand, we project future cash flows and analyze liquidity risk using hypothetical stress scenarios. We take necessary measures so that our businesses may withstand adverse market changes.
The effect on the business of each subsidiary is monitored by ascertaining liquidity risk in each subsidiary and in every country in which ORIX operates. We take appropriate measures to mitigate liquidity risk, including through such action aslending.
parent-to-subsidiary
ORIX Bank and ORIX Life Insurance are engaged in retail financial activities for individual customers and are regulated by Japanese financial authorities. Theyauthorities and are required to manage liquidity risk independently from other ORIX Group companies based on their internal regulations formulated according to the relevant regulations.
ORIX Bank maintains liquidity levels required by Japanese financial regulations by holding highly liquid assets such as cash and government and corporate bonds and by setting an upper limit for capital markets-based funding. In addition, ORIX Bank regularly monitors the status of its liquidity, estimates the tightness of cash flows under different scenarios and conductsmanagement of liquidity risk accordingly.
stage-by-stage
ORIX Life Insurance conducts stress tests on insured eventsstrives to maintain appropriate liquidity by setting standards for its holdings of cash and manages its liquidity requirements by holding highly liquid assetsgovernmental and corporate bonds. In addition to assessing current and future funding needs, ORIX Life Insurance has set categories corresponding to the urgency of such as cashfunding needs and cash equivalentsestablished standards and securities above a certain ratio against the balancecontingency plans so that it can swiftly and appropriately respond to situations that take place within each category in times of a liability reserve and by setting maximum limits for holdingheld-to-maturitystress.securities.
Compliance Risk Management
We define compliance risk as the risk of financial loss, regulatory sanction, disadvantage or reputational damage resulting from a failure by ORIX Group to comply with laws and regulations applicable to ORIX Group’s business or company management and/or a failure to comply with ORIX Group’s corporate philosophy, internal rules and generally accepted standards of business conduct.
It is the policy of ORIX Group to promote a culture of compliance, emphasizing high standards of ethical behavior at all levels of the organization, and to comply fully with applicable laws and regulations as well as corporate policies through robust and comprehensive compliance programs developed and maintained across all business units, corporate departments and support areas of the organization.
In order to lower the levelslevel of risks that we deem significantcompliance risk at the Group level, the compliance department requires each department of ORIX Group to formulate an annual compliance plan and monitors compliance risks within ORIX Group in order to reduce such risks. By implementing programs that sustain a culture of compliance, the compliance department seeks to mitigate compliance risk and to prevent the occurrence of serious incidents, and thereby contribute to the sound business and management of ORIX Group.
In addition, ORIX Group strives to raise awareness for compliance matters among its executives and employees by establishing and disseminating various regulations in accordance with ORIX Group Principles of Conduct, which sets forth ORIX Group’s principles of compliance. In addition, asProgress in sustaining a culture of compliance through internal training and other activities is regularly reported to our Audit Committee.
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As part of our internal control system, we have established internal and external whistleblower systems and developed preventative systems for reducing compliance risk. We have also established a system whereby material matters that are reported through the internal and external whistleblower systems and those that relate to legal or other violations are promptly reported to the representative executive officer and appropriate actions are taken in response to instructions received from the representative executive officer. The statuses of responses to material matters are reported to our Audit Committee and information is appropriately shared.
Furthermore, from the perspective of compliance risk.with applicable tax laws, we are committed to paying taxes in conformance with tax laws of relevant jurisdictions, tax treaties and guidelines, and internal rules, to managing our tax affairs in good faith and in compliance with applicable tax systems and to achieving tax transparency on a group-wide basis.
Legal Risk Management
We define legal risk as limitations or other negative effects on our businesses or company management that could result from the enactment of or change in relevant laws and regulations or from contract deficiencies.deficiencies in contracts.
In addition to establishing internal rules necessary for ensuring compliance with laws and regulations, in order to comply appropriately with revisions in laws and regulations, we have also taken measures to understand the applicability of such laws and regulations to each business in ORIX Group and provide instructions to business units to which such laws and regulations apply.
To avoid, reduce and prevent transactional legal risk, we generally require that the creditlegal department, the legalcompliance department and the compliancecredit department each be involved in evaluating and/or executing transactions.
For transactional agreements relating to business transactions, we have established a contract review and approval process involving the legal department in accordance with our prescribed internal rules.
To ensure that proper legal procedures are followed in connection with actual or potential disputes and litigation, we require that the legal department, the compliance department and the credit department each be involved in the management of such disputes and litigation, including lawsuits that have been, or are expected to be, brought against us and lawsuits that we bring, or expect to bring, against third parties. In addition, we have in place systems to prevent disputes and litigation such as a system for monitoring for trademark applications that could infringe on trademarks held by ORIX Group.
The legal department manages intellectual property rights and takes necessary protective measures immediately if an actual or potential infringement of ORIX Group’s intellectual property rights is discovered.
Information Risk Management
We define information risk as the risk of loss, caused by loss, damage or leakage of information or the failure of our information systems.
ORIX Group has established internal rules ondetailing the proper handling of information and information systems about officers and employees, as well those onas the secure operation of information systems. These rules have been prepared for executive officers as well as employees. The scope of these documents includes, our information security management systems, basic policy andas well as management standards. In addition, we have implemented technical and operational measures such as vulnerability countermeasures for our information systems and maintenance of various network security measures to protect against or mitigate cyber-attacks. Such measures include vulnerability management countermeasures. We have also established internal rules concerning our information security management systems, including controls for protecting personal data, basic policy, management standards, education and audits.
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The information security department endeavors to reduce the risk of system failure within ORIX Group, including from cyber-attack and damageGroup. The countermeasures are designed to information security, throughstrengthen the maintenance operation and management of internal systems.systems in order to address risks from cyber-attack and damage to information security. We have also created a system for reporting and responding to information security incidents.
Operational Risk Management
We define operational risk as the risk of loss resulting from damages, losses, adverse effects or damage to our reputation caused by inadequate or failed internal processes for business execution or failure to secure necessary human resources or prevention of human error or by a failure in operations due to external events such as natural disasters.
In order to clarify internal processes for business execution, we have established internal rules and conduct training to improve awareness of such rules. In addition, for compliance purpose, we are focused on developing and evaluating our internal control over financial reporting.
In order to reliably secure and retain diverse human resources, we promote diversity and inclusivity and strive to create a workplace of valuable for all of our employees so that each of them can fully utilize their various skills and specialized knowledge while engaging in their work in a manner that matches their life style. In addition to developing our human resource systems to take into account factors such as national and regional labor markets, market practices, compensation standards, laws and regulations, job duties and business characteristics, we have developed a work environment that respects human rights and seeks to ensure that employees can engage in meaningful work in a lively manner within a healthy and safe environment.
Additionally, we have established a system for teams to contact risk management departments swiftly in cases where an incident, customer claim or similar matter has arisen so that we can respond quickly and carefully and take measures to prevent reoccurrences.
The internal audit department conducts monitoring activities based on an annual internal audit plan that includes monitoring of material operational risks. The department endeavors to prevent the occurrence of events that could negatively affect Group management and seeks to strengthen the risk management function through monitoring activities.
External Environment-related Risk Management (Risk Related to Unpredictable Events)
Among the external environment-related risks that we face such as those relating to the business environment, we are particularly focused on addressing our systems to address and manage risks related to natural disasters and other unexpected risks. We have established internal rules to manage risks associated with disasters, and implemented a framework for organizational implementation of basic principles to manage risks arising from events such as natural disasters, terrorism and infectious diseases, as well as related activities.
For example, we have established systems for confirming the safety and status of all employees in the event our offices are closed due to an event such as a disaster or the spread of an infectious disease. To prepare for situations where employees working from our offices is impossible or inadvisable, we have also introduced systems to permit employee to work remotely so that our business operations are not disrupted.
Individual Business Risk Management
We engage in a broad spectrum of businesses, including financial service operations. We seek to perform complete and transparent monitoring and risk management according to the characteristics of each business segment.
Corporate Financial Services Segmentand Maintenance Leasing
Legal risk and credit risk are the main risks of Corporate Financial Services segment.the corporate financial services business.
Due to the offering of various products and services by business units in our Corporate Financial Services Segment,corporate financial services business, the enactment of or revisions or changes to related laws, regulations and accounting standards may adversely affect the products and services we offer and lead to a decline in fee income. In order to reduce such risk, business units conduct information gathering and coordinate with the legal department with regard to information on changes in relevant laws and regulation, as well as reassessing their business strategies as necessary.
With regard to credit transactions, Corporate Financial Services segmentthe corporate financial services business regularly monitors the transactions’ performance, and related collateral, as well asand collection fromstatus of customers whose balances exceed specified levels. The credit department regularly evaluates customers with large credit balances.
Within this segment,the corporate financial services business, we analyze current conditions and the outlook for specific business types and industries, including the potential impact on customers while making decisions about future transactions in that specific business type or industry.
For assets requiring extra monitoring, particularly in transactions secured by real estate, we take various measures such as capitalizing on our network of real estate-related departments to sell properties or introduce tenants.
Business risk and credit risk are the main risks of Maintenance Leasing segment.the maintenance leasing business.
To manage the risk of changes in the market value of property under operating leases, we continuously monitor market conditions and fluctuations in the value of leased property and adjustreassess residual value estimates of leased property in new investment transactions accordingly.
Cost fluctuation is a risk when providing various services associated with operating leases. In response to this, we analyze initial cost planning and performance, monitor future forecasts and control costs at an appropriate level.
In addition, our services might fall short of customer expectations due to changes in the operating environment or changes in and diversification of client needs. We monitor our service quality quantitatively and qualitatively and continuously strive to provide services at a level that meets our clients’ expectations and to improve our services in line with the operating environment.
Real Estate Segment
Business risk and market risk are the main risks of the Real Estate segment.
With respect to our real estate investment,investments, before making an investment decision we evaluate the actual cash flow performance of the target as against the initial plan and forecasts, and monitor investment strategies and schedules after execution. Upon a major divergence from the initial forecast, we reevaluate our strategy. In addition,
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Furthermore, when we invest in large scale or long-term projects, we consider diversifying risk by making joint investments with our partners.
In our facility operation business, we monitor performance indicators such as occupancy and utilization rates and profitability. We conduct market analysis and take initiatives to improve the desirability of our facilities, such as through renovations. To improve the quality of our services and facilities, we take into consideration customers’ feedback and also implement training programs for our employees.
In our condominium business (new and used), we monitor sales figures and profitability of individual businesses while keeping in mind the market environment, relevant interest rates and real estate-related taxation systems. Additionally, in our construction business, we seek to control costs such as those for materials, and construction periods, while also focusing on health and safety management.
PE Investment and Operation SegmentConcession
Business risk, market risk and operation risk are the main risks of PE Investment and OperationConcession segment.
When making investment decisions with regard to potential investees in the private equity business, we conduct a credit evaluation, analyzing the investee’s financial condition and assessing its cash flow, as is done for credit examinations. In addition, weWe also perform a multi-faceted evaluation of the characteristics of the business operation and investment scheme, in which administrative departments such as accounting and legal are also involved. AfterIn addition, after the initial investment, individual transactions are monitored for divergence from the initial scenario.
We emphasize monitoring financial condition of a company when increasing the corporate value of a company since cash flow is a key factor during such period. We also monitor market risk as the time for collection nears, measuring corporate value by referencing the corporate value of similar business types. The frequency of monitoring may increase based on changes in the business environment, and we simultaneously verify the adequacy of investment scenarios and take any necessary action. Furthermore, for investments that have a significant impact on the profitability of ORIX Group, we work to strengthen management through measures such as seconding of management personnel.
We conduct our concession business in public facilities such as airports, together with business partners.
The main risks of such business are business and operational risks. The long-term nature of this business adds uncertainty and, therefore, we conduct stress tests in advance to evaluate the effect of disaster recovery or business withdrawal costs on operating revenue and cash flow based on demand forecasts and monitor business plans and operations on a regular basis and as the situation warrants. We also strive to train staff with expertise on the management of public facilities and reduce operational risk by establishing a management system with business partners and strengthening governance.
Environment and Energy
Business risk, legal risk and operation risk are the main risks of the Environment and Energy segment.
In the loan servicingenvironment and energy business, when assessing potential loans, we not only assessconduct various businesses in the renewable energy, energy conservation and analyze variousresource recycling and waste processing operations sectors both in and outside of Japan. Because such business sectors are relatively new, they are easily impacted by factors such as cash flowthe external environment, and collateral value but also draw onchanges in social trends and systems and legal regulations, so there are cases when it becomes necessary to change theknow-howand expertise revenue structure of individual businesses. However, we have developedare able to date. After investing, we regularly assessuse our recovery strategyexperience
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from our existing businesses to quickly identify trends in changes in the external environment and assumptions and take various steps. We also seek to reduce creditgenerate new opportunities for revenue through changing or business model, developing new businesses, and operational riskselling and exchanging existing businesses.
In each business, we operate facilities of various types, scales and structures and actively seek out investment opportunities, such as M&A and alliances with wide variety of companies, to further expand our businesses, but we also continue to strengthen internal governance by conducting periodicestablishing internal auditingcontrol systems within each affiliate and monitoringhaving administrative departments within the segment conduct activities such as business management and by implementingaudits. In addition, in order to develop business operations based oncontinuity plan structures that ensure safety and appropriateness of each facility and develop readiness for situations such as natural disasters, accidents, and epidemics, we work procedureswith specialist departments with technical knowledge to establish human resources and internal rules in accordance with the applicable supervision and guidance from regulatory authorities.an effort to optimize operations.
In insurance underwriting, we risk sustaining losses due to changes in the economic environment or insurance accident rates over time such that they differ significantly from the assumptions made when the insurance fees were set. However,Through monitoring of these factors that could cause losses, we control for this through measures such asre-evaluatingre-evaluateunderwriting standards, developingdevelop new products and improvingimprove existing products. Furthermore, we employ reinsurance as one means of ensuring payments of insurance fees and the stability of our business management. When utilizing reinsurance, we determine standards for reinsurance and maintenance according to the characteristic of the transferred risk and effect of reinsurance. When choosing a reinsurance company, we focus on ensuring that there is a high probability we can recover the fees paid for reinsurance by taking into account underwriting capacity and financial health. To control
In the case of market risk, related to asset management,prepare for changes in the value of our assets and liabilities, we establish monitoring items which
Banking and Credit
Credit risk is the main risk of the Real estate investment loans business, the corporate loan businessBanking and the card loan business is credit risk.Credit segment.
Regarding each Realreal estate investment loan we extend for the purchase of condominiums and apartments for investment purposes, we conduct screenings through individual interviews, which consist of a comprehensive evaluation including not only the client’s real estate investment appetite, supporting documentation, and ability to repay but also the cash flows that can be derived from the property and its collateral value. Throughout this process, we carefully select partner realtors and utilize the real estate market information, industry
know-how
and network we have built over many years.Decision making for corporate loans is based on an investigation of the client’s performance, business plan, purposeintended use of the loan,proceeds, expected source of repayment and industry trends. We also reduce risk by avoiding overconcentration in any particular business type and product in our portfolio.
The card loan business uses a proprietary scoring system incorporating a credit model. We set interest rates and credit limits in line with each customer’s credit risk profile, after evaluating their creditworthiness based on an analysis of certain customer attributes or payment history, as well as other factors that might affect their ability to repay. Also, we undertake subsequent credit evaluations at regular intervals to monitor changes in the customer’s financial condition.
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Aircraft and Ships
In the aircraft business, we operate in the operating lease business and aircraft asset management business, where the main risks the businesses face are business risk, credit risk, market risk and operating risk. We generally limit the aircraft to those with high versatility that are comparatively easy to
re-lease
and evaluate sales depending on changes in market conditions. In addition, we conduct comprehensive assessments of the customers’ performance and related collateral at the time of financing. With regard to our affiliate, Avolon, we continuously monitor its business plan and operations. In addition, we support the sound management of Avolon by contributing to its management through the exercise of our rights as a shareholder and our members of its board of directors.In the ships business, we operate in the financing business, including operating leases, where the main risks the business faces are business risk, market risk, operating risk and credit risk. We generally limit our financing to small and
medium-sized
ships with high versatility that are comparatively easy tore-lease
and evaluate sales depending on changes in market conditions. Operational risk primarily arises from the risk of managing ships that we own, but we are able to substantially mitigate the possibility of unforeseen events by limiting the outsourcing of ship management to experienced and stable partners and conducting regular assessments. Credit risk is handled at the time of financing through comprehensive assessments of the borrower’s performance and related collateral. After conducting the financing, we continue to monitor borrowers and, for borrowers that require caution, our policy requires management to consider the collectability of the financing and to determine the necessity of an allowance for credit losses or an impairment.ORIX USA
Credit risk and market risk related to lending and investment are the main risks facing the lending investment business and finance business in the ORIX USA segment.
Regarding credit risk, at the time an investment or loan is made, we assign an internal risk rating to such investment or loan taking into consideration various standard credit metrics, collateral value, and enterprise value. The loan or investment is continuously monitored and the risk rating is periodically reviewed and updated if necessary. For any investments and/or loans for which the rating of the customer has reached or exceeded the cautionary level, our policy requires management to determine the necessity of an allowance for credit losses or an impairment. Regarding market risk, we monitor market values while referring to credit risk information and manage risk by pursuing early sales as appropriate to secure profits or minimize losses.
Operational risk is the main risk for the agency lending business in the United States. We make and sell loans and mortgage backed securities and provide servicing and asset management services with regard to those loans and mortgage backed securities. The majority of those loans and mortgage backed securities are insured by the Federal Housing Administration or guaranteed by a government-sponsored financial institution such as Fannie Mae and Freddie Mac. We conduct our agency lending business in accordance with the designated procedures set forth by these government agencies and government-sponsored institutions; and monitor and manage loan servicing and asset management quality through internal auditing for compliance with the designated procedures and periodic reviews by these agencies and institutions.
Operational risk is the main risk for the asset management business.
We promote the standardization of business processes, regulations and manuals and seek to prevent omissions and mistakes in conducting business operations and to improve efficiency generally. In addition, we ensure proper risk management by clarifying operating procedures and the authority and the responsibilities of administrators and supervisors in business operations.
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In addition to monitoring to maintain and ensure satisfactory levels of credit, market, and operational risk, we review our products and services to constantly maintain and improve performance and quality in response to changes in the business environment and evolving customer needs.
ORIX Europe
Under the supervision of OCE, OCE group companies mainly operate in the asset management industry, where the main risks they face are operational risk and compliance risk.
To mitigate operational and compliance risks in the asset management business, particularly risks arising from acting as a fiduciary manager for customer and client property, we promote a transparent risk culture and the standardization of business processes, internal regulations and procedures. Some operational risk in the asset management business stems from changes in the highly regulated environment of jurisdictions in which the companies operate so OCE group companies actively monitor regulatory developments at an early stage to address these risks, both directly and through representative associations. OCE group companies further ensure proper risk management by implementing risk management policies and frameworks in compliance with applicable regulations, client demand, and sound risk management practices. OCE’s role within the OCE group is to oversee and monitor the risk management and internal control frameworks of each OCE group company.
Asia and Australia
Our local subsidiaries in the Asia, Oceania and the Middle EastAustralia segment primarily operate leasing, loan, automobile leasing and investment businesses. The main risks those businesses face are credit risk, business risk and market risk.
In the leasing and loan businesses, comprehensive assessments of customers’ business performance and collateral are conducted. Regular monitoring is conducted for purposes such as tracking unpaid amounts and preventing deviations in portfolios at the local subsidiary level and corrective action is taken when necessary. In the automobile leasing business, risk management is conducted taking into account factors that vary from country to country like lease taxation systems and characteristics of the used automobile market.
In the investment business, investments are conducted in a manner similar to domestic investments, with an assessment of the transaction conducted initially and regular monitoring conducted after the transaction takes place. In cases where we have rights as a shareholder as a result of the transaction or have dispatched a director, we support sound management of the investee through our involvement in its board of directors.
Item 6. Directors, Senior Management and Employees
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
CORPORATE GOVERNANCE SYSTEM
We believe that a robust corporate governance system is a vital element of effective and enhanced management and have established sound and transparent corporate governance to carry out appropriate business activities in line with our core policiesManagement’s Basic Policy and to ensure objective management.
ORIX’s corporate governance system is characterized by:
separation of execution and supervision through a “Company with Nominating Committee, etc.” board model;
Nominating, Audit and Compensation Committees composed entirely of outside directors;
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all outside directors satisfying “Requirements for Independent Directors”; and
all outside directors being highly qualified in their respective fields.
Rationale behind adopting ORIX’s Corporate Governance System and history of the system
We believe that swift execution of operations is vital to effectively responding to changes in the business environment. Furthermore, we believe that ORIX promotes improved management transparency through a corporate governance system in which outside directors, who are expertshave expert knowledge in their respective fields, monitor and advise on legal compliancethe lawful and the appropriate execution of operations.operations with an independent view.
Based on these principles, our boardBoard of directorsDirectors possesses an oversight function and, under the “Company with Nominating Committee, etc.” board model delegates certain responsibilities to the three board committees (Nominating, Audit and Compensation Committees) to carry out the role of effective governance.
In addition, all outside directors must meet the conditionsobjective and specific “Requirements for director independence set forthIndependent Directors” stipulated by the Nominating Committee (described below under “Nominating Committee”).
Below is a summary of the history of ORIX’s corporate governance system;system:
June 1997 | Established Advisory Board | |
June 1998 | Introduced Corporate Executive Officer System | |
June 1999 | Introduced Outside | |
June 2003 | Adopted the “Company with Committees” board model | |
May 2006 | Adopted the new “Company with Committees” board model in line with the enactment of the Companies Act of Japan | |
May 2015 | Adopted the new “Company with Nominating Committee, etc.” board model in line with the amendment of the Companies Act of Japan |
The “Company with Nominating Committee, etc.” board model, as stipulated under the Companies Act of Japan, requires the establishment of three board of director committees: the Nominating, Audit and Compensation Committees. Each committee is required to consist of three or more directors, a majority of whom must be outside directors. Directors may serve on more than one committee. The term of office of committee members is not stipulated under the Companies Act of Japan. However, as a committee member must be a director of the Company, the term expires at the close of the first annual general meeting of shareholders after his or her election. Under the Companies Act of Japan, an outside director is defined as a director who does not have a role in executing the Company’s business, meaning an individual who has not assumed in the past ten years the position of a representative director or a director with the role of executing the business, executive officer (), manager or any other employee of the Company or any of its subsidiaries, and who does not currently assume such position of the Company or any of its subsidiaries. (See Item 16G “Corporate Governance”.)
shikkou-yaku
Board of Directors
The boardBoard of directorsDirectors has ultimate decision-making authority for our important affairs. It also monitors the performance of the directors and executive officers and receives performance reports from the executive officers and others. Our Articles of Incorporation provide for no fewer than three directors. Directors are elected at general meetings of shareholders. The term of office for any director, as stipulated under the Companies Act of Japan, for companies that adopt a “Company with Nominating Committee, etc.” board model, expires at the close of the first annual general meeting of shareholders after his or her election.election or
re-election
as the case may be.The boardBoard of directors carriesDirectors carry out decisions related to items that, either as a matter of law or pursuant to our Articles of Incorporation cannot be delegated to executive officers, and other important items as determined by the regulations of the boardBoard of directors. The boardDirectors. It also monitors the execution of operations by the directors and executive officers. Regarding decisions on operational execution, the Board of Directors is primarily responsible for determining matters such as ORIX’s management plan, which is developed by taking into account ORIX’s basic policies on capital management, fund procurement, and personnel strategies, and basic policy on the internal control system, and monitoring them on a regular basis. Aside from such items, the boardBoard of directorsDirectors delegates decision-making regarding operational execution to the representative executive officer to facilitate better efficiency and swiftness of such process. The boardFurthermore, as for the monitoring of directorsoperational execution, the Board of Directors also receives reports from executive officers and the three committees regarding the status of business operations.operations, collects information necessary for its monitoring activities, and monitors the appropriateness of operational execution based on such information.
With the exception of the aforementioned items, the boardBoard of directorsDirectors may delegate substantial management authority to the representative executive officer. The representative executive officer makes decisions on management issues as delegated by the boardBoard of directorsDirectors and executes the business of the Company. For example, the board may delegate to the representative executive officer the authority to approve issuances of shares of capital stock and bonds. In addition, the Companies Act of Japan permits an individual to simultaneously be a director and a representative executive officer of the Company.
From April 1, 20192020 through March 31, 2020,2021, the boardBoard of directorsDirectors met nineeight times. The attendance rate of directors for these meetings was 96%100%.
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Composition and size of Board of Directors
The boardBoard of directorsDirectors is composed of directors, including outside directors thatwho possess broad knowledge and experience. The number of directors on the board is also maintained at the level we consider to be appropriate for effective and efficient board discussion.
Structure and Activities of the Three Committees
As of June 29, 2020,2021, all three committees (Nominating, Audit and Compensation CommitteesCommittees) are composed entirely of outside directors and Nominating Committee composed of a majority of outside directors, with the chairperson of each committee being appointed from among outside directors. The members of each committee along with the number of committee meetings and attendance rates are shown below.
Nominating Committee | Audit Committee | Compensation Committee | ||||
Members as of June 29, | Sakie Akiyama (Chairperson) Hiroshi Watanabe | 3 Members (Outside Directors: 3) Aiko Sekine (Chairperson) | 3 Members (Outside Directors: 3) Michael Cusumano | |||
Number of meetings held during fiscal | Five (5) meetings |
Nominating Committee
The Nominating Committee is authorized to propose the slate of director appointments or dismissals to be submitted to the annual general meeting of shareholders. Directors are appointed and dismissed by a resolution of the annual general meeting of shareholders. In addition, the Nominating Committee deliberates on the agenda concerning the appointment or dismissal of our executive officers to be resolved at the boardBoard of directorsDirectors meeting, although this is not required under the Companies Act of Japan.
Furthermore, the Nominating Committee ensures that the boardBoard of directorsDirectors possesses the appropriate levels of and diversity in knowledge, experience, and expertise, through an established decision-making process for directors’ appointments. The Nominating Committee stipulates the “Requirements for Independent Directors” in accordance with the nomination criteria for director candidates described below. The Nominating Committee also nominates executive officer candidates to the boardBoard of directorsDirectors following an assessment of candidates’ past experience, knowledge, and suitability for the position to execute business decisions in the Company’s existing and new businesses.
Nomination criteria for director candidates:
(Internal Director)
An individual with a high degree of expertise in ORIX Group’s business and excellent business judgment and business administration skills
(Outside Director)
An individual with a wealth of experience as a business administrator
An individual with professional knowledge in fields such as economics, business administration, law and accounting, as such relate to corporate management
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An individual with extensive knowledge in areas such as politics, society, culture and academics, as such relate to corporate management
The Nominating Committee determines whether the conditions for director independence have been met in accordance with the independence-related nomination criteria for outside directors, which are:
| (1) | No individual may be a principal trading partner*, or an executive officer (including operating officer, hereinafter the same) or employee of a principal trading partner of ORIX Group. If such circumstances |
| existed in the past, one year must have passed since that person’s departure from such office or employment. |
* A “principal trading partner” refers to an entity with a business connection to ORIX Group with a transaction amount equivalent to more than the greater of 2% of such entitiesentity’s consolidated total sales (or consolidated total revenues) or one million U.S. dollars in any fiscal year ofduring the preceding four fiscal years.
| (2) | No individual may receive directly a large amount of compensation (10 million yen or higher in a fiscal year), excluding compensation as a director from ORIX Group in any fiscal year during the preceding four fiscal years. Further, any corporation or other entity in which such individual serves as a consultant, account specialist or legal expert may not receive a large amount of compensation (equivalent to more than the greater of 2% of such |
| (3) | No individual may be a major shareholder of ORIX (10% or higher of issued shares) or a representative of the interests of a major shareholder. |
| (4) | No individual may have served as an executive officer of a company having a relationship of concurrent directorship* with ORIX in any fiscal year of the preceding four fiscal years. |
* “Concurrent directorship” refers to a relationship in which an executive officer of ORIX or its subsidiaries also serves as a director of a company in which the individual has been an executive officer and an outside director of ORIX.
| (5) | No individual may be a member of the executive board (limited to those who execute business) or be a person executing the business (including an officer, corporate member or employee who executes business of the organization) of any organization (including public interest incorporated associations, public interest incorporated foundations and non-profit corporations) that have received a large amount of donation or financial assistance (annual average of 10 million yen or higher over the past three fiscal years) from ORIX Group. |
| (6) | No individual may have served as an accounting auditor or an accounting advisor ( kaikei san-yo |
| (7) | None of an individual’s family members* may fall under any of the following: |
| i) | A person who was an executive officer or an important employee of ORIX Group during the past three years. |
| ii) | A person who falls under one of the criteria specified in (1) through (3), (5) and (6) above; provided, however, that criterion (1) is limited to an executive officer, criterion (2) is limited to a corporate member or a partner of the corporation or other entity and criterion (6) is limited to an executive officer or an employee who performs the audit on ORIX Group in person. |
* Family members include a spouse, those related within the second degree by consanguinity or affinity, or other kin living with the outside director.
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| (8) | There must be no material conflict of interest or any possible conflict of interest that might influence the individual’s judgment in performing their duties as an outside director. |
Audit Committee
The Audit Committee monitors the operational execution of the directors and executive officers and prepares audit reports. In addition, the Audit Committee proposesdecides the appointmentcontent of proposals to appoint, dismiss or dismissal of, or the passage
Under the “Company with Nominating Committee, etc.” board model, the directors who compose the Audit Committee are not permitted to be executive officers, executive directors of the Company or its subsidiaries, or managers, employees or accounting advisors () of the Company’s subsidiaries. Under the “Company with Nominating Committee, etc.” board model, the Audit Committee generally has powers and duties to monitor the performance of the directors and executive officers in the performance of their responsibilities, as well as the right to propose the appointment or dismissal of, or to pass resolutions for refusing reappointment of the Company’s independent certified public accountants at the annual general meeting of shareholders. Any proposal for appointment or dismissal of a certified public accountant needs to be submitted to a general meeting of shareholders for approval. In furtherance of its responsibilities, the Audit Committee also has the power to request a report of business operations from any director, executive officer, manager or other employee at any time, and to inspect for itself the details of the Company’s business operations and financial condition.
kaikei
san-yo
Compensation Committee
The Compensation Committee has the authority to set the policy for determining compensation for directors and executive officers in accordance with the Companies Act of Japan and to set the specific compensation for each individual director and executive officer. Director and executive officer compensation information is disclosed in accordance with the Companies Act and the Financial Instruments and Exchange Act.
Executive Officers
Under the “Company with Nominating Committee, etc.” board model, and within the scope of laws and ordinances, corporate decisions made at boardthe Board of directors meetingsDirectors are delegated to the representative executive officersofficer (CEO) to accelerate and achieve efficiency in business operations. The representative executive officer makes important business execution decisions after deliberations by the Executive Committee (“EXCO”), the Investment and Credit Committee (“ICC”) or other appropriate committees in accordance with the Company’s internal policies. The business execution duties of executive officers are decided by the boardBoard of directorsDirectors and the representative executive officer and these duties are carried out based upon the Company’s internal policies. Group executives are appointed by the boardBoard of directorsDirectors from among directors and executive officers of Group companies.
Important decision-making related to business execution, monitoring, discussions, and information sharing is carried out by the following bodies:
Executive Committee
The EXCO members of which include the CEO, COO and CFO (“top management”), executive officers and other appropriate members, discusses important matters related to the management of the Company. Matters considered crucial to our operations are reported to the boardBoard of directorsDirectors as appropriate.
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Investment and Credit Committee
The ICC which includes members of top management and the executive officer responsible for investmentdiscusses regarding investments and credit discusses regarding credit transactions and investments that exceed certain specified investment or credit amounts. Matters considered crucial to our operations are reported to the boardBoard of directorsDirectors as appropriate after being discussed by the EXCO.
Group Executive Officer Committee
The Group Executive Officer Committee in which executive officers and group executives of the Company participate, discusses important matters relating to the business execution of ORIX Group.
Information Technology Management Committee
The Information Technology Management Committee includes members of top management and the president of ORIX Computer Systems Corporation. It meets to deliberatedeliberates on important matters concerning fundamental policies for IT operations and IT systems. The committee discusses the needs of and priorities for IT investment based on ORIX Group’s fundamental IT strategies. This method enables ORIX to ensure that IT decisions are consistent with its business strategies and to make IT investments that contribute to business growth and help reduce risk.
Disclosure Committee
To ensure timely and appropriate disclosure of information material to ORIX Group, the Disclosure Committee which is chaired by the CFO and consists of the executive officers in charge of various departments, including: the corporate planning department, corporate communications department, treasury and accounting department, credit department, legal department, compliance department, human resources and corporate administration department and internal audit department, receives reports on material
non-public
information from persons in charge of ORIX Group company departments, and takes steps necessary to determine whether or not timely disclosure of such information is necessary, and the appropriate means of disclosing such information. As part of ORIX Group’s corporate governance system, the Disclosure Committee plays a significant role in overseeing disclosure control and has a central role in the system for timely and appropriate disclosure of information to stakeholders.Policies on Auditing and Auditing System
The Audit Committee has established the following five items as its fundamental policies:
The Committee shall always emphasize a consolidated management standpoint in auditing.
The Committee shall monitor and verify the formulation and status of operations of the Group’s internal control systems. In particular, it shall consider the validity and effectiveness of compliance systems, systems to ensure the credibility of financial reporting, and risk management systems.
The Committee shall monitor and verify whether directors, executive officers, and employees under the supervision of executive officers are complying with laws, ordinances, and the provisions of the Articles of Incorporation in fulfilling their obligations of loyalty and due diligence, as well as any other legal obligations to the Group.
The Committee shall monitor and verify whether executive officers are determining the execution of their duties and carrying out said duties appropriately and efficiently in accordance with basic management policies, medium-term management plans, and other plans and policies established by the Board of Directors.
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To ensure the fairness and credibility of audits, the Committee shall monitor and verify whether the independent certified public accountants are maintaining their independent position and conducting appropriate audits as a professional expert.
Based on these fundamental policies, the Audit Committee verifies the status of the performance of duties and the formulation and status of operations of internal control systems with the representative executive officer
and the heads of internal control-related and accounting departments, and shares information with the executive officers responsible for the Group Internal Audit Department, the independent certified public accountants, and others as necessary. The Audit Committee also has access to external experts necessary to carry out its duties.
The Auditing functions of the Company are as follows.
Audit Committee
The Audit Committee which consists of three outside directors evaluates the Company’sGroup’s internal control systems from an independent standpoint and may appoint outside experts to conduct its duties if necessary. Aiko Sekine, chairperson of the Audit Committee, is qualified as a certified public accountant and has extensive knowledge in finance and accounting as a professional accountant. The number of meetings of the Audit Committee held and the attendance of each member in Fiscal 20202021 are as follows.
Name | Status of attendance at Audit Committee Meetings held in Fiscal | |
Aiko Sekine | Attended nine of nine meetings of the Audit Committee | |
Heizo Takenaka | Attended ten of eleven meetings of the Audit Committee | |
Hiroshi Watanabe | Attended nine of nine meetings of the Audit Committee | |
Eiko Tsujiyama | ||
Attended two of two meetings of the Audit Committee | ||
Nobuaki Usui | Attended two of two meetings of the Audit Committee |
In Fiscal 2020,fiscal 2021, the main items examined by the Audit Committee were the receipt of regular activity reports on the status of business execution from executive officers, the exchange of opinions with the CEO, the approval of the audit plan of the Group Internal Audit Department, the evaluation of the independent certified public accountants, the agreement on audit fees in cooperation with the independent certified public accountants, the reporting to the Board of Directors on the contents of deliberation by the Audit Committee, and the specific examination of qualitative and quantitative enhancement of the Audit Committee. In addition, the members of the Audit Committee attended Audit Committee meetings and deliberated on the above mentioned matters, shared information necessary for audit activities such as the current status of each business of ORIX Group, business strategy, project progress, etc. through site inspectionsindividual interviews with executive officers and briefing sessions.
Audit Committee Secretariat
The Audit Committee Secretariat which includes threefour staff members, supports the work of the Audit Committee under the Audit Committee’s instructions. The appointment and evaluation of, changes to, and disciplinary action toward the staff of the Audit Committee Secretariat are carried out by the executive officer responsible for the Group Internal Audit Department with the approval of the Audit Committee.
Operating Officer Responsible for Group Internal Audit Department
The Operating Officer Responsible for the Group Internal Audit Department supports the Audit Committee in collecting information. Such person is entrusted by the Audit Committee with attending important meetings within the ORIX Group and accurately reporting information essential to auditing activities to the Audit Committee in a timely manner.
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Reporting System to the Audit Committee
The following reporting system is in place to ensure that the information required by the Audit Committee is reported in a timely and accurate manner.
The directors, executive officers and employees of ORIX Group shall report information requested by the Appointed Audit Member to the Audit Committee of the Company (i.e., the member responsible for the collection of information regarding the performance of duties and investigation of operating assets, hereinafter the “Appointed Audit Member”) periodically or as appropriate.
The directors, executive officers and employees of ORIX Group shall report to the Audit Committee upon knowledge of any business activity by a group company that may constitute a serious breach of laws or regulations or a serious breach of the Articles of Incorporation of the relevant group company or serious misconduct, or any fact that could cause significant damage to such group company (hereinafter referred to as an incident of “corruption or scandal”).
Upon becoming aware that an incident of corruption or scandal is occurring, the directors, executive officers or employees of ORIX Group shall report to, consult with and provide the basis for such knowledge or suspicion to, the internal or external whistle-blower channels. If the head of whistleblower channels judges that such report or consultation is serious in nature, he / she shall report such information to the Audit Committee of the Company. In addition, the directors, executive officers and employees of ORIX may report concerns regarding accounting, internal controls or auditing matters to the Audit Committee or the Appointed Audit Member within the Audit Committee.
ORIX internal rules stipulate that any director, executive officer or employee of ORIX Group who has reported to or consulted with the whistle-blower channels and/or the Audit Committee shall not be treated adversely by reason of said report or consultation. ORIX has established and maintains a system in which persons who have so reported or consulted will not be subject to adverse treatment as a result of their reporting or consulting, including internal rules that stipulate that any person who engages in adverse treatment of an individual who so reports or consults shall be disciplined pursuant to the internal rules.
Group Internal Audit Department and Group Corporate Auditors
The Group Internal Audit Department, which includes 3753 staff (as of the end of May 2020)2021), performs internal audits on the effectiveness of internal control systems, and the efficiency and effectiveness of operations, compliance, and other factors pertaining to the management of the ORIX Group through a risk-based approach. It also jointly identifies and monitors critical risk through cooperation with corporate auditors and internal audit functions at group companies and works to maintain and enhance the ORIX Group’s internal auditing system.
Interactions among the Audit Committee, the Independent Certified Public Accountants and Others
In order to ensure the effectiveness of audits, the Audit Committee, the Audit Committee Secretariat, the internal audit department and the internal control-related functions (departments in charge of Group management), and the independent certified public accountants work together through the following procedures.
The Audit Committee reviews and approves the annual audit plan prepared by the internal audit department. In addition, the Audit Committee confirms the audit plan of the independent certified public accountants.
The Audit Committee receives reports on the results of internal audit department audits and the improvement status of the issues pointed out, and confirms problems in business execution.
The internal audit department always cooperates with the Audit Committee and fully cooperates with the Audit Committee’s request for investigation.
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The Audit Committee receives and discusses the status of internal control evaluation related to financial reporting by the internal audit department and reports on the evaluation results.
The Audit Committee hears and examines the audit opinion and recommendations of the independent certified public accountants for quarterly and
year-end
closing.The Audit Committee receives and discusses important information on accounting audits and internal control audits conducted by the independent certified public accountants.
The Audit Committee exchanges views with the independent certified public accountants as necessary on important audit matters.
The internal audit department exchanges views with the independent certified public accountants on risk recognition regarding financial reporting as necessary, and works to strengthen collaboration in order to enhance the effectiveness and efficiency of the supervisory function.
The internal control-related functions regularly reports on the status of operation status of the internal control system to the Audit Committee.
Interactions among outside director’s monitoring, internal audit, audit conducted by the Audit Committee and external audit, and with the internal control-related functions
Outside directors, as members of the Board of Directors, determine the company’s direction and strategy, establish basic policy on the internal control system and determine execution of important business affairs. They also demonstrate highly effective oversight functions through reporting about the status of the performance of duties by the Audit Committee and executive officers and reporting as to the status of operation of internal control systems within the internal control-related functions etc., separating from the execution of operations.
The Audit Committee is composed entirely of outside directors. The Committee conducts an audit regarding the status of the performance of directors’ and executive officers’ duties and an oversight of the Company’s independent certified public accountants in terms of its solid independent position.
The Audit Committee Secretariat provides an opportunity for an interview between members of the Audit Committee and executive officers of ORIX Group in order that members consisting of solely outside directors obtain further understanding of ORIX Group’s business.
After the closing of the Board of Directors meetings, debriefing sessions are held to report the current status of each business, business strategy, progress of projects, etc. and to share information necessary to enable appropriate oversight by the outside directors.
AUDITOR INDEPENDENCE
Presently, our independent certified public accountants are KPMG AZSA LLC. The independence of KPMG AZSA LLC has been evaluated by our Audit Committee. KPMG AZSA LLC has continuously audited ORIX Group since 1985.
ORIX Group prepares consolidated financial statements in accordance with U.S. GAAP. U.S. GAAP consolidated financial information is used by management for evaluating our performance and forms the basis for presentation of financial information to our shareholders. The consolidated financial statements prepared in accordance with U.S. GAAP that are included in this annual report filed with the SEC have been audited by KPMG AZSA LLC, which is registered with the PCAOB in the United States.
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We select the independent certified public accountants to conduct the Company’s audit or determine the reappointment thereof based on the external auditor basic appointment policy (“basic appointment policy”) defined by the Audit Committee, which takes into consideration their independence from the Company, as well as their expert knowledge, comprehensive ability to conduct audits, audit quality and the number of continuous audit years in the Company.
With regard to the independent certified public accountants, based on the basic appointment policy described above, if we deem that the independent certified public accountants do not demonstrate adequate expert knowledge, comprehensive ability to conduct audits, audit quality, or if they are in violation of laws or regulations, including the Companies Act and the Certified Public Accountants Act, if they are offensive to public order and morals, or if there are other suitable reasons, the Company’s Audit Committee shall submit a proposal to the General Meeting of Shareholders concerning the dismissal or
non-reappointment
of the independent certified public accountants.In addition, if the Company’s Audit Committee deems that the independent certified public accountants’ circumstances qualify as a reason for dismissal provided for in Article 340, Paragraph (1) of the Companies Act, the Audit Committee shall dismiss the independent certified public accountants.
The independent certified public accountants are to be evaluated each year based on the basic appointment policy, and in the fiscal year under review, we performed a comprehensive evaluation based on audit performance, audit quality, and audit fees.
In the opinion of management, the provision of
non-audit
services did not impair the independence of KPMG AZSA LLC.DIRECTORS
The Member of the Board of Directors of ORIX as of June 29, 20202021 are as follows:
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
Makoto Inoue (Oct. 2, 1952) | Member of the Board of Directors, Representative Executive Officer, President and Chief Executive Officer, Responsible for Group Strategy Business Unit | Apr. 1975 | Joined the Company | |||||
| Mar. 2001 | General Manager of Investment Banking Headquarters | |||||||
| Jan. 2003 | Deputy Head of Investment Banking Headquarters | |||||||
| Feb. 2005 | Assumed office of Executive Officer, the Company | |||||||
Head of Alternative Investment & Development Headquarters | ||||||||
| Jan. 2006 | Assumed office of Managing Executive Officer, the Company | |||||||
| Dec. 2006 | ||||||||
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
| Jun. 2008 | Head of International Administrative Headquarters, | |||||||
Head of Alternative Investment & Development Headquarters, | ||||||||
Responsible for IT Planning Office | ||||||||
| Jun. 2009 | Assumed office of Senior Managing Executive Officer, the Company | |||||||
| Jun. 2010 | Assumed office of Member of the Board of Directors, Deputy President, the Company | |||||||
| Jan. 2011 | Assumed office of Member of the Board of Directors, Representative Executive Officer, President, the Company Chief Operating Officer | |||||||
| Jan. 2014 | Co-Chief Executive Officer | |||||||
| Jun. 2014 | Chief Executive Officer | |||||||
| Jan. 2017 | Responsible for Group IoT Business Department, | |||||||
Responsible for New Business Development Department I and II | ||||||||
| Apr. 2017 | Responsible for Group IoT Business Department, | |||||||
Responsible for New Business Development Department | ||||||||
| May 2017 | Responsible for Open Innovation Business Department, | |||||||
Responsible for Group IoT Business Department, | ||||||||
Responsible for New Business Development Department | ||||||||
| Jan. 2018 | Responsible for Group Strategy Business Unit | |||||||
Shuji Irie (Mar. 14, 1963) | Member of the Board of Directors, Senior Managing Executive Officer, Head of Investment and Operation Headquarters | May 2001 | Joined Mizuho Securities CO., Ltd. (retired on Apr. 2011) | 3,437 (106,490) | ||||
| Apr. 2011 | Joined the Company | |||||||
| Sep. 2011 | Deputy Head of Investment and Operation Headquarters | |||||||
| Jan. 2013 | Assumed office of Executive Officer, the Company | |||||||
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Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, 2021 | |||||||||
| Jan. 2014 | Head of Investment and Operation Headquarters | |||||||||||
| Jan. 2016 | Assumed office of Managing Executive Officer, the Company | |||||||||||
Jun. 2018 | Assumed office of Member of the Board of Directors, Managing Executive Officer, the Company | |||||||||||
Jan. 2020 | Assumed office of Member of the Board of Directors, Senior Managing Executive Officer, the Company | |||||||||||
Shoji Taniguchi (Jan. 11, 1964) | Member of the Board of Directors, Senior Managing Executive Officer, Responsible for Treasury and Accounting Headquarters, Responsible for Enterprise Risk Management Headquarters, Responsible for Corporate Assistant to CEO | Apr. 1987 | Joined the Company (retired on Mar. 1993) | 25,000 | ||||||||
| Apr. 1993 | Joined Morgan Stanley & Co. LLC (retired on Feb. 2007) | |||||||||||
| Jul. 2005 | Co-head of Sales, Morgan Stanley Japan Ltd. (retired on Feb. 2007) | |||||||||||
| Feb. 2010 | Assumed office of President, RBS Securities Japan Ltd. (retired on Nov. 2015) | |||||||||||
| Nov. 2015 | Head of APAC, The Royal Bank of Scotland plc. (currently NatWest Markets Plc) (retired on Jun. 2018) | |||||||||||
| Oct. 2018 | Rejoined the Company Assumed office of Senior Advisor, the Company, Assistant to CEO | |||||||||||
| Jan. 2019 | Assumed office of Managing Executive Officer, the Company Responsible for Treasury and Accounting Headquarters | |||||||||||
| Jun. 2019 | Assumed office of Member of the Board of Directors, Managing Executive Office, the Company | |||||||||||
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
| Jan. 2020 | Assumed office of Member of the Board of Directors, Senior Managing Executive Officer, the Company | |||||||
Responsible for Enterprise Risk Management Headquarters, | ||||||||
Responsible for Corporate Planning Department, | ||||||||
Responsible for Corporate Communications Department | ||||||||
Satoru Matsuzaki (Apr. 12, 1966) | Member of the Board of Directors, Senior Managing Executive Officer, Head of Corporate Business Headquarters Chairman, ORIX Auto Corporation Chairman, ORIX Rentec Corporation | Apr. 1989 | Joined Crown Leasing Corporation (retired on Apr. 1997) | |||||
| Aug. 1997 | Joined the Company | |||||||
| Oct. 2005 | General Manager of Strategic Planning Group, Investment Banking Headquarters | |||||||
| Apr. 2006 | General Manager of Investment and Operation Group, Investment Banking Headquarters | |||||||
| Feb. 2010 | Head of Office of the President | |||||||
| Jun. 2010 | General Manager of Corporate Planning Department | |||||||
| Jan. 2012 | General Manager of Corporate Planning Department, | |||||||
General Manager of Corporate Communications Department | ||||||||
| May 2012 | General Manager of Corporate Planning Department, | |||||||
Special Advisor to Responsible for Corporate Communications Department | ||||||||
Jan. 2013 | Assumed office of Executive Officer, the Company | |||||||
Responsible for Corporate Planning Department, | ||||||||
Responsible for Corporate Communications Department | ||||||||
| Jan. 2014 | Domestic Sales Administrative Headquarters: Head of New Business Development and Head of Tokyo Sales | |||||||
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Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, 2021 | |||||
| Jun. 2015 | Responsible for New Business Development Department I and II, Head of Tokyo Sales Headquarters | |||||||
| Jan. 2017 | Head of Eastern Japan Sales Headquarters | |||||||
| Jan. 2018 | Assumed office of Managing Executive Officer, the Company Head of Domestic Sales Administrative Headquarters, Head of Eastern Japan Sales Headquarters | |||||||
| Jan. 2019 | Head of Corporate Business Headquarters | |||||||
| Jun. 2019 | Assumed office of Member of the Board of Directors, Managing Executive Office, the Company | |||||||
| Jan. 2020 | Assumed office of Member of the Board of Directors, Senior Managing Executive Officer, the Company | |||||||
Chairman, ORIX Auto Corporation, | ||||||||
Chairman, ORIX Rentec Corporation | ||||||||
Yoshiteru Suzuki (Jan. 15, 1963) | Member of the Board of Directors, Senior Managing Executive Officer President and Chief Executive Officer, ORIX Corporation USA | Apr. 1985 | Joined | 0 | ||||
| Jul. 1999 | Partner, KPMG LLP (retired on May 2002) | |||||||
| Jun. 2002 | Joined Cerberus Capital Management, L.P. | |||||||
| Jan. 2010 | Assumed office of Representative Director and President, Cerberus Japan K.K. (retired on Jun. 2015) | |||||||
| Oct. 2015 | Rejoined | |||||||
| Jan. 2018 | Assumed office of Executive Officer, the Company | |||||||
Assumed office of Deputy President, ORIX USA Corporation (currently ORIX Corporation USA) | ||||||||
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Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||||||
Jan. 2019 | Assumed office of Managing Executive Officer, the Company | |||||||||||
Sep. 2019 | Assumed office of President and Chief Executive Officer, ORIX Corporation USA | |||||||||||
Jan. 2020 | Assumed office of Senior Managing Executive Officer, the Company | |||||||||||
Jun. 2020 | Assumed office of Member of the Board of Directors, Senior Managing Executive Officer, the Company | |||||||||||
Stan Koyanagi (Dec. 25, 1960) | Member of the Board of Directors, Managing Executive Officer, Global General Counsel | Oct. 1985 | Joined SHEPPARD, MULLIN, RICHTER & HAMPTON LLP (retired on May 1988) | 2,000 (0) | ||||||||
Jan. 1993 | Partner, GRAHAM & JAMES LLP (currently Squire Patton Boggs LLP) (retired on Feb. 1997) | |||||||||||
Mar. 1997 | Vice President, ORIX USA Corporation (currently ORIX Corporation USA) | |||||||||||
| Mar. 1999 | General Counsel, Vice President and Manager, ORIX USA Corporation (currently ORIX Corporation USA) (retired on Dec. 2003) | |||||||||||
Jan. 2004 | Vice President and Associate General Counsel, KB HOME (retired on Jun. 2013) | |||||||||||
Jul. 2013 | Joined the Company Global General Counsel of Global Business Headquarters | |||||||||||
| Jun. 2017 | Assumed office of Member of the Board of Directors, Managing Executive Officer, the Company Responsible for Enterprise Risk Management, Global General Counsel | |||||||||||
| Jun. 2018 | Head of Enterprise Risk Management Headquarters | |||||||||||
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
| Jan. 2019 | ||||||||
Heizo Takenaka ( | Member of the Board of Directors (Outside Director) Board of Directors (Outside Director), SBI Holdings, Inc. | 0 | ||||||
| Apr. 1996 | ||||||||
Professor, | ||||||||
| Apr. 2001 | ||||||||
| Sep. 2002 | Minister of State for Financial Services and for Economic and Fiscal Policy | |||||||
| Jul. 2004 | Elected to House of Councilors | |||||||
| Sep. 2004 | Minister of State for Economics and Fiscal Policy and Communications and Privatization of Postal Services | |||||||
| Oct. 2005 | Minister for Internal Affairs and Communications and Privatization of Postal Services | |||||||
| Dec. 2006 | Assumed office of | |||||||
| Aug. 2009 | Assumed office of Chairman and Director, PASONA Group Inc. | |||||||
| Apr. 2010 | Professor, Faculty of Policy Management at Keio University (retired on Mar. 2016) | |||||||
| Jun. | Assumed office of Member of the Board of Directors (Outside Director), the Company | |||||||
| Apr. 2016 | Professor, Faculty of Regional Development Studies at Toyo University (currently Faculty of Global and Regional Studies at Toyo University) (retired on Mar. 2021) Assumed office of | |||||||
Center for Global Innovation Studies at Toyo University (retired on Mar. | ||||||||
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
| Jun. 2016 | ||||||||
Michael Cusumano ( | Member of the Board of Directors (Outside Director) Deputy Dean and Professor, Faculty of Member of the Board of Directors (Outside Director), | Assistant Professor, | 0 | |||||
| Jul. 1996 | Professor, Faculty of | |||||||
| Jul. 2007 | ||||||||
| Apr. 2016 | ||||||||
Assumed office of | ||||||||
Jun. | Assumed office of Member of the Board of Directors (Outside Director), the Company | |||||||
| Apr. | Senior Specially Appointed Professor, | |||||||
| Jul. 2020 | ||||||||
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
Sakie Akiyama (Dec. 1, 1962) | Member of the Board of Directors (Outside Director) Founder, Saki Corporation Member of the Board of Directors (Outside Director), Sony Corporation Board of Directors (Outside Director), JAPAN POST HOLDINGS Co., Ltd. Member of the Board (Outside Director), Mitsubishi Corporation | Apr. 1987 | Joined Arthur Andersen & Co. (retired on Mar. 1994) | 0 | ||||
| Apr. 1994 | Founded Saki Corporation Assumed office of Representative Director and Chief Executive Officer, Saki Corporation (retired on Sep. 2018) | |||||||
| Oct. 2018 | Assumed office of Founder, Saki Corporation | |||||||
| Jun. 2019 | Assumed office of Member of the Board of Directors (Outside Director), the Company | |||||||
Assumed office of Member of the Board of Directors (Outside Director), Sony Corporation | ||||||||
Assumed office of Board of Directors (Outside Director), JAPAN POST HOLDINGS Co., Ltd. | ||||||||
| Jun. 2020 | Assumed office of Member of the Board (Outside Director), Mitsubishi Corporation | |||||||
shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of | ||||||||||||
Hiroshi Watanabe (Jun. 26, 1949) | Member of the Board of Directors (Outside Director) President, Institute for International Monetary Affairs Director (Outside Director), Mitsubishi Materials Corporation | Apr. 1972 | Joined the Ministry of Finance | 0 | ||||||||
| Jan. 2003 | Director-General, International Bureau, Ministry of Finance | |||||||||||
Jul. 2004 | Vice Minister of Finance for International Affairs, Ministry of Finance (retired on Jul. 2007) | |||||||||||
| Oct. 2007 | Special Advisor, Japan Center for International Finance (retired on Sep. 2008) | |||||||||||
| Apr. 2008 | Professor, Graduate School of Commerce and Management, Faculty of Commerce and Management at Hitotsubashi university (currently School of Business Administration at Hitosubashi University Business School) (retired on Sep. 2008) | |||||||||||
| Oct. 2008 | Assumed office of Deputy Governor, Japan Finance Corporation (retired on Mar. 2012) | |||||||||||
135
Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, | |||||
| Apr. 2012 | Assumed office of Deputy Governor, Japan Bank for International Cooperation | |||||||
| Dec. 2013 | Assumed office of Governor, Japan Bank for International Cooperation (retired on Jun. 2016) | |||||||
| Oct. 2016 | Assumed office of President, Institute for International Monetary Affairs | |||||||
| Jun. 2017 | Assumed office of Director (Outside Director), Mitsubishi Materials Corporation | |||||||
| Jun. 2020 | Assumed office of Member of the Board of Directors (Outside Director), the Company | |||||||
Aiko Sekine (May 13, 1958) | Member of the Board of Directors (Outside Director) Professor, Faculty of Commerce at Waseda University Trustee, International Valuation Standards Council Advisor, Audit & Supervisory Board Member (Outside), Sumitomo Riko Company Limited Audit & Supervisory Board Member (Outside), IHI Corporation | Apr. 1981 | Joined Citibank, N.A., Tokyo Branch (retired on Jan. 1984) | 0 | ||||
| Oct. 1985 | Joined Aoyama Audit Corporation | |||||||
| Mar. 1989 | Certified as Public Accountant, Japan | |||||||
| Jul. 2001 | Partner of Chuo Aoyama Audit Corporation (retired on Aug. 2006) | |||||||
| Sep. 2006 | Partner of Aarata Audit Corporation (currently PricewaterhouseCoopers Aarata LLC) (retired on Jul. 2016) | |||||||
| Jul. 2007 | Executive Board Member of Japanese Institute of Certified Public Accountants | |||||||
| Jan. 2008 | Board Member of International Ethics Standards Board for Accountants, International Federation of Accountants (retired on Dec. 2010) | |||||||
| Jul. 2010 | Assumed office of Deputy President of Japanese Institute of Certified Public Accountants | |||||||
| Jul. 2016 | Assumed office of Chairman and President of Japanese Institute of Certified Public Accountants (retired on Jul. 2019) | |||||||
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Name (Date of birth) | Current positions and principal outside positions (1) | Business experience | Number of shares held (of which number of shares scheduled to be issued by share-based compensation plans) in the Company as of June 29, 2021 | |||||
| Jan. 2019 | Member of the Nominating Committee, International Federation of Accountants | |||||||
| Jul. 2019 | Advisor, | |||||||
| Jun. 2020 | Assumed office of Member of the Board of Directors (Outside Director), the Company | |||||||
Assumed office of Audit & Supervisory Board Member (Outside), Sumitomo Riko Company Limited | ||||||||
Assumed office of Audit & Supervisory Board Member (Outside), IHI Corporation | ||||||||
| Sep. 2020 | Professor, Faculty of Commerce at Waseda University | |||||||
| Oct. 2020 | Trustee, International Valuation Standards Council | |||||||
Chikatomo Hodo (Jul. 31, 1960) | Member of the Board of Directors (Outside Director) Senior Corporate Advisor, Accenture Japan Ltd. Outside Director, Konica Minolta Inc. Outside Director, Mitsubishi Chemical Holdings Corporation | Sep. 1982 | Joined Accenture Japan Ltd. | 0 (0) | ||||
| Sep. 2005 | ||||||||
| Apr. 2006 | Assumed office of Representative Director and President, Accenture Japan Ltd. | |||||||
| Sep. 2015 | Assumed office of Director and Chairman, Accenture Japan Ltd. (retired on Aug. 2017) | |||||||
| Sep. 2017 | Assumed office of Director and Senior Corporate Advisor, Accenture Japan Ltd. (retired as a Director on Jun. 2018) | |||||||
| Jun. 2018 | Assumed office of Outside Director, Konica Minolta Inc. | |||||||
| Jul. 2018 | Senior Corporate Advisor, Accenture Japan Ltd. | |||||||
| Jun. 2019 | Assumed office of Outside Director, Mitsubishi Chemical Holdings Corporation | |||||||
| Jun. 2021 | Assumed office of Member of the Board of Directors (Outside Director), the Company | |||||||
| Notes: | 1. All ORIX Member of the Board of Directors are engaged full-time except | |||
2. Name on the family register of Aiko Sekine is Aiko Sano. |
EXECUTIVE OFFICERS
The executive officers of the ORIX Group as of June 29, 2020,2021, excluding those who are also directors as listed above are as follows:
Name | Title | Areas of duties | Number of 2021shares held (of which number of shares scheduled to be issued by share-based compensation plans)in the Company as of June 29, | |||||
Kiyoshi Fushitani | Senior Managing Executive Officer | East Asia Business Headquarters Global Transportations Services Headquarters | | 1,500 | ) | |||
Yasuaki Mikami | Managing Executive Officer | Group Human Resources and Corporate Administration Headquarters Secretariat of The Board of Directors Work Style Reform Project | | 1,880 | ||||
Hitomaro Yano | Executive Officer | Treasury and Accounting Headquarters | | 5,100 | ) | |||
Toyonori Takahashi | Executive Officer | Group Kansai Representative MICE-IR OfficeReal Estate Sales Department Senior Managing Executive Officer, ORIX Real Estate Corporation | | 7,302 | ) | |||
Yasuhiro Tsuboi | Executive Officer | Credit and Investment Management Headquarters | | 1,908 | ) | |||
Michio Minato | Executive Officer | Group Strategy Business Unit President, ORIX Baseball Club Co., Ltd. | | 400 | ) | |||
Tetsuya Kotera | Executive Officer | Corporate Business Headquarters | | 1,402 | ) | |||
Eiji Arita | Executive Officer | Corporate Business Headquarters | | 1,600 | ) | |||
Seiichi Miyake | Executive Officer | Investment and Operation Headquarters | | 3,202 | ) | |||
Hidetake Takahashi | Executive Officer | Energy and Eco Services Business Headquarters Member of the Board of Directors, Ubiteq, INC. | | 7,100 | ) | |||
Tomoko Kageura | Executive Officer | Enterprise Risk Management Headquarters Global General Counsel Office | | 5,475 | ||||
Name | Title | Areas of duties | Number of 2021shares held (of which number of shares scheduled to be issued by share-based compensation plans)in the Company as of June 29, | |||||
Nobuki Watanabe | Executive Officer | CEO’s Office New Business Development Department | | 399 (17,750 | ) | |||
Toshinari Fukaya | Group Managing Executive | President, ORIX Real Estate Corporation President, DAIKYO INCORPORATED | | 4,200 | ) | |||
Hiroko Yamashina | Group Executive | | 32,700 | ) | ||||
Yuji Kamiyauchi | Group Executive | President, ORIX Auto Corporation Member of the Board of Directors, Ubiteq, INC. | | 3,700 | ) | |||
Takaaki Nitanai | Group Executive | Senior Managing Executive Officer, ORIX Real Estate Corporation | | 0 | ) | |||
Nobuhisa Hosokawa | Group Executive | President, ORIX Rentec Corporation | | 2,800 | ) | |||
Notes: | 1. Name on the family register of Tomoko Kageura is Tomoko Kanda. | |||
2. Name on the family register of Hiroko Yamashina is Hiroko Arai. |
EMPLOYEES
As of March 31, 2020,2021, we had 31,23333,153 full-time employees, compared to 31,233 as of March 31, 2020 and 32,411 as of March 31, 2019 and 31,890 as of March 31, 2018.2019. We employ 2,5185,933 staff in Corporate Financial Services segment, 3,021 staff inand Maintenance Leasing, segment, 8,6748,586 staff in Real Estate, segment, 3,7684,831 staff in PE Investment and Operation segment, 3,466Concession, 673 staff in Retail segment, 7,778Environment and Energy, 2,437 staff in Overseas Business segmentInsurance, 1,130 staff in Banking and 2,008Credit, 154 staff in Aircraft and Ships, 1,371 staff in ORIX USA, 1,356 staff in ORIX Europe, 4,554 staff in Asia and Australia, 2,128 staff as part of our headquarters function as of March 31, 2020.2021. As of March 31, 2020,2021, we had 19,58419,187 temporary employees. Some of our employees are represented by a union. We consider our labor relations to be excellent.
The mandatory retirement age for our employees is 65, but for our subsidiaries and affiliates the retirement age varies. ORIX and major domestic subsidiaries introduced a system for retirement at age 65 from April 2014. By implementing the system alongside the current
re-employment
system at retirement age, the system will allow employees to choose how they will work from age 60 according to their lifestyles. In April 2010, ORIX introduced an early voluntary retirement program that is available to ORIX employees who are at least 45 years old. Employees who take advantage of this program receive their accrued retirement package plus an incentive premium.ORIX and some of its subsidiaries have established contributory and noncontributory funded pension plans covering substantially all of their employees. The contributory funded pension plans include defined benefit pension plans and defined contribution pension plans. Under the plans, employees are entitled to lump sum payments at the time of termination of their employment or, if enrollment period requirements have been met, to pension payments. Defined benefit pension plans consist of a cash balance plan and a plan in which the amount of the payments are determined on the basis of length of service and remuneration at the time of termination. Our funding policy in respect of these plans is to contribute annually the amounts actuarially determined to be required. Assets of the plans are invested primarily in interest-bearing securities and marketable equity securities. In July 2004, ORIX introduced a defined contribution pension program. In November 2004, we received permission from the Japanese Ministry of Health, Labor and Welfare to transfer the substitutional portion of benefit obligation from our employer pension fund to the government and these assets were transferred back to the government in March 2005. Total costs (termination or pension plans for both employees and directors and corporate auditors) charged to income for all benefit plans (including defined benefit plans) were ¥8,738 million, ¥8,733 million, ¥9,845 million and ¥9,845¥11,018 million in fiscal 2018, 2019, 2020 and 2020,2021, respectively.
SHARE OWNERSHIP
As of June 29, 2020,2021, the directors, executive officers and group executives of the Company directly held an aggregate of 208,371211,941 Shares, representing 0.01% of the total Shares issued as of such date.
COMPENSATION
To promote greater management transparency in our governance, we had established the Executive Nomination and Compensation Committee in June 1999. Its functions included recommending executive remuneration. In June 2003, we adopted a “Company with Committees” board model and replaced the Executive Nominating and Compensation Committee with separate Nominating and Compensation Committees. For discussion of these committees, see “Item 6. —Directors, Senior Management and Employees—Nominating Committee” and “—Compensation Committee.”
Compensation for directors, executive officers and group executives in fiscal 20202021 was as follows (in millions of yen);
Fixed compensation (Number of people) | Performance- linked compensation (Number of people) | compensation (Number of people) | Total compensation | ||||||||||||||
Non-Executive Director and Outside Director | ¥ | (8 | ) | | — — | | ¥ | (8 | ) | ¥ | (8 | ) | |||||
Executive Officer and Group Executive | ¥ | 682 (25 | ) | ¥ | 425 (25 | ) | ¥ | 591 (25 | ) | ¥ | 1,699 (25 | ) | |||||
Total | ¥ | 775 (33 | ) | ¥ | 425 (25 | ) | ¥ | 604 (33 | ) | ¥ | 1,805 (33 | ) | |||||
The above list is the amount paid in accordance with the policies for the compensation of directors and Executive Officers resolved by the Compensation Committee held on June 21, 2019.26, 2020.
The amount paid listed in the table above with regard to the share-based compensation is calculated by multiplying the number of points confirmed to be provided as the portion for the fiscal year ended in March 20202021 by the stock market price paid by the trust when ORIX’s shares were acquired (¥1,5941,479.87 per share).
The targets and results with regard to the KPIs of the performance-linked compensation listed in the table above are as follows:
| - | Company-wide performance indicator |
We targeted the milestone rate with regard to the consolidated net income growth set by the compensation committee towards the achievement of the Company’s90%64%.
mid-term
strategic directions, and achieved | - | Division performance indicator |
We set the performance target for each division based on the company-wide performance target, and achieved 0%50% to 135%150% (median: 90%95%) by 2518 Executive Officers and 95 group executives (based on the total evaluation including qualitative assessment).
Compensation for Makoto Inoue, Member of the Board of Directors, Representative Executive Officer, President and Chief Executive Officer of ORIX, for fiscal 20202021 was ¥90¥117 million in fixed compensation, ¥81¥75 million in performance-linked compensation and ¥89¥111 million in share-based compensation.
Compensation for Stan Koyanagi,Shoji Taniguchi, Member of the Board of Directors, Senior Managing Executive Officer of ORIX, for fiscal 20202021 was ¥55¥41 million (¥12in fixed compensation, ¥34 million fromin performance-linked compensation and ¥34 million in share-based compensation.
Compensation for Satoru Matsuzaki, Member of the CompanyBoard of Directors, Senior Managing Executive Officer of ORIX, for fiscal 2021 was ¥39 million in fixed compensation, ¥27 million in performance-linked compensation and ¥43¥34 million in share-based compensation.
Compensation for Yoshiteru Suzuki, Member of the Board of Directors, Senior Managing Executive Officer of ORIX, for fiscal 2021 was ¥58 million (¥58 million from ORIX Corporation USA) in fixed compensation and ¥54¥25 million (¥54 million from ORIX Corporation USA) in performance-linked compensation and ¥34 million in share-based compensation.
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The actual total amount of the share-based compensation paid in fiscal 20202021 was ¥572¥302 million paid to two directors and fourtwo executive officers (including those serving concurrently as directors and Executive Officers) who retired during fiscal 2020 and two Executive Officer who retired before the end of fiscal 2019.2021. The following individualsindividual retired during fiscal year 20202021 and werewas paid share-based compensation totaling over ¥100 million. Compensation for Katsunobu Kamei,Yuichi Nishigori, currently ChairmanPresident of ORIX Asset ManagementBank Corporation, as GroupMember of the Board of Directors, Senior Managing Executive of ORIX, for fiscal 2020 was ¥26 million in fixed compensation, ¥7 million in performance-linked compensation and ¥205 million in share-based compensation (¥80 million from the Company and ¥160 million from ORIX Auto Corporation). Compensation for Kazutaka
The Compensation Committee sets the following “Policy of Determining Compensation of Directors and Executive Officers.”
Policy of Determining Compensation of Directors and Executive Officers
ORIX’s business objective is to increase shareholder value over the medium- to long-term. ORIX believes in the importance of each director and Executive Officer responsibly performing his or her duties, and cooperation among different business units in order to achieve continued growth of the ORIX Group. The Compensation Committee believes that in order to accomplish such business objectives, directors and Executive Officers should place emphasis not only on performance during the current fiscal year, but also on medium- to long-term results. Accordingly, under the basic policy that compensation should provide effective incentives, ORIX takes such factors into account when making decisions regarding the compensation system and compensation levels for directors and Executive Officers. Taking this basic policy into consideration, we have established separate policies for the compensation of directors and Executive Officers in accordance with their respective roles based on a decision of the compensation committee held on June 26, 2020.25, 2021.
Compensation Policy for Directors
The compensation policy for directors who are not also Executive Officers aims for compensation composed in a way that is effective in maintaining the supervisory and oversight functions of Executive Officers’ performance in business operations, which is the main duty of directors. Specifically, ORIX’s compensation structure for directors consists of fixed compensation and share-based compensation *. In addition, the Company strives to maintain a competitive level of compensation with director compensation according to the role fulfilled, and receives third-party research reports on director compensation for this purpose.
Fixed compensation is, in principal, a certain amount that is added to the compensation of the chairperson and member of each committee. For share-based compensation reflecting medium- to long-term performance, directors are granted a fixed amount of points on an annual basis for their period of service, and they are paid in ORIX shares corresponding to the amount of points they have accumulated at the time of retirement.
Compensation Policy for Executive Officers
The compensation policy for executive officers, including those who are also directors, aims for a level of compensation that is effective in maintaining business operation functions, while also incorporating a component that is linked to current period business performance. Specifically, ORIX’s compensation structure for executive officers consists of fixed compensation, performance-linked compensation, and share-based compensation **. In principle, the compensation mix for executive officers is to set the ratio fixed compensation, performance-linked compensation, and share-based compensation to 1:1:1. In addition, based on the outcome of a third-party compensation research agency investigation, the Company strives to maintain a competitive level of compensation with executive officer compensation functioning as an effective incentive.
Fixed compensation is decided for each individual based on a standard amount for each position. Compensation linked to business performance for the fiscal year ended March 20202021 uses the level of achievement of the consolidated net income growth target as a company-wide performance indicator, adjusting
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50% of the position-based standard amount within the range of 0% to 200% while, at the same time, using the level of achievement of the target of the division for which the relevant executive officer was responsible *** as a division performance indicator, adjusting 50% of the position-based standard amount within the range of 0% to
300%. In the case of the representative executive officers, the consolidated net income growth target is used as a sole performance indicator, adjusting the standard amount within the range of 0% to 200%. These performance indicators are selected based on the Company’s
mid-term
strategic directions. For share-based compensation reflecting medium- to long-term performance, executive officers are granted a fixed amount of points based on their position, and they are paid in ORIX shares corresponding to the amount of points they have accumulated at the time of retirement.
| * | Share-based compensation is the Board Incentive Plan Trust in which directors and Executive Officers are granted a fixed amount of points on an annual basis for their period of service, and at the time of retirement, ORIX’s shares are delivered through a trust to them in accordance with the number of points they have accumulated. The amount of points to be granted is determined in accordance with the guidelines adopted by the compensation committee. The compensation committee does not set a minimum ownership period for the shares delivered under the plan. The compensation committee can forfeit the share-based compensation from a recipient director or executive officer, if it finds he/she engaged in serious misconduct that could cause damage to the Company during his/her period of service. |
| ** | Compensation for executive officers based on foreign branches or executive officers with special expertise is determined based on individual deliberation about foreign local compensation practices/levels or their special expertise, as the case may be. |
| *** | The level of achievement of each division performance with regard to the performance-based compensation is measured based on a total evaluation focusing on the annual growth rate of each division and taking into account qualitative factors (such as target levels, details of achievement, future growth potential, effort status to ESG, etc.) |
For the authority and discretion of Compensation Committee, refer to “Item 6. Directors, Senior Management and Employees—Structure and Activities of the Three Committees—.”
Compensation Committee
All members of our shares for Directors, Executive Officersthe Compensation Committee attended all the meetings, and Group Executives.the attendance rate was 100%.
The main agenda items of the Compensation Committee were as follows:
Determination of performance evaluation and individual payment amount related to performance-linked compensation (annual bonus) for fiscal 2020
Examination of the compensation system for Directors and Executive Officers for fiscal 2021
Determination of the compensation system for Directors and Executive Officers for fiscal 2021
Examination of the compensation level for Directors and Executive Officers based on the outcome of a third-party compensation research agency investigation
Determination of the renewal of Board Incentive Plan Trust contract for share-based compensation
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The Compensation Committee conducts a comprehensive review, including confirming whether the specific compensation, etc. for individual Directors and Executive Directors is consistent with the compensation policies based on the resolution at the Compensation Committee meeting held on June 26, 2020, determines the compensation after verifying that the level of compensation is appropriate based on third-party research reports on Director compensation and other information, and judges whether the compensation is in line with the compensation policies.
In, addition, to further strengthen the sharing of profits with our shareholders and stakeholders, we have established shareholding guidelines to the Directors, Executive Officers and Group Executives to hold certain numbers of our shares in June 2005.
In June 2005, we introduced the share-based compensation, which is a program in which points are annually allocated to directors and executive officers based upon prescribed standards while in office, and the actual number of ORIX’s shares calculated based on the number of accumulated points is provided at the time of retirement. In July 2014, we started to provide these shares through a trust established by the Board Incentive Plan Trust. The Company entrusts money to the “Board Incentive Plan Trust”, which acquires ORIX’s shares from the stock market for directors and executive officers at the end of his or her tenure using money contributed in advance. The total number of points of the share-based compensation granted to directors, executive officers and group executives for fiscal 20202021 is equivalent to 320,250427,916 points. Under this system, ¥572¥302 million, which is equivalent to 446,805204,680 points accumulated up to the end of tenure, was paid to executive officers who left their positions during fiscal 2020.2021. As a result, the balance to directors, executive officers and group executives as of March 31, 20202021 was 1,389,6031,612,840 points.
There are no service contracts between any of our directors, executive officers or group executives and the Company or any of its subsidiaries providing for benefits upon termination of employment.
No stock options were granted in any year since 2009. Each unit of the Shares has one vote. We have not issued any preferred shares.
STOCK OPTION PLAN
We have adopted various incentive plans including a stock option plan. The purpose of our stock option plan is to enhance the link between management, corporate performance and stock price, and, in this way, improve our business results. These plans are administered by ORIX’s Human Resources Department. For further discussion of stock-based compensation, see Note 22 of “Item 18. Financial Statements.”
At the annual general meetings of shareholders in the years from 1997 to 2000 inclusive, our shareholders approved stock option plans under which ORIX purchased shares from the open market and held them for transfer to ORIX’s directors and executive officers and some employees upon the exercise of their options. Shareholders also approved a stock subscription rights plan in 2001 and stock acquisition rights plans from 2002 to 2005. From 2006 to 2008, the Compensation Committee approved stock acquisition rights plans for our directors and executive officers, and shareholders approved similar plans for certain ORIX employees, as well as directors, executive officers and certain employees of our subsidiaries and affiliates. From 2009 to 2020,2021, no stock option plans were adopted for our directors, executive officers, employees, or those of our subsidiaries and affiliates.
Item 7. Major Shareholders and Related Party Transactions
MAJOR SHAREHOLDERS
The following table shows our major shareholders registered on our Register of Shareholders as of March 31, 2020.2021.
Each unit of Shares (1 unit = 100 Shares) has one vote, and none of our major shareholders have different voting rights. We do not issue preferred shares.
Name | Number of Shares held | Percentage of Issued shares | ||||||
(Thousands) | (%) | |||||||
Japan Trustee Services Bank, Ltd. (Trust Account) | 106,417 | 8.47 | ||||||
The Master Trust Bank of Japan, Ltd. (Trust Account) | 99,484 | 7.92 | ||||||
Japan Trustee Services Bank, Ltd. (Trust Account 9) | 31,280 | 2.49 | ||||||
Japan Trustee Services Bank, Ltd. (Trust Account 7) | 29,260 | 2.32 | ||||||
SSBTC CLIENT OMNIBUS ACCOUNT | 27,184 | 2.16 | ||||||
Japan Trustee Services Bank, Ltd. (Trust Account 5) | 25,145 | 2.00 | ||||||
CITIBANK, N.A. -N.Y , AS DEPOSITARY BANK FOR DEPOSITARY SHARE HOLDERS | 23,515 | 1.87 | ||||||
BNYM AS AGT/CLTS 10 PERCENT | 23,460 | 1.86 | ||||||
JP MORGAN CHASE BANK 385151 | 22,440 | 1.78 | ||||||
State Street Bank West Client Treaty 505234 | 19,732 | 1.57 | ||||||
Name | Number of Shares held | Percentage of Issued shares | ||||||
(Thousands) | (%) | |||||||
The Master Trust Bank of Japan, Ltd. (Trust Account) | 106,463 | 8.73 | ||||||
Custody Bank of Japan, Ltd. (Trust Account) | 75,528 | 6.19 | ||||||
Custody Bank of Japan, Ltd. (Trust Account 9) | 27,824 | 2.28 | ||||||
Custody Bank of Japan, Ltd. (Trust Account 7) | 27,533 | 2.25 | ||||||
SSBTC CLIENT OMNIBUS ACCOUNT | 25,626 | 2.10 | ||||||
CITIBANK, N.A. -N.Y , AS DEPOSITARY BANK FOR DEPOSITARY SHARE HOLDERS | 23,308 | 1.91 | ||||||
SMBC Nikko Securities Inc. | 21,428 | 1.75 | ||||||
STATE STREET BANK WEST CLIENT-TREATY 505234 | 20,699 | 1.69 | ||||||
NORTHERN TRUST CO. (AVFC) SUB A/C NON TREATY | 18,965 | 1.55 | ||||||
Custody Bank of Japan, Ltd. (Trust Account 5) | 18,354 | 1.50 | ||||||
ORIX is not directly or indirectly owned or controlled by any corporations, by any foreign government or by any natural or legal persons severally or jointly. As of March 31, 2020,2021, the percentage of issued Shares held by overseas corporations and individuals was 46.62%44.05%. As of March 31, 2020,2021, approximately 4,703,1804,661,728 ADSs were outstanding (equivalent to 23,515,90023,308,640 or approximately 1.78%1.81% of ORIX’s issued Shares as of that date). As of March 31, 2020,2021, all our ADSs were held by one record holder in the United States.
On May 19, 2020, Nomura Asset Management Co., Ltd.11, 2021, Sumitomo Mitsui Trust Bank, Limited submitted a filing to the Kanto Local Finance Bureau indicating that Nomura Asset Management Co., Ltd.Sumitomo Mitsui Trust Holdings, Inc. held 66,944,50062,963,100 Shares, representing 5.05%4.90% of ORIX’s outstanding Shares, as part of Nomura Asset Management Co., Ltd.’sSumitomo Mitsui Trust Bank, Limited’s assets under management.
On May 12, 2020, Asset Management One Co., Ltd. submitted a filing to the Kanto Local Finance Bureau indicating that Asset Management One Co., Ltd. held 56,933,700 Shares, representing 4.30% of ORIX’s outstanding Shares, as part of Asset Management One Co., Ltd.’s assets under management.
RELATED PARTY TRANSACTIONS
To our knowledge, no individual beneficially owns 10% or more of any class of the Shares that might give that individual significant influence over us. In addition, we are not directly or indirectly owned or controlled by, or under common control with, any enterprise.
We may enter into transactions with shareholders or potential large investors in the ordinary course of our business. We may also enter into transactions in the ordinary course of our business with certain key management personnel or with certain companies over which we, or our key management personnel, may have a significant influence. Our business relationships with these companies and individuals cover many of the financial services we provide our clients generally. We believe that we conduct our business with these companies and individuals in the normal course and on terms equivalent to those that would exist if they did not have equity holdings in us, if they were not our key management personnel, or if we or our key management personnel did not have significant influence over them, as the case may be. None of these transactions is or was material to us or, to our knowledge, to the other party.
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Other than as outlined below, since the beginning of our last full fiscal year, there have been no transactions or outstanding loans, including guarantees of any kind, and there are none currently proposed, that are material to us, or to our knowledge, to the other party, between us and any (i) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, us; (ii) associates; (iii) individuals owning, directly or indirectly, an interest in the voting power of us that gives them significant influence over us, and close members of any such individual’s family; (iv) key management personnel, including directors and senior management of companies and close members of such individuals’ families; or (v) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (iii) or (iv) or over which such a person is able to exercise significant influence.
Since the beginning of our last full fiscal year, no loans to any of the persons listed in clause (iv) above were made other than those that were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present other unfavorable features.
There are no outstanding loans (including guarantees of any kind) made by us or any of our subsidiaries to or for the benefit of any of the persons listed in clauses (i) through (v) in the foregoing paragraphabove other than those listed in the table below. Certain of our affiliates may fall within the meaning of a related party under clauses (i) or (ii) of the foregoing paragraph.above. The amount of outstanding loans (including guarantees of any kind) made by us to or for the benefit of all our affiliates, including those which may fall within the meaning of a related party, totaled ¥39,398¥34,102 million as of March 31, 20202021 and did not exceed ¥42,000¥38,000 million at any time during fiscal 2020.2021.
Each of these loans was made in the ordinary course of business. The following table describes, for each related party borrower, the applicable interest rate (or range of interest rates), the largest aggregate amount outstanding during fiscal 20202021 and the aggregate amount outstanding as of March 31, 2020.2021.
Related Party | The largest aggregate amount outstanding during fiscal 2020 | Aggregate amount outstanding as of March 31, 2020 | Interest rate | |||||||||
(Millions of yen) | (%) | |||||||||||
Kansai Airports | ¥ | 12,333 | ¥ | 12,002 | 6.5 | |||||||
SORA Airlease Designated Activity Company | 8,040 | 8,040 | 6.0 – 9.5 | |||||||||
Meritix Airlease Limited | 2,988 | 2,958 | 6.0 – 9.5 | |||||||||
IOS II, LLC | 3,309 | 2,708 | 6.3 | |||||||||
Medical Corporation DIC | 2,110 | 2,110 | 5.0 | |||||||||
Shinko Medical Support Corporation | 1,870 | 1,760 | 5.0 | |||||||||
Meritix Airlease Dara Limited | 2,577 | 1,740 | 6.0 – 9.5 | |||||||||
California Proton Therapy Center, LLC | 2,466 | 1,476 | 7.5 – 10.0 | |||||||||
Imation Company, LLC | 1,468 | 1,468 | 7.5 | |||||||||
First Resort Co., Ltd | 864 | 845 | 3.5 | |||||||||
Wizard Acquisition | 781 | 777 | 12.0 | |||||||||
RAM Industries Acquisitions, LLC | 683 | 645 | 13.0 | |||||||||
Timber Parent, LLC | 630 | 629 | 16.0 | |||||||||
OCC-ART Investor Holdings, LLC | 606 | 595 | 13.0 | |||||||||
ALLIANCE ENVIRONMENTAL GROUP, LLC | 448 | 445 | 12.0 | |||||||||
LCR Parent, LLC | 449 | 444 | 12.0 | |||||||||
YM Lease Co., Ltd. | 400 | 400 | 0.9 | |||||||||
Related Party | The largest aggregate amount outstanding during fiscal 2021 | Aggregate amount outstanding as of March 31, 2021 | Interest rate | |||||||||
(Millions of yen) | (%) | |||||||||||
Kansai Airports | ¥ | 12,329 | ¥ | 12,002 | 6.5 | |||||||
SORA Airlease Designated Activity Company | 8,780 | 8,780 | 6.0 – 9.5 | |||||||||
Meritix Airlease Limited | 3,126 | 3,126 | 6.0 – 9.5 | |||||||||
IOS II, LLC | 2,734 | 2,486 | 6.3 | |||||||||
Medical Corporation DIC | 2,110 | 2,110 | 1.2 – 5.0 | |||||||||
Shinko Medical Support Corporation | 1,760 | 1,760 | 5.0 | |||||||||
California Proton Therapy Center, LLC | 1,573 | 908 | 7.5 – 10.0 | |||||||||
First Resort Co., Ltd | 845 | 845 | 3.5 | |||||||||
Wizard Acquistion | 842 | 627 | 12.0 | |||||||||
Timber Parent, LLC | 690 | 577 | 14.0 – 16.0 | |||||||||
ALLIANCE ENVIRONMENTAL GROUP, LLC | 445 | 360 | 12.0 | |||||||||
Junseikai Medical Corporation | 230 | 230 | 5.0 | |||||||||
YM LeaseCo., Ltd. | 400 | 200 | 0.9 | |||||||||
Tsubaki Marine S.A. | 55 | 55 | 1.0 | |||||||||
Medical Corporation NIDC | 20 | 20 | 1.2 – 5.0 | |||||||||
Pacific League Marketing Corporation | 49 | 14 | 2.9 | |||||||||
Kada Greenfarm Co., Ltd. | 2 | 2 | 3.1 | |||||||||
Meritix Airlease Dara Limited | 1,508 | 0 | 6.0 – 9.5 | |||||||||
Imation Company, LLC | 1,479 | 0 | 7.5 | |||||||||
RAM Industries Acquisitions, LLC | 645 | 0 | 13.0 | |||||||||
OCC-ART Investor Holdings, LLC | 601 | 0 | 13.0 | |||||||||
LCR Parent, LLC | 444 | 0 | 12.0 | |||||||||
Flexible Energy Service Co., Ltd. | 1 | 0 | 3.2 | |||||||||
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Related Party | The largest aggregate amount outstanding during fiscal 2020 | Aggregate amount outstanding as of March 31, 2020 | Interest rate | |||||||||
(Millions of yen) | (%) | |||||||||||
Junseikai Medical Corporation | 230 | 230 | 5.0 | |||||||||
Tsubaki Marine S.A. | 377 | 54 | 1.0 | |||||||||
Pacific League Marketing Corporation | 85 | 49 | 2.9 | |||||||||
Medical Corporation NIDC | 20 | 20 | 5.0 | |||||||||
Kada Greenfarm Co., Ltd. | 2 | 2 | 3.1 | |||||||||
Flexible Energy Service Co., Ltd. | 1 | 1 | 3.2 | |||||||||
TAS Environmental Services, L.P. | 1,247 | 0 | 12.0 | |||||||||
Women’s Marketing Inc. | 493 | 0 | 7.9 – 9.8 | |||||||||
FSC Topco Holdings, LLC | 277 | 0 | 13.0 | |||||||||
Magix Airlease Designated Activity Company | 246 | 0 | 9.0 | |||||||||
Sazanka Marine S.A. | 39 | 0 | 1.0 | |||||||||
Torigin Leasing Co., Ltd . | 15 | 0 | 0.8 | |||||||||
Item 8. Financial Information
All relevant financial statements are attached hereto. See “Item 18. Financial Statements.”
LEGAL PROCEEDINGS
See “Item 4. Information on the Company—Legal Proceedings.”
DIVIDEND POLICY AND DIVIDENDS
See “Item 10. Additional Information—Dividend Policy and Dividends.”
SIGNIFICANT CHANGES
None.
Item 9. The Offer and Listing
TOKYO STOCK EXCHANGE
The primary market for the Shares is the Tokyo Stock Exchange. The Shares have been traded on the First Section of the Tokyo Stock Exchange since 1973.
NEW YORK STOCK EXCHANGE
The ADS are listed on the New York Stock Exchange under the symbol “IX.”
One ADSs represents five Shares. On March 31, 2020,2021, approximately 4,703,1804,661,728 ADSs were outstanding. This is equivalent to 23,515,90023,308,640 or approximately 1.78%1.81% of the total number of Shares outstanding on that date. On that date, all our ADSs were held by one record holder in the United States.
Item 10. Additional Information
MEMORANDUM AND ARTICLES OF INCORPORATION
Purposes
Our corporate purposes, as provided in Article 2 of our Articles of Incorporation, are to engage in the following businesses: (i) lease, purchase and sale (including purchase and sale on an installment basis), maintenance and management of movable property of all types; (ii) moneylending business, purchase and sale of claims of all types, payment on behalf of third parties, guarantee and assumption of obligations, agent for collection of money and other financial business; (iii) holding, investment in, management, purchase and sale of financial instruments such as securities and other investment business; (iv) advice, brokerage and agency relating to the merger, capital participation, business alliance and business succession and reorganization, etc.; (v) financial instruments and exchange business, financial instruments broker business, banking, trust and insurance business, advisory service business relating to investment in commodities, trust agreement agency business and credit management and collection business;
(vi)
non-life
insurance agency business, insurance147
agency business under the Automobile Accident Compensation Security Law, and service related to soliciting life insurance;(vii) lease, purchase and sale, ground preparation, development, maintenance and management of real property and warehousing; (viii) contracting for construction, civil engineering, building utility and interior and exterior furnishing, and design and supervision thereof; (ix) management of various facilities for sports, lodging, restaurant, medical treatment, welfare and training and education, and conducting sports, etc.; (x) facility planning, development, maintenance, management and operation of airports, roads, other public facilities and similar kinds of aforementioned facilities and the assumption or undertaking of public works; (xi) production, processing, sale, purchase, research and development of agricultural products, food products and agriculture-related products and facilities; (xii) waste-disposal business; (xiii) trading of emission rights for greenhouse gases and other various subjects; (xiv) power generation business; (xv) supply of various energy resources and the products in relation thereto; (xv)(xvi) planning, developing, contracting for, lease and sale of, intangible property rights; (xvi)(xvii) information processing and providing services, telecommunications business; (xvii)(xviii) business of dispatching workers to enterprise and employment agency business; (xviii)(xix) purchase and sale of antiques; (xix)(xx) transport business; (xx)(xxi) mining of various minerals, and the manufacture and sale of the products in relation thereto; (xxi)(xxii) business
support and consulting; (xxii)(xxiii) brokerage, agency, investigation, manufacturing, processing, research and development for business relating to any of the preceding items, and other business; (xxiii)(xxiv) as a result of holding shares in a subsidiary company engaged in those activities, engaging in business relating to any of the preceding items and managing such company’s business activities; and (xxiv)(xxv) any and all businesses incidental or related to any of the preceding items.
Directors and Board of Directors, and Committees
There shall be no less than three directors of the Company (Article 16). The term of office of a director is for one (1) year and expires upon conclusion of the annual General Meeting of Shareholders relating to the last fiscal year ending within one year after election of director (Article 18). Resolutions of the Board of Directors are adopted by a majority vote of the directors present at a meeting attended by a majority of the directors who may participate in making resolutions (Article 21).
There is no provision in our Articles of Incorporation as to a director’s power to vote on a proposal or arrangement in which the director is materially interested, but, under the Companies Act or Regulations of the board of directors, the director must refrain from voting on such matters at meetings of the board of directors. Under the Companies Act, the board of directors may, by resolution, delegate to the executive officers its authority to make decisions with regard to certain important matters, including the incurrence by ORIX of a significant amount of loan, prescribed by law.
We are required to maintain a Nominating Committee, an Audit Committee and a Compensation Committee (Article 10). The Compensation Committee sets the specific compensation for each individual director and executive officer based on the policy for determining compensation for directors and executive officers (see Item 6). No member of the Compensation Committee may vote on a resolution with respect to his or her own compensation as a director.
Neither the Companies Act nor our Articles of Incorporation includes special provisions as to the retirement age of directors, or a requirement to hold any shares of capital stock of ORIX to qualify him or her as a director of ORIX.
Stock
Our authorized share capital is 2,590,000,000 shares. Currently our Articles of Incorporation provide only for the issuance of shares of common stock. All shares of capital stock of us have no par value. All issued shares are fully-paid and
non-assessable.
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Unless shareholders’ approval is required as described in “Voting Rights,” the shares will be issued under a resolution approved by the board of directors and a decision made by the executive officer under delegation by the board of directors.
For changes in the number of shares issued for the past three fiscal years, see Note 24 of “Item 18. Financial Statements.”
Under the Act on Book-Entry Transfer of Corporate Bonds, Shares, Etc. of Japan and regulations thereunder, or the Book-Entry Law, in Japan, every share which is listed on any of the stock exchanges in Japan shall be transferred and settled only by the central clearing system provided by Japan Securities Depository Center, Inc. (“JASDEC”) and all Japanese companies listed on any Japanese stock exchange no longer issue share certificates. Shareholders of listed shares must have accounts at account management institutions to hold their shares unless such shareholder has an account at JASDEC, and any transfer of shares is effected through book entry, and title to the shares passes to the transferee at the time when the transferred number of the shares is recorded in the transferee’s account at an account managing institution under the Book-Entry Law. The holder of
an account at an account managing institution is presumed to be the legal owner of the shares recorded in such account. Under the Companies Act and the Book-Entry Law, in order to assert shareholders’ rights against us, the transferee must have his or her name and address registered on our Register of Shareholders, except in limited circumstances. Foreign shareholders may file specimen signatures in lieu of seals. Nonresident shareholders are required to appoint a standing proxy in Japan or designate a mailing address in Japan. The registration of transfer and the application for reduced withholding tax on dividends can usually be handled by a standing proxy. See “Taxation—Japanese Taxation.” Japanese securities companies and commercial banks customarily will act as standing proxies and provide related services for standard fees.
Our transfer agent is Mitsubishi UFJ Trust and Banking Corporation, located at
4-5,
Marunouchi1-chome,
Chiyoda-ku,
Tokyo100-8212,
Japan.In general, there are no limitations on the right to own shares of our common stock, including the rights of nonresidents or foreign shareholders to hold or exercise voting rights on the securities imposed under Japanese law or by our Articles of Incorporation.
Settlement of transactions for shares listed on any of the stock exchanges in Japan will normally be effected on the fourth trading day from and including the transaction date. Settlement in Japan shall be made through JASDEC as described above.
Distributions of Surplus
Ordinary Dividends and Interim Dividends may be distributed by us in cash to shareholders or pledgees of record as of March 31 (in the case of Ordinary Dividends) or September 30 (in the case of Interim Dividends) of each year in proportion to the number of shares held by each shareholder or registered pledgee, as the case may be.
We may make distributions of surplus to the shareholders any number of times per fiscal year, subject to certain limitations as described below. Under our Articles of Incorporation, distributions of cash dividends need to be declared by a resolution of the board of directors. Distributions of surplus may be made in cash or in kind in proportion to the number of shares held by respective shareholders. A resolution of the board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date of the distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general meeting of shareholders or the board of directors, as the case may be, grant a right to the shareholders to require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders.
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Under our Articles of Incorporation, if Ordinary Dividends are distributed for common shares, we treat the shareholders or share pledgees registered or recorded on the Register of Shareholders as of March 31 of each year as the people having rights to receive such dividends. In case of the distribution of Interim Dividends, we distribute these to the shareholders or share pledgees registered or recorded on the Register of Shareholders as of September 30 each year. Dividends or other distributable assets shall not incur interest thereon. If the relevant distributed assets are not received within a full three years from the date on which the distribution of relevant distributed assets became effective, we may be released from its obligation to distribute such assets.
Under the Companies Act, when we make distributions of surplus, if the sum of our capital reserve () and earned surplus reserve () is less than
shihonjunbikin
riekijunbikin
one-quarter
of our stated capital, we must, until such sum reachesone-quarter
of the stated capital, set aside in our capital reserve and/or earned surplus reserve an amount equal toone-tenth
of the amount of surplus so distributed as required by ordinances of the Ministry of Justice.The amount of surplus at any given time must be calculated in accordance with the following formula:
A + B + C + D – (E + F + G)
In the above formula:
| “A” = | the total amount of other capital surplus and other earnings surplus, each such amount being that appearing on our nonconsolidated balance sheet as of the end of the last fiscal year; |
| “B” = | (if we have disposed of our treasury stock after the end of the last fiscal year) the amount of the consideration for such treasury stock received by us less the book value thereof; |
| “C” = | (if we have reduced our stated capital after the end of the last fiscal year) the amount of such reduction less the portion thereof that has been transferred to capital reserve or earned surplus reserve (if any); |
| “D” = | (if we have reduced our capital reserve or earned surplus reserve after the end of the last fiscal year) the amount of such reduction less the portion thereof that has been transferred to stated capital (if any); |
| “E” = | (if we have cancelled our treasury stock after the end of the last fiscal year) the book value of such treasury stock; |
| “F” = | (if we have distributed surplus to our shareholders after the end of the last fiscal year) the amount of the assets distributed to shareholders by way of such distribution of surplus; |
| “G” = | certain other amounts set forth in an ordinance of the Ministry of Justice, including (if we have reduced surplus and increased stated capital, capital reserve or earned surplus reserve after the end of the last fiscal year) the amount of such reduction and (if we have distributed surplus to our shareholders after the end of the last fiscal year) the amount set aside in capital reserve or earned surplus reserve (if any) as required by ordinances of the Ministry of Justice. |
Under the Companies Act, the aggregate book value of surplus distributed by us may not exceed a prescribed distributable amount, as calculated on the effective date of such distribution. Our distributable amount at any given time shall be the amount of surplus less the aggregate of: (a) the book value of our treasury stock; (b) the amount of consideration for any of our treasury stock disposed of by us after the end of the last fiscal year; and (c) certain other amounts set forth in an ordinance of the Ministry of Justice, including (if the total of the), we will further deduct from the amount of surplus a certain amount which is calculated based on our nonconsolidated and consolidated balance sheets as of the end of the last fiscal year as provided in ordinances of the Ministry of Justice.
one-half
of goodwill and the deferred assets exceeds the total of stated capital, capital reserve and earned surplus reserve, each such amount being that appearing on our nonconsolidated balance sheet as of the end of the last fiscal year) all or certain part of such exceeding amount as calculated in accordance with the ordinances of the Ministry of Justice. If we have opted to become a company that applies the restriction on distributable amounts on a consolidated basis (renketsu haito kisei tekiyo kaisha
150
If we have prepared interim financial statements as described below after the end of the last fiscal year, and if such interim financial statements have been approved by our board of directors or (if so required) by a general meeting of our shareholders, then the distributable amount must be adjusted to take into account the amount of profit or loss as set forth in ordinances of the Ministry of Justice, and the amount of consideration for any of our treasury stock disposed of by us, during the period in respect of which such interim financial statements have been prepared. Under the Companies Act, we are permitted to prepare nonconsolidated interim financial statements consisting of a balance sheet as of any date subsequent to the end of the last fiscal year and an income statement for the period from the first day of the current fiscal year to the date of such balance sheet. Interim financial statements prepared by us must be reviewed by our accounting auditor, as required by an ordinance of the Ministry of Justice.
In Japan, the
ex-dividend
date and the record date for dividends precede the date of determination of the amount of the dividend to be paid. The price of the shares generally goesex-dividend
on the second business day prior to the record date.Capital and Reserves
When we issue new shares, the amount of the cash or assets paid or contributed by subscribers for the new shares (with some exceptions) is required to be accounted for as stated capital, although we may account for an amount not exceeding
one-half
of the cash or assets as capital reserve by resolutions of the board of directors.We may at any time transfer the whole or any part of our additional
paid-in
capital and legal reserve to stated capital by a resolution of a general meeting of shareholders. The whole or any part of surplus which may be distributed as Ordinary Dividends or Interim Dividends may also be transferred to stated capital by a resolution of a general meeting of shareholders. We may, by a resolution of a general meeting of shareholders (in the case of the reduction of stated capital, a special resolution of a general meeting of shareholders, see “Voting Rights”) reduce stated capital, additionalpaid-in
capital and/or legal reserve.Stock Splits
We may at any time split the shares into a greater number of shares by resolution of the board of directors. When the board of directors resolves on the split of shares, it may also amend the Articles of Incorporation to increase the number of authorized shares to be issued in proportion to the relevant stock split. We must give public notice of the stock split, specifying the record date therefore, not less than two weeks prior to such record date.
On October 26, 2012, the board of directors adopted a resolution on astock split, effective as of April 1, 2013. The record date for the stock was one day prior to the effective date of the stock split. Our Articles of Incorporation were amended to increase the authorized share capital to cover the number of shares increased by the stock split, which amendment became effective simultaneously with the effectiveness of the stock split.
ten-for-one
Unit Share System
Our Articles of Incorporation provides that one hundred shares constitute one “unit” of shares. The number of shares constituting a unit may be altered by amending our Articles of Incorporation. The number of shares constituting a unit is not permitted to exceed 1,000 shares.
A shareholder may not exercise shareholders’ rights in relation to any shares that it holds that are less than one unit other than the rights set forth below under the Companies Act and the Articles of Incorporation.
| (i) | The right to receive the distribution of money, etc., when the Company distributes the money, etc. in exchange for acquiring one class of shares subject to terms under which the Company shall acquire all of such class shares; |
151
| (ii) | The right to receive the distribution of money, etc., in exchange for acquisition of shares subject to terms under which the Company shall acquire such shares; |
| (iii) | The right to receive allocation of shares when the Company allocates its shares without having a shareholder make new payment; |
| (iv) | The right to demand that the Company purchase shares that are less than one Unit held by the shareholder; |
| (v) | The right to receive distribution of remaining assets; |
| (vi) | The right to demand review of the Articles of Incorporation and the Register of Shareholders and delivery of their copies or a document describing registered matters, etc.; |
| (vii) | The right to demand registration or recordation of matters to be registered or recorded on the Register of Shareholders when the shareholder acquired the shares; |
| (viii) | The right to receive the distribution of money, etc. pursuant to reverse stock split, stock split, allocation of stock acquisition right for free (which means that the Company allocates its stock acquisition right without having a shareholder make new payment), distribution of dividends from retained earnings or change of corporate organization; |
| (ix) | The right to receive the distribution of money, etc. to be distributed pursuant to merger, share exchange or share-transfer effected by the Company; |
| (x) | The right to subscribe to Offering Shares and Offering Stock Acquisition Rights on a pro rata basis based upon the number of shares held by the shareholder; and |
| (xi) | The right to demand that the Company sell to the shareholder the number of additional shares necessary to make the number of shares of less than one Unit held by the shareholder, equal to one Unit. |
Under the book-entry transfer system operated by JASDEC, shares constituting less than one unit are generally transferable. Under the rules of the Japanese stock exchanges, however, shares constituting less than one unit do not comprise a trading unit, except in limited circumstances, and accordingly may not be sold on the Japanese stock exchanges.
A holder of shares constituting less than one unit may require us to purchase such shares at their market value in accordance with the provisions of our Share Handling Regulations. In addition, our Articles of Incorporation provide that a holder of shares constituting less than one unit may request us to sell to such holder such amount of shares which will, when added together with the shares constituting less than one unit held by such holder, constitute one unit of shares, in accordance with the provisions of the Share Handling Regulations.
General Meetings of Shareholders
The ordinary general meeting of our shareholders is usually held in Tokyo in June of each year. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary. Notice of a shareholders’ meeting stating the place, time and purpose thereof must be dispatched to each shareholder (or, in the case of a nonresident shareholder, to its resident proxy or mailing address in Japan) having voting rights at least two weeks prior to the date of such meeting. The record date for an ordinary general meeting of shareholders is March 31 of each year. General meetings of shareholders can be called by a director pursuant to a resolution of the board of directors.
Any shareholder or group of shareholders with at least 3.0% of the total number of voting rights for a period of six months or longer may require the convocation of a general meeting of shareholders for a particular purpose by showing such a purpose and reason for convocation to one of our directors. Unless such shareholders’ meeting is convened promptly or a convocation notice of a meeting which is to be held not later than eight weeks from the day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene such shareholders’ meeting.
152
Any shareholder or group of shareholders holding at least 300 voting rights or 1.0% of the total number of voting rights for six months or longer may propose a matter to be considered at a general meeting of shareholders by submitting a written request to one of our directors at least eight weeks prior to the date of such meeting.
Under the Companies Act, any of minimum percentages, time periods and number of voting rights necessary for exercising the minority shareholder rights described above may be decreased or shortened if the articles of incorporation of a joint stock corporation so provide.
Voting Rights
A holder of shares constituting one or more units is entitled to one vote for each unit. However, we do not have voting rights with respect to our own shares and if we directly or indirectly own 25% or more of voting rights of a corporate or other entity which is a shareholder, such corporate shareholder cannot exercise its voting rights. Except as otherwise provided by law or in our Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by a majority of the number of voting rights represented at the meeting. The quorum for election of directors is
one-third
of the total number of voting rights. Our shareholders are not entitled to cumulative voting in the election of directors. Our shareholders may exercise their voting rights through proxies, provided that the proxies are also shareholders having voting rights.Under the Companies Act and our Articles of Incorporation, any amendment to our Articles of Incorporation (except for certain amendments, see “Stock Splits”) and certain other instances require approval by a “special resolution” of shareholders, where the quorum is
one-third
of the total number of voting rights and the approval by at leasttwo-thirds
of the number of voting rights represented at the meeting is required. Other instances requiring such a “special resolution” include (i) the reduction of its stated capital, (ii) the removal of a director, (iii) the dissolution, liquidation, merger or consolidation, merger and corporate split or (iv) the formation of a parent company by way of share exchange or share transfer, (v) the transfer of the whole or a substantial part of its business, (vi) the acquisition of the whole business of another company, (vii) the issue to persons other than the shareholders of new shares at a “specially favorable” price or the issue or transfer to persons other than the shareholders of stock acquisition rights (including those incorporated in bonds with stock acquisition rights) under “specially favorable” conditions, (vii) consolidation of shares and (ix) acquisition of its own shares from a specific party other than its subsidiaries.Subscription Right
Holders of the shares have no
pre-emptive
rights. The board of directors may, however, determine that shareholders be given subscription rights to new shares, in which case such rights must be given on uniform terms to all shareholders as of a record date of which not less than two weeks’ prior public notice must be given. The issue price of such new shares must be paid in full.Stock Acquisition Rights
We may issue stock acquisition rights () and bonds with stock acquisition rights (). Except where the issue would be on “specially favorable” conditions, the issue of stock acquisition rights or bonds with stock acquisition rights may be authorized by a resolution of the board of directors. Upon exercise of the stock acquisition rights, the holder of such rights may acquire shares by way of payment of the applicable exercise price or, if so determined by a resolution of the board of directors, by way of substitute payments in lieu of redemption of the bonds. If our Articles of Incorporation prohibit us from delivering shares, it will pay a cash payment equal to the market value of the shares.
shinkabu yoyakuken
shinkabu yoyakuken-tsuki shasai
Liquidation Rights
In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to the respective number of shares which they hold.
153
Reports to Shareholders
We currently furnish to our shareholders notices of shareholders’ meetings, annual business reports, including financial statements, and notices of resolutions adopted at the shareholders’ meetings, all of which are in Japanese. Public notice shall be electronic public notice, provided, however, that if the Company is unable to give an electronic public notice due to an accident or any other unavoidable reason, public notices of the Company shall be given in the “Nihon Keizai Shinbun.”
Record Date of Register of Shareholders
As stated above, March 31 is the record date for the payment of Ordinary Dividends and the determination of shareholders entitled to vote at the ordinary general meeting of shareholders. In addition, we may set a record date for determining the shareholders entitled to other rights and for other purposes by giving at least two weeks’ prior public notice. Under the Book-Entry Law, JASDEC is required to give us a notice of the names and addresses of the shareholders, the number of shares held by them and other relevant information as of each such record date, and the register of our shareholders shall be updated accordingly.
Repurchase of Own Shares
We may acquire our shares, including shares of our common stock: (i) by way of purchase on any Japanese stock exchange or by way of tender offer (pursuant to a resolution of the board of directors); (ii) from a specific shareholder other than any of our subsidiaries (pursuant to a special resolution of a general meeting of shareholders); or (iii) from any of our subsidiaries (pursuant to a resolution of the board of directors).
In the case of (ii) above, any other shareholder of such class may make a request to a director, at least five days prior to the relevant shareholders’ meeting, to include such shareholder as a seller in the proposed purchase. However, no such right will be available if the relevant class of shares is listed on any Japanese stock exchange and the purchase price or any other consideration to be received by the relevant specific shareholder does not exceed the then market price of the shares calculated in a manner set forth in ordinances of the Ministry of Justice.
Any such acquisition of our shares must satisfy certain requirements that the total amount of the purchase price may not exceed the distributable amount, as described in “—Distributions of Surplus.” We may hold our shares acquired in compliance with the provisions of the Companies Act, and may generally cancel such shares by a resolution of the board of directors, although the disposal of such shares is subject to the same proceedings for the issuance of new shares, in general.
Stock Options
Under the Companies Act, a stock option plan is available by issuing stock acquisition rights.
Generally, a stock option plan may be adopted by a resolution of the board directors. However, if the conditions of such stock acquisition rights are “specially favorable,” a special resolution at a general meeting of shareholders is required. The special resolution must set forth the class and number of shares to be issued or transferred on exercise of the options, the exercise price, the exercise period and other terms of the options.
MATERIAL CONTRACTS
Not applicable.
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FOREIGN EXCHANGE AND OTHER REGULATIONS
Foreign Exchange
The Foreign Exchange and Foreign Trade Law of Japan, as amended, and the cabinet orders and ministerial ordinances thereunder (the “Foreign Exchange Regulations”) govern the acquisition and holding of shares of capital stock of ORIX by “exchange nonresidents” and by “foreign investors” (as defined below). The Foreign Exchange Regulations currently in effect do not, however, regulate transactions between exchange nonresidents who purchase or sell shares outside Japan for
non-Japanese
currencies.“Exchange nonresidents” are defined as individuals who are not resident in Japan and corporations whose principal offices are located outside Japan. Generally, the branch and other offices of nonresident corporations located within Japan are regarded as residents of Japan and branch and other offices of Japanese corporations located outside Japan are regarded as exchange nonresidents. “Foreign investors” are defined to be (i) individuals who are exchange nonresidents, (ii) corporations or other organizations that are established under the laws of foreign countries or whose principal offices are located outside Japan, (iii) corporations of which 50% or more of their voting rights are held, directly or indirectly, by (i) and/or (ii) above, (iv) partnerships or similar organizations of which 50% or more of total capital contributions are attributable to nonresident, or a majority of general partners are exchange nonresidents, and (v) corporations or other organizations of which a majority of the officers (or officers having the power of representation) are nonresident individuals.
In general, the acquisition of a Japanese company’s stock shares (such as the shares of capital stock of ORIX) by an exchange nonresident from a resident of Japan is not subject to any prior filing requirements. In certain limited circumstances, however, prior notification or report to the Minister of Finance and any other competent Ministers for an acquisition of this type may be required. In the case where a resident of Japan transfers shares of a Japanese company (such as the shares of capital stock of ORIX) for consideration exceeding ¥100 million to an exchange nonresident, the resident of Japan who transfers the shares is required to report the transfer to the Minister of Finance within 20 days from the date of the transfer, unless the transfer was made through a bank, securities company or financial future trader licensed under the Japanese laws.
If a foreign investor acquires shares of a Japanese company listed on a Japanese stock exchange (such as the shares of capital stock of ORIX) or that are traded on anmarket in Japan and as a result of the acquisition the foreign investor in combination with any existing holdings directly or indirectly holds 1% or more of the issued shares or voting rights of the relevant company, holds a certain percentage or more of the shares of such a company and consents to matters that could have a significant effect on the management of the business of the company, or acquires or succeeds to the business of a Japanese corporation by a business transfer, corporate split, or merger, the foreign investor is, in general, required to report such acquisition to the Minister of Finance and any other competent Ministers within 45 days following the date of such acquisition. In the case of certain designated types of business affecting Japan’s national security, etc., prior notification is required with respect to such an acquisition or other relevant actions. However, in certain cases it may be possible for a foreign investor to be exempted from the prior notification obligation for an acquisition.
over-the-counter
The acquisition of shares by exchange nonresidents by way of stock split is not subject to the foregoing notification requirements.
Under the Foreign Exchange Regulations, dividends paid on, and the proceeds of sales in Japan of, shares held by nonresidents of Japan may in general be converted into any foreign currency and repatriated abroad.
Large Shareholdings Report
The Financial Instruments and Exchange Act requires any person who has become, beneficially and solely or jointly, a holder of more than 5% of the total issued shares of capital stock of a company listed on any
155
Japanese financial instruments exchange (such as the shares of capital stock of ORIX) or whose shares are traded on themarkets in Japan, to file with the Prime Minister within five business days a report concerning such shareholdings. An alteration report must also be made in respect of any subsequent change of 1% or more in any such holding or any change in material matters set out in reports previously filed, with certain exceptions. For this purpose, shares issuable to such person upon exchange of exchangeable securities or exercise of stock acquisition rights are taken into account in determining both the size of such person’s holding and the issuer’s total issued share capital.
over-the-counter
Filing of Share Acquisition Plan
The Act on Prohibition of Private Monopolization and Maintenance of Fair Trade requires any company (including a foreign company) which crosses certain domestic sales thresholds and newly acquires a holder of more than 20% or 50% of the total issued voting shares of capital stock (such as the shares of capital stock of ORIX) or the shares of a company (including a foreign company) which meets certain conditions, to file a share acquisition plan concerning such shares with the Fair Trade Commission at least 30 days prior to the closing or the acquisition.
DIVIDEND POLICY AND DIVIDENDS
The following table shows the amount of dividends applicable to fiscal year per share for each of the fiscal years indicated, which amounts are translated into dollars per ADS at the noon buying rate for Japanese yen in New York City for cable transfers in foreign currencies on the relevant dividend payment date as published by the Federal Reserve Bank.
Year ended | Dividends applicable to fiscal year per Share | Translated into dollar per ADS | ||||||
March 31, 2016 | 45.75 | 2.09 | ||||||
March 31, 2017 | 52.25 | 2.39 | ||||||
March 31, 2018 | 66.00 | 3.01 | ||||||
March 31, 2019 | 76.00 | 3.45 | ||||||
March 31, 2020 | 76.00 | 3.53 | ||||||
Year ended | Dividends applicable to fiscal year per Share | Translated into dollar per ADS | ||||||
March 31, 2017 | 52.25 | 2.39 | ||||||
March 31, 2018 | 66.00 | 3.01 | ||||||
March 31, 2019 | 76.00 | 3.45 | ||||||
March 31, 2020 | 76.00 | 3.53 | ||||||
March 31, 2021 | 78.00 | 3.65 | ||||||
ORIX aims to increase shareholder value by utilizing profits earned from business activities that were secured primarily as retained earnings, to strengthen its business foundation and make investments for future growth. At the same time, ORIX strives to make stable and sustainable distribution of dividends at a level in line with its business performance. In addition, with regards to the decision of whether to buy back shares, ORIX aims to act with flexibility and swiftness while considering various factors such as the adequate level of the Company’s retained earnings, the soundness of its financial condition and external factors such as changes in the business environment, share price and its trend and target performance indicators.
COVID-19
and depending on year-end
dividend has been decided at The annual dividend for the next fiscal year ending March 31, 2022 is forecasted at 78.00 yen per share (forecasted interim dividend of 39.00 yen and76.0078.00 yen per share in the previous fiscal year ended March 31, 2019. The payout ratio for fiscal 2020 was 32.0%, up 2% from the previous fiscal year.2021.
year-end
dividend of 39.00 yen) as well as 156
Pursuant to the amendment to the Act on Special Measures Concerning Taxation, dividends paid to U.S. Holders of Shares or ADSs are generally subject to a Japanese withholding tax. The tax rate can be found in “Item 10 TAXATION, JAPANESE TAXATION—”
Shares.
TAXATION
JAPANESE TAXATION
The following is a summary of the principal Japanese tax consequences for owners of the Shares or ADSs who are nonresident individuals of Japan or
non-Japanese
corporations without a permanent establishment inJapan (“nonresident Holders”). The statements regarding Japanese tax laws set forth below are based on the laws in force and as interpreted by the Japanese taxation authorities as of the date hereof and are subject to changes in the applicable Japanese laws or conventions for the avoidance of double taxation occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor and potential investors are advised to consult with their own tax advisors to satisfy themselves as to:
the overall tax consequences of the acquisition, ownership and disposition of Shares or ADSs, including specifically the tax consequences under Japanese law;
the laws of the jurisdiction of which they are resident; and
any tax treaty between Japan and their country of residence.
Shares
Generally, a nonresident Holder is subject to Japanese withholding tax on dividends on Shares or ADSs paid by us. Stock splits are not subject to Japanese income or corporation tax.
Pursuant to the Act on Special Measures Concerning Taxation and the Act on Special Measures Concerning the Securing of Financial Resources for Reconstruction Measures Involving the Great East Japan Earthquake, the Japanese withholding tax rate applicable to dividends on Shares or ADSs paid to nonresident Holders by us is 15.315% for dividends. However, where an individual nonresident Holder who holds 3% or more of the total number of shares issued by us, the withholding tax rate applicable will be 20.42% for dividends. Japan has entered into income tax treaties, conventions and agreements where this withholding tax rate is, in some cases, reduced to a lower percentage for portfolio investors. Nonresident Holders who are entitled under an applicable treaty, convention, or agreement to this reduced Japanese withholding tax rate are required to submit an Application Form for the Income Tax Convention regarding Relief from Japanese Income Tax on Dividends in advance through us to the relevant Japanese tax authority before the payment of dividends. A standing proxy for a nonresident Holder may provide such application service. Nonresident Holders who do not submit an application in advance will be entitled to claim the refund from the relevant Japanese tax authority of those withholding taxes withheld in excess of the rate of an applicable tax treaty.
The Convention between the United States and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “Tax Convention”) provides for a maximum rate of Japanese withholding tax which may be imposed on dividends paid to an eligible United States resident not having a permanent establishment in Japan. Under the Tax Convention, the maximum withholding rate is generally limited to 10% of the relevant dividends.
Gains derived from the sale outside Japan of Shares or ADSs by a nonresident Holder, are, in general, not subject to Japanese income or corporation taxes.
Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired Shares or ADSs as a legatee, heir or done.
157
UNITED STATES TAXATION
The following discussion describes the material U.S. federal income tax consequences of ownership and disposition of Shares or ADSs held as capital assets by U.S. Holders (described below).
This discussion does not describe all of the tax consequences that may be relevant to a U.S. holder in light of the holder’s particular circumstances (including the application of the provisions of the code known as the Medicare contribution tax) or to holders subject to special rules, such as:
certain financial institutions;
insurance companies;
dealers and traders in securities who use amethod of tax accounting;
mark-to-market
persons holding Shares or ADSs as part of a hedging transaction, straddle, conversion transaction or other integrated transaction;
persons whose functional currency for U.S. federal income tax purposes are not the U.S. dollar;
entities classified as partnerships for U.S. federal income tax purposes;
persons subject to the alternative minimum tax;
tax-exempt
entities, including “individual retirement accounts” and “Roth IRAs”;regulated investment companies;
persons that own or are deemed to own 10% or more of the stock of the Company, by vote or value;
persons holding the shares or ADSs in connection with a trade or business carried on outside the United States; or
persons who acquired Shares or ADSs pursuant to the exercise of any employee stock option or otherwise as compensation.
If an entity that is classified as a partnership for U.S. federal income tax purposes holds Shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding Shares or ADSs and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of Shares or ADSs.
This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the Tax Convention, changes to any of which subsequent to the date of this annual report may affect the tax consequences described herein. It is also based in part on representations by the depositary and assumes that each obligation under the deposit agreement and any related agreement will be performed in accordance with its terms.
As used herein, the term “U.S. Holder” means a beneficial owner of Shares or ADSs that is for U.S. federal income tax purposes:
a citizen or individual resident of the United States;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof; or
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
We believe we may have been a passive foreign investment company (a “PFIC”) for the year to which this annual report relates. However, because of uncertainties in the manner of application of the PFIC rules, including uncertainties as to the valuation and proper characterization of certain of our assets as passive or active, our PFIC status is uncertain. In addition, we may be a PFIC in the foreseeable future.
158
Persons considering the purchase of Shares or ADSs should consult their tax advisors with regard to the PFIC rules described below as well as the application of other U.S. federal income tax laws relevant to their particular situations and any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
In general, a U.S. Holder of ADSs will be treated as the owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if the U.S. Holder exchanges ADSs for the underlying shares represented by those ADSs.
Taxation of Distributions
Subject to the PFIC rules described below, distributions paid on Shares or ADSs, other than certain pro rata distributions of common shares, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Assuming that we are a PFIC, dividends paid by us will not be eligible for the preferential dividend tax rate otherwise available to certain
non-corporate
U.S. Holders. The amount of a dividend will include any amounts withheld by us or our paying agent in respect of Japanese taxes, as discussed above under “Taxation—Japanese Taxation—Shares” The amount of the dividend will be treated as foreign source dividend income to U.S. Holders and will not be eligible for the dividends received deduction generally allowed to U.S. corporations under the Code.Dividends paid in yen will be included in the income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of the U.S. Holder’s (or, in the case of ADSs, the depositary’s) receipt of the dividend, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize a foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have a foreign currency gain or loss if such holder does not convert the amount of such dividend into U.S. dollars on the date of its receipt. Any foreign currency gain or loss resulting from the conversion of the yen will generally be treated as U.S. source ordinary income or loss.
Subject to the PFIC rules described below and to applicable limitations that may vary depending upon the U.S. Holder’s circumstances, and subject to the discussion above regarding concerns expressed by the U.S. Treasury, Japanese taxes withheld from dividends on Shares or ADSs at a rate not exceeding the applicable rate provided for by the Tax Convention will be creditable against the U.S. Holder’s U.S. federal income tax liability. The maximum rate of withholding tax on dividends paid to a U.S. Holder pursuant to the Tax Convention is 10%. As discussed under “Taxation—Japanese Taxation—Shares” above, under current Japanese law, the statutory rate is higher than the maximum Tax Convention rate. Japanese taxes withheld in excess of the rate applicable under the Tax Convention will not be eligible for credit against a U.S. Holder’s federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules governing foreign tax credits are complex and, therefore, U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances. Instead of claiming a credit, U.S. Holders may, upon election, deduct such otherwise creditable Japanese taxes in computing taxable income, subject to generally applicable limitations under U.S. law.
Passive Foreign Investment Company Rules
If we are a PFIC for any year during a U.S. Holder’s holding period of the Shares or ADSs, and the U.S. Holder has not made aelection for the Shares or ADSs, as described below, the holder will be 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. Upon a disposition of Shares or ADSs (including under certain circumstances, a pledge, and under proposed Treasury regulations, a disposition pursuant to certain otherwise
mark-to-market
tax-free
reorganizations) gain recognized by a U.S. Holder would be allocated ratably over its holding period for the Shares or ADSs. The amounts allocated to the taxable year of the sale or other exchange and to any year before the Company became a159
PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to
tax at the highest rate in effect for individuals or corporations for such year, as appropriate, and an interest charge would be imposed on the resulting tax liability. Similar rules would apply to any distribution in respect of Shares or ADSs to the extent it exceeds 125 percent of the average of the annual distributions on Shares or ADSs received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter (any such distribution, an “excess distribution”). Any loss realized on a disposition of Shares or ADSs will be capital loss, and will be long-term capital loss if the U.S. Holder held the Shares or ADSs for more than one year. The amount of the loss will equal the difference between the U.S. Holder’s tax basis in the Shares or ADSs disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Such loss will generally be U.S.-source loss for foreign tax credit purposes.
If we are a PFIC for any year during which a U.S. Holder holds Shares or ADSs, we generally will continue to be treated as a PFIC with respect to the U.S. Holder for all succeeding years during which the U.S. Holder holds Shares or ADSs, even if we cease to meet the threshold requirements for PFIC status. U.S. Holders should consult their tax advisers regarding the potential availability of a “deemed sale” election that would allow them to eliminate this continuing PFIC status.
If we are a PFIC, U.S. Holders will be deemed to own their proportionate shares of our subsidiaries that are PFICs and will be subject to U.S. federal income tax according to the rules described above on (i) certain distributions by subsidiary PFICs and (ii) a disposition of shares of a subsidiary PFIC, even though holders have not received the proceeds of those distributions or dispositions directly.
If the Shares or ADSs are “regularly traded” on a “qualified exchange,” a U.S. Holder of Shares or ADSs would be eligible to make aelection that would result in tax treatment different from the general tax treatment for PFICs described above. The Shares or ADSs will be treated as “regularly traded” in any calendar year in which more than aquantity of the Shares or ADSs are traded on a qualified exchange for at least 15 days during each calendar quarter. A “qualified exchange” includes the NYSE, on which our ADSs are traded, and a foreign exchange that is regulated by a governmental authority in which the exchange is located and with respect to which certain other requirements are met. The Internal Revenue Service (“IRS”) has not yet identified specific foreign exchanges that are “qualified” for this purpose. Under current law, theelection may be available to holders of ADSs because the ADSs will be listed on the NYSE, although there can be no assurance that the ADSs will be “regularly traded” for purposes of theelection. However, even if a U.S. Holder makes aelection with respect to our Shares or ADSs, a U.S. Holder will not be able to make aelection with respect to any of our subsidiaries that are PFICs. U.S. Holders should consult their tax advisers regarding the availability and advisability of making aelection in their particular circumstances. In particular, U.S. Holders should consider carefully the impact of aelection with respect to their ADSs given that we may have subsidiary PFICs for which aelection may not be available.
mark-to-market
de minimis
mark-to-market
mark-to-market
mark-to-market
mark-to-market
mark-to-market
mark-to-market
mark-to-market
If a U.S. Holder is eligible and makes theelection, the U.S. Holder will include each year, as ordinary income, the excess, if any, of the fair market value of the Shares or ADSs at the end of the taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the Shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of theelection). If a U.S. Holder validly makes the election, the holder’s basis in the Shares or ADSs will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of Shares or ADSs in a year when the Company is a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of theelection).
mark-to-market
mark-to-market
mark-to-market
We do not intend to comply with the requirements necessary for a U.S. Holder to make a “qualified electing fund” election, which is sometimes available to shareholders of a PFIC.
Special rules apply to determine the foreign tax credit with respect to withholding taxes imposed on excess distributions on shares of a PFIC. These rules could limit the amount of the foreign tax credit that would otherwise have been available.
If a U.S. Holder owns Shares or ADSs during any year in which we are a PFIC, the U.S. Holder will generally be required to file IRS Form 8621 with its federal income tax return with respect to us and with respect to each of our subsidiaries that is a PFIC, subject to certain exceptions.
We urge U.S. Holders to consult their tax advisors concerning our status as a PFIC and the tax considerations relevant to an investment in a PFIC, including the availability and consequences of making theelection discussed above.
mark-to-market
Backup Withholding and Information Reporting
Payments of dividends and sales proceeds that are made within the United States or through certain
U.S.-related
financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is an exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. Holders who are individuals (and certain entities closely held by individuals) may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock of a
non-U.S.
person, generally on Form 8938, subject to exceptions (including an exception for financial assets held through a U.S. financial institution). U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to the Shares or ADSs.DOCUMENTS ON DISPLAY
We are subject to the reporting requirements of the Act. In accordance with these requirements, we file annual reports on Form
20-F
and furnish periodic reports on Form6-K
with the Commission.These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s Public Reference Room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States atThe Commission also maintains a website at http://www.sec.gov that contains reports and proxy information regarding issuers that file electronically with the Commission via EDGAR.
1-800-SEC-0330.
We are currently exempt from the rules under the Act that prescribe the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Act. We are not required under the Act to publish financial statements as frequently or as promptly as are U.S. companies subject to the Act. We will, however, continue to furnish our shareholders with annual reports containing audited financial statements and will issue press releases containing unaudited interim financial information as well as such other reports as may from time to time be authorized by our board of directors or as may be otherwise required.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
MARKET RISKS
Our primary market risk exposures are interest rate risk, exchange rate risk and risk of market prices in stocks. We enter into derivative transactions to hedge interest rate risk and exchange rate risk. Our risk management for market risk exposure and derivative transactions areis described under “Item 5. Operating and Financial Review and Prospects—Risk Management.”
The following quantitative information about the market risk of our financial instruments does not include information about financial instruments to which the requirements under ASC 825 (“Financial Instruments”) do not apply, such as net investment in leases, investment in operating leases, and insurance contracts. As a result, the following information does not present all the risks of our financial instruments. We omitted the disclosure of financial instruments for trading purposes because the amount is immaterial.
Interest Rate Risk
Many of our assets and liabilities are composed of floating and fixed rate assets and liabilities. Our floating rate assets and liabilities utilize various rates to determine interest amounts receivable and payable thereunder, including U.S. dollar and Japanese yen LIBOR, TIBOR and prime rates. Movements in market interest rates affect gains and losses in those assets and liabilities. Accordingly, we endeavor to reduce interest rate risk through techniques such as funding interest rate bearing assets through liabilities with similar interest rate characteristics, e.g., financing floating-rate assets with floating-rate liabilities and financing fixed-rate assets with fixed-rate liabilities.
The table below of interest rate sensitivity for financial instruments summarizes installment loans, investment in securities (floating and fixed rate) and long-short-term and short-termlong-term debt. These instruments are further classified under fixed or floating rates. For such items, the principal collection and repayment schedules and the weighted average interest rates for collected and repaid portions are disclosed. Concerning interest rate swaps, under derivative instruments, the estimated notional principal amount for each contractualcontract period and the weighted average of swap rates are disclosed. The average interest rates of financial instruments as of March 31, 2021 were 3.4% for installment loans, 1.6% for investment in securities (floating and fixed rate), 1.1% for short-term and long-term debt and 0.2% for deposits. As of March 31, 2021, the average payment rate of interest rate swaps was 1.7% and the average receipt rate was 0.0%. The average interest rates of financial instruments as of March 31, 2020 were: 3.6% for installment loans, 1.7% for investment in securities (floating and fixed rate), 1.6% for long-short-term and short-termlong-term debt and 0.3% for deposits. As of March 31, 2020, the average payment rate of interest rate swaps was 2.1% and the average receipt rate was (0.1%). The average interest rates of financial instruments as of March 31, 2019 were: 4.1% for installment loans, 2.0% for investment in securities (floating and fixed rate), 1.7% for long- and short-term debt and 0.2% for deposits. As of March 31, 2019, the average payment rate of interest rate swaps was 1.8% and the average receipt rate was 0.1%. As of March 31, 2020,2021, there was no material change in the balance or in the average interest rate of financial instruments from March 31, 2019.2020. The table below shows our interest rate risk exposure and the results of our interest rate sensitivity analysis.
INTEREST RATE SENSITIVITY
NONTRADING FINANCIAL INSTRUMENTS
Expected Maturity Date | Total | March 31, 2020 Estimated Fair Value | ||||||||||||||||||||||||||||||
Years ending March 31, | ||||||||||||||||||||||||||||||||
2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | |||||||||||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Installment loans (fixed rate) | ¥ | 298,261 | ¥ | 123,823 | ¥ | 95,860 | ¥ | 68,118 | ¥ | 54,213 | ¥ | 428,248 | ¥ | 1,068,523 | ¥ | 1,059,759 | ||||||||||||||||
Average interest rate | 5.2 | % | 7.4 | % | 7.0 | % | 6.8 | % | 6.9 | % | 4.3 | % | 5.5 | % | — | |||||||||||||||||
Installment loans (floating rate) | ¥ | 280,804 | ¥ | 228,674 | ¥ | 254,918 | ¥ | 187,364 | ¥ | 193,663 | ¥ | 1,513,322 | ¥ | 2,658,745 | ¥ | 2,581,523 | ||||||||||||||||
Average interest rate | 3.2 | % | 3.9 | % | 4.3 | % | 3.5 | % | 3.4 | % | 2.1 | % | 2.8 | % | — | |||||||||||||||||
Investment in securities (fixed rate) | ¥ | 35,282 | ¥ | 39,676 | ¥ | 41,327 | ¥ | 63,439 | ¥ | 115,854 | ¥ | 1,342,413 | ¥ | 1,637,991 | ¥ | 1,680,087 | ||||||||||||||||
Average interest rate | 1.0 | % | 1.5 | % | 1.9 | % | 1.3 | % | 1.3 | % | 1.6 | % | 1.5 | % | — | |||||||||||||||||
Investment in securities (floating rate) | ¥ | 5,195 | ¥ | 7,383 | ¥ | 1,895 | ¥ | 4,674 | ¥ | 16,075 | ¥ | 77,472 | ¥ | 112,694 | ¥ | 94,287 | ||||||||||||||||
Average interest rate | 6.2 | % | 5.1 | % | 4.8 | % | 6.6 | % | 4.8 | % | 4.6 | % | 4.8 | % | — | |||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Short-term debt | ¥ | 336,832 | ¥ | 0 | ¥ | 0 | ¥ | 0 | ¥ | 0 | ¥ | 0 | ¥ | 336,832 | ¥ | 336,832 | ||||||||||||||||
Average interest rate | 1.7 | % | — | — | — | — | — | 1.7 | % | — | ||||||||||||||||||||||
Deposits | ¥ | 1,472,739 | ¥ | 181,385 | ¥ | 229,131 | ¥ | 56,387 | ¥ | 292,061 | ¥ | 0 | ¥ | 2,231,703 | ¥ | 2,233,451 | ||||||||||||||||
Average interest rate | 0.2 | % | 0.2 | % | 0.3 | % | 0.3 | % | 0.3 | % | — | 0.3 | % | — | ||||||||||||||||||
Long-term debt (fixed rate) | ¥ | 334,524 | ¥ | 327,818 | ¥ | 279,423 | ¥ | 190,816 | ¥ | 302,195 | ¥ | 426,700 | ¥ | 1,861,476 | ¥ | 1,873,743 | ||||||||||||||||
Average interest rate | 1.5 | % | 1.7 | % | 1.4 | % | 0.8 | % | 2.3 | % | 1.5 | % | 1.6 | % | — | |||||||||||||||||
Long-term debt (floating rate) | ¥ | 324,289 | ¥ | 304,722 | ¥ | 320,329 | ¥ | 248,085 | ¥ | 218,331 | ¥ | 1,002,122 | ¥ | 2,417,878 | ¥ | 2,417,954 | ||||||||||||||||
Average interest rate | 1.5 | % | 1.9 | % | 1.6 | % | 1.5 | % | 1.2 | % | 1.6 | % | 1.6 | % | — | |||||||||||||||||
Expected Maturity Date | Total | March 31, 2021 Estimated Fair Value | ||||||||||||||||||||||||||||||
Years ending March 31, | ||||||||||||||||||||||||||||||||
2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | |||||||||||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Installment loans (fixed rate) | ¥ | 246,996 | ¥ | 137,654 | ¥ | 93,640 | ¥ | 72,288 | ¥ | 52,875 | ¥ | 429,346 | ¥ | 1,032,799 | ¥ | 1,029,197 | ||||||||||||||||
Average interest rate | 4.3 | % | 6.5 | % | 7.6 | % | 8.4 | % | 6.7 | % | 4.1 | % | 5.2 | % | — | |||||||||||||||||
Installment loans (floating rate) | ¥ | 273,278 | ¥ | 261,049 | ¥ | 171,764 | ¥ | 173,402 | ¥ | 144,268 | ¥ | 1,601,873 | ¥ | 2,625,634 | ¥ | 2,603,815 | ||||||||||||||||
Average interest rate | 3.6 | % | 3.9 | % | 3.5 | % | 3.6 | % | 4.0 | % | 2.1 | % | 2.7 | % | — | |||||||||||||||||
Investment in securities (fixed rate) | ¥ | 31,845 | ¥ | 34,533 | ¥ | 50,020 | ¥ | 105,826 | ¥ | 79,944 | ¥ | 1,708,811 | ¥ | 2,010,979 | ¥ | 2,013,388 | ||||||||||||||||
Average interest rate | 1.3 | % | 3.4 | % | 1.1 | % | 1.2 | % | 2.1 | % | 1.4 | % | 1.4 | % | — | |||||||||||||||||
Investment in securities (floating rate) | ¥ | 5,412 | ¥ | 8,478 | ¥ | 3,732 | ¥ | 16,431 | ¥ | 4,287 | ¥ | 91,238 | ¥ | 129,578 | ¥ | 129,661 | ||||||||||||||||
Average interest rate | 6.0 | % | 5.2 | % | 4.9 | % | 4.8 | % | 4.1 | % | 3.5 | % | 4.0 | % | — | |||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Short-term debt | ¥ | 307,269 | ¥ | 0 | ¥ | 0 | ¥ | 0 | ¥ | 0 | ¥ | 0 | ¥ | 307,269 | ¥ | 307,269 | ||||||||||||||||
Average interest rate | 1.4 | % | — | — | — | — | — | 1.4 | % | — | ||||||||||||||||||||||
Deposits | ¥ | 1,130,583 | ¥ | 306,890 | ¥ | 345,173 | ¥ | 281,527 | ¥ | 253,612 | ¥ | 0 | ¥ | 2,317,785 | ¥ | 2,319,941 | ||||||||||||||||
Average interest rate | 0.1 | % | 0.3 | % | 0.3 | % | 0.3 | % | 0.3 | % | — | 0.2 | % | — | ||||||||||||||||||
Long-term debt (fixed rate) | ¥ | 358,882 | ¥ | 304,757 | ¥ | 315,078 | ¥ | 306,630 | ¥ | 128,713 | ¥ | 537,312 | ¥ | 1,951,372 | ¥ | 1,979,939 | ||||||||||||||||
Average interest rate | 1.9 | % | 1.5 | % | 1.4 | % | 1.5 | % | 0.8 | % | 1.1 | % | 1.4 | % | — | |||||||||||||||||
Long-term debt (floating rate) | ¥ | 345,860 | ¥ | 342,109 | ¥ | 339,043 | ¥ | 206,500 | ¥ | 243,142 | ¥ | 988,807 | ¥ | 2,465,461 | ¥ | 2,417,954 | ||||||||||||||||
Average interest rate | 1.0 | % | 1.0 | % | 0.7 | % | 0.6 | % | 0.6 | % | 1.1 | % | 0.9 | % | — | |||||||||||||||||
NONTRADING DERIVATIVE FINANCIAL INSTRUMENTS
Expected Maturity Date | Total | March 31, 2020 Estimated Fair Value | ||||||||||||||||||||||||||||||
Years ending March 31, | ||||||||||||||||||||||||||||||||
2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | |||||||||||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||||||||||
Interest rate swaps: | ||||||||||||||||||||||||||||||||
Notional amount (floating to fixed) | ¥ | 39,839 | ¥ | 44,995 | ¥ | 62,826 | ¥ | 17,279 | ¥ | 17,522 | ¥ | 320,076 | ¥ | 502,537 | ¥ | (44,002 | ) | |||||||||||||||
Average pay rate | 2.9 | % | 2.5 | % | 2.0 | % | 2.8 | % | 2.8 | % | 1.9 | % | 2.1 | % | — | |||||||||||||||||
Average receive rate | 0.4 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.4 | % | (0.2 | %) | (0.1 | %) | — | |||||||||||||||||
Expected Maturity Date | Total | March 31, 2021 Estimated Fair Value | ||||||||||||||||||||||||||||||
Years ending March 31, | ||||||||||||||||||||||||||||||||
2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | |||||||||||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||||||||||
Interest rate swaps: | ||||||||||||||||||||||||||||||||
Notional amount (floating to fixed) | ¥ | 49,866 | ¥ | 60,595 | ¥ | 64,839 | ¥ | 40,067 | ¥ | 48,438 | ¥ | 274,575 | ¥ | 538,380 | ¥ | (21,951 | ) | |||||||||||||||
Average pay rate | 2.4 | % | 2.1 | % | 1.1 | % | 1.8 | % | 0.9 | % | 1.8 | % | 1.7 | % | — | |||||||||||||||||
Average receive rate | 0.1 | % | 0.3 | % | 0.2 | % | 0.3 | % | (0.0 | %) | (0.1 | %) | 0.0 | % | — | |||||||||||||||||
The above table excludes purchased loans, which are exposed to interest rate risk, because it is difficult to estimate the timing and extent of collection of such loans. Purchased loans are deteriorated credit loans which we acquire at a discount and for which full collection of all contractually required payments from the debtors is unlikely. The total book value of our purchased loans as of March 31, 20202021 was ¥13,218¥12,351 million.
Long-term debt (floating rate) in the table above includes the amount of ¥94,000 million subordinated syndicated loan (hybrid loan, whose maturity date is year 2076) conducted in fiscal 2017, of which ¥60,000 million and ¥34,000 million may be repaid after 5 years and 7 years, respectively.
Long-term debt (fixed rate) in the table above includesinclude the amount of ¥100,000¥150,000 million of unsecured subordinated bonds with interest payment deferrable clauses and optional early redemption conditions (hybrid bondsbonds). Out of this amount, ¥100,000 million was executed in fiscal 2020, whose maturity date isand will mature in fiscal 2080),2080, of which ¥60,000 million and ¥40,000 million may be redeemed after 5 years, and 10 years respectively.
¥50,000 million was executed in fiscal 2021, and will mature in fiscal 2081, of which ¥29,000 million and ¥21,000 million may be redeemed after 5 years, and 10 years respectively.
We are also exposed to interest rate risks in our life insurance businesses because revenues from life insurance related investment income fluctuate based on changes in market interest rates, while life insurance premiums and costs do not.
Exchange Rate Risk
We hold foreign currency-denominated assets and liabilities and deal in foreign currencies. It is our policy to match balances of foreign currency-denominated assets and liabilities as a means of hedging exchange rate risk. There are, however, cases where a certain part of our foreign currency-denominated investments are not hedged for such risk.
We have identified all positions that are subject to exchange rate risk, including retained earnings accumulated in foreign currencies in our overseas subsidiaries, which is translated to Japanese yen upon consolidation, that are subject to exchange rate risk.consolidation. ORIX shareholders’ equity is subject to exchange rate risk arising from such translations. Other positions, such as potential losses in future earnings, are calculated using several hypothetical scenarios based on 10% changes in the relevant currencies. Based on these scenarios, there were no exchange losses in future earnings as of March 31, 2019. Exchange losses in future earnings were estimated to be ¥363 million and ¥54 million as of March 31, 2020.2020 and 2021, respectively. The largest of such losses were estimated in scenarios where the U.S. dollar appreciated 10% against the Japanese yen from the rate in effect on March 31, 2020.2020 and 2021.
Risk of Market Prices in Stocks
We have marketable stocks that are subject to price risk arising from changes in their market prices. Our shareholders’ equity and net income bear risks due to changes in the market prices of these securities. To manage these risk of market price fluctuations, we assume a scenario of a 10% uniform downward movement in stock prices compared with stock prices as of March 31, 20192020 and 2020,2021, respectively, and under such circumstances estimate ¥4,018¥3,642 million and ¥3,642¥5,487 million decrease in the fair value of our equity securities as of March 31, 20192020 and 2020.2021.
Item 12. Description of Securities Other than Equity Securities
FEES AND PAYMENTS RELATING TO OUR AMERICAN DEPOSITARY SHARES
SCHEDULE OF FEES AND CHARGES
Citibank N.A., or the Depositary, serves as the depositary for our ADSs. As an ADS holder, you will be required to pay the following service fees to the Depositary:
Service | Fee | |
Issuance of ADSs upon deposit of Shares | Up to 5¢ per ADS issued | |
Cancellation of ADSs and delivery of deposited securities | Up to 5¢ per ADS canceled | |
Exercise of rights to purchase additional ADSs | Up to 5¢ per ADS issued | |
Distribution of cash proceeds upon sale of rights and other entitlements | Up to 2¢ per ADS held |
As an ADS holder you will also be responsible to pay various fees and expenses incurred by the Depositary and various taxes and governmental charges such as:
Taxes, including applicable interest and penalties, and other governmental charges;
164
Fees for the transfer and registration of Shares charged by the registrar and transfer agent for the Shares in Japan (i.e., upon deposit and withdrawal of Shares);
Expenses for cable, telex and fax transmissions and for delivery of securities;
Fees and expenses of the Depositary incurred in connection with compliance with exchange control regulations and regulatory requirements applicable to the Shares or ADSs; and
Fees and expenses of the Depositary in delivering deposited securities.
We have agreed to pay some other charges and expenses of the depositary bank. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of these changes.
PAYMENTS TO ORIX FROM THE DEPOSITARY
The Depositary has agreed to reimburse us for certain expenses we incur in connection with our ADR program. These reimbursable expenses include investor relations expenses, and proxy voting and related expenses. In fiscal 2020,2021, this amount was $95,258.$80,000.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
In order to improve the convenience and liquidity of our securities on exchanges where our shares are listed, in accordance with “Action Plan for Consolidating Trading Units” issued in November 2007 by the securities exchanges in Japan, the Company implemented astock split of shares of its common stock on March 31, 2013, pursuant to which one hundred shares constitutes one unit as of April 1, 2013. The change resulted in no substantive change in trading unit price levels. As a result of the stock split, the ratio of ADSs to underlying shares changed from 0.5 underlying shares per one ADS to five underlying shares per one ADS. The change has not affected ADS unit price levels or other material ADS terms.
10-for-1
Item 15. Controls and Procedures
As of March 31, 2020,2021, the ORIX Group, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the principal financial officer, performed an evaluation of the effectiveness of the ORIX Group’s disclosure controls and procedures (as defined in Rule
13a-15(e)
under the Securities Exchange Act of 1934, as amended). The Company’s management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding the achievement of management’s control objectives. Based on this evaluation, the Company’s Chief Executive Officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Act, within the time periods specified in the SEC’s rules and forms. There has been no change in the ORIX Group’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Management’s report on internal control over financial reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule
13a-15(f)
under the Securities Exchange Act of 1934, as amended). The internal control over financial reporting process of the ORIX Group was designed by, or under the supervision of, the Company’s Chief Executive Officer and principal financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the ORIX Group;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that receipts and expenditures of the ORIX Group are being made only in accordance with authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the ORIX Group’s assets that could have a material effect on the financial statements.
166
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the effectiveness of our internal control over financial reporting as of March 31, 20202021 by using the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management concluded that our internal control over financial reporting was effective as of March 31, 2020.2021.
The effectiveness of our internal control over financial reporting has been audited by KPMG AZSA LLC, an independent registered public accounting firm, who also audited our consolidated financial statements as of and for each of the years in the three-year period ended March 31, 2020,2021, as stated in their attestation report which is included in Item 18 (page
F-3).
Item 16A. Audit Committee Financial Expert
Our board of directors has determined that Aiko Sekine is an “audit committee financial expert,” within the meaning of the current rules of the U.S. Securities and Exchange Commission. Aiko Sekine is “independent” as required by Section 303A.06 of the New York Stock Exchange Listed Company Manual.
Name on the family register of Aiko Sekine is Aiko Sano.
Item 16B. Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Pursuant to our Code of Ethics, last amended in April 2014, officers of ORIX covered by ORIX’s Code of Ethics are required to promptly bring to the attention of the Company’s Executive Officer of the Group Compliance Department any information concerning any violations of the Code of Ethics.
Item 16C. Principal Accountant Fees and Services
FEES PAID TO PRINCIPAL ACCOUNTANT
AUDIT FEES
In fiscal 20192020 and 2020,2021, KPMG (including Japanese and overseas affiliates of KPMG AZSA LLC) billed us ¥3,106¥3,248 million and ¥3,248¥3,008 million, respectively, for direct audit fees.
AUDIT-RELATED FEES
In fiscal 20192020 and 2020,2021, KPMG billed us ¥175¥134 million and ¥134¥176 million, respectively, for audit-related services, including attestation, assurance and related services that are not reported under audit fees.
TAX FEES
In fiscal 20192020 and 2020,2021, KPMG billed us ¥301¥258 million and ¥258¥142 million, respectively, forservices, including tax compliance and tax advice.services.
tax-related
ALL OTHER FEES
In fiscal 20192020 and 2020,2021, KPMG billed us ¥10¥20 million and ¥20¥19 million, respectively, for other products and services, which primarily consisted of advisory services.
AUDIT COMMITTEE’S
PRE-APPROVAL
POLICIES AND PROCEDURESIn terms of audit services, every year the independent registered public accounting firm draws up its annual audit plan and annual budget, which is evaluated by ORIX’s Accounting Department. Subsequently,
pre-approval
is obtained from the Audit Committee.Non-audit
services are generally not obtained from the independent registered public accounting firm or its affiliates. In situations where ORIX must engage thenon-audit
services of the independent registered public accounting firm, preapproval is obtained from the Audit Committee on acase-by-case
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Year ended March 31, 2020 | (a) Total number of Shares Purchased | (b) Average Price Paid per Share | (c) Total number of Shares Purchased as Part of Publicly Announced Plans or Programs* 1 | (d) Maximum number (or Approximate Yen Value) of Shares that May Yet be Purchased Under the Plans or Programs* 1 | ||||||||||||
April 2019 | 0 | ¥ | 0 | 0 | ¥ | 0 | ||||||||||
May 2019 | 71 | 1,564 | 0 | 0 | ||||||||||||
June 2019 | 50 | 1,585 | 0 | 0 | ||||||||||||
July 2019 | 60 | 1,673 | 0 | 0 | ||||||||||||
August 2019 | 0 | 0 | 0 | 0 | ||||||||||||
September 2019 | 0 | 0 | 0 | 0 | ||||||||||||
October 2019 | 20 | 1,619 | 0 | 100,000,000,000 | ||||||||||||
November 2019 | 453,680 | 1,700 | 453,600 | 99,229,034,000 | ||||||||||||
December 2019 | 6,853,120 | 1,826 | 6,853,000 | 86,715,510,900 | ||||||||||||
January 2020 | 3,616,860 | 1,816 | 3,616,800 | 80,146,451,350 | ||||||||||||
February 2020 | 8,046,320 | 1,892 | 8,046,300 | 64,923,660,300 | ||||||||||||
March 2020 | 6,866,700 | 1,550 | 6,866,700 | 54,280,627,600 | ||||||||||||
Total | 25,836,881 | ¥ | 1,770 | 25,836,400 | ¥ | 54,280,627,600 | ||||||||||
Year ended March 31, 2021 | (a) Total number of Shares Purchased | (b) Average Price Paid per Share | (c) Total number of Shares Purchased as Part of Publicly Announced Plans or Programs* 1,2,3,4 | (d) Maximum number (or Approximate Yen Value) of Shares that May Yet be Purchased Under the Plans or Programs* 1,2,3,4 | ||||||||||||
April 2020 | 6,428,600 | ¥ | 1,223 | 6,428,600 | ¥ | 46,421,339,850 | ||||||||||
May 2020 | 1,796,300 | 1,241 | 1,796,300 | 0 | ||||||||||||
June 2020 | 0 | 0 | 0 | 0 | ||||||||||||
July 2020 | 100 | 1,380 | 0 | 0 | ||||||||||||
August 2020 | 140 | 1,268 | 0 | 0 | ||||||||||||
September 2020 | 50 | 1,326 | 0 | 0 | ||||||||||||
October 2020 | 10 | 1,345 | 0 | 0 | ||||||||||||
November 2020 | 16,296,170 | 1,533 | 16,296,100 | 19,210,697,400 | ||||||||||||
December 2020 | 8,804,420 | 1,582 | 8,804,300 | 5,280,637,350 | ||||||||||||
January 2021 | 3,130,170 | 1,687 | 3,130,100 | 0 | ||||||||||||
February 2021 | 80 | 1,778 | 0 | 0 | ||||||||||||
March 2021 | 30 | 1,807 | 0 | 0 | ||||||||||||
Total | 36,456,070 | ¥ | 1,489 | 36,455,400 | ¥ | 0 | ||||||||||
| *1 | The Company resolved the share repurchase as follows at a meeting of the Board of Directors held on October 28, 2019. |
• Class of shares to be repurchased | Common shares | |
• Total number of shares to be repurchased | Up to 70,000,000 shares | |
(approx.5.5% of the total outstanding shares (excluding treasury shares)) | ||
• Total purchase price of shares to be repurchased | Up to 100 billion yen | |
• Repurchase period | From November 1, 2019 to May 8, 2020 | |
• Method of share repurchase | Market purchases based on the discretionary dealing contract regarding repurchase of own shares | |
168
| *2 | The share repurchase based on the above resolution at the Board of Directors meeting was completed. The details of share repurchase |
• Class of shares repurchased | Common shares |
• Total number of shares repurchased | 8,224,900 shares | |
• Total purchase price of shares repurchased | 10,088,218,300 yen | |
• Repurchase period | From April 1, 2020 to May 8, 2020 | |
• Method of share repurchase | Market purchases based on the discretionary dealing contract regarding repurchase of own shares |
| *3 | The Company resolved the share repurchase as follows at a meeting of the Board of Directors held on November 2, 2020. |
• Class of shares to be repurchased | Common shares | |
• Total number of shares to be repurchased | Up to 50,000,000 shares | |
| (approx.4.0% of the total outstanding shares (excluding treasury shares)) | ||
• Total purchase price of shares to be repurchased | Up to 44.2 billion yen | |
• Repurchase period | November 9, 2020 to March 31, 2021 | |
• Method of share repurchase | Market purchases based on the discretionary dealing contract regarding repurchase of own shares | |
| *4 | The share repurchase based on the above resolution at the Board of Directors meeting was completed. The details of share repurchase are as follows. |
• Class of shares repurchased | Common shares | |
• Total number of shares repurchased | 28,230,500 shares | |
• Total purchase price of shares repurchased | 44,199,883,050 yen | |
• Repurchase period | From November 9, 2020 to January 8, 2021 | |
• Method of share repurchase | Market purchases based on the discretionary dealing contract regarding repurchase of own shares |
| *5 | The Company resolved the share repurchase as follows at a meeting of the Board of Directors held on May 13, 2021. |
• Class of shares to be repurchased | Common shares | |
• Total number of shares to be repurchased | Up to 50,000,000 shares | |
| (approx.4.1% of the total outstanding shares (excluding treasury shares)) | ||
• Total purchase price of shares to be repurchased | Up to 50 billion yen | |
• Repurchase period | May 17, 2021 to March 31, 2022 | |
• Method of share repurchase | Market purchases based on the discretionary dealing contract regarding repurchase of own shares | |
Item 16F. Change in Registrant’s Certifying Accountant.
Not applicable.
Item 16G. Corporate Governance
Our ADSs have been listed on the New York Stock Exchange, or NYSE, since 1998. As an NYSE-listed company, we are required to comply with certain corporate governance standards under Section 303A of the NYSE Listed Company Manual. However, as a foreign private issuer, we are permitted to follow home country practice in lieu of certain provisions of Section 303A.
169
Our corporate governance practices differ in certain significant respects from those that U.S. companies must adopt in order to maintain a NYSE listing and, in accordance with Section 303A.11 of the NYSE’s Listed Company Manual, we provide a brief, general summary of such differences.
The composition of our board of directors and its committees differs significantly in terms of independence from the composition requirements for boards and committees that U.S. companies must satisfy in order to maintain a NYSE listing. We are not required to meet the NYSE’s independence requirements for individuals on our board of directors or our Nominating, Audit, and Compensation Committees. Under Japanese law, a majority of the membership on the committees must be “outside directors”—a Japanese law concept that shares similarities with the U.S. concept of “independent director” where the company is a ““Company with Nominating Committee, etc.” However, we are not required to include on our board of directors a majority of outside directors, nor are we required to compose our committees exclusively from outside directors. Six out of our 12 directors are outside directors. Under the Companies Act, the directors who compose the Audit Committee are not permitted to be executive officers or executive directors of the Company or its subsidiaries, or managers, employees or accounting advisors of the Company’s subsidiaries. Our Audit Committee members meet this requirement. We have adopted a written charter for our Compensation Committee that addresses committee member appointment and removal, committee structure and operations, and reporting to the board. However, our Compensation Committee has not retained, or obtained the advice of, a compensation consultant, independent legal counsel or other adviser.advisor.
Under the Companies Act, an outside director is a director (i) who is not an executive director, executive officer, manager or any other kind of employee (an “Executive Director, etc.”) of the Company or its subsidiaries and who has not been an Executive Director, etc. of the Company or its subsidiaries in the past 10 years; (ii) who has not been an Executive Director, etc. of the Company or its subsidiaries for the past 10 years from the assumptions of any of the position of director, accounting advisor, or auditor; (iii) who is not a person with a controlling stake in the management of the Company, such as a holder of more than 50 percent of the Company’s shares, etc., or has not been an Executive Director, etc. of the parent company of the Company; (iv) who has not been an Executive Director, etc. of any other company with same parent company; and (v) who has not been the spouse or the kin (within the second degree) of any director, manager or any other kind of important employee of the Company, or a person with a controlling stake in the management of the Company, such as a holder of more than 50 percent of the Company’s shares etc.
(shikko-yaku)
In addition to differences in composition requirements for our board of directors and its committees, we are not required to:
make publicly available one or more documents that summarize all aspects of our corporate governance guidelines or prepare a written code that states the objectives, responsibilities, and performance evaluation of our Nominating, Audit and Compensation Committees in a manner that satisfies the NYSE’s requirements;
adopt a code of business conduct and ethics for our directors, officers, and employees that addresses fully the topics necessary to satisfy the NYSE’s requirements;
hold regularly scheduled executive sessions for our outside directors;
obtain shareholder approval for all equity compensation plans for employees, directors or executive officers of ORIX or for material revisions to any such plans;
provide the compensation committee with authority to obtain or retain the advice of a compensation adviseradvisor only after taking into consideration all factors relevant to determining the adviser’sadvisor’s independence from management.
170
PART III
Item 17. Financial Statements
ORIX has elected to provide financial statements and related information pursuant to Item 18.
Item 18. Financial Statements
See pagesF-137.F-150.
F-1
throughThe following consolidated financial statements of ORIX listed below and the report thereon by its independent registered public accounting firm are filed as part of this Form
20-F:
| (a) | Consolidated Balance Sheets as of March 31, |
| (b) | Consolidated Statements of Income for the years ended March 31, |
| (c) | Consolidated Statements of Comprehensive Income for the years ended March 31, |
| (d) | Consolidated Statements of Changes in Equity for the years ended March 31, |
| (e) | Consolidated Statements of Cash Flows for the years ended March 31, |
| (f) | Notes to Consolidated Financial Statements (page |
| (g) | Schedule II.—Valuation and Qualifying Accounts and Reserves (page F-150). |
Item 19. Exhibits
We have filed the following documents as exhibits to this document.
Exhibit Number | Description | |||
Exhibit 1.1 | ||||
| Exhibit 1.2 | ||||
| Exhibit 1.3 | ||||
| Exhibit 2.1 | ||||
| ||||
| Exhibit 2.2 | ||||
| Exhibit 8.1 | ||||
| Exhibit 11.1 | ||||
| Exhibit 12.1 | ||||
| Exhibit 13.1 | ||||
| Exhibit 15.1 | ||||
| Exhibit 101 | ||||
Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| Exhibit 101 | ||||
Inline XBRL Schema Document. | ||||
| Exhibit 101 | ||||
Inline XBRL Calculation Linkbase Document. | ||||
| Exhibit 101 | ||||
Inline XBRL Definition Linkbase Document. | ||||
| Exhibit 101 | ||||
Inline XBRL Labels Linkbase Document. | ||||
| Exhibit 101 | ||||
Inline XBRL Presentation Linkbase Document. | ||||
| Exhibit 104 | ||||
The cover page for the Company’s Annual Report on 20-F for the year ended March 31, | ||||
We have not included as exhibits certain instruments with relation to our long-term debt or the long-term debt of our subsidiaries. The total amount of securities of us or our subsidiaries authorized under any such instrument does not exceed 10% of our consolidated total assets. We hereby agree to furnish to the SEC, upon its request, a copy of any and all such instruments.
SIGNATURES
The company hereby certifies that it meets all of the requirements for filing on Form
20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.ORIX KABUSHIKI KAISHA | ||
By: | /s/ S ANIGUCHI | |
Name: | Shoji Taniguchi | |
Title: | Senior Managing Executive Officer |
Date: June 29, 20202021
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | |||||||
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
ORIX Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of ORIX Corporation (a Japanese corporation) and its subsidiaries (the Group) as of March 31, 20202021 and 2019,2020, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three- yearthree-year period ended March 31, 2020,2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of March 31, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2020,2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group’s internal control over financial reporting as of March 31, 2020,2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated June 29, 20202021 expressed an unqualified opinion on the effectiveness of the Group’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.PCAOB
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the carrying value of the indefinite-lived intangible assetassets for asset management contract
As discussed in Notes 1 and 16 to the consolidated financial statements, the Group’s indefinite-lived intangible assets as of March 31, 2021 was ¥234,281 million, of which ¥161,081 million represents asset
F-2
management contracts. The Group performs an impairment test for indefinite-lived intangible assets at least annually and whenever events or changes in circumstances indicate that the asset might be impaired. As a result of the impairment test, if the carrying amount of an
intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Group’s indefinite-lived intangible assets balance as of March 31, 2020 was ¥214,582 million, of which ¥141,069 million represents asset management contracts. The fair values of the asset management contracts wereare determined utilizing a discounted cash flow model and the key inputs and assumptions to the valuation includedinclude the forecasted balances of assets under management (AuM) used to estimate the future cash flows and the weighted average cost of capital (WACC) as a discount rate.
We identified the assessment of the carrying value of the indefinite-lived intangible asset for a certain asset management contract held by a subsidiary in an overseas businessthe ORIX Europe segment as a critical audit matter. Changes in the key inputs and assumptions have a significant effect on the fair value of the asset management contract indicating a higher risk related to the impairment assessment and, therefore, required a high degree of auditor judgment. In addition,Specifically, the forecasted balances of AuM were challenging to test as there was a high degree of estimation uncertainty in forecasting future growth of AuM. Also, a high degree of auditor judgment, including specialized skills and knowledge, was required to test the WACC due to the subjectivity in determining its inputs.
The following are the primary procedures we performed to address this critical audit matter includedmatter. We evaluated the following. Wedesign and tested the operating effectiveness of certain internal controls overrelated to the Group’s impairment assessment process of the asset management contract, including controls over the development of the key inputsforecasted balances of AuM and assumptions.the WACC. We evaluated the Group’s ability to accurately estimatedevelopment of the forecasted balances of AuM by comparinganalyzing the actual AuM balances compared to those forecasted in the prior year toand by considering the actual results.performance of the funds managed under the asset management contract. We performed a sensitivity analysis over the forecasted balances of AuM and the WACC to assess the impact to the Group’s determination that the fair value of the asset management contract exceeded its carrying amount. In addition, we involved valuation professionals with specialized industry skills and knowledge, and experience, who assisted in assessing the WACC used by management in the assessment, by comparing it against a WACC range that was developed using publicly available market data and independently developed assumptions.
Assessment of the fair value measurement of the investment funds categorized as Level 3 financial instruments in the fair value hierarchy
As discussed in Notes 1 and 2 to the consolidated financial statements, certainthe Group’s financial assets measured at fair value on a recurring basis under Level 3 of the fair value hierarchy as of March 31, 2021 amounted to ¥244,987 million, which included ¥91,410 million of investment funds. Certain overseas subsidiaries are determined as investment companies under ASC 946 (Financial Services-Investment Companies)(“Financial Services—Investment Companies”) and hold investment funds measured at fair value with changes in fair value recognized in earnings on a recurring basis. These investment funds are classified as Level 3 in the fair value hierarchy, because the Group measures their fair value using valuation techniques with key inputs that are unobservable. The Group’s Level 3 financial assets measured at fair value on a recurring basis as of March 31, 2020 amounted to ¥209,690 million, which included ¥83,901 million of investment funds. The fair value measurement of the Level 3 investment funds held by a certain investment company werein the ORIX USA segment is estimated based on the valuation methodology of the underlying equity investments using a combination ofby weighting the income approach technique using discounted cash flows and the market approach technique utilizing market multiples. Key inputs and assumptions used for the valuation include earnings before interest, taxes, depreciation and amortization (EBITDA) multiples, projected cash flows andflow forecasts, weighted average cost of capital (WACC). and weighting of the techniques.
We identified the assessment of the fair value measurement of the Level 3 investment funds held by the certain investment company in the ORIX USA segment as a critical audit matter. In additionDue to the significant measurement uncertainty associated with the fair value of such investment funds, a high degree of subjectivity was used in determining the methodology and the key inputs and assumptions, minorincluding EBITDA multiples, cash flow forecasts, WACC and weighting of the techniques. Minor changes in these key inputs and assumptions used for the valuation wouldcould have a significant effect on the Group’s net income. Therefore, a high degree of challenging auditor judgment was required. Additionally, the audit effort associated with this estimate required specialized skills and knowledge.
F-3
The following are the primary procedures we performed to address this critical audit matter includedmatter. We evaluated the following. Wedesign and tested the operating effectiveness of certain internal controls overrelated to the Group’s fair value measurement process for the Level 3 investment funds, including controls over (1) the development of the methodology and (2) the determination of the key inputs and assumptions.assumptions used for the valuation. We
evaluating appropriateness of the Group’s fair value measurement methodology in accordance with U.S. generally accepted accounting principles,
evaluating the reasonableness of the selected EBITDA multiples through the comparison to independently developed EBITDA multiples, and
evaluating the reasonableness of the WACC assumptionassumptions through performing an assessment using publicly available market data and independently developed assumptions.assumptions, and
evaluating the reasonableness of the weighting of the techniques applied to arrive at the fair value.
Assessment of the carrying value of aircraft for operating leases
As discussed in Notes 1, 6 and 34 to the consolidated financial statements, the Group’s Investment in Operating leases balance as of March 31, 2021 was ¥1,408,189 million, of which ¥262,019 million represents long-lived assets related to the Aircraft and Ships segment balance, which includes the aircraft balance for operating leases held by ORIX Aviation Systems Limited. The Group performs a recoverability test for long-lived assets to be held and used in operations, including the aircraft, whenever events or changes in circumstances indicate that the assets might be impaired. The assets are considered not recoverable when the undiscounted future cash flows that are expected to be generated by those assets are less than the carrying amount of those assets. The carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount. The fair value of the assets is estimated using discounted cash flow model. The key inputs and assumptions to the undiscounted forecasted cash flows used in the recoverability test include the cash flows from operating leases and residual values of the aircraft which were estimated based on values obtained from independent third-party appraisers.
We identified the assessment of the carrying value of the aircraft for operating leases held by ORIX Aviation Systems Limited as a critical audit matter. There was a high degree of estimation uncertainty in estimating the forecasted cash flows from operating leases and residual values of the aircraft used in the recoverability test and, therefore, those were challenging to test.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s recoverability test of the aircraft, including controls over the development of the forecasted cash flows from operating leases and residual values of the aircraft. We evaluated the development of the undiscounted forecasted cash flows used in the recoverability test by comparing the key inputs and assumptions to the performance of the Group’s aircraft portfolio, in-force contractual arrangements and externally available market value reports from independent third-party appraisers. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in assessing the relevance and reliability of the information from the independent third-party appraisers.
Assessment of recognition of basis difference adjustments within Equity in Net Income of Affiliates for aircraft for operating leases related to an equity method investment
As discussed in Notes 15 and 34 to the consolidated financial statements, the Group’s Investment in Affiliates balance as of March 31, 2021 was ¥887,764 million, of which ¥293,469 million related to the Aircraft
F-4
and Ships segment including the investment in an equity method affiliate, Avolon Holdings Limited, which holds aircraft for operating leases. The Group recognizes as part of its investment, basis differences related to the differences between the fair values and the carrying amounts of the investee’s assets and liabilities on acquisition. Such basis differences are adjusted for any impairment with such changes in the differences included in Equity in Net Income of Affiliates. As part of assessing Equity in Net Income of Affiliates for Avolon Holdings Limited due to any adjustments of the basis differences related to the underlying aircraft, the Group evaluates the investee’s impairment analysis of the underlying aircraft for operating leases. The investee analysis of the underlying aircraft contains evaluation of key inputs and assumptions including the forecasted cash flows from operating leases and residual values of the underlying aircraft.
We identified the assessment of the recognition of basis difference adjustments within Equity in Net Income of Affiliates for aircraft for operating leases related to the equity method investment in Avolon Holdings Limited, as a critical audit matter. There was a high degree of estimation uncertainty in reviewing the impact to such basis differences including evaluation of forecasted cash flows from operating leases and residual values of the aircraft held by Avolon Holdings Limited which was challenging to test.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s review of the recognition of basis difference adjustments within Equity in Net Income of Affiliates, including controls over the evaluation of the investee impairment analysis for aircraft for operating leases. We evaluated the carrying amount of basis differences and recognition of any adjustments to such basis differences within Equity in Net Income of Affiliates by assessing the performance of the investee’s aircraft portfolio, in-force contractual arrangements and externally available market value reports from independent third-party appraisers. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in assessing the relevance and reliability of the information from the independent third-party appraisers.
KPMG AZSA LLC
We have served as the Group’s auditor since 1985.
Tokyo, Japan
June 29, 20202021
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
ORIX Corporation
Opinion on Internal Control Over Financial Reporting
We have audited ORIX Corporation (a Japanese corporation) and subsidiaries’ (the Group) internal control over financial reporting as of March 31, 2020,2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020,2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Group as of March 31, 20202021 and 2019,2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2020,2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated June 29, 20202021 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group’sGroups internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
KPMG AZSA LLC
Tokyo, Japan
June 29, 20202021
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 20192020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||||
2019 | 2020 | |||||||||||||
ASSETS | ||||||||||||||
Cash and Cash Equivalents | ¥ | 1,161,032 | ¥ | 982,666 | ||||||||||
Restricted Cash | 122,548 | 152,618 | ||||||||||||
Investment in Direct Financing Leases | 1,155,632 | 0 | ||||||||||||
Net investment in Leases | 0 | 1,080,964 | ||||||||||||
Installment Loans | 3,277,670 | 3,740,486 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2019 | ¥ | 38,671 | million | |||||||||||
March 31, 2020 | ¥ | 90,893 | million | |||||||||||
Allowance for Doubtful Receivables on Financ e Leases and Probable Loan Losses | (58,011 | ) | (56,836 | ) | ||||||||||
Investment in Operating Leases | 1,335,959 | 1,400,001 | ||||||||||||
Investment in Securities | 1,928,916 | 2,245,323 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2019 | ¥ | 27,367 | million | |||||||||||
March 31, 2020 | ¥ | 25,295 | million | |||||||||||
Property under Facility Operations | 441,632 | 562,485 | ||||||||||||
Investment in Affiliates | 842,760 | 821,662 | ||||||||||||
Trade Notes, Accounts and Other Receivable | 280,590 | 312,744 | ||||||||||||
Inventories | 115,695 | 126,013 | ||||||||||||
Office Facilities | 108,390 | 203,930 | ||||||||||||
Other Assets | 1,462,104 | 1,495,472 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2019 | ¥ | 12,449 | million | |||||||||||
March 31, 2020 | ¥ | 18,206 | million | |||||||||||
Total Assets | ¥ | 12,174,917 | ¥ | 13,067,528 | ||||||||||
Millions of yen | ||||||||||||||
2020 | 2021 | |||||||||||||
ASSETS | ||||||||||||||
Cash and Cash Equivalents | ¥ | 982,666 | ¥ | 951,242 | ||||||||||
Restricted Cash | 152,618 | 128,333 | ||||||||||||
Net investment in Leases | 1,080,964 | 1,029,518 | ||||||||||||
Installment Loans | 3,740,486 | 3,670,784 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2020 | ¥90,893 | million | ||||||||||||
March 31, 2021 | ¥63,272 | million | ||||||||||||
Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses | (56,836 | ) | 0 | |||||||||||
Allowance for Credit Losses | 0 | (78,945 | ) | |||||||||||
Investment in Operating Leases | 1,400,001 | 1,408,189 | ||||||||||||
Investment in Securities | 2,245,323 | 2,660,443 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2020 | ¥25,295 | million | ||||||||||||
March 31, 2021 | ¥9,384 | million | ||||||||||||
The amounts which are associated to available-for-sale | ||||||||||||||
As of March 31, 2021 | ||||||||||||||
Amortized Cost | ¥2,026,767 | �� | million | |||||||||||
Allowance for Credit Losses | ¥120 | million | ||||||||||||
Property under Facility Operations | 562,485 | 491,855 | ||||||||||||
Investment in Affiliates | 821,662 | 887,764 | ||||||||||||
Trade Notes, Accounts and Other Receivable | 312,744 | 354,334 | ||||||||||||
Inventories | 126,013 | 142,156 | ||||||||||||
Office Facilities | 203,930 | 246,399 | ||||||||||||
Other Assets | 1,495,472 | 1,671,010 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2020 | ¥18,206 | million | ||||||||||||
March 31, 2021 | ¥6,297 | million | ||||||||||||
Total Assets | ¥ | 13,067,528 | ¥ | 13,563,082 | ||||||||||
Notes: | 1. Accounting Standards Update | |||
2. Allowance for credit losses on loans to affiliates are recorded in investment in affiliates since the second quarter of fiscal 2021. Before fiscal 2020, there were no allowance for probable loan losses on affiliates. | ||||
Millions of yen | ||||||||
2019 | 2020 | |||||||
Cash and Cash Equivalents | ¥ | 4,437 | ¥ | 7,117 | ||||
Investment in Direct Financing Leases (Net of Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses) | 15,058 | 0 | ||||||
Net Investment in Leases (Net of Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses) | 0 | 3,377 | ||||||
Installment Loans (Net of Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses) | 185,988 | 218,268 | ||||||
Investment in Operating Leases | 82,405 | 75,904 | ||||||
Property under Facility Operations | 203,933 | 296,208 | ||||||
Investment in Affiliates | 52,079 | 51,456 | ||||||
Other | 100,101 | 136,641 | ||||||
| ¥ | 644,001 | ¥ | 788,971 | |||||
Millions of yen | ||||||||
2020 | 2021 | |||||||
Cash and Cash Equivalents | ¥ | 7,117 | ¥ | 4,305 | ||||
Net Investment in Leases (Net of Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses / Allowance for Credit Losses) | 3,377 | 0 | ||||||
Installment Loans (Net of Allowance for Doubtful Receivables on Finance Leases and Probable Loan Losses / Allowance for Credit Losses) | 218,268 | 238,236 | ||||||
Investment in Operating Leases | 75,904 | 78,633 | ||||||
Property under Facility Operations | 296,208 | 230,216 | ||||||
Investment in Affiliates | 51,456 | 51,226 | ||||||
Other | 136,641 | 111,924 | ||||||
| ¥ | 788,971 | ¥ | 714,540 | |||||
F-7
CONSOLIDATED BALANCE SHEETS—(Continued)
AS OF MARCH 31, 20192020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||||
2019 | 2020 | |||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||
Liabilities: | ||||||||||||||
Short-term Debt | ¥ | 309,549 | ¥ | 336,832 | ||||||||||
Deposits | 1,927,741 | 2,231,703 | ||||||||||||
Trade Notes, Accounts and Other Payable | 293,480 | 282,727 | ||||||||||||
Policy Liabilities and Policy Account Balances | 1,521,355 | 1,591,475 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2019 | ¥360,198 | million | ||||||||||||
March 31, 2020 | ¥300,739 | million | ||||||||||||
Income Taxes: | ||||||||||||||
Current | 42,010 | 28,203 | ||||||||||||
Deferred | 313,833 | 328,147 | ||||||||||||
Long-term Debt | 4,186,222 | 4,279,354 | ||||||||||||
Other Liabilities | 617,746 | 912,921 | ||||||||||||
Total Liabilities | 9,211,936 | 9,991,362 | ||||||||||||
Redeemable Noncontrolling Interests | 9,780 | 10,331 | ||||||||||||
Commitments and Contingent Liabilities | ||||||||||||||
Equity: | ||||||||||||||
Common stock: | 221,111 | 221,111 | ||||||||||||
Authorized: | 2,590,000,000 | shares | ||||||||||||
Issued: | ||||||||||||||
March 31, 2019 | 1,324,629,128 | shares | ||||||||||||
March 31, 2020 | 1,324,629,128 | shares | ||||||||||||
Additional Paid-in Capital | 257,625 | 257,638 | ||||||||||||
Retained Earnings | 2,555,585 | 2,754,461 | ||||||||||||
Accumulated Other Comprehensive Income (Loss) | (61,343 | ) | (118,532 | ) | ||||||||||
Treasury Stock, at Cost: | (75,904 | ) | (121,070 | ) | ||||||||||
March 31, 2019 | 44,667,776 | shares | ||||||||||||
March 31, 2020 | 70,157,472 | shares | ||||||||||||
ORIX Corporation Shareholders’ Equity | 2,897,074 | 2,993,608 | ||||||||||||
Noncontrolling Interests | 56,127 | 72,227 | ||||||||||||
Total Equity | 2,953,201 | 3,065,835 | ||||||||||||
Total Liabilities and Equity | ¥ | 12,174,917 | ¥ | 13,067,528 | ||||||||||
Millions of yen | ||||||||||||||
2020 | 2021 | |||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||
Liabilities: | ||||||||||||||
Short-term Debt | ¥ | 336,832 | ¥ | 307,269 | ||||||||||
Deposits | 2,231,703 | 2,317,785 | ||||||||||||
Trade Notes, Accounts and Other Payable | 282,727 | 260,712 | ||||||||||||
Policy Liabilities and Policy Account Balances | 1,591,475 | 1,822,422 | ||||||||||||
The amounts which are measured at fair value by electing the fair value option are as follows: | ||||||||||||||
March 31, 2020 | ¥300,739 | million | ||||||||||||
March 31, 2021 | ¥266,422 | million | ||||||||||||
Income Taxes: | ||||||||||||||
Current | 28,203 | 22,170 | ||||||||||||
Deferred | 328,147 | 341,290 | ||||||||||||
Long-term Debt | 4,279,354 | 4,416,833 | ||||||||||||
Other Liabilities | 912,921 | 971,457 | ||||||||||||
Total Liabilities | 9,991,362 | 10,459,938 | ||||||||||||
Redeemable Noncontrolling Interests | 10,331 | 0 | ||||||||||||
Commitments and Contingent Liabilities | 0 | 0 | ||||||||||||
Equity: | ||||||||||||||
Common stock: | 221,111 | 221,111 | ||||||||||||
Authorized: | 2,590,000,000 | shares | ||||||||||||
Issued: | ||||||||||||||
March 31, 2020 | 1,324,629,128 | shares | ||||||||||||
March 31, 2021 | 1,285,724,480 | shares | ||||||||||||
Additional Paid-in Capital | 257,638 | 259,361 | ||||||||||||
Retained Earnings | 2,754,461 | 2,744,588 | ||||||||||||
Accumulated Other Comprehensive Income (Loss) | (118,532 | ) | (84,650 | ) | ||||||||||
Treasury Stock, at Cost: | (121,070 | ) | (111,954 | ) | ||||||||||
March 31, 2020 | 70,157,472 | shares | ||||||||||||
March 31, 2021 | 68,386,164 | shares | ||||||||||||
ORIX Corporation Shareholders’ Equity | 2,993,608 | 3,028,456 | ||||||||||||
Noncontrolling Interests | 72,227 | 74,688 | ||||||||||||
Total Equity | 3,065,835 | 3,103,144 | ||||||||||||
Total Liabilities and Equity | ¥ | 13,067,528 | ¥ | 13,563,082 | ||||||||||
2. | ||
Millions of yen | ||||||||
2019 | 2020 | |||||||
Short-Term Debt | ¥ | 580 | ¥ | 6,030 | ||||
Trade Notes, Accounts and Other Payable | 7,339 | 3,140 | ||||||
Long-Term Debt | 418,631 | 464,904 | ||||||
Other | 16,480 | 45,671 | ||||||
| ¥ | 443,030 | ¥ | 519,745 | |||||
Millions of yen | ||||||||
2020 | 2021 | |||||||
Short-Term Debt | ¥ | 6,030 | ¥ | 500 | ||||
Trade Notes, Accounts and Other Payable | 3,140 | 2,390 | ||||||
Long-Term Debt | 464,904 | 413,268 | ||||||
Other | 45,671 | 42,024 | ||||||
| ¥ | 519,745 | ¥ | 458,182 | |||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2018, 2019, 2020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Revenues: | ||||||||||||
Finance revenues | ¥ | 228,252 | ¥ | 242,893 | ¥ | 276,864 | ||||||
Gains on investment securities and dividends | 43,302 | 15,958 | 22,499 | |||||||||
Operating leases | 379,665 | 413,918 | 430,665 | |||||||||
Life insurance premiums and related investment income | 351,590 | 347,136 | 367,778 | |||||||||
Sales of goods and real estate | 1,079,052 | 596,165 | 406,511 | |||||||||
Services income | 780,910 | 818,794 | 776,012 | |||||||||
Total revenues | 2,862,771 | 2,434,864 | 2,280,329 | |||||||||
Expenses: | ||||||||||||
Interest expense | 76,815 | 93,337 | 99,138 | |||||||||
Costs of operating leases | 252,327 | 257,321 | 289,604 | |||||||||
Life insurance costs | 255,070 | 246,533 | 269,425 | |||||||||
Costs of goods and real estate sold | 1,003,509 | 535,261 | 354,006 | |||||||||
Services expense | 482,796 | 508,320 | 483,914 | |||||||||
Other (income) and expense | 429 | 1,301 | 14,925 | |||||||||
Selling, general and administrative expenses | 431,594 | 437,028 | 460,199 | |||||||||
Provision for doubtful receivables and probable loan losses | 17,265 | 22,525 | 24,425 | |||||||||
Write-downs of long-lived assets | 5,525 | 2,418 | 3,043 | |||||||||
Write-downs of securities | 1,246 | 1,382 | 11,969 | |||||||||
Total expenses | 2,526,576 | 2,105,426 | 2,010,648 | |||||||||
Operating Income | 336,195 | 329,438 | 269,681 | |||||||||
Equity in Net Income of Affiliates | 50,103 | 32,978 | 67,924 | |||||||||
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net | 49,203 | 33,314 | 74,001 | |||||||||
Bargain Purchase Gain | 0 | 0 | 955 | |||||||||
Income before Income Taxes | 435,501 | 395,730 | 412,561 | |||||||||
Provision for Income Taxes | 113,912 | 68,691 | 105,837 | |||||||||
Net Income | 321,589 | 327,039 | 306,724 | |||||||||
Net Income Attributable to the Noncontrolling Interests | 8,002 | 2,890 | 3,640 | |||||||||
Net Income Attributable to the Redeemable Noncontrolling Interests | 452 | 404 | 384 | |||||||||
Net Income Attributable to ORIX Corporation Shareholders | ¥ | 313,135 | ¥ | 323,745 | ¥ | 302,700 | ||||||
Millions of yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Revenues: | ||||||||||||
Finance revenues | ¥ | 242,893 | ¥ | 276,864 | ¥ | 271,194 | ||||||
Gains on investment securities and dividends | 15,958 | 22,499 | 46,097 | |||||||||
Operating leases | 413,918 | 430,665 | 397,065 | |||||||||
Life insurance premiums and related investment income | 347,136 | 367,778 | 487,550 | |||||||||
Sales of goods and real estate | 596,165 | �� | 406,511 | 410,953 | ||||||||
Services income | 818,794 | 776,012 | 679,849 | |||||||||
Total revenues | 2,434,864 | 2,280,329 | 2,292,708 | |||||||||
Expenses: | ||||||||||||
Interest expense | 93,337 | 99,138 | 78,068 | |||||||||
Costs of operating leases | 257,321 | 289,604 | 295,628 | |||||||||
Life insurance costs | 246,533 | 269,425 | 374,348 | |||||||||
Costs of goods and real estate sold | 535,261 | 354,006 | 347,721 | |||||||||
Services expense | 508,320 | 483,914 | 439,233 | |||||||||
Other (income) and expense | 1,301 | 14,925 | 17,125 | |||||||||
Selling, general and administrative expenses | 437,028 | 460,199 | 456,795 | |||||||||
Provision for doubtful receivables and probable loan losses | 22,525 | 24,425 | 0 | |||||||||
Provision for Credit Losses | 0 | 0 | 16,021 | |||||||||
Write-downs of long-lived assets | 2,418 | 3,043 | 3,020 | |||||||||
Write-downs of securities | 1,382 | 11,969 | 5,935 | |||||||||
Total expenses | 2,105,426 | 2,010,648 | 2,033,894 | |||||||||
Operating Income | 329,438 | 269,681 | 258,814 | |||||||||
Equity in Net Income of Affiliates | 32,978 | 67,924 | 481 | |||||||||
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net | 33,314 | 74,001 | 23,300 | |||||||||
Bargain Purchase Gain | 0 | 955 | 4,966 | |||||||||
Income before Income Taxes | 395,730 | 412,561 | 287,561 | |||||||||
Provision for Income Taxes | 68,691 | 105,837 | 90,747 | |||||||||
Net Income | 327,039 | 306,724 | 196,814 | |||||||||
Net Income Attributable to the Noncontrolling Interests | 2,890 | 3,640 | 4,453 | |||||||||
Net Income (Loss) Attributable to the Redeemable Noncontrolling Interests | 404 | 384 | (23 | ) | ||||||||
Net Income Attributable to ORIX Corporation Shareholders | ¥ | 323,745 | ¥ | 302,700 | ¥ | 192,384 | ||||||
| Notes: | 1. | |||
2. Credit Losses Standard has been adopted since April 1, 2020 and the amounts of provision for doubtful receivables and probable loan losses have been reclassified to provision for credit losses. For further information, see Note 1 “Significant Accounting and Reporting Policies | ||||
3. Provision for credit losses of loans to affiliates are recorded in equity in net income of affiliates since the second quarter of fiscal 2021. |
CONSOLIDATED STATEMENTS OF INCOME—(Continued)
FOR THE YEARS ENDED MARCH 31, 2018, 2019, 2020 AND 20202021
ORIX Corporation and Subsidiaries
Yen | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Amounts per Share of Common Stock for Income Attributable to ORIX Corporation Shareholders: | ||||||||||||
Basic: | ||||||||||||
Net Income Attributable to ORIX Corporation Shareholders | ¥ | 244.40 | ¥ | 252.92 | ¥ | 237.38 | ||||||
Diluted: | ||||||||||||
Net Income Attributable to ORIX Corporation Shareholders | ¥ | 244.15 | ¥ | 252.70 | ¥ | 237.17 | ||||||
Cash Dividends | 56.25 | 69.00 | 81.00 | |||||||||
Yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Amounts per Share of Common Stock for Income Attributable to ORIX Corporation Shareholders: | ||||||||||||
Basic: | ||||||||||||
Net Income Attributable to ORIX Corporation Shareholders | ¥ | 252.92 | ¥ | 237.38 | ¥ | 155.54 | ||||||
Diluted: | ||||||||||||
Net Income Attributable to ORIX Corporation Shareholders | ¥ | 252.70 | ¥ | 237.17 | ¥ | 155.39 | ||||||
Cash Dividends | 69.00 | 81.00 | 76.00 | |||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED MARCH 31, 2018, 2019, 2020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Net Income | ¥ | 321,589 | ¥ | 327,039 | ¥ | 306,724 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Net change of unrealized gains (losses) on investment in securities | (22,834 | ) | 10,215 | (22,456 | ) | |||||||
Net change of debt valuation adjustments | 0 | 231 | 875 | |||||||||
Net change of defined benefit pension plans | (2,962 | ) | (7,346 | ) | 1,529 | |||||||
Net change of foreign currency translation adjustments | (1,955 | ) | (11,537 | ) | (31,664 | ) | ||||||
Net change of unrealized gains (losses) on derivative instruments | 779 | (4,118 | ) | (8,556 | ) | |||||||
Total other comprehensive income (loss) | (26,972 | ) | (12,555 | ) | (60,272 | ) | ||||||
Comprehensive Income | 294,617 | 314,484 | 246,452 | |||||||||
Comprehensive Income Attributable to the Noncontrolling Interests | 6,433 | 2,784 | 756 | |||||||||
Comprehensive Income Attributable to the Redeemable Noncontrolling Interests | 36 | 730 | 187 | |||||||||
Comprehensive Income Attributable to ORIX Corporation Shareholders | ¥ | 288,148 | ¥ | 310,970 | ¥ | 245,509 | ||||||
Millions of yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Net Income | ¥ | 327,039 | ¥ | 306,724 | ¥ | 196,814 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Net change of unrealized gains (losses) on investment in securities | 10,215 | (22,456 | ) | (11,182 | ) | |||||||
Net change of debt valuation adjustments | 231 | 875 | (899 | ) | ||||||||
Net change of defined benefit pension plans | (7,346 | ) | 1,529 | 5,330 | ||||||||
Net change of foreign currency translation adjustments | (11,537 | ) | (31,664 | ) | 36,246 | |||||||
Net change of unrealized gains (losses) on derivative instruments | (4,118 | ) | (8,556 | ) | 4,782 | |||||||
Total other comprehensive income (loss) | (12,555 | ) | (60,272 | ) | 34,277 | |||||||
Comprehensive Income | 314,484 | 246,452 | 231,091 | |||||||||
Comprehensive Income Attributable to the Noncontrolling Interests | 2,784 | 756 | 5,128 | |||||||||
Comprehensive Income (loss) Attributable to the Redeemable Noncontrolling Interests | 730 | 187 | (303 | ) | ||||||||
Comprehensive Income Attributable to ORIX Corporation Shareholders | ¥ | 310,970 | ¥ | 245,509 | ¥ | 226,266 | ||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED MARCH 31, 2018, 2019, 2020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||||||||||||||||||||||
ORIX Corporation Shareholders’ Equity | Total ORIX Corporation Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | ||||||||||||||||||||||||||||
Balance at March 31, 2017 | ¥ | 220,524 | ¥ | 268,138 | ¥ | 2,077,474 | ¥ | (21,270 | ) | ¥ | (37,168 | ) | ¥ | 2,507,698 | ¥ | 139,927 | ¥ | 2,647,625 | ||||||||||||||
Contribution to subsidiaries | 0 | 13,830 | 13,830 | |||||||||||||||||||||||||||||
Transaction with noncontrolling interests | (972 | ) | (1 | ) | (973 | ) | (35,522 | ) | (36,495 | ) | ||||||||||||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Net income | 313,135 | 313,135 | 8,002 | 321,137 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
Net change of unrealized gains (losses) on investment in securities | (22,746 | ) | (22,746 | ) | (88 | ) | (22,834 | ) | ||||||||||||||||||||||||
Net change of defined benefit pension plans | (2,984 | ) | (2,984 | ) | 22 | (2,962 | ) | |||||||||||||||||||||||||
Net change of foreign currency translation adjustments | (2 | ) | (2 | ) | (1,537 | ) | (1,539 | ) | ||||||||||||||||||||||||
Net change of unrealized gains (losses) on derivative instruments | 745 | 745 | 34 | 779 | ||||||||||||||||||||||||||||
Total other comprehensive income (loss) | (24,987 | ) | (1,569 | ) | (26,556 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 288,148 | 6,433 | 294,581 | |||||||||||||||||||||||||||||
Cash dividends | (72,757 | ) | (72,757 | ) | (8,218 | ) | (80,975 | ) | ||||||||||||||||||||||||
Exercise of stock options | 437 | 219 | 656 | 0 | 656 | |||||||||||||||||||||||||||
Acquisition of treasury stock | (39,110 | ) | (39,110 | ) | 0 | (39,110 | ) | |||||||||||||||||||||||||
Disposal of treasury stock | (476 | ) | 733 | 257 | 0 | 257 | ||||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to redemption value | (1,876 | ) | (1,876 | ) | 0 | (1,876 | ) | |||||||||||||||||||||||||
Reclassification of change in accounting standards | (692 | ) | 692 | 0 | 0 | 0 | ||||||||||||||||||||||||||
Other, net | 382 | (1 | ) | 381 | 0 | 381 | ||||||||||||||||||||||||||
Balance at March 31, 2018 | ¥ | 220,961 | ¥ | 267,291 | ¥ | 2,315,283 | ¥ | (45,566 | ) | ¥ | (75,545 | ) | ¥ | 2,682,424 | ¥ | 116,450 | ¥ | 2,798,874 | ||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2014-09 | 405 | 405 | 354 | 759 | ||||||||||||||||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2016-01 | 2,899 | (2,899 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2016-16 | 3,772 | 3,772 | 0 | 3,772 | ||||||||||||||||||||||||||||
Balance at April 1, 2018 | ¥ | 220,961 | ¥ | 267,291 | ¥ | 2,322,359 | ¥ | (48,465 | ) | ¥ | (75,545 | ) | ¥ | 2,686,601 | ¥ | 116,804 | ¥ | 2,803,405 | ||||||||||||||
Contribution to subsidiaries | 0 | 7,680 | 7,680 | |||||||||||||||||||||||||||||
Transaction with noncontrolling interests | (10,033 | ) | (103 | ) | (10,136 | ) | (60,347 | ) | (70,483 | ) | ||||||||||||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Net income | 323,745 | 323,745 | 2,890 | 326,635 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
Net change of unrealized gains (losses) on investment in securities | 10,174 | 10,174 | 41 | 10,215 | ||||||||||||||||||||||||||||
Net change of debt valuation adjustments | 231 | 231 | 0 | 231 | ||||||||||||||||||||||||||||
Net change of defined benefit pension plans | (7,289 | ) | (7,289 | ) | (57 | ) | (7,346 | ) | ||||||||||||||||||||||||
Net change of foreign currency translation adjustments | (11,775 | ) | (11,775 | ) | (88 | ) | (11,863 | ) | ||||||||||||||||||||||||
Net change of unrealized gains (losses) on derivative instruments | (4,116 | ) | (4,116 | ) | (2 | ) | (4,118 | ) | ||||||||||||||||||||||||
Total other comprehensive income (loss) | (12,775 | ) | (106 | ) | (12,881 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 310,970 | 2,784 | 313,754 | |||||||||||||||||||||||||||||
Cash dividends | (88,438 | ) | (88,438 | ) | (10,794 | ) | (99,232 | ) | ||||||||||||||||||||||||
Exercise of stock options | 150 | 75 | 225 | 0 | 225 | |||||||||||||||||||||||||||
Acquisition of treasury stock | (707 | ) | (707 | ) | 0 | (707 | ) | |||||||||||||||||||||||||
Disposal of treasury stock | (233 | ) | 348 | 115 | 0 | 115 | ||||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to redemption value | (2,131 | ) | (2,131 | ) | 0 | (2,131 | ) | |||||||||||||||||||||||||
Other, net | 525 | 50 | 575 | 0 | 575 | |||||||||||||||||||||||||||
Balance at March 31, 2019 | ¥ | 221,111 | ¥ | 257,625 | ¥ | 2,555,585 | ¥ | (61,343 | ) | ¥ | (75,904 | ) | ¥ | 2,897,074 | ¥ | 56,127 | ¥ | 2,953,201 | ||||||||||||||
Millions of yen | ||||||||||||||||||||||||||||||||
ORIX Corporation Shareholders’ Equity | Total ORIX Corporation Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | ||||||||||||||||||||||||||||
Balance at March 31, 2018 | ¥ | 220,961 | ¥ | 267,291 | ¥ | 2,315,283 | ¥ | (45,566 | ) | ¥ | (75,545 | ) | ¥ | 2,682,424 | ¥ | 116,450 | ¥ | 2,798,874 | ||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2014-09 | 405 | 405 | 354 | 759 | ||||||||||||||||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2016-01 | 2,899 | (2,899 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2016-16 | 3,772 | 3,772 | 0 | 3,772 | ||||||||||||||||||||||||||||
Balance at April 1, 2018 | ¥ | 220,961 | ¥ | 267,291 | ¥ | 2,322,359 | ¥ | (48,465 | ) | ¥ | (75,545 | ) | ¥ | 2,686,601 | ¥ | 116,804 | ¥ | 2,803,405 | ||||||||||||||
Contribution to subsidiaries | 0 | 7,680 | 7,680 | |||||||||||||||||||||||||||||
Transaction with noncontrolling interests | (10,033 | ) | (103 | ) | (10,136 | ) | (60,347 | ) | (70,483 | ) | ||||||||||||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Net income | 323,745 | 323,745 | 2,890 | 326,635 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
Net change of unrealized gains on investment in securities | 10,174 | 10,174 | 41 | 10,215 | ||||||||||||||||||||||||||||
Net change of debt valuation adjustments | 231 | 231 | 0 | 231 | ||||||||||||||||||||||||||||
Net change of defined benefit pension plans | (7,289 | ) | (7,289 | ) | (57 | ) | (7,346 | ) | ||||||||||||||||||||||||
Net change of foreign currency translation adjustments | (11,775 | ) | (11,775 | ) | (88 | ) | (11,863 | ) | ||||||||||||||||||||||||
Net change of unrealized gains (losses) on derivative instruments | (4,116 | ) | (4,116 | ) | (2 | ) | (4,118 | ) | ||||||||||||||||||||||||
Total other comprehensive income (loss) | (12,775 | ) | (106 | ) | (12,881 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 310,970 | 2,784 | 313,754 | |||||||||||||||||||||||||||||
Cash dividends | (88,438 | ) | (88,438 | ) | (10,794 | ) | (99,232 | ) | ||||||||||||||||||||||||
Exercise of stock options | 150 | 75 | 225 | 0 | 225 | |||||||||||||||||||||||||||
Acquisition of treasury stock | (707 | ) | (707 | ) | 0 | (707 | ) | |||||||||||||||||||||||||
Disposal of treasury stock | (233 | ) | 348 | 115 | 0 | 115 | ||||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to redemption value | (2,131 | ) | (2,131 | ) | 0 | (2,131 | ) | |||||||||||||||||||||||||
Other, net | 525 | 50 | 575 | 0 | 575 | |||||||||||||||||||||||||||
Balance at March 31, 2019 | ¥ | 221,111 | ¥ | 257,625 | ¥ | 2,555,585 | ¥ | (61,343 | ) | ¥ | (75,904 | ) | ¥ | 2,897,074 | ¥ | 56,127 | ¥ | 2,953,201 | ||||||||||||||
Contribution to subsidiaries | 0 | 17,047 | 17,047 | |||||||||||||||||||||||||||||
Transaction with noncontrolling interests | 241 | 2 | 243 | 1,340 | 1,583 | |||||||||||||||||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Net income | 302,700 | 302,700 | 3,640 | 306,340 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
Net change of unrealized gains (losses) on investment in securities | (22,390 | ) | (22,390 | ) | (66 | ) | (22,456 | ) | ||||||||||||||||||||||||
Net change of debt valuation adjustments | 875 | 875 | 0 | 875 | ||||||||||||||||||||||||||||
Net change of defined benefit pension plans | 1,527 | 1,527 | 2 | 1,529 | ||||||||||||||||||||||||||||
Net change of foreign currency translation adjustments | (28,917 | ) | (28,917 | ) | (2,550 | ) | (31,467 | ) | ||||||||||||||||||||||||
Net change of unrealized gains (losses) on derivative instruments | (8,286 | ) | (8,286 | ) | (270 | ) | (8,556 | ) | ||||||||||||||||||||||||
Total other comprehensive income (loss) | (57,191 | ) | (2,884 | ) | (60,075 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 245,509 | 756 | 246,265 | |||||||||||||||||||||||||||||
Cash dividends | (103,824 | ) | (103,824 | ) | (3,043 | ) | (106,867 | ) | ||||||||||||||||||||||||
Acquisition of treasury stock | (45,720 | ) | (45,720 | ) | 0 | (45,720 | ) | |||||||||||||||||||||||||
Disposal of treasury stock | (334 | ) | 554 | 220 | 0 | 220 | ||||||||||||||||||||||||||
Other, net | 106 | 106 | 0 | 106 | ||||||||||||||||||||||||||||
Balance at March 31, 2020 | ¥ | 221,111 | ¥ | 257,638 | ¥ | 2,754,461 | ¥ | (118,532 | ) | ¥ | (121,070 | ) | ¥ | 2,993,608 | ¥ | 72,227 | ¥ | 3,065,835 | ||||||||||||||
F-12
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
FOR THE YEARS ENDED MARCH 31, 2018, 2019, 2020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||||||||||||||||||||||
ORIX Corporation Shareholders’ Equity | Total ORIX Corporation Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | ||||||||||||||||||||||||||||
Balance at March 31, 2019 | ¥ | 221,111 | ¥ | 257,625 | ¥ | 2,555,585 | ¥ | (61,343 | ) | ¥ | (75,904 | ) | ¥ | 2,897,074 | ¥ | 56,127 | ¥ | 2,953,201 | ||||||||||||||
Contribution to subsidiaries | 0 | 17,047 | 17,047 | |||||||||||||||||||||||||||||
Transaction with noncontrolling interests | 241 | 2 | 243 | 1,340 | 1,583 | |||||||||||||||||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Net income | 302,700 | 302,700 | 3,640 | 306,340 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
Net change of unrealized gains (losses) on investment in securities | (22,390 | ) | (22,390 | ) | (66 | ) | (22,456 | ) | ||||||||||||||||||||||||
Net change of debt valuation adjustments | 875 | 875 | 0 | 875 | ||||||||||||||||||||||||||||
Net change of defined benefit pension plans | 1,527 | 1,527 | 2 | 1,529 | ||||||||||||||||||||||||||||
Net change of foreign currency translation adjustments | (28,917 | ) | (28,917 | ) | (2,550 | ) | (31,467 | ) | ||||||||||||||||||||||||
Net change of unrealized gains (losses) on derivative instruments | (8,286 | ) | (8,286 | ) | (270 | ) | (8,556 | ) | ||||||||||||||||||||||||
Total other comprehensive income (loss) | (57,191 | ) | (2,884 | ) | (60,075 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 245,509 | 756 | 246,265 | |||||||||||||||||||||||||||||
Cash dividends | (103,824 | ) | (103,824 | ) | (3,043 | ) | (106,867 | ) | ||||||||||||||||||||||||
Acquisition of treasury stock | (45,720 | ) | (45,720 | ) | 0 | (45,720 | ) | |||||||||||||||||||||||||
Disposal of treasury stock | (334 | ) | 554 | 220 | 0 | 220 | ||||||||||||||||||||||||||
Other, net | 106 | 106 | 0 | 106 | ||||||||||||||||||||||||||||
Balance at March 31, 2020 | ¥ | 221,111 | ¥ | 257,638 | ¥ | 2,754,461 | ¥ | (118,532 | ) | ¥ | (121,070 | ) | ¥ | 2,993,608 | ¥ | 72,227 | ¥ | 3,065,835 | ||||||||||||||
Millions of yen | ||||||||||||||||||||||||||||||||
ORIX Corporation Shareholders’ Equity | Total ORIX Corporation Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | ||||||||||||||||||||||||||||
Balance at March 31, 2020 | ¥ | 221,111 | ¥ | 257,638 | ¥ | 2,754,461 | ¥ | (118,532 | ) | ¥ | (121,070 | ) | ¥ | 2,993,608 | ¥ | 72,227 | ¥ | 3,065,835 | ||||||||||||||
Cumulative effect of adopting Accounting Standards Update 2016-13 | (42,855 | ) | (42,855 | ) | (71 | ) | (42,926 | ) | ||||||||||||||||||||||||
Balance at April 1, 2020 | ¥ | 221,111 | ¥ | 257,638 | ¥ | 2,711,606 | ¥ | (118,532 | ) | ¥ | (121,070 | ) | ¥ | 2,950,753 | ¥ | 72,156 | ¥ | 3,022,909 | ||||||||||||||
Contribution to subsidiaries | 0 | 18,225 | 18,225 | |||||||||||||||||||||||||||||
Transaction with noncontrolling interests | 1,700 | 1,700 | (8,688 | ) | (6,988 | ) | ||||||||||||||||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Net income | 192,384 | 192,384 | 4,453 | 196,837 | ||||||||||||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||||||||
Net change of unrealized gains (losses) on investment in securities | (11,207 | ) | (11,207 | ) | 25 | (11,182 | ) | |||||||||||||||||||||||||
Net change of debt valuation adjustments | (899 | ) | (899 | ) | 0 | (899 | ) | |||||||||||||||||||||||||
Net change of defined benefit pension plans | 5,302 | 5,302 | 28 | 5,330 | ||||||||||||||||||||||||||||
Net change of foreign currency translation adjustments | 36,015 | 36,015 | 511 | 36,526 | ||||||||||||||||||||||||||||
Net change of unrealized gains on derivative instruments | 4,671 | 4,671 | 111 | 4,782 | ||||||||||||||||||||||||||||
Total other comprehensive income | 33,882 | 675 | 34,557 | |||||||||||||||||||||||||||||
Total comprehensive income | 226,266 | 5,128 | 231,394 | |||||||||||||||||||||||||||||
Cash dividends | (95,164 | ) | (95,164 | ) | (12,133 | ) | (107,297 | ) | ||||||||||||||||||||||||
Acquisition of treasury stock | (55,443 | ) | (55,443 | ) | 0 | (55,443 | ) | |||||||||||||||||||||||||
Disposal of treasury stock | (227 | ) | (0 | ) | 322 | 95 | 0 | 95 | ||||||||||||||||||||||||
Cancellation of treasury stock | (64,237 | ) | 64,237 | 0 | 0 | 0 | ||||||||||||||||||||||||||
Other, net | 250 | (1 | ) | 249 | 0 | 249 | ||||||||||||||||||||||||||
Balance at March 31, 2021 | ¥ | 221,111 | ¥ | 259,361 | ¥ | 2,744,588 | ¥ | (84,650 | ) | ¥ | (111,954 | ) | ¥ | 3,028,456 | ¥ | 74,688 | ¥ | 3,103,144 | ||||||||||||||
Notes: | ||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2018, 2019, 2020 AND 20202021
ORIX Corporation and Subsidiaries
Millions of yen | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | ¥ | 321,589 | ¥ | 327,039 | ¥ | 306,724 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 279,923 | 295,589 | 304,204 | |||||||||
Principal payments received under net investment in leases | 0 | 0 | 474,110 | |||||||||
Provision for doubtful receivables and probable loan losses | 17,265 | 22,525 | 24,425 | |||||||||
Equity in net income of affiliates (excluding interest on loans) | (46,587 | ) | (29,674 | ) | (65,764 | ) | ||||||
Gains on sales of subsidiaries and affiliates and liquidation losses, net | (49,203 | ) | (33,314 | ) | (74,001 | ) | ||||||
Bargain purchase gain | 0 | 0 | (955 | ) | ||||||||
Gains on sales of securities other than trading | (32,083 | ) | (10,182 | ) | (18,886 | ) | ||||||
Gains on sales of operating lease assets | (35,291 | ) | (62,883 | ) | (51,072 | ) | ||||||
Write-downs of long-lived assets | 5,525 | 2,418 | 3,043 | |||||||||
Write-downs of securities | 1,246 | 1,382 | 11,969 | |||||||||
Deferred tax provision | 5,588 | (35,128 | ) | 14,890 | ||||||||
Decrease in trading securities | 144,367 | 95,370 | 63,681 | |||||||||
Decrease in inventories | 10,609 | 6,852 | 11,938 | |||||||||
Decrease (Increase) in trade notes, accounts and other receivable | (13,984 | ) | (5,576 | ) | 12,348 | |||||||
In Decreasecrease ( ) in trade notes, accounts and other payable | 17,831 | 10,990 | (3,853 | ) | ||||||||
Increase (Decrease) in policy liabilities and policy account balances | (53,512 | ) | 10,109 | 70,120 | ||||||||
Increase Decrease( ) in income taxes payable | (74,241 | ) | 36,753 | (33,318 | ) | |||||||
Other, net | 69,749 | (44,592 | ) | (7,137 | ) | |||||||
Net cash provided by operating activities | 568,791 | 587,678 | 1,042,466 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Purchases of lease equipment | (971,163 | ) | (998,073 | ) | (948,445 | ) | ||||||
Principal payments received under direct financing leases | 470,870 | 469,262 | 0 | |||||||||
Installment loans made to customers | (1,396,724 | ) | (1,460,336 | ) | (1,527,000 | ) | ||||||
Principal collected on installment loans | 1,184,298 | 1,239,385 | 1,134,142 | |||||||||
Proceeds from sales of operating lease assets | 285,954 | 429,295 | 339,504 | |||||||||
Investment in affiliates, net | (110,547 | ) | (278,027 | ) | (44,140 | ) | ||||||
Proceeds from sales of investment in affiliates | 74,742 | 56,423 | 79,950 | |||||||||
Purchases of available-for-sale debt securities | (372,236 | ) | (556,213 | ) | (711,973 | ) | ||||||
Proceeds from sales of available-for-sale debt securities | 395,629 | 221,824 | 249,427 | |||||||||
Proceeds from redemption of available-for-sale debt securities | 97,565 | 73,156 | 82,754 | |||||||||
Purchases of equity securities other than trading | (67,147 | ) | (66,959 | ) | (53,616 | ) | ||||||
Proceeds from sales of equity securities other than trading | 104,600 | 83,261 | 34,145 | |||||||||
Purchases of property under facility operations | (80,095 | ) | (62,221 | ) | (44,466 | ) | ||||||
Acquisitions of subsidiaries, net of cash acquired | (66,034 | ) | (119,105 | ) | (134,894 | ) | ||||||
Sales of subsidiaries, net of cash disposed | 43,278 | 56,584 | 91,835 | |||||||||
Other, net | (32,110 | ) | 37,793 | (17,709 | ) | |||||||
Net cash used in investing activities | (439,120 | ) | (873,951 | ) | (1,470,486 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Net increase (decrease) in debt with maturities of three months or less | 50,900 | (50,881 | ) | 16,182 | ||||||||
Proceeds from debt with maturities longer than three months | 1,488,259 | 1,123,923 | 924,779 | |||||||||
Repayment of debt with maturities longer than three months | (1,396,531 | ) | (932,676 | ) | (832,881 | ) | ||||||
Net increase in deposits due to customers | 143,318 | 169,830 | 304,182 | |||||||||
Cash dividends paid to ORIX Corporation shareholders | (72,757 | ) | (88,438 | ) | (103,824 | ) | ||||||
Acquisition of treasury stock | (39,110 | ) | (707 | ) | (45,720 | ) | ||||||
Contribution from noncontrolling interests | 4,740 | 22,760 | 23,994 | |||||||||
Purchases of shares of subsidiaries from noncontrolling interests | (11,299 | ) | (86,165 | ) | (4,501 | ) | ||||||
Net increase (decrease) in call money | (18,000 | ) | 20,000 | 10,000 | ||||||||
Other, net | (8,510 | ) | (10,999 | ) | (3,508 | ) | ||||||
Net cash provided by financing activities | 141,010 | 166,647 | 288,703 | |||||||||
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | 1,224 | (1,911 | ) | (8,979 | ) | |||||||
Net increase (decrease) in Cash, Cash Equivalents and Restricted Cash | 271,905 | (121,537 | ) | (148,296 | ) | |||||||
Cash, Cash Equivalents and Restricted Cash at Beginning of Year | 1,133,212 | 1,405,117 | 1,283,580 | |||||||||
Cash, Cash Equivalents and Restricted Cash at End of Year | ¥ | 1,405,117 | ¥ | 1,283,580 | ¥ | 1,135,284 | ||||||
Millions of yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | ¥ | 327,039 | ¥ | 306,724 | ¥ | 196,814 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 295,589 | 304,204 | 315,955 | |||||||||
Principal payments received under net investment in leases | 0 | 474,110 | 419,907 | |||||||||
Provision for doubtful receivables and probable loan losses | 22,525 | 24,425 | 0 | |||||||||
Provision for credit losses | 0 | 0 | 16,021 | |||||||||
Equity in net (income) loss of affiliates (excluding interest on loans) | (29,674 | ) | (65,764 | ) | 837 | |||||||
Gains on sales of subsidiaries and affiliates and liquidation losses, net | (33,314 | ) | (74,001 | ) | (23,300 | ) | ||||||
Bargain purchase gain | 0 | (955 | ) | (4,966 | ) | |||||||
Gains on sales of securities other than trading | (10,182 | ) | (18,886 | ) | (15,228 | ) | ||||||
Gains on sales of operating lease assets | (62,883 | ) | (51,072 | ) | (26,358 | ) | ||||||
Write-downs of long-lived assets | 2,418 | 3,043 | 3,020 | |||||||||
Write-downs of securities | 1,382 | 11,969 | 5,935 | |||||||||
Deferred tax provision | (35,128 | ) | 14,890 | 25,518 | ||||||||
Decrease in trading securities | 95,370 | 63,681 | 12,103 | |||||||||
(Increase) Decrease in inventories | 6,852 | 11,938 | (12,061 | ) | ||||||||
(Increase) Decrease in trade notes, accounts and other receivable | (5,576 | ) | 12,348 | (12,657 | ) | |||||||
Increase (Decrease) in trade notes, accounts and other payable | 10,990 | (3,853 | ) | (1,947 | ) | |||||||
Increase in policy liabilities and policy account balances | 10,109 | 70,120 | 230,947 | |||||||||
Increase (Decrease) in income taxes payable | 36,753 | (33,318 | ) | (11,045 | ) | |||||||
Other, net | (44,592 | ) | (7,137 | ) | (23,819 | ) | ||||||
Net cash provided by operating activities | 587,678 | 1,042,466 | 1,095,676 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Purchases of lease equipment | (998,073 | ) | (948,445 | ) | (709,999 | ) | ||||||
Principal payments received under direct financing leases | 469,262 | 0 | 0 | |||||||||
Installment loans made to customers | (1,460,336 | ) | (1,527,000 | ) | (1,198,978 | ) | ||||||
Principal collected on installment loans | 1,239,385 | 1,134,142 | 1,139,608 | |||||||||
Proceeds from sales of operating lease assets | 429,295 | 339,504 | 138,912 | |||||||||
Investment in affiliates, net | (278,027 | ) | (44,140 | ) | (112,922 | ) | ||||||
Proceeds from sales of investment in affiliates | 56,423 | 79,950 | 41,730 | |||||||||
Purchases of available-for-sale | (556,213 | ) | (711,973 | ) | (709,349 | ) | ||||||
Proceeds from sales of available-for-sale | 221,824 | 249,427 | 285,836 | |||||||||
Proceeds from redemption of available-for-sale | 73,156 | 82,754 | 31,859 | |||||||||
Purchases of equity securities other than trading | (66,959 | ) | (53,616 | ) | (56,314 | ) | ||||||
Proceeds from sales of equity securities other than trading | 83,261 | 34,145 | 30,532 | |||||||||
Purchases of property under facility operations | (62,221 | ) | (44,466 | ) | (43,954 | ) | ||||||
Acquisitions of subsidiaries, net of cash acquired | (119,105 | ) | (134,894 | ) | (82,163 | ) | ||||||
Sales of subsidiaries, net of cash disposed | 56,584 | 91,835 | 57,722 | |||||||||
Other, net | 37,793 | (17,709 | ) | (15,772 | ) | |||||||
Net cash used in investing activities | (873,951 | ) | (1,470,486 | ) | (1,203,252 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Net decrease (increase) in debt with maturities of three months or less | (50,881 | ) | 16,182 | (42,136 | ) | |||||||
Proceeds from debt with maturities longer than three months | 1,123,923 | 924,779 | 1,171,350 | |||||||||
Repayment of debt with maturities longer than three months | (932,676 | ) | (832,881 | ) | (1,013,937 | ) | ||||||
Net increase in deposits due to customers | 169,830 | 304,182 | 85,737 | |||||||||
Cash dividends paid to ORIX Corporation shareholders | (88,438 | ) | (103,824 | ) | (95,164 | ) | ||||||
Acquisition of treasury stock | (707 | ) | (45,720 | ) | (55,443 | ) | ||||||
Contribution from noncontrolling interests | 22,760 | 23,994 | 24,487 | |||||||||
Purchases of shares of subsidiaries from noncontrolling interests | (86,165 | ) | (4,501 | ) | (4,791 | ) | ||||||
Net decrease (increase) in call money | 20,000 | 10,000 | (17,500 | ) | ||||||||
Other, net | (10,999 | ) | (3,508 | ) | (12,719 | ) | ||||||
Net cash provided by financing activities | 166,647 | 288,703 | 39,884 | |||||||||
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | (1,911 | ) | (8,979 | ) | 11,983 | |||||||
Net decrease in Cash, Cash Equivalents and Restricted Cash | (121,537 | ) | (148,296 | ) | (55,709 | ) | ||||||
Cash, Cash Equivalents and Restricted Cash at Beginning of Year | 1,405,117 | 1,283,580 | 1,135,284 | |||||||||
Cash, Cash Equivalents and Restricted Cash at End of Year | ¥ | 1,283,580 | ¥ | 1,135,284 | ¥ | 1,079,575 | ||||||
Notes: 1. | ||||
Notes: 2. | Credit Losses Standard has been adopted since April 1, 2020, and the amounts of Provision for doubtful receivables and probable loan losses has been reclassified to Provision for credit losses. For further information, see Note 1 “Significant Accounting and Reporting Policies |
The accompanying notes to consolidated financial statements are an integral part of these statements.
F-14
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
ORIX Corporation and Subsidiaries
1. Significant Accounting and Reporting Policies
In preparing the accompanying consolidated financial statements, ORIX Corporation (the “Company”) and its subsidiaries have complied with generally accepted accounting principles in the United States (“U.S. GAAP”), except for the accounting for stock splits. Significant accounting and reporting policies are summarized as follows:
(a) Basis of presenting financial statements
The Company and its subsidiaries in Japan maintain their books in conformity with Japanese accounting practices, which differ in certain respects from U.S. GAAP.
The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP and, therefore, reflect certain adjustments to the books and records of the Company and its subsidiaries. The principal adjustments relate to revenue recognition for revenue from contracts with customers, initial direct costs to originate leases and loans, accounting for allowance for credit losses, use of a straight-line basis of depreciation for operating lease assets, deferral of life insurance policy acquisition costs, calculation of insurance policy liabilities, accounting for goodwill and other intangible assets in business combinations, accounting for pension plans, accounting for sales of the parent’s ownership interest in subsidiaries, classification in the statements of cash flows, accounting for transfer of financial assets, accounting for investment in securities, accounting for fair value option, accounting for lessee’s lease and reflection of the income tax effect on such adjustments.
(b) Principles of consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. Investments in affiliates, where the Company has the ability to exercise significant influence by way of 20% – 50% ownership or other means, are accounted for by using the equity method. Where the Company holds majority voting interests but noncontrolling shareholders have substantive participating rights to decisions that occur as part of the ordinary course of their business, the equity method is applied. In addition, the consolidated financial statements include VIEs to which the Company and its subsidiaries are primary beneficiaries.
A certain
overseas
subsidiary consolidates subsidiaries determined as investment companies under ASC 946 (“Financial Services—Investment Companies”). Investments held by the investment company subsidiaries are carried at fair value with changes in fair value recognized in earnings.A lag period of up tothree months is used on a consistent basis for recognizing the results of certain subsidiaries and affiliates.
All significant intercompany accounts and transactions have been eliminated in consolidation.
(c) Use of estimates
The preparation of consolidated 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has identified ten areas where it believes assumptions and estimates are particularly critical to the financial statements. The Company makes estimates and assumptions to the selection of valuation techniques and determination of assumptions used in fair value measurements, the determination and periodic reassessment of the unguaranteed residual value for finance
F-1F-145
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
leases and operating leases, the determination and reassessment of insurance policy liabilities and deferred policy acquisition costs, the determination of the allowance for doubtful receivables on finance leases and probable loan losses and the allowance for credit losses (including the allowance for
off-balance
sheet credit exposures), the recognition and measurement of impairment of long-lived assets, the recognition and measurement of impairment of investment in securities, the determination of the valuation allowance for deferred tax assets and the evaluation of tax positions, the assessment and measurement of effectiveness in hedging relationship using derivative financial instruments, the determination of benefit obligation and net periodic pension cost and the recognition and measurement of impairment of goodwill and indefinite-lived intangible assets.In addition, we carefully considered the future outlook regarding the spread of the2020,2021, there was no significant impact on our accounting estimates. However, the outlook for future outbreaks of
COVID-19.
As of March 31, COVID-19
and the resulting global economic slowdown is uncertain and it may change rapidly. Therefore our accounting estimates may change over time.(d) Foreign currencies
translation
The Company and its subsidiaries maintain their accounting records in their functional currency. Transactions in foreign currencies are recorded in the entity’s functional currency based on the prevailing exchange rates on the transaction date. Monetary assets and liabilities in foreign currencies are recorded in the entity’s functional currency based on the prevailing exchange rates at the end of each fiscal year.
The financial statements of overseas subsidiaries and affiliates are translated into Japanese yen by applying the exchange rates in effect at the end of each fiscal year to all assets and liabilities. Income and expenses are translated at the average rates of exchange prevailing during the fiscal year. The currencies in which the operations of the overseas subsidiaries and affiliates are conducted are regarded as the functional currencies of these companies. Foreign currency translation adjustments reflected in other comprehensive income (loss), net of applicable income taxes, arise from the translation of foreign currency financial statements into Japanese yen.
(e) Revenue recognition
The Company and its subsidiaries recognize revenues from only contracts with customers, such as sales of goods and real estate, and services income, based on the following five steps;
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance
obligation
In accordance with these steps, revenues are recognized to depict the transfer of promised goods or services to customers in the amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenues are recognized net of discount, incentives and estimated sales returns. In case that the Company and its subsidiaries receive payment from customers before satisfying performance obligations, the amounts are recognized as contract liabilities. In transactions that involve third parties, if the Company and its subsidiaries control the goods or services before they are transferred to the customers, revenue is recognized on gross amount as the principal.
F-1
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Excluding the aforementioned policy, the policies as specifically described hereinafter are applied for each of revenue items.
Finance Revenues
(1) Revenues from finance leases
Lessor leases consist of leases for various equipment types, including office equipment, industrial machinery, transportation equipment and real estates. Net investment in leases includes sales-type leases and direct financing leases which are full-payout leases. Leases not qualifying as sales-type leases or direct financing leases are accounted for as operating leases. Interest income on net investment in leases is recognized over the life of each respective lease using the interest method. When lease payment is variable, it is accounted for as income in profit or loss in the period when the changes in facts and circumstances on which the variable payment is based occur. InWhen providing leasing services, the Company and its subsidiaries execute supplementalsimultaneously conduct supplementary businesses, such as handling taxes and paying insurance on leased assets on behalf of lessees. The compensations for those lessor costs received from lessees are recognized in revenues from finance leases and those costs are recognized in other (income) and expense. The estimated unguaranteed residual value represents estimated proceeds from the disposition of equipment at the time the lease is terminated. Estimates of residual values are determined based on market values of used equipment, estimates of when and the extent to which equipment will become obsolete and actual recovery being experienced for similar used equipment. Initial direct costs of sales-type leases and direct financing leases are being deferred and amortized as a yield adjustment over the life of the related lease by using interest method. The unamortized balance of initial direct costs of sales-type leases and direct financing leases is reflected as a component of net investment in leases.
(2) Revenues from installment loans
Interest income on installment loans is recognized on an accrual basis. Certain direct loan origination costs, net of origination fees, are being deferred and amortized over the contractual term of the loan as an adjustment of the related loan’s yield using the interest method. Interest payments received on impaired loans other than purchased loans are recorded as interest income unless the collection of the remaining investment is doubtful at which time payments received are recorded as reductions of principal. For purchased loans, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans regardless of whether impairment is recognized or not.loans.
(3) Revenues from financial guarantees
At the inception of a guarantee, fair value for the guarantee is recognized as a liability in the consolidated balance sheets. The Company and its subsidiaries recognize revenue mainly over the term of guarantee by a systematic and rational amortization method as the Company and the subsidiaries are released from the risk of the obligation.
(4)
Non-accrual
policyIn common with all classes, for net investment in leases and installment loans, or more, or earlier, if management determines
past-due
financing receivables are receivables for which principal or interest ispast-due
30 days or more. Loans whose terms have been modified are not classified aspast-due
financing receivables if the principals and interests are notpast-due
30 days or more in accordance with the modified terms. The Company and its subsidiaries suspend accruing revenues onpast-due
installment loans and net investment in leases when principal or interest ispast-due
90 daysF-1F-167
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
or more, or earlier, if management determines that their collections are doubtful based on factors such as individual debtors’ creditworthiness, historical loss experience, current delinquencies and delinquency trends. However, delinquencies during the relevant period ofdoubtful receivables and probable loan losscredit losses process. Cash repayments received onlease receivablesnet investment in leases to accrual status when it becomes probable that the Company and its subsidiaries will be able to collect all amounts due according to the contractual terms of these loans and receivables, as evidenced by continual payments from the debtors. The period of such continual payments before returning to accrual status varies depending on factors that we consider are relevant in assessing the debtors’ creditworthiness, such as the debtors’ business characteristics and financial conditions as well as relevant economic conditions and trends.
past-due
financing receivables are out of the scope of the suspension of revenue recognition unless their collections are doubtful when the government issues a request for grace of repayment within a maximum of 6 months due to reasons that cannot be attributed to the obligor, such as a disaster, or when similar requests are made by public bodies. Accrued but uncollected interest is reclassified to net investment in leases or installment loans in the accompanying consolidated balance sheets and becomes subject to the allowance for non-accrual
loans are applied first against past due interest and then any surpluses are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries returnnon-accrual
loans and Gains on investment securities and dividends
—
Operating leases
—
COVID-19
related rent concessions and changes of lease payments do not result in a substantial increase to the rights of the lessor or the obligations of the lessee, the concessions are eligible to be applied for the practical expedient. The Company and its subsidiaries applied the practical expedient when accounting for eligible rent concessions mentioned above. Taking lessees’ future business performance into consideration, the Company and its subsidiaries applied the practical expedient by the following 3 approaches: recognize revenue under the original lease contract, recognize revenue under the conditions changed by rent concessions or only recognize revenue when receiving the lease payments.In providing leasing services, the Company and its subsidiaries execute supplementalsimultaneously conduct supplementary businesses, such as handling taxes and paying insurance on leased assets on behalf of lessees.
The compensations for those lessor costs received from lessees are recognized in operating lease revenues and those costs are recognized in costs of operating leases. Investment in operating leases is recorded at cost less accumulated depreciation and isdepreciation. In addition, operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis. The estimated average useful lives of principal operating lease assets classified as transportation equipment is
6 years, measuring and information-related equipment is
4years, real estate (other than land) is
33 years and other is
8 years. Depreciation expenses are included in costs of operating leases. Gains or losses arising from dispositions of operating lease assets are included in operating lease revenues.
Estimates of residual values are based on market values of used equipment, estimates of when and the extent to which equipment will become obsolete and actual recovery being experienced for similar used equipment. Initial direct costs of operating leases are being deferred and amortized as a straight-line basis over the life of the related lease.The unamortized balance of initial direct costs is reflected as
investment investment in
operating leases.(f) Insurance and reinsurance transactions
Premium income from life insurance policies, net of premiums on reinsurance ceded, is recognized as earned premiums when due.
F-1
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Life insurance benefits are recorded as expenses when they are incurred. Policy liabilities and policy account balances for future policy benefits are measured using the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. The policies are characterized as long-duration policies and mainly consist of whole life, term life, endowments, medical insurance and individual annuity insurance contracts. For policies other than individual annuity insurance contracts, computation of policy liabilities necessarily includes assumptions about mortality, morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. A certain subsidiary continually evaluates the potential for changes in the estimates and assumptions applied in determining policy liabilities, both positive and negative and uses the results of these evaluations both to adjust recorded liabilities and to adjust underwriting criteria and product offerings.
The insurance contracts sold by the subsidiary include variable annuity, variable life and fixed annuity insurance contracts. The subsidiary manages investment assets on behalf of variable annuity and variable life
policyholders, which consist of equity securities and are included in investment in securities in the consolidated balance sheets. These investment assets are measured at fair value with realized and unrealized gains or losses recognized in life insurance premiums and related investment income in the consolidated statements of income. The subsidiary elected the fair value option for the entire variable annuity and variable life insurance contracts with changes in the fair value recognized in life insurance costs.
The subsidiary provides minimum guarantees to variable annuity and variable life policyholders under which it is exposed to the risk of compensating losses incurred by the policyholders to the extent contractually required. To mitigate the risk, a portion of the minimum guarantee risk related to variable annuity and variable life insurance contracts is ceded to reinsurance companies and the remaining risk is economically hedged by entering into derivative contracts. The reinsurance contracts do not relieve the subsidiary from the obligation as the primary obligor to compensate certain losses incurred by the policyholders, and the default of the reinsurance companies may impose additional losses on the subsidiary. Certain subsidiaries have elected the fair value option for certain reinsurance contracts relating to variable annuity and variable life insurance contracts, which are included in other assets in the consolidated balance sheets.
Policy liabilities and policy account balances for fixed annuity insurance contracts are measured based on the single-premiums plus interest based on expected rate and fair value adjustments relating to the acquisition of the subsidiary, less withdrawals, expenses and other charges. The credited interest is recorded in life insurance costs in the consolidated statements of income.
Certain costs related directly to the successful acquisition of new or renewal insurance contracts, or deferred policy acquisition costs are deferred and amortized over the respective policy periods in proportion to anticipated premium revenue. These deferred policy acquisition costs consist primarily of agent commissions, except for recurring policy maintenance costs and certain variable costs and expenses for underwriting policies.
(g) Allowance for doubtful receivables onleases and probable loan
net investment in
losses
The allowance for doubtful receivables on net investment in leases and probable loan losses is maintained at a level which, in the judgment of management, is appropriate to provide for probable losses inherent in lease and loan portfolios. The allowance is increased by provision charged to income and is decreased by charge-offs, net of recoveries.
Developing the allowance for doubtful receivables on net investment in leases and probable loan losses is subject to numerous estimates and judgments. In evaluating the appropriateness of the allowance, management considers various factors, including the business characteristics and financial conditions of the obligors, current
F-1
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
economic conditions and trends, prior
charge-off
experience, current delinquencies and delinquency trends, future cash flows expected to be received from the net investment in leases and loans and value of underlying collateral and guarantees.Impaired loans are individually evaluated for a valuation allowance based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. For
non-impaired
loans, including loans that are not individually evaluated for impairment, and net investment in leases, the Company and its subsidiaries evaluate priorcharge-off
experience segmented by the debtors’ industries and the purpose of the loans, and then develop the allowance for doubtful receivables on net investment in leases and probable loan losses considering the priorcharge-off
experience and current economic conditions.The Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal considering debtors’ creditworthiness and the liquidation status of collateral.
Accounting Standards Update
2016-13
(“Measurement of Credit Losses on Financial Instruments”—ASC 326 (“Financial Instruments—Credit Losses”)) (hereinafter, “Credit Losses Standard”) has been adopted since April 1, 2020.The allowance for credit losses estimates all credit losses expected to occur in future over the remaining life of net investment in leases, financial assets measured at amortized cost, such as installment loans,debt securities and other receivables, and is recognized adequately based on the management judgement. Expected repayments are reflected in the remaining life. The allowance for credit losses is increased by provision charged to income and is decreased by charge-offs, net of recoveries mainly.
held-to-maturity
Developing the allowance for credit losses is subject to numerous estimates and judgments. In evaluating the appropriateness of the allowance, management considers various factors, including the business characteristics and financial conditions of the obligors, prior
charge-off
experience, current delinquencies and delinquency trends, value of underlying collateral and guarantees, current economic conditions and trends and expected outlook in future.The Company and its subsidiaries estimate the allowance for credit losses by using various methods according to these estimates and judgments. When certain financial assets have similar risk characteristics to other financial assets, these financial assets are collectively evaluated as a pool. On the contrary, when financial assets do not have similar risk characteristics to other financial assets, the financial assets are evaluated individually. The company and its subsidiaries select the most appropriate calculation method based on available information, such as the nature and related risk characteristics on financial assets, the prior
charge-off
experience and future forecast scenario with correlated economic indicators.The Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal considering debtors’ creditworthiness and the liquidation status of collateral, etc.
In addition, if the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable by the entity, credit losses related the loan commitments of card loans and installment loans and financial guarantees are in the scope of the allowance for credit losses. For the loan commitments of card loans and installment loans, credit losses are recognized on the loan commitments for the portion expected to be drawn. For financial guarantees, the allowance is recognized for the contingent obligation which generates credit risk exposures. These allowance for off-balance sheet credit exposures is measured using the same measurement objectives as the allowance for loans and net investment leases, considering quantitative and
F-
20
NOTES TO CONSOLIDATEDSTATEMENTS— STATEMENTS—(Continued)
FINANCIAL
ORIX Corporation and Subsidiaries
qualitative factors including historical loss experience, current conditions and reasonable and supportable forecasts. The allowance for
off-balance
sheet credit exposure is accounted for in other liabilities on the consolidated balance sheets.The Company and its subsidiaries perform a recoverability test for long-lived assets to be held and used in operations, including tangible assets and intangible assets being depreciated or amortized, consisting primarily of office buildings, condominiums, aircraft, ships, mega solar facilities and other properties under facility operations, whenever events or changes in circumstances indicated that the assets might be impaired. The assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount. The Company and its subsidiaries determine the fair value using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate.
Equity securities are generally reported at fair value with unrealized gains and losses included in income. Equity securities without readily determinable fair values are recorded at fair value at its cost minus impairment, if any, plus or minus changes resulting from observable price changes under the election of the measurement alternative, except for investments which are valued at net asset value per share.
Equity securities elected to apply the measurement alternative are written down to its fair value with losses included in income if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying value.
In addition, investments included in equity securities that are accounted for under the equity method are recorded at fair value with unrealized gains and losses included in income if certain subsidiaries elect the fair value option.
Trading debt securities are reported at fair value with unrealized gains and losses included in income.
Available-for-sale
Credit Losses Standard has been adopted to the impairment ofHeld-to-maturitydebt securities are recorded atamortizedcost.
available-for-sale
non-credit
losses component. Impairment related to credit losses is recognized in earnings through an allowance for credit losses. Impairment related to other factors than credit losses is recognized in other comprehensive income (loss), net of applicable income taxes. In estimating an allowance for credit losses, the Company and its subsidiaries consider F-
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
allowance for credit losses, if the debt securities are expected to be sold and the fair value is less than the amortized cost. In the past fiscal year, if the Company and its subsidiaries concluded that the impairment was other-than-temporary, the credit loss component and thenon-creditloss component. The credit loss component iswas recognized in earnings andas direct write-down of the amortized cost.
Held-to-maturity
(k) Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. The Company and its subsidiaries release to earnings stranded income tax effects in accumulated other comprehensive income (loss) resulting from changes in tax laws or rates or changes in judgment about realization of a valuation allowance on a specific identification basis when the individual items are completely sold or terminated. A valuation allowance is recognized if, based on the weight of available evidence, it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.
The Company and its subsidiaries file tax returns in Japan and certain foreign tax jurisdictions and recognize the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, and measure tax positions that meet the recognition threshold at the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company and its subsidiaries present an unrecognized tax benefit as either a reduction of a deferred tax asset, a reduction of an amount refundable or a liability, based on the intended method of settlement. The Company and its subsidiaries classify penalties and interest expense related to income taxes as part of provision for income taxes in the consolidated statements of income.
The Company and certain subsidiaries have elected to file a consolidated tax return
in Japan
for National Corporation tax purposes.The Company and its subsidiaries have securitized and sold to investors various financial assets such as lease receivables and loan receivables. In the securitization process, the assets to be securitized are sold to trusts or special purpose companies, collectively special purpose entities (“SPEs”(hereinafter, “SPEs”), that issue asset-backed beneficial interests and securities to the investors.
SPEs used in securitization transactions are consolidated if the Company and its subsidiaries are the primary beneficiary of the SPEs, and the transfers of the financial assets to those consolidated SPEs are not accounted for as sales. Assets held by consolidated SPEs continue to be accounted for as lease receivables or loan receivables, as they were before the transfer, and asset-backed beneficial interests and securities issued to the investors are accounted for as debt. When the Company and its subsidiaries have transferred financial assets to a transferee that is not subject to consolidation, the Company and its subsidiaries account for the transfer as a sale if control over the transferred assets is surrendered.
F-F-2022
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The Company and certain subsidiaries originate and sell loans into the secondary market, while retaining the obligation to service those loans. In addition, a certain subsidiary undertakes obligations to service loans originated by others. The subsidiary recognizes servicing assets if it expects the benefit of servicing to more than adequately compensate it for performing the servicing or recognizes servicing liabilities if it expects the benefit of servicing to less than adequately compensate it. These servicing assets and liabilities are initially recognized at fair value and subsequently accounted for using the amortization method whereby the assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss. On a quarterly basis, servicing assets and liabilities are evaluated for impairment or increased obligations. The fair value of servicing assets and liabilities is estimated using an internal valuation model, or by obtaining an opinion of value from an independent third-party vendor. Both methods are based on calculating the present value of estimated future net servicing cash flows, taking into consideration discount rates, prepayments and servicing costs. The internal valuation model is validated at least semiannually through third-party valuations.
The Company and its subsidiaries recognize all derivatives on the consolidated balance sheets at fair value. The accounting treatment of subsequent changes in the fair value depends on their use, and whether they qualify as effective “hedges” for accounting purposes. Derivatives for the purpose of economic hedge that are not qualified for hedge accounting are adjusted to fair value through the consolidated statements of income. If a derivative is aderivatives are qualified for hedge accounting, then depending on its nature, changes in its fair value will be either offset against changes in the fair value of hedged assets or liabilities through the consolidated statements of income, or recorded in other comprehensive income (loss), net of applicable income taxes.
If a derivative is held as a hedge of the variability of fair value related to a recognized asset or liability or an unrecognized firm commitment (“fair value” hedge), changes in the fair value of the derivative are recorded in earnings along with the changes in the fair value of the hedged item.
If a derivative is held as a hedge of the variability of cash flows related to a forecasted transaction or a recognized asset or liability (“cash flow” hedge), changes in the fair value of the derivative are recorded in other comprehensive income (loss), net of applicable income taxes, until earnings are affected by the variability in cash flows of the designated hedged item.
If a derivative is held as a hedge of a foreign-currency fair-value or cash-flow hedge (“net investment in a foreign currency” hedge),operation, changes in the fair value of the derivative are recorded in either earnings or other comprehensive income (loss), net of applicable income taxes, depending on whether the hedging activity is a fair-value hedge or a cash-flow hedge. However, if a derivative is used as a hedge of a net investment in a foreign operation, changes in its fair value are recorded in the foreign currency translation adjustments account within other comprehensive income (loss), net of applicable income taxes.
For all hedging relationships that are designated and qualified for hedge accounting, at the inception of the hedge, the Company and its subsidiaries formally document the details of the hedging relationship and the hedging activity. The Company and its subsidiaries formally assess, both at the hedge’s inception and on an ongoing basis, the effectiveness of the hedge relationship. The Company and its subsidiaries cease hedge accounting prospectively when the derivative no longer qualifies for hedge accounting.
F-
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
(n) Pension plans
The Company and certain subsidiaries have contributory andTheAmong the plans, the costs of defined benefit pension plans are accrued based on amounts determined using actuarial methods, with assumptions of discount rate, rate of increase in compensation level, expected long-term rate of return on plan assets and others.
non-contributory
pension plans covering substantially all of their employees. The Company and its subsidiaries also recognize the funded status of pension plans, measured as the difference between the fair value of plan assets and the benefit obligation, on the consolidated balance sheets. Changes in that funded status are recognized in the year in which the changes occur through other comprehensive income (loss), net of applicable income taxes.
In principle, the Company and its subsidiaries measure stock-based compensation expense as consideration for services provided by employees based on the fair value on the grant date. The costs are recognized over the requisite service period.
Stock splits implemented prior to October 1, 2001 had been accounted for by transferring an amount equivalent to the par value of the shares from additional
paid-in
capital to common stock as required by the Japanese Commercial Code (the “Code”) before amendment. However, no such reclassification was made for stock splits when common stock already included a portion of the proceeds from shares issued at a price in excess of par value. This method of accounting was in conformity with accounting principles generally accepted in Japan.As a result of a revision to the Code before amendment effective on October 1, 2001 and the Companies Act implemented on May 1, 2006, the above-mentioned method of accounting required by the Code became unnecessary.
In the United States, stock splits in comparable circumstances are considered to be stock dividends and are accounted for by transferring from retained earnings to common stock and additional
paid-in
capital amounts equal to the fair market value of the shares issued. Common stock is increased by the par value of the shares and additionalpaid-in
capital is increased by the excess of the market value over par value of the shares issued.Had such stock splits made prior to October 1, 2001 been accounted for in this manner, additional20202021 would have increased by approximately ¥24,674 million, with a corresponding decrease in retained earnings. Total ORIX Corporation shareholders’ equity would remain unchanged. Stock splits on May 19, 2000 were excluded from the above amounts because the stock splits were not considered to be stock dividends under U.S. GAAP.
paid-in
capital as of March 31, Cash and cash equivalents include cash on hand, deposits placed with banks and short-term highly liquid investments with original maturities of three months or less.
Restricted cash consists of trust accounts under securitization programs and real estate, deposits related to servicing agreements, deposits collected on the underlying assets and applied to
non-recourse
loans, deposits held on behalf of third parties in the aircraft-related business and others.F-
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
(s) Property under facility operations
Property under facility operations consist primarily of operating facilities (including hotels and training facilities) and environmental assets (including mega solar and thermal power stations), which are stated at cost less accumulated depreciation, and depreciation is calculated mainly on a straight-line basis over the estimated useful lives of the assets. Depreciation expenses in fiscal 2018, 2019, 2020 and 20202021 were ¥25,444 million, ¥28,133 million, ¥27,147 million and ¥27,147¥30,448 million, respectively. Accumulated depreciation was ¥102,185¥105,433 million and ¥105,433¥132,184 million as of March 31, 20192020 and 2020,2021, respectively. Estimated useful lives range up to 50 years for buildings, up to 60 years for structures and up to 30 years for others.
Trade notes, accounts and other receivable primarily include accounts receivables in relation to sales of assets to be leased, inventories and other assets, payment made on behalf of lessees for property tax, maintenance fees and insurance premiums in relation to lease contracts, and receivables relating to debt securities sold.
Inventories consist primarily of residential condominiums under development, completed residential condominiums (including those waiting to be delivered to buyers under the contract for sale), and merchandise for sale. Residential condominiums under development are carried at cost less any impairment losses, and completed residential condominiums and merchandise for sale are stated at the lower of cost or fair value less cost to sell. The cost of inventories that are unique and not interchangeable is determined on the specific identification method and the cost of other inventories is principally determined on the average method. As of March 31, 20192020 and 2020,2021, residential condominiums under development were ¥55,860¥56,156 million and ¥56,156¥57,502 million, respectively, and completed residential condominiums and merchandise for sale were ¥59,835¥69,857 million and ¥69,857¥84,654 million, respectively.
The Company and its subsidiaries recorded ¥936 million, ¥703 million, ¥863 million and ¥863 ¥2,510
million of write-downs principally on completed residential condominiums and merchandise for sale for fiscal 2018, 2019, 2020 and 2020,2021, respectively, primarily resulting from a decrease in expected sales price. These write-downs were recorded in costs of goods and real estate sold and included mainly in PE Investment and Concession segment, Real Estate segment, Investment and Operation segment and Corporate Financial Services and Maintenance Leasing segment.
Office facilities are stated at cost less accumulated depreciation. Depreciation is calculated on a declining-balance basis or straight-line basis over the estimated useful lives of the assets. Depreciation expenses in fiscal
Right-of-use
The Company and its subsidiaries record the ROURight-of-use assets (hereinafter, “ROU assets”) recognized from the lessee’s lease transaction as investment in operating leases, property under facility operations and office facilities. Lease liabilities are included in other liabilities.
ROU assets are consisted of the amount of the initial measurement of the lease liability and any lease payments made to the lessor at or before the commencement date and stated at cost less accumulated amortization. The initial measurement of the lease liability is at the present value of the lease payments not yet paid, discounted using the discountlessee’s incremental borrowing rate for the lease at lease commencement. ROU assets of finance
F-
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
leases are amortized mainly on a straight-line basis over the lease term. ROU assets of operating leases are amortized over the lease term by the fixed term operating cost minus the interest cost. Amortization of ROU assets of finance leases and operating leases expenses are included in costs of operating leases, services expense and selling, general and administrative expenses.
Other assets consist primarily of goodwill and other intangible assets in acquisitions, reinsurance recoverables in relation to reinsurance contracts, deferred insurance policy acquisition costs which are amortized over the contract periods, leasehold deposits, advance payments made in relation to construction of real estate under operating leases and property under facility operations, prepaid benefit cost, prepaid expenses for property tax, maintenance fees and insurance premiums in relation to lease contracts, servicing assets, derivative assets, contract assets related to real estate contract works and deferred tax assets.
(y) Business combinations
The Company and its subsidiaries account for all business combinations using the acquisition method. The Company and its subsidiaries recognize intangible assets acquired in a business combination apart from goodwill if the intangible assets meet one of two criteria—either the contractual-legal criterion or the separately identifiable criterion. Goodwill is measured as an excess of the aggregate of consideration transferred and the fair value of noncontrolling interests over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed in the business combination measured at fair value. The Company and its subsidiaries would recognize a bargain purchase gain when the amount of recognized net assets exceeds the sum of consideration transferred and the fair value of noncontrolling interests. In a business combination achieved in stages, the Company and its subsidiaries remeasure their previously held equity interest at their acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings.
(z) Goodwill and other intangible assets
The Company and its subsidiaries perform an impairment test for goodwill and any indefinite-lived intangible assets at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for impairment whenwhenever such events or changes occur.
Accounting Standards Updatefirst step of thetwo-stepgoodwill impairment test. The Company and its subsidiaries perform the qualitative assessment for some goodwill but bypass the qualitative assessment and proceed directly to the first step of thetwo-stepimpairment test for other goodwill. For the
2017-04
(“Simplifying the Test for Goodwill Impairment”—ASC 350 (“Intangible—Goodwill and Other”)) has been adopted since April 1, 2020. The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether to calculate the fair value of a reporting unit under the goodwill for which the qualitative assessment is performed, if, after assessing the totality of events or circumstances, the Company and/or subsidiaries determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company and/or subsidiaries do not perform thetwo-stepimpairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or subsidiaries proceed to perform the first step of thetwo-stepimpairment test. The first step of goodwill impairment test used to identify potential impairment, calculates the fair value of the reporting unit and compares the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit falls below its carrying amount, the second step of thegoodwillimpairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares implied fair value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess.the difference. The Company and its subsidiaries test the goodwill either at the operating segment level or one level below the operating segments.
The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The Company and its subsidiaries perform the qualitative assessment for some indefinite-lived intangible assets but bypass the qualitative
F-
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
assessment and perform the quantitative assessment for other indefinite-lived intangible assets. For those indefinite-lived intangible assets for which the qualitative assessment is performed, if, after assessing the totality of events and circumstances, the Company and/or subsidiaries conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the Company and/or subsidiaries do not perform the quantitative impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or subsidiaries calculate the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Intangible assets with finite lives are amortized over their useful lives and tested for impairment. The Company and its subsidiaries perform a recoverability test for the intangible assets whenever events or changes in circumstances indicate that the assets might be impaired. The intangible assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount.
aa
) Trade notes, accounts and other payableTrade notes, accounts and other payable include primarily accounts payable in relation to purchase of assets to be leased, merchandise for sale and other assets, accounts payable in relation to construction work of residential condominiums and deposits received mainly for withholding income tax.
ab
) Other LiabilitiesOther liabilities include primarily lease liabilities recognized from the lessee’s lease transaction, accrued expenses related to interest and bonus, accrued benefit liability, advances received from lessees in relation to lease contracts, deposits received from real estate transaction, contract liabilities mainly related to automobile maintenance services and software services, and derivative liabilities.liabilities and allowance for credit losses on
off-balance
sheet credit exposures.
(F-25ac
The Company and its subsidiaries capitalized interest costs of ¥1,043 million, ¥940 million, ¥622 million and ¥622¥858 million in fiscal 2018, 2019, 2020 and 2020,2021, respectively, primarily related to assets under construction such as specific environmental assets, long-term real estate development and ship projects.
ad
) AdvertisingThe costs of advertising are expensed as incurred. The total amounts charged to advertising expense in fiscal 2018, 2019, 2020 and 20202021 were ¥26,083 million, ¥20,650 million, ¥16,480 million and ¥16,480¥17,313 million, respectively.
(
ae
Basic earnings per share is computed by dividing net income attributable to ORIX Corporation shareholders by the weighted average number of shares of outstanding common stock in each period. Diluted earnings per share is calculated by reflecting the potential dilution that could occur if securities or other contracts issuing common stock were exercised or converted into common stock.
af
) Additional acquisition and partial sale of the parent’s ownership interest in subsidiariesAdditional acquisition of the parent’s ownership interest in subsidiaries and partial sale of such interest where the parent continues to retain control of the subsidiary are accounted for as equity transactions. On the
F-
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
other hand, in a transaction that results in the loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the remeasurement to fair value of the interest retained.
ag
) Redeemable noncontrolling interestsNoncontrolling interests in a certain subsidiary are redeemable preferred shares which are subject to call and put rights upon certain shareholder events. As redemption of the noncontrolling interest is not solely in the control of the subsidiary, it is recorded between liabilities and equity on the consolidated balance sheets at its estimated redemption value.
ah
) Issuance of stock by an affiliateWhen an affiliate issues stocks to unrelated third parties, the Company and its subsidiaries’ ownership interest in the affiliate decreases. In the event that the price per share is more or less than the Company and its subsidiaries’ average carrying amount per share, the Company and its subsidiaries adjust the carrying amount of its investment in the affiliate and recognize
the
gain or loss in the consolidated statements of income in the year in which the change in ownership interest occurs.ai
) New accounting pronouncementsIn June 2016, Accounting Standards Updatedebt securities. These updates are effective for fiscal years beginning after December 15, 2019,The Company and interim periods within those fiscal years. The amendments inits subsidiaries adopted these updates should be appliedon April 1, 2020 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in whichperiod. Consequently, financial information of comparative periods has not been updated and the guidance is effective. Early application is permitteddisclosures required under Credit Losses Standard are not provided for fiscal year beginning after December 15, 2018, including interim periods within the fiscal year. The Company and its subsidiaries will adopt these updates onbefore April 1, 2020. Based on the Company and its subsidiaries’ assessment and best estimates to date, theThe allowance for credit losses for financial assets such as installment loans, net investment in leases andare expected to increasewas increased due to the changes of the measurement of the allowance for credit losses. The effect of the adoption of theseupdates updates on the Company and its subsidiaries’ financial position at the adoption date will bewas an increase of approximately ¥32,000¥31,745 million in the allowance for credit losses for financial assets, an increase of
2016-13
(“Measurement of Credit Losses on Financial Instruments”—ASC 326 (“Financial Instruments—Credit Losses”)) was issued, and related amendments were issued thereafter. These updates significantly change how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss model requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are within the scope of these updates. These updates also make targeted amendments to the current impairment model foravailable-for-sale
off-balance-sheet
credit exposures such as financial guarantees and loan commitments off-balance
sheet credit exposures and a decrease of In January 2017, Accounting Standards UpdateSimplifyingSimplifying the Test for Goodwill Impairment”—ASC 350 (“Intangible—Goodwill and Other”)) was issued. This update eliminates Step 2 from the currentconventional two-step goodwill impairment test. Instead, goodwill impairments would be measured by the amount by which the carrying amount exceeds the reporting unit’s fair value. This update also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it is more likely than not that the goodwill is impaired, to perform Step 2 of the goodwill impairment test. This update is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates on or after January 1, 2017. The Company and its subsidiaries will adoptadopted this update on April 1, 2020. Generally, the effect of adopting this update on the Company and its subsidiaries’ results of operation or financial position will depend on the outcomes of future goodwill impairment tests.
2017-04
(“F-
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
In August 2018, Accounting Standards Update defer the effective date by one year were issued thereafter. These updates change the recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. These updates require an insurance entity to review and, if there is a change, update cash flow assumptions at least annually and to update discount rate used for liability for future policy benefits at each reporting date for nonparticipating traditional long-duration and limited-payment contracts. The effect of updating the discount rate is recognized in other comprehensive income (loss). These updates also require market risk benefits to be measured at fair value, and simplify amortization of deferred acquisition costs. Furthermore, these updates require additional disclosures for long-duration contracts. These updates are effective for fiscal years beginning after December 15, 2021,2022, and interim periods within those fiscal years. Early application is permitted. For the liability for future policy benefits and deferred acquisition costs, these updates are applied to contracts in force as of beginning of the earliest period presented (hereinafter, “the transition date” of these updates) on a modified retrospective basis, and an insurance entity may elect to apply retrospectively. For the market risk benefits, these updates are applied retrospectively at the transition date, and the difference between fair value and carrying value requires an adjustment to retained earnings at the transition date. The cumulative effect of changes in the instrument-specific credit risk between contract inception date and the transition date should be recognized in accumulated other comprehensive income at the transition date. The Company and its subsidiaries will adopt these updates on April 1, 2022.2023. The Company and its subsidiaries are currently evaluating the effect that the adoption of these updates will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by these updates.
2018-12
(“Targeted Improvements to the Accounting for Long-Duration Contracts”—ASC 944 (“Financial Services—Insurance”)) was issued, and the original effective date was deferred by two years by related amendments whichIn August 2018, Accounting Standards UpdateThis update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted. An entity is also permitted to early adopt any removed or modified disclosure requirements and delay adoption of the additional disclosure requirements until their effective date. Removals and modifications of disclosure requirements should be mainly applied retrospectively to all periods presented upon their effective date, while the additional disclosure requirements should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company and its subsidiaries early adopted the removals of disclosure requirements from the three months ended September 30, 2018. The Company and its subsidiaries will adoptadopted the modifications and additions of disclosure requirements from fiscal 2021.on April 1, 2020. Since this update relates to disclosure requirements, the adoption will not have anhad no effect on the Company and its subsidiaries’ results of operations or financial position.
2018-13
(“Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”—ASC 820 (“Fair Value Measurement”)) was issued. This update modifies and adds the disclosure requirements for Fair Value Measurements. This update also removes disclosure requirements of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. In August 2018, Accounting Standards UpdateThis update is effective for fiscal years ending after December 15, 2020. The amendments in this update should be applied on a retrospective basis to all periods presented. Early adoption is permitted. The Company and its subsidiaries will adoptadopted this update from fiscal 2021.on April 1, 2020. Since this update relates to disclosure requirements, the adoption will not have anhad no effect on the Company and its subsidiaries’ results of operations or financial position.
2018-14
(“Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”—ASC715-20
(“Compensation—Retirement Benefits—Defined Benefit Plans—General”)) was issued. This update adds and clarifies the disclosure requirements for Pension Plans, and removes certain disclosure requirements such as the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. In December 2019, Accounting Standards Update
2019-12
(“Simplifying the Accounting for Income Taxes”—ASC 740 (“Income Taxes”)) was issued. This update removes the exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and other exceptions. This update also simplifies certain other elements of the accounting for the income taxes. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 and early adoption is permitted. TheF-
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
income tax simplifications related to changes in ownership of foreign equity method investments and foreign subsidiaries shall be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The other amendments in this update shall be applied on a retrospective basis to all periods presented, on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, or on a prospective basis. The Company and its subsidiaries will adopt this update on April 1, 2021. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will not have a material impact on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this update.
In January 2020, Accounting Standards Update —ASC—ASC 321 (“Investments-EquityInvestments—Equity Securities”), ASC 323 (“Investments-EquityInvestments—Equity Method and Joint Ventures), and ASC 815 (“Derivatives and Hedging)) was issued. This update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321 (“Investments-EquityInvestments—Equity Securities”) immediately before applying or upon
2020-01 (“
(“Clarifying the Interactions between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging”discontinuing the equity method. This update also clarifies the scope of considerations for forward contracts and purchased options on certain securities that do not meet the definition of a derivative. This update is effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The Company and its subsidiaries will adopt this update on April 1, 2021. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will not have a material effect on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this update.position.
In March 2020, Accounting Standards Updateissued. This update providesissued, and related amendments were issued thereafter. These updates provide companies with optional expedients and exceptions for applying generally accepted accounting principles to contract, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This update isThese updates are effective as of March 12, 2020 through December 31, 2022. The Company and its subsidiaries did not adopt these updates as of March 31, 2021. The Company and its subsidiaries expect to adopt these updates during the reference rate transition period. We are currently in the process of identifying the potential effect on the Company and its subsidiaries’ results of operations or financial position by the adoption of this update.these updates.
2020-04 (“
(“Facilitation of the Effects of Reference Rate Reform on Financial Reporting”—ASC 848 (“Reference Rate Reform”)) was 2. Fair Value Measurements
The Company and its subsidiaries classify and prioritize inputs used in valuation techniques to measure fair value into the following three levels:
Level 1 — Inputs of quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3 — Unobservable inputs for the assets or liabilities.
The Company and its subsidiaries differentiate between those assets and liabilities required to be carried at fair value at every reporting period (“recurring”) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (“nonrecurring”). The Company and its subsidiaries mainly
F-
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
measure certain loans held for sale, trading debt securities,debt securities, certain equity securities, derivatives, certain reinsurance recoverables, and variable annuity and variable life insurance contracts at fair value on a recurring basis.
available-for-sale
The following tables present recorded amounts of major financial assets and liabilities measured at fair value on a recurring basis as of March 31, 20192020 and 2020:2021:
March 31, 2019
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale*1 | ¥ | 38,671 | ¥ | 0 | ¥ | 38,671 | ¥ | 0 | ||||||||
Trading debt securities | 1,564 | 0 | 1,564 | 0 | ||||||||||||
Available-for-sale debt securities: | 1,264,244 | 24,831 | 1,138,966 | 100,447 | ||||||||||||
Japanese and foreign government bond securities*2 | 430,851 | 3,227 | 427,624 | 0 | ||||||||||||
Japanese prefectural and foreign municipal bond securities | 193,305 | 0 | 190,417 | 2,888 | ||||||||||||
Corporate debt securities*3 | 487,997 | 21,604 | 459,235 | 7,158 | ||||||||||||
CMBS and RMBS in the Americas | 61,479 | 0 | 61,479 | 0 | ||||||||||||
Other asset-backed securities and debt securities | 90,612 | 0 | 211 | 90,401 | ||||||||||||
Equity securities*4*5 | 425,593 | 68,631 | 295,769 | 61,193 | ||||||||||||
Derivative assets: | 15,495 | 299 | 9,924 | 5,272 | ||||||||||||
Interest rate swap agreements | 138 | 0 | 138 | 0 | ||||||||||||
Options held/written and other | 11,140 | 0 | 5,868 | 5,272 | ||||||||||||
Futures, foreign exchange contracts | 3,007 | 299 | 2,708 | 0 | ||||||||||||
Foreign currency swap agreements | 1,203 | 0 | 1,203 | 0 | ||||||||||||
Credit derivatives written | 7 | 0 | 7 | 0 | ||||||||||||
Netting*6 | (1,497 | ) | 0 | 0 | 0 | |||||||||||
Net derivative assets | 13,998 | 0 | 0 | 0 | ||||||||||||
Other assets: | 12,449 | 0 | 0 | 12,449 | ||||||||||||
Reinsurance recoverables*7 | 12,449 | 0 | 0 | 12,449 | ||||||||||||
Total | ¥ | 1,758,016 | ¥ | 93,761 | ¥ | 1,484,894 | ¥ | 179,361 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities: | ¥ | 25,958 | ¥ | 522 | ¥ | 25,436 | ¥ | 0 | ||||||||
Interest rate swap agreements | 17,439 | 0 | 17,439 | 0 | ||||||||||||
Options held/written and other | 2,809 | 0 | 2,809 | 0 | ||||||||||||
Futures, foreign exchange contracts | 5,336 | 522 | 4,814 | 0 | ||||||||||||
Foreign currency swap agreements | 364 | 0 | 364 | 0 | ||||||||||||
Credit derivatives held | 10 | 0 | 10 | 0 | ||||||||||||
Netting*6 | (1,497 | ) | 0 | 0 | 0 | |||||||||||
Net derivative Liabilities | 24,461 | 0 | 0 | 0 | ||||||||||||
Policy Liabilities and Policy Account Balances: | 360,198 | 0 | 0 | 360,198 | ||||||||||||
Variable annuity and variable life insurance contracts*8 | 360,198 | 0 | 0 | 360,198 | ||||||||||||
Total | ¥ | 386,156 | ¥ | 522 | ¥ | 25,436 | ¥ | 360,198 | ||||||||
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale*1 | ¥ | 90,893 | ¥ | 0 | ¥ | 90,893 | ¥ | 0 | ||||||||
Trading debt securities | 7,431 | 0 | 7,431 | 0 | ||||||||||||
Available-for-sale | 1,631,185 | 21,490 | 1,521,342 | 88,353 | ||||||||||||
Japanese and foreign government bond securities*2 | 653,945 | 3,301 | 650,644 | 0 | ||||||||||||
Japanese prefectural and foreign municipal bond securities | 250,355 | 0 | 247,523 | 2,832 | ||||||||||||
Corporate debt securities*3 | 596,477 | 18,189 | 574,294 | 3,994 | ||||||||||||
CMBS and RMBS in the Americas | 48,672 | 0 | 48,672 | 0 | ||||||||||||
Other asset-backed securities and debt securities | 81,736 | 0 | 209 | 81,527 | ||||||||||||
Equity securities*4*5 | 375,174 | 58,400 | 232,873 | 83,901 | ||||||||||||
Derivative assets: | 39,690 | 202 | 20,258 | 19,230 | ||||||||||||
Options held/written and other | 21,346 | 0 | 2,116 | 19,230 | ||||||||||||
Futures, foreign exchange contracts | 13,265 | 202 | 13,063 | 0 | ||||||||||||
Foreign currency swap agreements | 5,079 | 0 | 5,079 | 0 | ||||||||||||
Netting*6 | (9,152 | ) | 0 | 0 | 0 | |||||||||||
Net derivative assets | 30,538 | 0 | 0 | 0 | ||||||||||||
Other assets: | 18,206 | 0 | 0 | 18,206 | ||||||||||||
Reinsurance recoverables*7 | 18,206 | 0 | 0 | 18,206 | ||||||||||||
Total | ¥ | 2,162,579 | ¥ | 80,092 | ¥ | 1,872,797 | ¥ | 209,690 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities: | ¥ | 73,649 | ¥ | 2,471 | ¥ | 71,178 | ¥ | 0 | ||||||||
Interest rate swap agreements | 44,002 | 0 | 44,002 | 0 | ||||||||||||
Options held/written and other | 20,004 | 0 | 20,004 | 0 | ||||||||||||
Futures, foreign exchange contracts | 9,506 | 2,471 | 7,035 | 0 | ||||||||||||
Foreign currency swap agreements | 137 | 0 | 137 | 0 | ||||||||||||
Netting*6 | (9,152 | ) | 0 | 0 | 0 | |||||||||||
Net derivative Liabilities | 64,497 | 0 | 0 | 0 | ||||||||||||
Policy Liabilities and Policy Account Balances: | 300,739 | 0 | 0 | 300,739 | ||||||||||||
Variable annuity and variable life insurance contracts*8 | 300,739 | 0 | 0 | 300,739 | ||||||||||||
Total | ¥ | 374,388 | ¥ | 2,471 | ¥ | 71,178 | ¥ | 300,739 | ||||||||
F-
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
March 31, 20202021
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale*1 | ¥ | 90,893 | ¥ | 0 | ¥ | 90,893 | ¥ | 0 | ||||||||
Trading debt securities | 7,431 | 0 | 7,431 | 0 | ||||||||||||
Available-for-sale debt securities: | 1,631,185 | 21,490 | 1,521,342 | 88,353 | ||||||||||||
Japanese and foreign government bond securities*2 | 653,945 | 3,301 | 650,644 | 0 | ||||||||||||
Japanese prefectural and foreign municipal bond securities | 250,355 | 0 | 247,523 | 2,832 | ||||||||||||
Corporate debt securities*3 | 596,477 | 18,189 | 574,294 | 3,994 | ||||||||||||
CMBS and RMBS in the Americas | 48,672 | 0 | 48,672 | 0 | ||||||||||||
Other asset-backed securities and debt securities | 81,736 | 0 | 209 | 81,527 | ||||||||||||
Equity securities*4*5 | 375,174 | 58,400 | 232,873 | 83,901 | ||||||||||||
Derivative assets: | 39,690 | 202 | 20,258 | 19,230 | ||||||||||||
Options held/written and other | 21,346 | 0 | 2,116 | 19,230 | ||||||||||||
Futures, foreign exchange contracts | 13,265 | 202 | 13,063 | 0 | ||||||||||||
Foreign currency swap agreements | 5,079 | 0 | 5,079 | 0 | ||||||||||||
Netting*6 | (9,152 | ) | 0 | 0 | 0 | |||||||||||
Net derivative assets | 30,538 | 0 | 0 | 0 | ||||||||||||
Other assets: | 18,206 | 0 | 0 | 18,206 | ||||||||||||
Reinsurance recoverables*7 | 18,206 | 0 | 0 | 18,206 | ||||||||||||
Total | ¥ | 2,162,579 | ¥ | 80,092 | ¥ | 1,872,797 | ¥ | 209,690 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities: | ¥ | 73,649 | ¥ | 2,471 | ¥ | 71,178 | ¥ | 0 | ||||||||
Interest rate swap agreements | 44,002 | 0 | 44,002 | 0 | ||||||||||||
Options held/written and other | 20,004 | 0 | 20,004 | 0 | ||||||||||||
Futures, foreign exchange contracts | 9,506 | 2,471 | 7,035 | 0 | ||||||||||||
Foreign currency swap agreements | 137 | 0 | 137 | 0 | ||||||||||||
Netting*6 | (9,152 | ) | 0 | 0 | 0 | |||||||||||
Net derivative Liabilities | 64,497 | 0 | 0 | 0 | ||||||||||||
Policy Liabilities and Policy Account Balances: | 300,739 | 0 | 0 | 300,739 | ||||||||||||
Variable annuity and variable life insurance contracts*8 | 300,739 | 0 | 0 | 300,739 | ||||||||||||
Total | ¥ | 374,388 | ¥ | 2,471 | ¥ | 71,178 | ¥ | 300,739 | ||||||||
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale*1 | ¥ | 63,272 | ¥ | 0 | ¥ | 63,272 | ¥ | 0 | ||||||||
Trading debt securities | 2,654 | 0 | 2,654 | 0 | ||||||||||||
Available-for-sale | 2,003,917 | 6,012 | 1,864,448 | 133,457 | ||||||||||||
Japanese and foreign government bond securities*2 | 821,158 | 3,105 | 818,053 | 0 | ||||||||||||
Japanese prefectural and foreign municipal bond securities | 276,276 | 0 | 273,515 | 2,761 | ||||||||||||
Corporate debt securities*3 | 742,251 | 2,907 | 738,323 | 1,021 | ||||||||||||
CMBS and RMBS in the Americas | 34,457 | 0 | 34,457 | 0 | ||||||||||||
Other asset-backed securities and debt securities | 129,775 | 0 | 100 | 129,675 | ||||||||||||
Equity securities*4*5 | 396,465 | 82,039 | 223,016 | 91,410 | ||||||||||||
Derivative assets: | 22,696 | 352 | 8,521 | 13,823 | ||||||||||||
Interest rate swap agreements | 1,867 | 0 | 1,867 | 0 | ||||||||||||
Options held/written and other | 19,504 | 0 | 5,681 | 13,823 | ||||||||||||
Futures, foreign exchange contracts | 1,179 | 352 | 827 | 0 | ||||||||||||
Foreign currency swap agreements | 146 | 0 | 146 | 0 | ||||||||||||
Netting*6 | (1,944 | ) | 0 | 0 | 0 | |||||||||||
Net derivative assets | 20,752 | 0 | 0 | 0 | ||||||||||||
Other assets: | 6,297 | 0 | 0 | 6,297 | ||||||||||||
Reinsurance recoverables*7 | 6,297 | 0 | 0 | 6,297 | ||||||||||||
Total | ¥ | 2,495,301 | ¥ | 88,403 | ¥ | 2,161,911 | ¥ | 244,987 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities: | ¥ | 71,034 | ¥ | 475 | ¥ | 70,526 | ¥ | 33 | ||||||||
Interest rate swap agreements | 23,818 | 0 | 23,818 | 0 | ||||||||||||
Options held/written and other | 17,009 | 0 | 16,976 | 33 | ||||||||||||
Futures, foreign exchange contracts | 25,739 | 475 | 25,264 | 0 | ||||||||||||
Foreign currency swap agreements | 4,459 | 0 | 4,459 | 0 | ||||||||||||
Credit derivatives held | 9 | 0 | 9 | 0 | ||||||||||||
Netting*6 | (1,944 | ) | 0 | 0 | 0 | |||||||||||
Net derivative Liabilities | 69,090 | 0 | 0 | 0 | ||||||||||||
Policy Liabilities and Policy Account Balances: | 266,422 | 0 | 0 | 266,422 | ||||||||||||
Variable annuity and variable life insurance contracts*8 | 266,422 | 0 | 0 | 266,422 | ||||||||||||
Total | ¥ | 337,456 | ¥ | 475 | ¥ | 70,526 | ¥ | 266,455 | ||||||||
| *1 | A certain subsidiary elected the fair value option on certain loans held for sale. These loans are multi-family and seniors housing loans and are sold to Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and institutional investors. Included in “Other (income) and expense” in the consolidated statements of income were gains million and a loss |
F-3
2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
of ¥3,260 million from the change in the fair value of the loans for fiscal |
non-accrual status. |
| *2 | A certain subsidiary elected the fair value option for investments in foreign government bond securities included in available-for-sale |
| *3 | A certain subsidiary elected the fair value option for investments in foreign corporate debt securities included in available-for-sale were of ¥784 million, ¥210 million and |
| *4 | Certain subsidiaries elected the fair value option for certain investments in investment funds included in equity securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were gains of from the change in the fair value of those investments for fiscal the fair value option were |
| *5 | The amounts of investment funds measured at net asset value per share which are not included in the above tables were million d ¥ 13,737 million as of March 31, |
| *6 | It represents the amount offset under counterparty netting of derivative assets and liabilities. |
| *7 | Certain subsidiaries elected the fair value option for certain reinsurance contracts held. The fair value of the reinsurance contracts elected for the fair value option in other assets were |
| *8 | Certain subsidiaries elected the fair value option for the entire variable annuity and variable life insurance contracts |
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following tables present the reconciliation of financial assets and liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) in fiscal 2018, 2019, 2020 and 2020:2021:
Millions of yen | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2017 | Gains or losses (realized/unrealized) | Purchases*3 | Sales | Settlements*4 | Transfers in and/ or out of Level 3 (net) | Balance at March 31, 2018 | Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 2018*1 | |||||||||||||||||||||||||||||||||
Included in earnings*1 | Included in other comprehensive income*2 | Total | ||||||||||||||||||||||||||||||||||||||
Available-for-sale securities | ¥ | 124,516 | ¥ | 3,690 | ¥ | (5,717 | ) | ¥ | (2,027 | ) | ¥ | 79,925 | ¥ | (37,942 | ) | ¥ | (43,555 | ) | ¥ | 0 | ¥ | 120,917 | ¥ | (35 | ) | |||||||||||||||
Corporate debt securities | 1,618 | 0 | 2 | 2 | 2,050 | 0 | (633 | ) | 0 | 3,037 | 0 | |||||||||||||||||||||||||||||
CMBS and RMBS in the Americas | 57,858 | 1,664 | (3,248 | ) | (1,584 | ) | 1,858 | (3,347 | ) | (18,775 | ) | 0 | 36,010 | (97 | ) | |||||||||||||||||||||||||
Other asset-backed securities and debt securities | 65,040 | 2,026 | (2,471 | ) | (445 | ) | 76,017 | (34,595 | ) | (24,147 | ) | 0 | 81,870 | 62 | ||||||||||||||||||||||||||
Other securities | 27,801 | 4,169 | (1,976 | ) | 2,193 | 26,991 | (19,106 | ) | 0 | 0 | 37,879 | 4,274 | ||||||||||||||||||||||||||||
Investment funds | 27,801 | 4,169 | (1,976 | ) | 2,193 | 26,991 | (19,106 | ) | 0 | 0 | 37,879 | 4,274 | ||||||||||||||||||||||||||||
Derivative assets and liabilities (net) | 5,233 | (3,356 | ) | 0 | (3,356 | ) | 2,024 | 0 | (1,610 | ) | 0 | 2,291 | (3,356 | ) | ||||||||||||||||||||||||||
Options held/written and other | 5,233 | (3,356 | ) | 0 | (3,356 | ) | 2,024 | 0 | (1,610 | ) | 0 | 2,291 | (3,356 | ) | ||||||||||||||||||||||||||
Other asset | 22,116 | (11,191 | ) | 0 | (11,191 | ) | 5,385 | 0 | (1,302 | ) | 0 | 15,008 | (11,191 | ) | ||||||||||||||||||||||||||
Reinsurance recoverables*5 | 22,116 | (11,191 | ) | 0 | (11,191 | ) | 5,385 | 0 | (1,302 | ) | 0 | 15,008 | (11,191 | ) | ||||||||||||||||||||||||||
Policy Liabilities and Policy Account Balances | 605,520 | (19,265 | ) | 0 | (19,265 | ) | 0 | 0 | (180,775 | ) | 0 | 444,010 | (19,265 | ) | ||||||||||||||||||||||||||
Variable annuity and variable life insurance contracts*6 | 605,520 | (19,265 | ) | 0 | (19,265 | ) | 0 | 0 | (180,775 | ) | 0 | 444,010 | (19,265 | ) | ||||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2018 | Gains or losses (realized/unrealized) | Purchases*3 | Sales | Settlements*4 | Transfers in and/ or out of Level 3 (net) | Balance at March 31, 2019 | Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 2019*1 | |||||||||||||||||||||||||||||||||
Included in earnings*1 | Included in other comprehensive income*2 | Total | ||||||||||||||||||||||||||||||||||||||
Available-for-sale | ¥ | 120,917 | ¥ | 1,912 | ¥ | 2,020 | ¥ | 3,932 | ¥ | 44,163 | ¥ | (23,241 | ) | ¥ | (27,221 | ) | ¥ | (18,103 | ) | ¥ | 100,447 | ¥ | 268 | |||||||||||||||||
Japanese prefectural and foreign municipal bond securities | 0 | (553 | ) | 136 | (417 | ) | 0 | 0 | 0 | 3,305 | 2,888 | 0 | ||||||||||||||||||||||||||||
Corporate debt securities | 3,037 | 0 | 4 | 4 | 3,100 | 0 | (981 | ) | 1,998 | 7,158 | 0 | |||||||||||||||||||||||||||||
CMBS and RMBS in the Americas | 36,010 | 1,034 | 546 | 1,580 | 1,304 | (6,711 | ) | (8,777 | ) | (23,406 | ) | 0 | 0 | |||||||||||||||||||||||||||
Other asset-backed securities and debt securities | 81,870 | 1,431 | 1,334 | 2,765 | 39,759 | (16,530 | ) | (17,463 | ) | 0 | 90,401 | 268 | ||||||||||||||||||||||||||||
Equity securities | 37,879 | 4,443 | 578 | 5,021 | 37,871 | (1,080 | ) | (18,498 | ) | 0 | 61,193 | 4,192 | ||||||||||||||||||||||||||||
Investment funds | 37,879 | 4,443 | 578 | 5,021 | 37,871 | (1,080 | ) | (18,498 | ) | 0 | 61,193 | 4,192 | ||||||||||||||||||||||||||||
Derivative assets and liabilities (net) | 2,291 | 2,981 | 0 | 2,981 | 0 | 0 | 0 | 0 | 5,272 | 2,981 | ||||||||||||||||||||||||||||||
Options held/written and other | 2,291 | 2,981 | 0 | 2,981 | 0 | 0 | 0 | 0 | 5,272 | 2,981 | ||||||||||||||||||||||||||||||
Other asset | 15,008 | (5,483 | ) | 0 | (5,483 | ) | 3,572 | 0 | (648 | ) | 0 | 12,449 | (5,483 | ) | ||||||||||||||||||||||||||
Reinsurance recoverables*5 | 15,008 | (5,483 | ) | 0 | (5,483 | ) | 3,572 | 0 | (648 | ) | 0 | 12,449 | (5,483 | ) | ||||||||||||||||||||||||||
Policy Liabilities and Policy Account Balances | 444,010 | 7,874 | 321 | 8,195 | 0 | 0 | (75,617 | ) | 0 | 360,198 | 7,874 | |||||||||||||||||||||||||||||
Variable annuity and variable life insurance contracts*6 | 444,010 | 7,874 | 321 | 8,195 | 0 | 0 | (75,617 | ) | 0 | 360,198 | 7,874 | |||||||||||||||||||||||||||||
2020
Millions of yen | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2019 | Gains or losses (realized/unrealized) | Purchases*3 | Sales | Settlements*4 | Transfers in and/ or out of Level 3 (net) | Balance at March 31, 20 20 | Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 20 20 *1 | |||||||||||||||||||||||||||||||||
Included in earnings*1 | Included in other comprehensive income*2 | Total | ||||||||||||||||||||||||||||||||||||||
Available-for-sale | ¥ | 100,447 | ¥ | 1,291 | ¥ | (13,721 | ) | ¥ | (12,430 | ) | ¥ | 41,270 | ¥ | (3,925 | ) | ¥ | (34,018 | ) | ¥ | (2,991 | ) | ¥ | 88,353 | ¥ | 131 | |||||||||||||||
Japanese prefectural and foreign municipal bond securities | 2,888 | 0 | (56 | ) | (56 | ) | 0 | 0 | 0 | 0 | 2,832 | 0 | ||||||||||||||||||||||||||||
Corporate debt securities | 7,158 | 0 | (8 | ) | (8 | ) | 900 | 0 | (1,065 | ) | (2,991 | ) | 3,994 | 0 | ||||||||||||||||||||||||||
Other asset-backed securities and debt securities | 90,401 | 1,291 | (13,657 | ) | (12,366 | ) | 40,370 | (3,925 | ) | (32,953 | ) | 0 | 81,527 | 131 | ||||||||||||||||||||||||||
Equity securities | 61,193 | 8,197 | (1,641 | ) | 6,556 | 31,725 | (10,108 | ) | (5,465 | ) | 0 | 83,901 | 8,033 | |||||||||||||||||||||||||||
Investment funds | 61,193 | 8,197 | (1,641 | ) | 6,556 | 31,725 | (10,108 | ) | (5,465 | ) | 0 | 83,901 | 8,033 | |||||||||||||||||||||||||||
Derivative assets and liabilities (net) | 5,272 | 10,402 | (192 | ) | 10,210 | 3,748 | 0 | 0 | 0 | 19,230 | 10,402 | |||||||||||||||||||||||||||||
Options held/written and other | 5,272 | 10,402 | (192 | ) | 10,210 | 3,748 | 0 | 0 | 0 | 19,230 | 10,402 | |||||||||||||||||||||||||||||
Other asset | 12,449 | 2,937 | 0 | 2,937 | 3,053 | 0 | (233 | ) | 0 | 18,206 | 2,937 | |||||||||||||||||||||||||||||
Reinsurance recoverables*5 | 12,449 | 2,937 | 0 | 2,937 | 3,053 | 0 | (233 | ) | 0 | 18,206 | 2,937 | |||||||||||||||||||||||||||||
Policy Liabilities and Policy Account Balances | 360,198 | 4,802 | 1,215 | 6,017 | 0 | 0 | (53,442 | ) | 0 | 300,739 | 4,802 | |||||||||||||||||||||||||||||
Variable annuity and variable life insurance contracts*6 | 360,198 | 4,802 | 1,215 | 6,017 | 0 | 0 | (53,442 | ) | 0 | 300,739 | 4,802 | |||||||||||||||||||||||||||||
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
S
—(Continued)ORIX Corporation and Subsidiaries
2021
Millions of yen | ||||||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2020 | Gains or losses (realized/unrealized) | Purchases*3 | Sales | Settlements*4 | Transfers in and/ or out of Level 3 (net) | Balance at March 31, 202 1 | Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 202 1 *1 | Change in unrealized gains or losses included in other comprehensive income for assets and liabilities still held at March 31, 202 1 *2 | ||||||||||||||||||||||||||||||||||||
Included in earnings*1 | Included in other comprehensive income*2 | Total | ||||||||||||||||||||||||||||||||||||||||||
Available-for-sale | ¥ | 88,353 | ¥ | (1,065 | ) | ¥ | 14,870 | ¥ | 13,805 | ¥ | 51,270 | ¥ | (12,890 | ) | ¥ | (5,187 | ) | ¥ | (1,894 | ) | ¥ | 133,457 | ¥ | (1,228 | ) | ¥ | 14,729 | |||||||||||||||||
Japanese prefectural and foreign municipal bond securities | 2,832 | (115 | ) | 44 | (71 | ) | 0 | 0 | 0 | 0 | 2,761 | (115 | ) | 44 | ||||||||||||||||||||||||||||||
Corporate debt securities | 3,994 | 0 | 1 | 1 | 0 | 0 | (974 | ) | (2,000 | ) | 1,021 | 0 | 1 | |||||||||||||||||||||||||||||||
Other asset-backed securities and debt securities | 81,527 | (950 | ) | 14,825 | 13,875 | 51,270 | (12,890 | ) | (4,213 | ) | 106 | 129,675 | (1,113 | ) | 14,684 | |||||||||||||||||||||||||||||
Equity securities | 83,901 | 14,304 | 1,765 | 16,069 | 2,001 | (4,718 | ) | (5,518 | ) | (325 | ) | 91,410 | 14,042 | 1,769 | ||||||||||||||||||||||||||||||
Investment funds | 83,901 | 14,304 | 1,765 | 16,069 | 2,001 | (4,718 | ) | (5,518 | ) | (325 | ) | 91,410 | 14,042 | 1,769 | ||||||||||||||||||||||||||||||
Derivative assets and liabilities (net) | 19,230 | (5,474 | ) | 34 | (5,440 | ) | 0 | 0 | 0 | 0 | 13,790 | (5,474 | ) | 34 | ||||||||||||||||||||||||||||||
Options held/written and other | 19,230 | (5,474 | ) | 34 | (5,440 | ) | 0 | 0 | 0 | 0 | 13,790 | (5,474 | ) | 34 | ||||||||||||||||||||||||||||||
Other asset | 18,206 | (14,201 | ) | 0 | (14,201 | ) | 2,713 | 0 | (421 | ) | 0 | 6,297 | (14,201 | ) | 0 | |||||||||||||||||||||||||||||
Reinsurance recoverables*5 | 18,206 | (14,201 | ) | 0 | (14,201 | ) | 2,713 | 0 | (421 | ) | 0 | 6,297 | (14,201 | ) | 0 | |||||||||||||||||||||||||||||
Policy Liabilities and Policy Account Balances | 300,739 | (42,066 | ) | (1,248 | ) | (43,314 | ) | 0 | 0 | (77,631 | ) | 0 | 266,422 | (42,066 | ) | (1,248 | ) | |||||||||||||||||||||||||||
Variable annuity and variable life insurance contracts*6 | 300,739 | (42,066 | ) | (1,248 | ) | (43,314 | ) | 0 | 0 | (77,631 | ) | 0 | 266,422 | (42,066 | ) | (1,248 | ) | |||||||||||||||||||||||||||
| *1 | Principally, gains and losses from available-for-sale available-for-sale |
| *2 | Unrealized gains and losses from available-for-sale debt securities are included in “Net change of unrealized gains (losses) on investment in securities” and “Net change of foreign currency translation |
| *3 | Increases resulting from an acquisition of a subsidiary and insurance contracts ceded to reinsurance companies are included. |
| *4 | Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and variable life policyholders due to death, surrender and maturity of the investment period are included. |
| *5 | “Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.” |
| *6 | “Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events. |
Millions of yen | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2018 | Gains or losses (realized/unrealized) | Purchases*3 | Sales | Settlements*4 | Transfers in and/ or out of Level 3 (net) | Balance at March 31, 2019 | Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 2019*1 | |||||||||||||||||||||||||||||||||
Included in earnings*1 | Included in other comprehensive income*2 | Total | ||||||||||||||||||||||||||||||||||||||
Available-for-sale debt securities | ¥ | 120,917 | ¥ | 1,912 | ¥ | 2,020 | ¥ | 3,932 | ¥ | 44,163 | ¥ | (23,241 | ) | ¥ | (27,221 | ) | ¥ | (18,103 | ) | ¥ | 100,447 | ¥ | 268 | |||||||||||||||||
Japanese prefectural and foreign municipal bond securities | 0 | (553 | ) | 136 | (417 | ) | 0 | 0 | 0 | 3,305 | 2,888 | 0 | ||||||||||||||||||||||||||||
Corporate debt securities | 3,037 | 0 | 4 | 4 | 3,100 | 0 | (981 | ) | 1,998 | 7,158 | 0 | |||||||||||||||||||||||||||||
CMBS and RMBS in the Americas | 36,010 | 1,034 | 546 | 1,580 | 1,304 | (6,711 | ) | (8,777 | ) | (23,406 | ) | 0 | 0 | |||||||||||||||||||||||||||
Other asset-backed securities and debt securities | 81,870 | 1,431 | 1,334 | 2,765 | 39,759 | (16,530 | ) | (17,463 | ) | 0 | 90,401 | 268 | ||||||||||||||||||||||||||||
Equity securities | 37,879 | 4,443 | 578 | 5,021 | 37,871 | (1,080 | ) | (18,498 | ) | 0 | 61,193 | 4,192 | ||||||||||||||||||||||||||||
Investment funds | 37,879 | 4,443 | 578 | 5,021 | 37,871 | (1,080 | ) | (18,498 | ) | 0 | 61,193 | 4,192 | ||||||||||||||||||||||||||||
Derivative assets and liabilities (net) | 2,291 | 2,981 | 0 | 2,981 | 0 | 0 | 0 | 0 | 5,272 | 2,981 | ||||||||||||||||||||||||||||||
Options held/written and other | 2,291 | 2,981 | 0 | 2,981 | 0 | 0 | 0 | 0 | 5,272 | 2,981 | ||||||||||||||||||||||||||||||
Other asset | 15,008 | (5,483 | ) | 0 | (5,483 | ) | 3,572 | 0 | (648 | ) | 0 | 12,449 | (5,483 | ) | ||||||||||||||||||||||||||
Reinsurance recoverables*5 | 15,008 | (5,483 | ) | 0 | (5,483 | ) | 3,572 | 0 | (648 | ) | 0 | 12,449 | (5,483 | ) | ||||||||||||||||||||||||||
Policy Liabilities and Policy Account Balances | 444,010 | 7,874 | 321 | 8,195 | 0 | 0 | (75,617 | ) | 0 | 360,198 | 7,874 | |||||||||||||||||||||||||||||
Variable annuity and variable life insurance contracts*6 | 444,010 | 7,874 | 321 | 8,195 | 0 | 0 | (75,617 | ) | 0 | 360,198 | 7,874 | |||||||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 2020*1 | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2019 | Gains or losses (realized/unrealized) | Purchases*3 | Sales | Settlements*4 | Transfers in and/ or out of Level 3 (net) | Balance at March 31, 2020 | ||||||||||||||||||||||||||||||||||
Included in earnings *1 | Included in other comprehensive income*2 | Total | ||||||||||||||||||||||||||||||||||||||
Available-for-sale debt securities | ¥ | 100,447 | ¥ | 1,291 | ¥ | (13,721 | ) | ¥ | (12,430 | ) | ¥ | 41,270 | ¥ | (3,925 | ) | ¥ | (34,018 | ) | ¥ | (2,991 | ) | ¥ | 88,353 | ¥ | 131 | |||||||||||||||
Japanese prefectural and foreign municipal bond securities | 2,888 | 0 | (56 | ) | (56 | ) | 0 | 0 | 0 | 0 | 2,832 | 0 | ||||||||||||||||||||||||||||
Corporate debt securities | 7,158 | 0 | (8 | ) | (8 | ) | 900 | 0 | (1,065 | ) | (2,991 | ) | 3,994 | 0 | ||||||||||||||||||||||||||
Other asset-backed securities and debt securities | 90,401 | 1,291 | (13,657 | ) | (12,366 | ) | 40,370 | (3,925 | ) | (32,953 | ) | 0 | 81,527 | 131 | ||||||||||||||||||||||||||
Equity securities | 61,193 | 8,197 | (1,641 | ) | 6,556 | 31,725 | (10,108 | ) | (5,465 | ) | 0 | 83,901 | 8,033 | |||||||||||||||||||||||||||
Investment funds | 61,193 | 8,197 | (1,641 | ) | 6,556 | 31,725 | (10,108 | ) | (5,465 | ) | 0 | 83,901 | 8,033 | |||||||||||||||||||||||||||
Derivative assets and liabilities (net) | 5,272 | 10,402 | (192 | ) | 10,210 | 3,748 | 0 | 0 | 0 | 19,230 | 10,402 | |||||||||||||||||||||||||||||
Options held/written and other | 5,272 | 10,402 | (192 | ) | 10,210 | 3,748 | �� | 0 | 0 | 0 | 19,230 | 10,402 | ||||||||||||||||||||||||||||
Other asset | 12,449 | 2,937 | 0 | 2,937 | 3,053 | 0 | (233 | ) | 0 | 18,206 | 2,937 | |||||||||||||||||||||||||||||
Reinsurance recoverables*5 | 12,449 | 2,937 | 0 | 2,937 | 3,053 | 0 | (233 | ) | 0 | 18,206 | 2,937 | |||||||||||||||||||||||||||||
Policy Liabilities and Policy Account Balances | 360,198 | 4,802 | 1,215 | 6,017 | 0 | 0 | (53,442 | ) | 0 | 300,739 | 4,802 | |||||||||||||||||||||||||||||
Variable annuity and variable life insurance contracts*6 | 360,198 | 4,802 | 1,215 | 6,017 | 0 | 0 | (53,442 | ) | 0 | 300,739 | 4,802 | |||||||||||||||||||||||||||||
In fiscal 2019, Japanese prefectural and foreign municipal bond securities totaling ¥3,305
million were transferred from Level 2 to Level 3, since the valuation techniques to measure fair value of a certain foreign municipal bond security has been changed to discounted cash flows methodologies using unobservable inputs. The change of the valuation techniques is due to judgement that the Company and its subsidiaries cannot rely on price quotations from independent pricing service vendors and brokers considering deterioration of estimated cash flows from the security. In addition, CMBS and RMBS in the Americas totaling ¥23,406
¥23,406 million were transferred from Level 3 to Level 2, since the inputs such as trading price and/or bid price became observable due to the market returning to active.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
In fiscal 2020, corporate debt securities totaling ¥2,991 million were transferred from Level 3 to Level 2, since the inputs became observable.
In fiscal 2021, corporate debt securities totaling ¥2,000 million and investment funds totaling ¥325
million were transferred from Level 3 to
Level 2, since the inputs became observable. In addition, other asset-backed securities and debt securities totaling ¥106 million were transferred from Level 2 to Level 3, since the inputs became unobservable.
The following tables present recorded amounts of assets measured at fair value on a nonrecurring basis duringfiscal 2019 fiscal 2020 and 2020.2021. These assets are measured at fair value on a nonrecurring basis mainly to recognize impairment:
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale | ¥ | 3,839 | ¥ | 0 | ¥ | 3,839 | ¥ | 0 | ||||||||
Real estate collateral-dependent loans (net of allowance for probable loan losses) | 6,630 | 0 | 0 | 6,630 | ||||||||||||
Investment in operating leases and property under facility operations | 12,901 | 0 | 0 | 12,901 | ||||||||||||
Certain investments in affiliates | 2,897 | 0 | 0 | 2,897 | ||||||||||||
| ¥ | 26,267 | ¥ | 0 | ¥ | 3,839 | ¥ | 22,428 | |||||||||
2020 | ||||||||||||||||
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale | ¥ | 4,823 | ¥ | 0 | ¥ | 0 | ¥ | 4,823 | ||||||||
Real estate collateral-dependent loans (net of allowance for probable loan losses) | 12,557 | 0 | 0 | 12,557 | ||||||||||||
Investment in operating leases and property under facility operations | 5,731 | 0 | 1,193 | 4,538 | ||||||||||||
Certain investments in affiliates | 11,213 | 8,741 | 0 | 2,472 | ||||||||||||
| ¥ | 34,324 | ¥ | 8,741 | ¥ | 1,193 | ¥ | 24,390 | |||||||||
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale | ¥ | 4,823 | ¥ | 0 | ¥ | 0 | ¥ | 4,823 | ||||||||
Real estate collateral-dependent loans (net of allowance for probable loan losses) | 12,557 | 0 | 0 | 12,557 | ||||||||||||
Investment in operating leases and property under facility operations | 5,731 | 0 | 1,193 | 4,538 | ||||||||||||
Certain investments in affiliates | 11,213 | 8,741 | 0 | 2,472 | ||||||||||||
| ¥ | 34,324 | ¥ | 8,741 | ¥ | 1,193 | ¥ | 24,390 | |||||||||
2021 | ||||||||||||||||
Millions of yen | ||||||||||||||||
Total Carrying Value in Consolidated Balance Sheets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Loans held for sale | ¥ | 238 | ¥ | 0 | ¥ | 238 | ¥ | 0 | ||||||||
Real estate collateral-dependent loans (net of allowance for credit losses) | 10,679 | 0 | 0 | 10,679 | ||||||||||||
Investment in operating leases and property under facility operations | 6,740 | 0 | 1,806 | 4,934 | ||||||||||||
Certain equity securities | 10,486 | 0 | 6,909 | 3,577 | ||||||||||||
Certain investments in affiliates | 11,413 | 8,799 | 0 | 2,614 | ||||||||||||
Certain goodwill | 775 | 0 | 0 | 775 | ||||||||||||
| ¥ | 40,331 | ¥ | 8,799 | ¥ | 8,953 | ¥ | 22,579 | |||||||||
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following is a description of the main valuation methodologies used for assets and liabilities measured at fair value.
Loans held for sale
Certain loans, which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are consideredThe loans held for sale in the Americas are classified as Level 2, if the Company and its subsidiaries measure their fair value based on a market approach using inputs other than quoted prices that are observable for the assets such as treasury rate, swap rate and market spread. The loans held for sale in the Americas are classified as Level 3, if the Company and its subsidiaries measure their fair value based on discounted cash flow methodologies using inputs that are unobservable in the market.
held-for-sale.
Real estate collateral-dependent loans
The valuation allowance for credit losses for large balanceimpaired loans with deterioration in credit quality determined using a present value technique is not considered a fair value measurement. However, measurement for impaired loans with deterioration in credit quality determined using the loan’s observable market price or the fair value of the collateral securing the collateral-dependent loans are fair value measurements and are subject to the disclosure requirements for nonrecurring fair value measurements.
non-homogeneous
loans is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. According to ASC 820 (“Fair Value Measurement”), measurement for The Company and its subsidiaries determine the fair value of the real estate collateral of real estate collateral-dependent loans using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries generally obtain a new appraisal once a fiscal year. In addition, the Company and its subsidiaries periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a significant change in economic and/or physical conditions, which may materially affect the fair value of the collateral. Real estate collateral-dependent loans whose fair values are estimated using appraisals of the underlying collateral based on these valuation techniques are classified as Level 3 because such appraisals involve unobservable inputs. These unobservable inputs contain discount rates and cap rates as well as future cash flows estimated to be generated from real estate collateral. An increase (decrease) in the discount rate or cap rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of real estate collateral-dependent loans.
Investment in operating leases and property under facility operations and land and buildings undeveloped or under construction
Investment in operating leases measured at fair value is mostly real estate. The Company and its subsidiaries determine the fair value of investment in operating leases and property under facility operations and land and buildings undeveloped or under construction using appraisals prepared by independent third party appraisers or the Company’s own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flow methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries classified the assets as Level 3 because such appraisals involve unobservable
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
inputs. These unobservable inputs contain discount rates as well as future cash flows estimated to be generated
from the assets or projects. An increase (decrease) in the discount rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of investment in operating leases and property under facility operations and land and buildings undeveloped or under construction.
Movable properties owned by a certain subsidiary are classified as Level 2, because fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets.
Trading debt securities anddebt securities
available-for-sale
If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets and accordingly these securities are classified as Level 2. If market prices are not available and there are no observable inputs, then fair value is estimated by using valuation models such as discounted cash flow methodologies and broker quotes. Such securities are classified as Level 3, as the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company and its subsidiaries check the validity of received prices based on comparison to prices of other similar assets and market data such as relevant benchmark indices.
The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as Level 2 if the inputs such as trading price and/or bid price are observable. The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as Level 3 if the Company and subsidiaries evaluate the fair value based on the unobservable inputs. In determining whether the inputs are observable or unobservable, the Company and its subsidiaries evaluate various factors such as the lack of recent transactions, price quotations that are not based on current information or vary substantially over time or among market makers, a significant increase in implied risk premium, a widemarket) and other factors. With respect to certain CMBS and RMBS in the Americas and other asset-backed securities, the Company and its subsidiaries classified these securities that were measured at fair value based on the observable inputs such as trading price and/or bit price as Level 2. But for those securities that lacked observable trades because they are older vintage or below investment grade securities, the Company and its subsidiaries limit the reliance on independent pricing service vendors and brokers. As a result, the Company and its subsidiaries established internally developed pricing models using valuation techniques such as discounted cash flow model using Level 3 inputs in order to estimate fair value of these debt securities and classified them as Level 3. Under the models, the Company and its subsidiaries use anticipated cash flows of the security discounted at a risk-adjusted discount rate that incorporates our estimate of credit risk and liquidity risk that a market participant would consider. The cash flows are estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security. An increase (decrease) in the discount rate or default rate would result in a decrease (increase) in the fair value of CMBS and RMBS in the Americas and other asset-backed securities.
bid-ask
spread, significant decline in new issuances, little or no public information (e.g. aprincipal-to-principal
Equity securities and investment in affiliates
If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets and accordingly these securities are classified as Level 2. In addition, a certain overseasAmericas subsidiary measures its investments held by the investment companies which are owned by the subsidiary at fair value.
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
These investment funds, certain equity securities and certain investments in affiliates are classified as Level 3, because fair value
measurement is based on the combination of discounted cash flow methodologies and market multiple valuation methods, andor broker quotes. Discounted cash flow methodologies use future cash flows to be generated from investees, weighted average cost of capital (WACC) and others. Market multiple valuation methods use earnings before interest, taxes, depreciation and amortization (EBITDA) multiples based on actual and projected cash flows, comparable peer companies, and comparable precedent transactions and others. Furthermore, certain subsidiaries elected the fair value option for investments in some funds. These investment funds for which the fair value option is elected are classified as level 3, because the subsidiaries measure their fair value using discounting to net asset value based on inputs that are unobservable in the market.market, or broker quotes.
Derivatives
For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, classified as Level 1. For
non-exchange
traded derivatives, fair value is based on commonly used models and discounted cash flow methodologies. If the inputs used for these measurements including yield curves and volatilities, are observable, the Company and its subsidiaries classify it as Level 2. If the inputs are not observable, the Company and its subsidiaries classify it as Level 3. These unobservable inputs contain discount rates. An increase (decrease) in the discount rate would result in a decrease (increase) in the fair value of derivatives.Reinsurance recoverables
Certain subsidiaries have elected the fair value option for certain reinsurance contracts related to variable annuity and variable life insurance contracts to partially offset the changes in fair value recognized in earnings of the policy liabilities and policy account balances attributable to the changes in the minimum guarantee risks of the variable annuity and variable life insurance contracts. These reinsurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiaries measure their fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.
Variable annuity and variable life insurance contracts
A certain subsidiary has elected the fair value option for the entire variable annuity and variable life insurance contracts held in order to match earnings recognized for changes in fair value of policy liabilities and policy account balances with the earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and variable life policyholders, derivative contracts and changes in fair value of reinsurance contracts. The changes in fair value of the variable annuity and variable life insurance contracts are linked to the fair value of the investment in securities managed on behalf of variable annuity and variable life policyholders. These securities consist mainly of equity securities traded in the market. In addition, variable annuity and variable life insurance contracts are exposed to the minimum guarantee risk, and the subsidiary adjusts the fair value of the underlying investments by incorporating changes in fair value of the minimum guarantee risk in the evaluation of the fair value of the entire variable annuity and variable life insurance contracts. The variable annuity and variable life insurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiary measures the fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.
Goodwill
For the information about the valuation methodologies, see Note 16 “Goodwill and Other Intangible Assets”.
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Information about Level 3 Fair Value Measurements
The following tables provide information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 20192020 and 2020.2021.
March 31, 2019 | ||||||||||||
Millions of yen | Valuation technique(s) | Significant unobservable inputs | Range (Weighted average) | |||||||||
Fair value | ||||||||||||
Assets: | ||||||||||||
Available-for-sale debt securities: | ||||||||||||
Japanese prefectural and foreign municipal bond securities | ¥ | 2,888 | Discounted cash flows | Discount rate | 8.5% | |||||||
(8.5%) | ||||||||||||
Corporate debt securities | 2,162 | Discounted cash flows | Discount rate | 0.1% – 1.3% | ||||||||
(0.8%) | ||||||||||||
4,996 | Appraisals/Broker quotes | — | — | |||||||||
Other asset-backed securities and debt securities | 23,651 | Discounted cash flows | Discount rate | 0.2% – 51.2% | ||||||||
(8.3%) | ||||||||||||
Probability of default | 0.6% – 1.6% | |||||||||||
(0.8%) | ||||||||||||
66,750 | Appraisals/Broker quotes | — | — | |||||||||
Equity securities: | ||||||||||||
Investment funds | 6,012 | Internal cash flows | Discount rate | 0.0% – 65.0% | ||||||||
(11.3%) | ||||||||||||
32,702 | Discounted cash flows | Discount rate | 3.8% – 17.0% | |||||||||
(14.1%) | ||||||||||||
22,479 | Appraisals/Broker quotes | — | — | |||||||||
Derivative assets: | ||||||||||||
Options held/written and other | 5,005 | Discounted cash flows | Discount rate | 0.0% – 15.0% | ||||||||
(8.6%) | ||||||||||||
267 | Appraisals/Broker quotes | — | — | |||||||||
Other assets: | ||||||||||||
Reinsurance recoverables | 12,449 | Discounted cash flows | Discount rate | (0.1)% – 0.4% | ||||||||
(0.1%) | ||||||||||||
Mortality rate | 0.0% – 100.0% | |||||||||||
(1.3%) | ||||||||||||
Lapse rate | 1.5% – 24.0% | |||||||||||
(16.2%) | ||||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||||
(99.9%) | ||||||||||||
Total | ¥ | 179,361 | ||||||||||
Liabilities: | ||||||||||||
Policy liabilities and Policy Account Balances: | ||||||||||||
Variable annuity and variable life insurance contracts | ¥ | 360,198 | Discounted cash flows | Discount rate | (0.1)% – 0.4% | |||||||
(0.1%) | ||||||||||||
Mortality rate | 0.0% – 100.0% | |||||||||||
(1.3%) | ||||||||||||
Lapse rate | 1.5% – 54.0% | |||||||||||
(16.0%) | ||||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||||
(80.3%) | ||||||||||||
Total | ¥ | 360,198 | ||||||||||
March 31, 2020 | ||||||||||
Millions of yen | Valuation technique(s) | Significant unobservable inputs | Range (Weighted average) | |||||||
Fair value | ||||||||||
Assets: | ||||||||||
Available-for-sale | ||||||||||
Japanese prefectural and foreign municipal bond securities | ¥ | 2,832 | Discounted cash flows | Discount rate | 8.5% | |||||
| (8.5%) | ||||||||||
Corporate debt securities | 1,995 | Discounted cash flows | Discount rate | 0.4% – 2.5% | ||||||
| (0.8%) | ||||||||||
| 1,999 | Appraisals/Broker quotes | — | — | |||||||
Other asset-backed securities and debt securities | 20,582 | Discounted cash flows | Discount rate | 1.0% – 51.2% | ||||||
| (12.1%) | ||||||||||
| Probability of default | 1.9% | |||||||||
| (1.9%) | ||||||||||
| 60,945 | Appraisals/Broker quotes | — | — | |||||||
Equity securities: | ||||||||||
Investment funds | 5,714 | Internal cash flows | Discount rate | 0.0% | ||||||
| (0.0%) | ||||||||||
| 54,898 | Discounted cash flows | WACC | 7.6% – 19.1% | |||||||
| (16.5%) | ||||||||||
| EV/Terminal EBITDA multiple | 7.0x-11.9x | |||||||||
| (9.3x) | ||||||||||
| Market multiples | EV/Last twelve months EBITDA multiple | 7.5x-11.8x | ||||||||
| (9.4x) | ||||||||||
| EV/Forward EBITDA multiple | 6.5x-10.3x | |||||||||
| (8.4x) | ||||||||||
| EV/Precedent transaction last twelve months EBITDA multiple | 7.5x-12.1x | |||||||||
| (9.5x) | ||||||||||
| 23,289 | Appraisals/Broker quotes | — | — | |||||||
Derivative assets: | ||||||||||
Options held/written and other | 19,170 | Discounted cash flows | Discount rate | 12.0% – 33.0% | ||||||
| (14.4%) | ||||||||||
| 60 | Appraisals/Broker quotes | — | — | |||||||
Other assets: | ||||||||||
Reinsurance recoverables | 18,206 | Discounted cash flows | Discount rate | (0.2)% – 0.6% | ||||||
| (0.2%) | ||||||||||
| Mortality rate | 0.0% – 100.0% | |||||||||
| (1.4%) | ||||||||||
| Lapse rate | 1.5% – 14.0% | |||||||||
| (7.1%) | ||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||
| (100.0%) | ||||||||||
Total | ¥ | 209,690 | ||||||||
Liabilities: | ||||||||||
Policy liabilities and Policy Account Balances: | ||||||||||
Variable annuity and variable life insurance contracts | ¥ | 300,739 | Discounted cash flows | Discount rate | (0.2)% – 0.6% | |||||
| (0.2%) | ||||||||||
| Mortality rate | 0.0% – 100.0% | |||||||||
| (1.3%) | ||||||||||
| Lapse rate | 1.5% – 30.0% | |||||||||
| (6.9%) | ||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||
| (80.9%) | ||||||||||
Total | ¥ | 300,739 | ||||||||
F-40
March 31, 2020 | ||||||||||||
Millions of yen | Valuation technique(s) | Significant unobservable inputs | Range (Weighted average) | |||||||||
Fair value | ||||||||||||
Assets: | ||||||||||||
Available-for-sale debt securities: | ||||||||||||
Japanese prefectural and foreign municipal bond securities | ¥ | 2,832 | Discounted cash flows | Discount rate | 8.5% | |||||||
(8.5%) | ||||||||||||
Corporate debt securities | 1,995 | Discounted cash flows | Discount rate | 0.4% – 2.5% | ||||||||
(0.8%) | ||||||||||||
1,999 | Appraisals/Broker quotes | — | — | |||||||||
Other asset-backed securities and debt securities | 20,582 | Discounted cash flows | Discount rate | 1.0% – 51.2% | ||||||||
(12.1%) | ||||||||||||
Probability of default | 1.9% | |||||||||||
(1.9%) | ||||||||||||
60,945 | Appraisals/Broker quotes | — | — | |||||||||
Equity securities: | ||||||||||||
Investment funds | 5,714 | Internal cash flows | Discount rate | 0.0% | ||||||||
(0.0%) | ||||||||||||
54,898 | Discounted cash flows | WACC | 7.6% – 19.1% | |||||||||
(16.5%) | ||||||||||||
EV/Terminal EBITDA multiple | 7.0x – 11.9x | |||||||||||
( 9.3x ) | ||||||||||||
Market multiples | EV/Last twelve months EBITDA multiple | 7.5x – 11.8x | ||||||||||
( 9.4x ) | ||||||||||||
EV/Forward EBITDA multiple | 6.5x – 10.3x (8.4x) | |||||||||||
EV/Precedent transaction last twelve months EBITDA multiple | 7.5x – 12.1x (9.5x) | |||||||||||
23,289 | Appraisals/Broker quotes | — | — | |||||||||
Derivative assets: | ||||||||||||
Options held/written and other | 19,170 | Discounted cash flows | Discount rate | 12.0% – 33.0% | ||||||||
(14.4%) | ||||||||||||
60 | Appraisals/Broker quotes | — | — | |||||||||
Other assets: | ||||||||||||
Reinsurance recoverables | 18,206 | Discounted cash flows | Discount rate | (0.2)% – 0.6% | ||||||||
(0.2%) | ||||||||||||
Mortality rate | 0.0% – 100.0% | |||||||||||
(1.4%) | ||||||||||||
Lapse rate | 1.5% – 14.0% | |||||||||||
(7.1%) | ||||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||||
(100.0%) | ||||||||||||
Total | ¥ | 209,690 | ||||||||||
Liabilities: | ||||||||||||
Policy liabilities and Policy Account Balances: | ||||||||||||
Variable annuity and variable life insurance contracts | ¥ | 300,739 | Discounted cash flows | Discount rate | (0.2)% – 0.6% | |||||||
(0.2%) | ||||||||||||
Mortality rate | 0.0% – 100.0% | |||||||||||
(1.3%) | ||||||||||||
Lapse rate | 1.5% – 30.0% | |||||||||||
(6.9%) | ||||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||||
(80.9%) | ||||||||||||
Total | ¥300,739 | |||||||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
March 31, 2021 | ||||||||||||
Millions of yen | Valuation technique(s) | Significant unobservable inputs | Range (Weighted average) | |||||||||
Fair value | ||||||||||||
Assets: | ||||||||||||
Available-for-sale | ||||||||||||
Japanese prefectural and foreign municipal bond securities | ¥ | 2,761 | Appraisals/Broker quotes | — | — | |||||||
Corporate debt securities | 1,021 | Discounted cash flows | Discount rate | 0.3% – 1.8% | ||||||||
| (0.7%) | ||||||||||||
Other asset-backed securities and debt securities | 25,891 | Discounted cash flows | Discount rate | 1.0% – 51.2% | ||||||||
| (11.1%) | ||||||||||||
| Probability of default | 1.9% | |||||||||||
| (1.9%) | ||||||||||||
| 103,784 | Appraisals/Broker quotes | — | — | |||||||||
Equity securities: | ||||||||||||
Investment funds | 78,134 | Discounted cash flows | WACC | 13.1% – 18.7% | ||||||||
| (16.8%) | ||||||||||||
| EV/Terminal EBITDA multiple | 7.3x – 10.5x | |||||||||||
| (8.6x) | ||||||||||||
| Market multiples | EV/Last twelve months EBITDA multiple | 6.8x – 9.5x | ||||||||||
| (7.8x) | ||||||||||||
| EV/Forward EBITDA multiple | 7.6x – 11.6x | |||||||||||
| (9.0x) | ||||||||||||
| EV/Precedent transaction last twelve months EBITDA multiple | 7.7x – 10.9x | |||||||||||
| (9.1x) | ||||||||||||
| 13,276 | Appraisals/Broker quotes | — | — | |||||||||
Derivative assets: | ||||||||||||
Options held/written and other | 13,762 | Discounted cash flows | Discount rate | 12.0% – 33.0% | ||||||||
| (14.3%) | ||||||||||||
| 61 | Appraisals/Broker quotes | — | — | |||||||||
Other assets: | ||||||||||||
Reinsurance recoverables | 6,297 | Discounted cash flows | Discount rate | 0.0% – 0.4% | ||||||||
| (0.1%) | ||||||||||||
| Mortality rate | 0.0% – 100.0% | |||||||||||
| (1.6%) | ||||||||||||
| Lapse rate | 1.5% – 14.0% | |||||||||||
| (6.7%) | ||||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||||
| (100.0%) | ||||||||||||
Total | ¥ | 244,987 | ||||||||||
Liabilities: | ||||||||||||
Derivative liabilities: | ||||||||||||
| Options held/written and other | ¥ | 33 | Appraisals/Broker quotes | — | — | |||||||
Policy liabilities and Policy Account Balances: | ||||||||||||
Variable annuity and variable life insurance contracts | 266,422 | Discounted cash flows | Discount rate | 0.0% – 0.4% | ||||||||
| (0.1%) | ||||||||||||
| Mortality rate | 0.0% – 100.0% | |||||||||||
| (1.6%) | ||||||||||||
| Lapse rate | 1.5% – 30.0% | |||||||||||
| (6.9%) | ||||||||||||
Annuitization rate (guaranteed minimum annuity benefit) | 0.0% – 100.0% | |||||||||||
| (76.7%) | ||||||||||||
Total | ¥ | 266,455 | ||||||||||
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following tables provide information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets measured at fair value on a nonrecurring basis during fiscal 20192020 and 2020.2021.
2019 | ||||||||||||||||
Millions of yen | Significant unobservable inputs | Range (Weighted average) | ||||||||||||||
Fair value | Valuation technique(s) | |||||||||||||||
Assets: | ||||||||||||||||
Real estate collateral-dependent loans (net of allowance for probable loan losses) | ¥ | 6,630 | Direct capitalization | Capitalization rate | 5.8% – 8.2% | |||||||||||
((6.3%) | ||||||||||||||||
Appraisals | — | — | ||||||||||||||
Investment in operating leases and property under facility operations | 2,345 | Discounted cash flows | Discount rate | 7.3% | ||||||||||||
((7.3%) | ||||||||||||||||
10,556 | Appraisals | — | — | |||||||||||||
Certain investments in affiliates | 334 | Business enterprise value multiples | — | — | ||||||||||||
Discounted cash flows | Discount rate | 14.0% | ||||||||||||||
((14.0%) | ||||||||||||||||
2,563 | Appraisals | — | — | |||||||||||||
| ¥ | 22,428 | |||||||||||||||
2020 | ||||||||||||||||
Millions of yen | Significant unobservable inputs | Range (Weighted average) | ||||||||||||||
Fair value | Valuation technique(s) | |||||||||||||||
Assets: | ||||||||||||||||
Loans held for sale | ¥ | 4,823 | Discounted cash flows | Discount rate | 5.7% – 7.7% | |||||||||||
(6.8)% | ||||||||||||||||
Real estate collateral-dependent loans (net of allowance for probable loan losses) | 12,557 | Direct capitalization | Capitalization rate | 5.6% – 7.0% | ||||||||||||
((6.0%) | ||||||||||||||||
Appraisals | — | — | ||||||||||||||
Investment in operating leases and property under facility operations | 302 | Direct capitalization | Capitalization rate | 4.3% | ||||||||||||
(4.3)% | ||||||||||||||||
Discounted cash flows | Discount rate | 4.1% | ||||||||||||||
(4.1)% | ||||||||||||||||
4,236 | Appraisals | — | — | |||||||||||||
Certain investments in affiliates | 359 | Discounted cash flows | WACC | 14.0% | ||||||||||||
(14.0%) | ||||||||||||||||
Market multiples | EV/Precedent transaction last twelve months EBITDA multiple | 7.0x (7.0x) | ||||||||||||||
EV/Precedent transaction three year average EBITDA multiple | 7.0x (7.0x) | |||||||||||||||
2,113 | Appraisals | — | — | |||||||||||||
| ¥ | 24,390 | |||||||||||||||
2020 | ||||||||||||
Millions of yen | Valuation technique(s) | Significant unobservable inputs | Range (Weighted average) | |||||||||
Fair value | ||||||||||||
Assets: | ||||||||||||
Loans held for sale | ¥ | 4,823 | Discounted cash flows | Discount rate | 5.7% – 7.7% | |||||||
| (6.8%) | ||||||||||||
Real estate collateral-dependent loans (net of allowance for probable loan losses) | 12,557 | Direct capitalization | Capitalization rate | 5.6% – 7.0% | ||||||||
| (6.0%) | ||||||||||||
| Appraisals | — | — | ||||||||||
Investment in operating leases and property under facility operations | 302 | Direct capitalization | Capitalization rate | 4.3% | ||||||||
| (4.3%) | ||||||||||||
Discounted cash flows | Discount rate | 4.1% | ||||||||||
| (4.1%) | ||||||||||||
| 4,236 | Appraisals | — | — | |||||||||
Certain investments in affiliates | 359 | Discounted cash flows | WACC | 14.0% | ||||||||
| (14.0%) | ||||||||||||
| Market multiples | EV/Precedent transaction last twelve months EBITDA multiple | 7.0x | ||||||||||
| (7.0x) | ||||||||||||
| EV/Precedent transaction three year average EBITDA multiple | 7.0x | |||||||||||
| (7.0x) | ||||||||||||
| 2,113 | Appraisals | — | — | |||||||||
| ¥ | 24,390 | |||||||||||
2021 | ||||||||||||
Millions of yen | Valuation technique(s) | Significant unobservable inputs | Range (Weighted average) | |||||||||
Fair value | ||||||||||||
Assets: | ||||||||||||
Real estate collateral-dependent loans (net of allowance for credit losses) | ¥ | 1,953 | Direct capitalization | Capitalization rate | 5.1% – 7.0% | |||||||
| (5.9%) | ||||||||||||
| 8,726 | Appraisals | — | — | |||||||||
Investment in operating leases and property under facility operations | 4,934 | Appraisals | — | — | ||||||||
Certain equity securities | 3,577 | Appraisals | — | — | ||||||||
Certain investments in affiliates | 2,614 | Appraisals | — | — | ||||||||
Certain goodwill | 775 | Market multiples | EV/Precedent transaction last twelve months EBITDA multiple | 5.5x | ||||||||
(5.5x) | ||||||||||||
| ¥ | 22,579 | |||||||||||
The Company and its subsidiaries generally use discounted cash flow methodologies or similar internally developed models to determine the fair value of Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, changes in these unobservable inputs may have a significant impact on the fair value.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Certain of these unobservable inputs will have a directionally consistent impact on the fair value of the asset or liability for a given change in that input. Alternatively, the fair value of the asset or liability may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change in another input having a potentially muted impact to the overall fair value of that particular asset or liability. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in certain inputs are interrelated to one another), which may counteract or magnify the fair value impact.
Unobservable inputs are weighted by the relative fair value of the asset or liability.
For more analysis of the sensitivityuncertainty of each input, see the description of the main valuation methodologies used for assets and liabilities measured at fair value.
3. Acquisitions and Divestitures
(1) Acquisitions
During fiscal 2019, the Company and its subsidiaries acquired entities for a total cost of the acquisition consideration of ¥148,483 million, which was paid mainly in cash. Goodwill initially recognized in these transactions amounted to ¥72,466 million and the goodwill is not deductible for income tax purposes. The amount of acquired intangible assets other than goodwill recognized in these transactions was ¥15,991 million.
During fiscal 2020, the Company and its subsidiaries acquired entities for a total cost of the acquisition consideration of ¥190,119 million, which was paid mainly in cash. Goodwill initially recognized in these transactions amounted to ¥46,522 million and the goodwill is not deductible for income tax purposes. The amount of acquired intangible assets other than goodwill recognized in these transactions was ¥20,437 million.
During fiscal 2021, the Company and its subsidiaries acquired entities for a total cost of the acquisition consideration of ¥104,197 million, which was paid mainly in cash. Goodwill initially recognized in these transactions amounted to ¥59,186 million and the goodwill is not deductible for income tax purposes. The amount of acquired intangible assets other than goodwill recognized in these transactions was ¥30,595
million. The Company reflected certain preliminary estimates with respect to the fair value of certain components of the underlying net assets of these entities in determining amounts of the goodwill. The amount of the goodwill and intangible assets could possibly be adjusted because certain of these acquisitions were made near the fiscalOverseas BusinessPE Investment and Concession segment and Investment and OperationORIX Europe segment.
year-end
and the purchase price allocations have not been completed yet with respect to the final valuation of acquired intangible assets among others. The acquisitions were mainly included in The company 2018 and 2019. As a result of the reassessment of the provisional purchase price allocation during
Company
did 0t recognize any bargain purchase gain during fiscalfiscal
2020, the Company recognized bargain purchase gains of ¥955 million associated with two of its acquisitions executed during fiscal 2019. The bargain purchase gains were included in Corporate Financial Services and Maintenance Leasing segment. As a result of the reassessment of the provisional purchase price allocation of wind power generation subsidiaries in India and another acquisition executed during fiscal 2020, the Company recognized bargain purchase gains of
¥4,966 million during fiscal 2021. The bargain purchase gains consisted of ¥4,365 million in Environment and Energy segment and
¥601 million in PE Investment and Concession segment.
The segment in which goodwill is allocated is disclosed in Note 16 “Goodwill and Other Intangible Assets.”
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
(2) Divestitures
Gains on sales of subsidiaries and affiliates and liquidation losses, net for fiscal 2018, 2019, 2020 and 20202021 amounted to ¥49,203 million, ¥33,314 million, and ¥74,001 million respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for fiscal 2018 mainly consisted of ¥30,176¥23,300 million, in Investment and Operation segment, ¥15,408 million in Overseas Business segment, ¥2,028 million in Corporate Financial Services segment and ¥1,604 million in Real Estate segment.respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for fiscal 2019 mainly consisted of ¥23,513¥20,609 million in Overseas Business ORIX USA
segment, ¥8,025 million in Real Estate segment and ¥1,220¥2,841 million in Maintenance LeasingAsia and Australia segment. Gains on sales of subsidiaries and affiliates and liquidation losses, net for fiscal 2020 mainly consisted of ¥39,663¥26,424 million in Overseas BusinessORIX USA segment, ¥17,995¥18,127 million in PE Investment and OperationConcession segment, and ¥16,223 million in Real Estate segment and ¥13,085 million in ORIX Europe segment.
Gains on sales of subsidiaries and affiliates and liquidation losses, net for fiscal 2021 mainly consisted of ¥11,516 million in Environment and Energy segment, ¥6,604 million in Asia and Australia segment and ¥4,261
million in ORIX USA segment.
Since April 1, 2020, the
4. Revenues from Contracts with Customers
The following table provides information about revenues from contracts with customers, and other sources of revenue in fiscal 2019, 2020 and 2020. For further information about sales of goods, real estate sales and services income in fiscal 2018, see Note 5 “Sales of Goods and Real Estate Sales and Services Income.”2021.
Millions of yen | ||||||||
2019 | 2020 | |||||||
Goods or services category | ||||||||
Sales of goods | ¥ | 462,029 | ¥ | 287,558 | ||||
Real estate sales | 134,136 | 118,953 | ||||||
Asset management and servicing | 191,820 | 181,851 | ||||||
Automobile related services | 78,723 | 77,987 | ||||||
Facilities operation | 104,005 | 69,297 | ||||||
Environment and energy services | 132,243 | 141,532 | ||||||
Real estate management and brokerage | 103,062 | 104,110 | ||||||
Real estate contract work | 82,217 | 88,966 | ||||||
Other | 107,341 | 104,059 | ||||||
Total revenues from contracts with customers | ¥ | 1,395,576 | ¥ | 1,174,313 | ||||
Other revenues* | 19,383 | 8,210 | ||||||
Total sales of goods and real estate and services income | ¥ | 1,414,959 | ¥ | 1,182,523 | ||||
Millions of yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Goods or services category | ||||||||||||
Sales of goods | ¥ | 462,029 | ¥ | 287,558 | ¥ | 321,883 | ||||||
Real estate sales | 134,136 | 118,953 | 89,070 | |||||||||
Asset management and servicing | 191,820 | 181,851 | 173,191 | |||||||||
Automobile related services | 78,723 | 77,987 | 72,000 | |||||||||
Facilities operation | 104,005 | 69,297 | 23,811 | |||||||||
Environment and energy services | 132,243 | 141,532 | 137,011 | |||||||||
Real estate management and brokerage | 103,062 | 104,110 | 101,942 | |||||||||
Real estate contract work | 82,217 | 88,966 | 80,179 | |||||||||
Other | 107,341 | 104,059 | 88,468 | |||||||||
Total revenues from contracts with customers | 1,395,576 | 1,174,313 | 1,087,555 | |||||||||
Other revenues* | 19,383 | 8,210 | 3,247 | |||||||||
Total sales of goods and real estate and services income | ¥ | 1,414,959 | ¥ | 1,182,523 | ¥ | 1,090,802 | ||||||
| * | Other revenues are not in the scope of revenue from contracts with customers. |
F-44
NOTES TO CONSOLIDATEDSTATEMENTS— STATEMENTS—(Continued)
FINANCIAL
ORIX Corporation and Subsidiaries
The following table provides information about costs of goods sold and real estate sold and services expense in fiscal 2019, 2020 and 2020. For further information about costs of goods sold, costs of real estate sold and services expenses in fiscal 2018, see Note 5 “Sales of Goods and Real Estate Sales and Services Income.”2021.
Millions of yen | ||||||||
2019 | 2020 | |||||||
Goods or services category | ||||||||
Costs of goods sold | ¥ | 419,001 | ¥ | 247,036 | ||||
Costs of real estate sold | 116,260 | 106,970 | ||||||
Asset management and servicing | 44,107 | 37,808 | ||||||
Automobile related services | 47,859 | 48,579 | ||||||
Facilities operation | 95,207 | 66,163 | ||||||
Environment and energy services | 105,414 | 110,899 | ||||||
Real estate management and brokerage | 94,869 | 94,119 | ||||||
Real estate contract work | 71,958 | 76,983 | ||||||
Other | 48,906 | 49,363 | ||||||
Total expenses of costs of goods and real estate sold and services expenses | ¥ | 1,043,581 | ¥ | 837,920 | ||||
Millions of yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Goods or services category | ||||||||||||
Costs of goods sold | ¥ | 419,001 | ¥ | 247,036 | ¥ | 272,657 | ||||||
Costs of real estate sold | 116,260 | 106,970 | 75,064 | |||||||||
Asset management and servicing | 44,107 | 37,808 | 42,145 | |||||||||
Automobile related services | 47,859 | 48,579 | 45,734 | |||||||||
Facilities operation | 95,207 | 66,163 | 41,461 | |||||||||
Environment and energy services | 105,414 | 110,899 | 105,246 | |||||||||
Real estate management and brokerage | 94,869 | 94,119 | 89,685 | |||||||||
Real estate contract work | 71,958 | 76,983 | 69,815 | |||||||||
Other | 48,906 | 49,363 | 45,147 | |||||||||
Total expenses of costs of goods and real estate sold and services expenses | ¥ | 1,043,581 | ¥ | 837,920 | ¥ | 786,954 | ||||||
The Company and its subsidiaries recognize revenues when control of the promised goods or services is transferred to our customers, in the amounts that reflect the consideration we expect to receive in exchange for those goods or services. Revenues are recognized net of discounts, incentives and estimated sales returns. Amount to be collected for third party is deducted from revenues. The Company and its subsidiaries evaluate whether we are principal or agent on distinctive goods or services. InWhen a revenue transaction thatinvolves a third party, concerns, if the Company and its subsidiaries control the goods or services before they are transferred to customers, revenue is recognized on gross amount as the principal. There is no significant variability in considerations included in revenues, except for the performance fees regarding asset management business hereinafter, and there is no significant financing component in considerations on transactions.
For further information about breakdowns of revenues disaggregated by goods or services category and geographical location by segment, see Note 343
4
“Segment Information.”Revenue recognition criteria on each goods or services category are mainly as follows:
Sales of goods
The Company and its subsidiaries sell various goods such as precious metals, medical equipment, business management software and other to customers. Revenues from sales of goods are recognized when there is a transfer of control of the product to customers. The Company and its subsidiaries determine transfer of control based on when the products are shipped or delivered to customers, or inspected by customers.
Real estate sales
Certain subsidiaries are involved in condominium business. Revenues from salesales of detached houses and residential condominiums are recognized when the real estate is delivered to customers.
Asset management and servicing
Certain subsidiaries offer customers investment management services for their financial assets, asset management as well as maintenance and administrative services for their real estate properties. Furthermore, the
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Company and its subsidiaries perform servicing on behalf of customers. Revenues from asset management and servicing primarily include management fees, servicing fees, and performance fees. Management and servicing fees are recognized over the contract period with customers, since the customers simultaneously receive and consume all of the benefits provided by the performancesubsidiaries as the subsidiaries perform. Management fees are calculated based on the predetermined percentages of the market value of the assets under management or net assets of the investment funds in accordance with contract terms. Servicing fees are calculated based on the predetermined percentages of the amount in assets under management in accordance with contract terms. Fees based on the performance of the assets under management are recognized when the performance obligations are satisfied, to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The performance fee is estimated by using the most likely amount method, in accordance with contract terms. Servicing fees related to financial assets that the Company and its subsidiaries had originated and transferred to investors, are not in the scope of revenue from contracts with customers. These fees are accounted for servicing assets under which the benefits of servicing are expected to more than adequately compensate for performing the servicing, or servicing liabilities under which the benefits of servicing are not expected to adequately compensate for performing the servicing.
Automobile related services
Certain subsidiaries mainly provide automobile maintenance services to customers, as automobile related services. In the service, since customers simultaneously receive and consume all of the benefits provided by the performancesubsidiaries as the subsidiaries perform, revenues are recognized over the contract period with customers. For measurement of progress, the cost incurred is used, because that reasonably describes transfer of control of services to customers. The subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Facilities operation
The Company and its subsidiaries are running hotels, Japanese inns, training facilities, a multipurpose dome and other facilities. Revenues from these operations are recognized over the customers’ usage period of the facilities, since customers simultaneously receive and consume all of the benefits provided by the performanceCompany and its subsidiaries as the Company and its subsidiaries perform. The value transferred to customers is directly measured based on the usage period. With respect to operation of a multipurpose dome, a certain subsidiary receives payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities. Gains on sale of property under facility operations included in services income are not inwithin the scope of revenue from contracts with customers duebecause these gains refer to the gains are transfers of nonfinancialnon-financial assets to counterparties that are not considered to be our customers.
Environment and energy services
The Company and its subsidiaries offer services that provide electric power forto business operators’ factories, office buildings and other facilities. Revenues from electric power supply by purchasing electricity or running power plants are recognized over the contracted distribution period with customers, since customers simultaneously receive and consume all of the benefits provided by the performanceCompany and its subsidiaries as the Company and its subsidiaries perform. The value transferred to customers is directly measured based on electricity usage by customers. Furthermore, certain subsidiaries are running waste processing facilities. Revenues from resources and waste processing business are primarily recognized over the service contract period with customers, since
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
with customers, since customers simultaneously receive and consume all of the benefits provided by the performancesubsidiaries as the subsidiaries perform. The value transferred to customers is directly measured based on the amount of resources and waste to be processed.
Real estate management and brokerage
The Company and its subsidiaries mainly offer management of condominiums, office buildings, and facilities and other,others, to customers, as real estate management and brokerage business. Since customers simultaneously receive and consume all of the benefits provided by the performanceCompany and its subsidiaries as the Company and its subsidiaries perform, revenues from these services are recognized over the contract period with customers. Direct measurement of the value transferred to customers based on time elapsed, is used as method of measuring progress. The Company and its subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Real estate contract work
Certain subsidiaries offer repair and contract work for condominiums, office buildings, and facilities, and other,others, to customers. The work is held on the real estate where customers own or rent, and the subsidiaries’ performance creates the asset that the customers’ control as the asset is created or enhanced. Additionally, the performance does not create an asset with an alternative use to the subsidiaries, and the subsidiaries have a substantial enforceable right to payment for performance completed to date so that revenues are recognized over the contract work period. For measurement of progress, the cost incurred is used, because that reasonably describes transfer of control of services to customers. The subsidiaries recognize contract assets regarding a part of its performance obligations that the subsidiaries performed,it performs as contract assets, and the amounts are reported inunder other assets on the consolidated balance sheets.sheet. Furthermore, the subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Other
The Company and its subsidiaries have been developing a variety of businesses. Main revenue streams are as follows;
Maintenance services of software, measurement equipment and other:
Certain subsidiaries offerperformancesubsidiaries as the subsidiaries perform. For measurement of progress, the cost incurred is used, because that reasonably describes transfer of control of services to customers. The subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
business management
software maintenance services and support, and maintenance of measurement equipment to customers. Revenues from these services are recognized over the contract period with customers, since customers simultaneously receive and consume all of the benefits provided by the Fee business:
The Company and its subsidiaries are involved in insurance policy referrals and other agency business. Commission revenues from these businesses are primarily recognized when the contract between our customers and their client is signed.
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following table provides information about balances from contracts with customers as of March 31, 20192020 and 2020.2021.
Millions of yen | ||||||||
March 31, 2019 | March 31, 2020 | |||||||
Trade Notes, Accounts and Other Receivable | ¥ | 161,884 | ¥ | 165,676 | ||||
Contract assets (Included in Other Assets) | 2,277 | 3,811 | ||||||
Contract liabilities (Included in Other Liabilities) | 45,371 | 32,805 | ||||||
Millions of yen | ||||||||
March 31, 2020 | March 31, 2021 | |||||||
Trade Notes, Accounts and Other Receivable | ¥ | 165,676 | ¥ | 180,828 | ||||
Contract assets (Included in Other Assets) | 3,811 | 6,558 | ||||||
Contract liabilities (Included in Other Liabilities) | 32,805 | 40,436 | ||||||
For fiscal 20192020 and 2020,2021, there were no significant changes in contract assets. For fiscal 2019, there werenosignificant changes in contract liabilities. For fiscal 2020, contract liabilities decreased due to deconsolidation of contract liabilities of ¥14,342 million related to facilities operation caused by the sale of ORIX Living. For fiscal 2021, there were no significant changes in contract liabilities.
For fiscal 2019,2020, revenue amounted to ¥38,905 ¥31,908
million was included in contract liabilities as of the beginning of the previous fiscal year.March 31, 2019. For fiscal 2020,2021, revenue amounted to ¥31,908
¥30,367 million was included in contract liabilities as of the end of the previous fiscal year.March 31, 2020.
As of March 31, 2020,2021, transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) is mainly related to automobile related services, real estate sales and amounted to ¥137,320¥140,885 million. Remaining term for the obligations ranges up to 1514 years. Furthermore, automobile related services primarily constitute the performance obligations that are unsatisfied (or partially unsatisfied) will be recognized as revenue over the next 10 years. The Company and its subsidiaries applied practical expedients in the disclosure, and performance obligations for contracts that have an original expected duration of one year or less and contracts under which the value transferred to a customer is directly measured and recognized as revenue by the amount it has a right to invoice to the customer are not included. The transaction price allocated to unsatisfied performance obligations does not include the estimate of material variable consideration.
As of March 31, 20192020 and 2020,2021, assets recognized from the costs to obtain or fulfill contracts with customers were not material.
5. Sales of Goods and Real Estate Sales and Services Income
yen | ||||
The following table provides information about Cash, Cash Equivalents and Restricted Cash which are included in the Company’s consolidated balance sheets as of March 31, 20192020 and 2020,2021, respectively.
Millions of yen | ||||||||
2019 | 2020 | |||||||
Cash and Cash Equivalents | ¥ | 1,161,032 | ¥ | 982,666 | ||||
Restricted Cash | 122,548 | 152,618 | ||||||
Cash, Cash Equivalents and Restricted Cash | ¥ | 1,283,580 | ¥ | 1,135,284 | ||||
Millions of yen | ||||||||
2020 | 2021 | |||||||
Cash and Cash Equivalents | ¥ | 982,666 | ¥ | 951,242 | ||||
Restricted Cash | 152,618 | 128,333 | ||||||
Cash, Cash Equivalents and Restricted Cash | ¥ | 1,135,284 | ¥ | 1,079,575 | ||||
Cash payments during fiscal 2018, 2019, 2020 and 20202021 are as follows:
Millions of yen | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Cash payments: | ||||||||||||
Interest | ¥ | 75,013 | ¥ | 92,424 | ¥ | 99,788 | ||||||
Income taxes, net | 181,854 | 67,065 | 124,236 | |||||||||
Millions of yen | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
Cash payments: | ||||||||||||
Interest | ¥ | 92,424 | ¥ | 99,788 | ¥ | 80,313 | ||||||
Income taxes, net | 67,065 | 124,236 | 76,292 | |||||||||
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The main2018, 2019, 2020 and 20202021 are as follows.
non-cash
activities in fiscal In fiscal 20182019 and 2019,2021, real estate under operating leases of ¥226¥1,373 million and ¥1,373¥75 million, respectively, were recognized with the corresponding amounts of installment loans being derecognized as a result of acquiring real estate collateral. In fiscal 2019, property under facility operations of ¥28 million was recognized with the corresponding amounts of installment loans being derecognized as a result of acquiring real estate collateral. In fiscal 2019, 2020 and 2020,2021, other assets of ¥320 million, ¥29 million and ¥29¥1 million, respectively, were
recognized
with the corresponding amounts of installment loans being derecognized as a result of acquiring real estate collateral.million,in the Company’s consolidated balance sheet due to deconsolidation of a subsidiary and certain VIEs which had been consolidated by certain subsidiaries. The derecognized assets mainly consist of installment loans and property under facility operations, and the derecognized liabilities mainly consist of long-term debt. In fiscal 2020, assets and liabilities decreased by ¥1,281
¥1,281 million and ¥33 million, in the Company’s consolidated balance sheet due to deconsolidation of a subsidiary and certain VIEs which had been consolidated by certain subsidiaries. The derecognized assets mainly consist of investment in securities, and the derecognized liabilities mainly consist of other liabilities. In fiscal 2021, assets and liabilities decreased by ¥5,218 million and ¥18 million in the Company’s consolidated balance sheet due to deconsolidation of a subsidiary and certain VIEs which had been consolidated by certain subsidiaries. The derecognized assets mainly consist of investment in securities, and the derecognized liabilities mainly consist of other liabilities. Derecognition of these assets and liabilities were not included in cash flows from investing activities or financing activities in the consolidated statements of cash flows because they did not involve cash transactions.
On April 1, 2019, the Company and its subsidiaries adopted New Lease Standard, which resulted in a gross up of ROU assets and corresponding lease liabilities. ROU assets obtained in exchange for lease liabilities were not included in cash flows from investing activities or financing activities because they did not involve cash transactions. For further information, see Note 1 “Significant Accounting and Reporting Policies (ag) New accounting pronouncements” and Note 76 “Leases.”
(1) Lessor
Some of the contracts include options to extend or to terminate the lease. The Company and its subsidiaries determine the lease term while taking such periods covered by options into account when determined the lease term when it is reasonably certain that it will exercise these options. The majority of the lease contracts do not contain bargain purchase options for customers.
The estimated unguaranteed residual value represents estimated proceeds from the disposition of equipment at the time the lease is terminated. The estimated unguaranteed residual value is determined based on market value of used equipment, estimates of when and how much equipment will become obsolete, and actual
recovery
being experienced for similar used equipment. The Company and its subsidiaries may incur losses if the estimated residual amounts are unable to collect or need to recognize valuation losses when the estimates differ from actual trends in equipment valuation and the secondhand market. The risk of loss on leased assets relating to the estimated unguaranteed residual value of the leased assets is monitored through projections of the estimated unguaranteed residual value at lease origination and periodic review of estimated unguaranteed residual value.F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
When auto leases are bundled with maintenance contracts, considerations on contracts are allocated based upon the estimated standalone selling prices of the lease and
non-lease
components. Lease components generally include product and financing cost, andnon-lease
components generally consist of maintenance contracts.A
non-lease
components from the associated lease components. In this service, ASC 606 is applied to the entire contract because the consideration related tonon-lease
components accounts for the majority of contract consideration. Revenues from these operations are recognized over the customers’ usage period of the services, since customers simultaneously receive and consume the benefits when the performance obligations are satisfied. The value transferred to customers is directly measured based on the usage period.Lease income for fiscal 2020 isand 2021 are as follows:
Millions of yen | ||||||||
Fiscal Year ended March 31, 2020 | Fiscal Year ended March 31, 2021 | |||||||
Lease income – net investment in leases | ||||||||
Interest income | ¥ | 72,663 | ¥ | 69,718 | ||||
Other | 2,412 | 2,113 | ||||||
Lease income – operating leases* | 430,665 | 397,065 | ||||||
Total lease income | ¥ | 505,740 | ¥ | 468,896 | ||||
| * | Gains from the disposition of real estate under operating leases included in operating lease revenues |
Lease income from net investment in leases is included in finance revenues in the2020.
consolidated
statements of income. Gains and losses from the disposition of net investment in leases were not material for fiscal Net investment in leases at March 31, 2020 and 2021 consists of the following:
Millions of yen | Millions of yen | |||||||
March 31, 2020 | March 31, 2021 | |||||||
Lease receivables | ¥ | 1,049,409 | ¥ | 998,050 | ||||
Unguaranteed residual value | 27,868 | 29,245 | ||||||
Initial direct costs | 3,687 | 2,223 | ||||||
Total | ¥ | 1,080,964 | ¥ | 1,029,518 | ||||
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Investment in operating leases at March 31, 2020 and 2021 consists of the following:
Millions of yen | ||||||||
2020 | 2021 | |||||||
Transportation equipment | ¥ | 1,305,908 | ¥ | 1,364,559 | ||||
Measuring and information-related equipment | 287,301 | 307,010 | ||||||
Real estate | 305,981 | 291,917 | ||||||
Other | 32,119 | 43,507 | ||||||
| 1,931,309 | 2,006,993 | |||||||
Accumulated depreciation | (678,245 | ) | (741,022 | ) | ||||
Net | 1,253,064 | 1,265,971 | ||||||
Right-of-use | 121,553 | 114,268 | ||||||
Accrued rental receivables | 25,384 | 28,259 | ||||||
Allowance for doubtful receivables on operating leases* | 0 | (309 | ) | |||||
Total | ¥ | 1,400,001 | ¥ | 1,408,189 | ||||
| * | ||||
Costs of operating leases include depreciation and various expenses (insurance, property tax and other). Depreciation and various expenses for fiscal 2020 and 2021 are as follows:
Millions of yen | ||||||||
2020 | 2021 | |||||||
Depreciation expenses | ¥ | 209,586 | ¥ | 217,212 | ||||
Various expenses | 80,018 | 78,416 | ||||||
Total | ¥ | 289,604 | ¥ | 295,628 | ||||
Remaining lease receivables of net investment in leases (including residual value guarantees) range up to 2928 years at March 31, 2020.2021. Remaining lease receivables of the operating lease contracts range up to 6160 years at March 31, 2020.2021. At March 31, 2020,2021, the amounts due in each of the next five years and thereafter are as follows:
Millions of yen | ||||||||
Years ending March 31, | Net investment in leases | Operating leases | ||||||
2021 | ¥ | 411,013 | ¥ | 289,277 | ||||
2022 | 297,692 | 194,257 | ||||||
2023 | 197,792 | 130,752 | ||||||
2024 | 120,602 | 83,242 | ||||||
2025 | 68,894 | 48,525 | ||||||
Thereafter | 82,385 | 126,200 | ||||||
Total lease payments | 1,178,377 | ¥ | 872,253 | |||||
Less imputed interest | (128,968 | ) | ||||||
Total lease receivables | ¥ | 1,049,409 | ||||||
Millions of yen | ||||||||
Years ending March 31, | Net investment in leases | Operating leases | ||||||
2022 | ¥ | 422,309 | ¥ | 309,912 | ||||
2023 | 275,941 | 197,837 | ||||||
2024 | 179,308 | 131,063 | ||||||
2025 | 108,799 | 80,549 | ||||||
2026 | 61,469 | 43,921 | ||||||
Thereafter | 70,851 | 117,232 | ||||||
Total lease payments | 1,118,677 | ¥ | 880,514 | |||||
Less imputed interest | (120,627 | ) | ||||||
Total lease receivables | ¥ | 998,050 | ||||||
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
(2) Lessee
The Company and its subsidiaries determine if an arrangement is a lease at inception of each contract. The Company and its subsidiaries have operating and finance leases for various assets including lands, office
buildings, employees’ accommodations, and vehicles. Some of the lease arrangements include options to extend or terminate lease term. The Company and its subsidiaries determine the lease term while taking such options into account when determined the lease term when it is reasonably certain that it will exercise these options. The Company and its subsidiaries’ lease arrangements do not contain material residual value guarantees or material restrictive covenants. As a rate implicit in
most
ofthe
leases cannot be readily determinable, the Company and its subsidiaries use incremental borrowing rate based on the information available at commencement to determine the present values of lease payments.The component of lease expense for fiscal 2020 and 2021 are as follows:
Millions of yen | Millions of yen | |||||||
Year ended March 31, 2020 | Year ended March 31, 2021 | |||||||
Finance lease cost | ||||||||
Depreciation expenses of right-of-use | ¥ | 743 | ¥ | 359 | ||||
Interest expenses of lease liabilities | 302 | 131 | ||||||
| 1,045 | 490 | |||||||
Operating lease cost | 42,427 | 42,964 | ||||||
Short-term lease cost | 2,633 | 3,347 | ||||||
Variable lease cost | 948 | 230 | ||||||
Sublease income | (3,688 | ) | (4,142 | ) | ||||
Total | ¥ | 43,365 | ¥ | 42,889 | ||||
Supplemental cash flow information related to leases for fiscal 2020 and 2021 are as follows:
Millions of yen | ||||||||
Year Ended March 31, 2020 | ||||||||
Finance leases | Operating leases | |||||||
Cash paid for amounts included in the measurements of lease liabilities: | ||||||||
Cash flows from operating activities | ¥ | 302 | ¥ | 44,610 | ||||
Cash flows from financing activities | 494 | 0 | ||||||
Right-of-use assets obtained in exchange for lease liabilities: | ¥ | 531 | ¥ | 39,775 | ||||
Millions of yen | ||||||||
Year Ended March 31, 2020 | ||||||||
Finance leases | Operating leases | |||||||
Cash paid for amounts included in the measurements of lease liabilities: | ||||||||
Cash flows from operating activities | ¥ | 302 | ¥ | 44,610 | ||||
Cash flows from financing activities | 494 | 0 | ||||||
Right-of-use | ¥ | 531 | ¥ | 39,775 | ||||
Millions of yen | ||||||||
Year Ended March 31, 2021 | ||||||||
Finance leases | Operating leases | |||||||
Cash paid for amounts included in the measurements of lease liabilities: | ||||||||
Cash flows from operating activities | ¥ | 131 | ¥ | 41,680 | ||||
Cash flows from financing activities | 674 | 0 | ||||||
Right-of-use | ¥ | 228 | ¥ | 55,344 | ||||
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Supplemental balance sheet information related to lessee leases at March 31, 2020 and 2021 are as follows:
Millions of yen, except lease term and discount rate | ||||||||
March 31, 2020 | ||||||||
Finance leases | Operating leases | |||||||
Investment in Operating Leases | ¥ | 0 | ¥ | 121,553 | ||||
Property under Facility Operations | 2,241 | 73,226 | ||||||
Office Facilities | 8 | 75,381 | ||||||
Total right-of-use assets | 2,249 | 270,160 | ||||||
Other Liabilities | 2,840 | 266,790 | ||||||
Total lease liabilities | ¥ | 2,840 | ¥ | 266,790 | ||||
Weighted average remaining lease term | 9years | 13years | ||||||
Weighted average discount rate | 3.01 | % | 1.08 | % | ||||
Millions of yen, except lease term and discount rate | ||||||||
March 31, 2020 | ||||||||
Finance leases | Operating leases | |||||||
Investment in Operating Leases | ¥ | 0 | ¥ | 121,553 | ||||
Property under Facility Operations | 2,241 | 73,226 | ||||||
Office Facilities | 8 | 75,381 | ||||||
Total right-of-use | 2,249 | 270,160 | ||||||
Other Liabilities | 2,840 | 266,790 | ||||||
Total lease liabilities | ¥ | 2,840 | ¥ | 266,790 | ||||
Weighted average remaining lease term | 9years | 13years | ||||||
Weighted average discount rate | 3.0 | % | 1.1 | % | ||||
Millions of yen, except lease term and discount rate | ||||||||
March 31, 2021 | ||||||||
Finance leases | Operating leases | |||||||
Investment in Operating Leases | ¥ | 257 | ¥ | 114,011 | ||||
Property under Facility Operations | 1,990 | 69,291 | ||||||
Office Facilities | 487 | 108,717 | ||||||
Total right-of-use | 2,734 | 292,019 | ||||||
Other Liabilities | 3,417 | 289,890 | ||||||
Total lease liabilities | ¥ | 3,417 | ¥ | 289,890 | ||||
Weighted average remaining lease term | 7years | 12years | ||||||
Weighted average discount rate | 4.4 | % | 1.1 | % | ||||
At March 31, 2020,2021, the amounts of lease liabilities related to lessee leases due in each of the next five years and thereafter are as follows:
Millions of yen | ||||||||
Years ending March 31, | Finance leases | Operating leases | ||||||
2021 | ¥ | 485 | ¥ | 45,303 | ||||
2022 | 484 | 30,701 | ||||||
2023 | 482 | 26,884 | ||||||
2024 | 477 | 23,861 | ||||||
2025 | 473 | 21,649 | ||||||
Thereafter | 848 | 135,909 | ||||||
Total lease payments | 3,249 | 284,307 | ||||||
Less imputed interest | (409 | ) | (17,517 | ) | ||||
Total lease liabilities | ¥ | 2,840 | ¥ | 266,790 | ||||
Millions of yen | ||||||||
Years ending March 31, | Finance leases | Operating leases | ||||||
2022 | ¥ | 869 | ¥ | 47,926 | ||||
2023 | 676 | 38,281 | ||||||
2024 | 596 | 32,513 | ||||||
2025 | 540 | 29,881 | ||||||
2026 | 254 | 25,483 | ||||||
Thereafter | 698 | 134,119 | ||||||
Total lease payments | 3,633 | 308,203 | ||||||
Less imputed interest | (216 | ) | (18,313 | ) | ||||
Total lease liabilities | ¥ | 3,417 | ¥ | 289,890 | ||||
Included in finance revenues in the consolidated statements of income areis direct financing leases revenues of ¥59,900 million and ¥58,246 million for fiscal 2018 and 2019, respectively.2019.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Gains and losses from the disposition of direct financing lease assets, which were included in finance revenues, were not material for fiscal 2018 and 2019.
For further information about net investment in76 of “Leases.”
leases
for fiscal 2020 and 2021, see Note For fiscal 2018 and 2019, gains from the disposition of real estate under operating leases included in operating lease revenues are ¥16,383 million and ¥36,763 million, respectively, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues are ¥18,908 million and ¥26,120 million, respectively.million.
Costs of operating leases include depreciation and various expenses (insurance, property tax and other). Depreciation and various expenses for fiscal 2018 and 2019 are as follows:
Millions of yen | ||||||||
2018 | 2019 | |||||||
Depreciation expenses | ¥ | 195,047 | ¥ | 202,858 | ||||
Various expenses | 57,280 | 54,463 | ||||||
| ¥ | 252,327 | ¥ | 257,321 | |||||
Millions of yen | ||||
2019 | ||||
Depreciation expenses | ¥ | 202,858 | ||
Various expenses | 54,463 | |||
| ¥ | 257,321 | |||
For further information about investment in76 of “Leases.”
operating
leases for fiscal 2020 and 2021, see Note The composition of installment loans by domicile and type of borrower at March 31, 20192020 and 20202021 is as follows:
Millions of yen | ||||||||
2019 | 2020 | |||||||
Borrowers in Japan: | ||||||||
Consumer— | ||||||||
Real estate loans | ¥ | 1,560,832 | ¥ | 1,842,131 | ||||
Card loans | 245,139 | 223,651 | ||||||
Other | 32,962 | 32,618 | ||||||
1,838,933 | 2,098,400 | |||||||
Corporate— | ||||||||
Real estate companies | 288,851 | 300,984 | ||||||
Non-recourse loans | 53,067 | 48,566 | ||||||
| Commercial, industrial and other companies | 266,675 | 255,309 | ||||||
608,593 | 604,859 | |||||||
Overseas: | ||||||||
Real estate companies | 104,883 | 250,195 | ||||||
Non-recourse loans | 49,915 | 83,515 | ||||||
Commercial, industrial companies and other | 658,930 | 690,299 | ||||||
813,728 | 1,024,009 | |||||||
Purchased loans* | 16,416 | 13,218 | ||||||
| ¥ | 3,277,670 | ¥ | 3,740,486 | |||||
Millions of yen | ||||||||
2020 | 2021 | |||||||
Borrowers in Japan: | ||||||||
Consumer— | ||||||||
Real estate loans | ¥ | 1,842,131 | ¥ | 1,995,031 | ||||
Card loans | 223,651 | 188,547 | ||||||
Other | 32,618 | 27,698 | ||||||
| 2,098,400 | 2,211,276 | |||||||
Corporate— | ||||||||
Real estate companies | 300,984 | 279,046 | ||||||
Non-recourse loans | 48,566 | 47,956 | ||||||
Commercial, industrial and other companies | 255,309 | 203,890 | ||||||
| 604,859 | 530,892 | |||||||
Overseas: | ||||||||
Real estate companies | ¥ | 250,195 | ¥ | 197,074 | ||||
Non-recourse loans | 83,515 | 113,129 | ||||||
Commercial, industrial companies and other | 690,299 | 606,062 | ||||||
| 1,024,009 | 916,265 | |||||||
Purchased loans* | 13,218 | 12,351 | ||||||
| ¥ | 3,740,486 | ¥ | 3,670,784 | |||||
| * | Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely. |
F-5
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
Generally, installment loans are made under agreements that require the borrower to provide collateral or guarantors.
At March 31, 2020,2021, the contractual maturities of installment loans (except purchased loans) for each of the next five years and thereafter are as follows:
Years ending March 31, | Millions of yen | |||
2021 | ¥ | 579,065 | ||
2022 | 352,497 | |||
2023 | 350,778 | |||
2024 | 255,482 | |||
2025 | 247,876 | |||
Thereafter | 1,941,570 | |||
Total | ¥ | 3,727,268 | ||
Years ending March 31, | Millions of yen | |||
2022 | ¥ | 520,274 | ||
2023 | 398,703 | |||
2024 | 265,404 | |||
2025 | 245,690 | |||
2026 | 197,143 | |||
Thereafter | 2,031,219 | |||
Total | ¥ | 3,658,433 | ||
Revenues from installment loans which are included in finance revenues in the consolidated statements of income are ¥134,211 million, ¥148,863 million, ¥166,966 million and ¥166,966¥169,401 million for fiscal 2018, 2019, 2020 and 2020,2021, respectively.
Certain loans, for which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held for sale and are carried at the lower of cost or market value determined on an individual basis, except loans held for sale for which the fair value option was elected. A subsidiary elected the fair value option on its loans held for sale. The subsidiary enters into forward sale agreements to offset the change in the fair value of loans held for sale, and the election of the fair value option allows the subsidiary to recognize both the change in the fair value of the loans and the change in the fair value of the forward sale agreements due to changes in interest rates in the same accounting period. Loans held for sale are included in installment loans, and the outstanding balances of these loans as of March 31, 20192020 and 20202021 were ¥54,311¥127,194 million and ¥127,194¥72,658 million, respectively. There were ¥38,671¥90,893 million and ¥90,893¥63,272 million of loans held for sale as of March 31, 20192020 and 2020,2021, respectively, measured at fair value by electing the fair value option.
Purchased loans acquired by the Company and its subsidiaries are generally loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely and characterized by extended period of16,41613,218,20192020, 2021, respectively, and the fair value at the acquisition date of purchased loans acquired during fiscal201920204,7162,983
non-performance
by the borrower, and it is difficult to reliably estimate the amount, timing, or nature of collections. Because such loans are commonly collateralized by real estate, the Company and its subsidiaries may pursue various approaches to maximizing the return from the collateral, including arrangement of borrower’snegotiated transaction of such collateral before foreclosure, the renovation, refurbishment or the sale of such loans to third parties. Accordingly, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans. The total carrying amounts of these purchased loans were ¥
¥13,218 million and ¥
¥12,351 million as of March
31, 2020 and
2020 and
2021 were ¥
¥2,983 million and ¥
¥2,704 million, respectively.
F-55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
When it is probable that the Company and its subsidiaries will be unable to collect all book value, the Company and its subsidiaries consider purchased loans impaired, and a valuation allowance for the excess amount of the book value over the estimated recoverable amount of the loans is provided. For most cases, the recoverable amount is estimated based on the collateral value. Purchased loans for which valuation allowances were provided amounted to ¥3,658 million and ¥1,497 million as of March 31, 2019 and 2020, respectively.2020.
Changes in the allowance for uncollectible accounts relating to the purchased loans for fiscal 2018, 2019 and 2020 are as follows:
Millions of yen | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Beginning balance | ¥ | 6,061 | ¥ | 4,292 | ¥ | 3,186 | ||||||
Provision (Reversal) | (539 | ) | (331 | ) | (24 | ) | ||||||
Charge-offs | (1,375 | ) | (822 | ) | (1,789 | ) | ||||||
Recoveries | 152 | 126 | 77 | |||||||||
Other* | (7 | ) | (79 | ) | 8 | |||||||
Ending balance | ¥ | 4,292 | ¥ | 3,186 | ¥ | 1,458 | ||||||
Millions of yen | ||||||||
2019 | 2020 | |||||||
Beginning balance | ¥ | 4,292 | ¥ | 3,186 | ||||
Provision (Reversal) | (331 | ) | (24 | ) | ||||
Charge-offs | (822 | ) | (1,789 | ) | ||||
Recoveries | 126 | 77 | ||||||
Other* | (79 | ) | 8 | |||||
Ending balance | ¥ | 3,186 | ¥ | 1,458 | ||||
| * | Other includes foreign currency translation adjustments. |
The Company and its subsidiaries provide the following information disaggregated by portfolio segment and class of financing receivable.
Allowance for credit losses—by portfolio segment
Credit quality of financing receivables—by class
Impaired loans
Credit quality indicators
Non-accrual
andpast-due
financing receivablesInformation about troubled debt restructurings—by class
A portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. The Company and its subsidiaries classify our portfolio segments by instruments of loans and net investment in leases. Classes of financing receivables are
determined
based on the initial measurement attribute, risk characteristics of the financing receivables and the method for monitoring and assessing obligors’ credit risk, and are defined as the level of detail necessary for a financial statement user to understand the risks inherent in the financing receivables. Classes of financing receivables generally are a disaggregation of a portfolio segment, and the Company and its subsidiaries disaggregate our portfolio segments into classes by regions, instruments or industries of our debtors.F-5
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following table provides information about the allowance for credit losses for fiscal 2018, 2019 and 2020:
March 31, 2018 | ||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||
Loans | Direct f inancing leases | Total | ||||||||||||||||||||||
Consumer | Corporate | Purchased loans*1 | ||||||||||||||||||||||
Non-recourse loans | Other | |||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||
Beginning balance | ¥ | 18,599 | ¥ | 2,951 | ¥ | 21,079 | ¥ | 6,061 | ¥ | 10,537 | ¥ | 59,227 | ||||||||||||
Provision (Reversal) | 11,922 | (173 | ) | 3,814 | (539 | ) | 2,241 | 17,265 | ||||||||||||||||
Charge-offs | (9,784 | ) | (2,031 | ) | (4,643 | ) | (1,375 | ) | (2,733 | ) | (20,566 | ) | ||||||||||||
Recoveries | 657 | — | 260 | 152 | 32 | 1,101 | ||||||||||||||||||
Other*2 | (198 | ) | (59 | ) | (2,103 | ) | (7 | ) | 12 | (2,355 | ) | |||||||||||||
Ending balance | ¥ | 21,196 | ¥ | 688 | ¥ | 18,407 | ¥ | 4,292 | ¥ | 10,089 | ¥ | 54,672 | ||||||||||||
Individually evaluated for impairment | 3,020 | 149 | 8,295 | 2,880 | — | 14,344 | ||||||||||||||||||
Not individually evaluated for impairment | 18,176 | 539 | 10,112 | 1,412 | 10,089 | 40,328 | ||||||||||||||||||
Financing receivables: | ||||||||||||||||||||||||
Ending balance | ¥ | 1,739,173 | ¥ | 73,305 | ¥ | 974,058 | ¥ | 18,933 | ¥ | 1,194,888 | ¥ | 4,000,357 | ||||||||||||
Individually evaluated for impairment | 18,911 | 3,745 | 19,385 | 5,101 | — | 47,142 | ||||||||||||||||||
Not individually evaluated for impairment | 1,720,262 | 69,560 | 954,673 | 13,832 | 1,194,888 | 3,953,215 | ||||||||||||||||||
March 31, 2019 | ||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||
Loans | Direct financing leases | Total | ||||||||||||||||||||||
Consumer | Corporate | Purchased loans*1 | ||||||||||||||||||||||
Non-recourse loans | Other | |||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||
Beginning balance | ¥ | 21,196 | ¥ | 688 | ¥ | 18,407 | ¥ | 4,292 | ¥ | 10,089 | ¥ | 54,672 | ||||||||||||
Provision (Reversal) | 12,400 | 213 | 5,919 | (331 | ) | 4,324 | 22,525 | |||||||||||||||||
Charge-offs | (13,115 | ) | 0 | (4,080 | ) | (822 | ) | (2,413 | ) | (20,430 | ) | |||||||||||||
Recoveries | 687 | 0 | 246 | 126 | 158 | 1,217 | ||||||||||||||||||
Other*2 | 27 | 18 | 170 | (79 | ) | (109 | ) | 27 | ||||||||||||||||
Ending balance | ¥ | 21,195 | ¥ | 919 | ¥ | 20,662 | ¥ | 3,186 | ¥ | 12,049 | ¥ | 58,011 | ||||||||||||
Individually evaluated for impairment | 3,372 | 166 | 8,276 | 1,917 | 0 | 13,731 | ||||||||||||||||||
Not individually evaluated for impairment | 17,823 | 753 | 12,386 | 1,269 | 12,049 | 44,280 | ||||||||||||||||||
Financing receivables: | ||||||||||||||||||||||||
Ending balance | ¥ | 1,906,022 | ¥ | 99,028 | ¥ | 1,201,893 | ¥ | 16,416 | ¥ | 1,155,632 | ¥ | 4,378,991 | ||||||||||||
Individually evaluated for impairment | 23,163 | 4,448 | 27,452 | 3,764 | 0 | 58,827 | ||||||||||||||||||
Not individually evaluated for impairment | 1,882,859 | 94,580 | 1,174,441 | 12,652 | 1,155,632 | 4,320,164 | ||||||||||||||||||
March 31, 2020 | ||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||
Loans | Direct financing leases | Total | ||||||||||||||||||||||
Consumer | Corporate | Purchased loans*1 | ||||||||||||||||||||||
Non-recourse loans | Other | |||||||||||||||||||||||
Allowance for credit losses : | ||||||||||||||||||||||||
Beginning balance | ¥ | 21,195 | ¥ | 919 | ¥ | 20,662 | ¥ | 3,186 | ¥ | 12,049 | ¥ | 58,011 | ||||||||||||
Provision (Reversal) | 12,254 | 903 | 7,988 | (24 | ) | 3,304 | 24,425 | |||||||||||||||||
Charge-offs | (13,723 | ) | (1 | ) | (6,548 | ) | (1,789 | ) | (2,859 | ) | (24,920 | ) | ||||||||||||
Recoveries | 554 | 0 | 133 | 77 | 24 | 788 | ||||||||||||||||||
Other*3 | 262 | (35 | ) | (877 | ) | 8 | (826 | ) | (1,468 | ) | ||||||||||||||
Ending balance | ¥ | 20,542 | ¥ | 1,786 | ¥ | 21,358 | ¥ | 1,458 | ¥ | 11,692 | ¥ | 56,836 | ||||||||||||
Individually evaluated for impairment | 3,602 | 228 | 8,950 | 667 | 0 | 13,447 | ||||||||||||||||||
Not individually evaluated for impairment | 16,940 | 1,558 | 12,408 | 791 | 11,692 | 43,389 | ||||||||||||||||||
Financing receivables : | ||||||||||||||||||||||||
Ending balance | ¥ | 2,171,139 | ¥ | 132,081 | ¥ | 1,296,854 | ¥ | 13,218 | ¥ | 1,080,964 | ¥ | 4,694,256 | ||||||||||||
Individually evaluated for impairment | 26,533 | 2,466 | 55,216 | 1,605 | 0 | 85,820 | ||||||||||||||||||
Not individually evaluated for impairment | 2,144,606 | 129,615 | 1,241,638 | 11,613 | 1,080,964 | 4,608,436 | ||||||||||||||||||
Notes 1: Loans held for sale are not included in the table above.
F-5F-597
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
March 31, 2019 | ||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||
Loans | Direct f inancing leases | Total | ||||||||||||||||||||||
Consumer | Corporate | Purchased loans*1 | ||||||||||||||||||||||
Non-recourse loans | Other | |||||||||||||||||||||||
Allowance for credit losses : | ||||||||||||||||||||||||
Beginning balance | ¥ | 21,196 | ¥ | 688 | ¥ | 18,407 | ¥ | 4,292 | ¥ | 10,089 | ¥ | 54,672 | ||||||||||||
Provision (Reversal) | 12,400 | 213 | 5,919 | (331 | ) | 4,324 | 22,525 | |||||||||||||||||
Charge-offs | (13,115 | ) | 0 | (4,080 | ) | (822 | ) | (2,413 | ) | (20,430 | ) | |||||||||||||
Recoveries | 687 | 0 | 246 | 126 | 158 | 1,217 | ||||||||||||||||||
Other*3 | 27 | 18 | 170 | (79 | ) | (109 | ) | 27 | ||||||||||||||||
Ending balance | ¥ | 21,195 | ¥ | 919 | ¥ | 20,662 | ¥ | 3,186 | ¥ | 12,049 | ¥ | 58,011 | ||||||||||||
Individually evaluated for impairment | 3,372 | 166 | 8,276 | 1,917 | 0 | 13,731 | ||||||||||||||||||
Not individually evaluated for impairment | 17,823 | 753 | 12,386 | 1,269 | 12,049 | 44,280 | ||||||||||||||||||
Financing receivables : | ||||||||||||||||||||||||
Ending balance | ¥ | 1,906,022 | ¥ | 99,028 | ¥ | 1,201,893 | ¥ | 16,416 | ¥ | 1,155,632 | ¥ | 4,378,991 | ||||||||||||
Individually evaluated for impairment | 23,163 | 4,448 | 27,452 | 3,764 | 0 | 58,827 | ||||||||||||||||||
Not individually evaluated for impairment | 1,882,859 | 94,580 | 1,174,441 | 12,652 | 1,155,632 | 4,320,164 | ||||||||||||||||||
March 31, 2020 | ||||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||||
Loans | Net investment in leases | Total | ||||||||||||||||||||||
Consumer | Corporate | Purchased loans*1 | ||||||||||||||||||||||
Non-recourse loans | Other | |||||||||||||||||||||||
Allowance for credit losses : | ||||||||||||||||||||||||
Beginning balance | ¥ | 21,195 | ¥ | 919 | ¥ | 20,662 | ¥ | 3,186 | ¥ | 12,049 | ¥ | 58,011 | ||||||||||||
Provision (Reversal) | 12,254 | 903 | 7,988 | (24 | ) | 3,304 | 24,425 | |||||||||||||||||
Charge-offs | (13,723 | ) | (1 | ) | (6,548 | ) | (1,789 | ) | (2,859 | ) | (24,920 | ) | ||||||||||||
Recoveries | 554 | 0 | 133 | 77 | 24 | 788 | ||||||||||||||||||
Other*3 | 262 | (35 | ) | (877 | ) | 8 | (826 | ) | (1,468 | ) | ||||||||||||||
Ending balance | ¥ | 20,542 | ¥ | 1,786 | ¥ | 21,358 | ¥ | 1,458 | ¥ | 11,692 | ¥ | 56,836 | ||||||||||||
Individually evaluated for impairment | 3,602 | 228 | 8,950 | 667 | 0 | 13,447 | ||||||||||||||||||
Not individually evaluated for impairment | 16,940 | 1,558 | 12,408 | 791 | 11,692 | 43,389 | ||||||||||||||||||
Financing receivables : | ||||||||||||||||||||||||
Ending balance | ¥ | 2,171,139 | ¥ | 132,081 | ¥ | 1,296,854 | ¥ | 13,218 | ¥ | 1,080,964 | ¥ | 4,694,256 | ||||||||||||
Individually evaluated for impairment | 26,533 | 2,466 | 55,216 | 1,605 | 0 | 85,820 | ||||||||||||||||||
Not individually evaluated for impairment | 2,144,606 | 129,615 | 1,241,638 | 11,613 | 1,080,964 | 4,608,436 | ||||||||||||||||||
| 2: | New Lease Standard has been adopted since April 1, 2019, and the amounts of investment in direct financing leases have been reclassified to net investment in leases. |
| *1 | Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely. |
| *2 | Other mainly includes foreign currency translation adjustments and decrease in allowance related to sales of loans. |
| *3 | Other mainly includes foreign currency translation adjustments. |
In developing the allowance for credit losses, the Company and its subsidiaries consider, among other things, the following factors:
business characteristics and financial conditions of obligors;
current economic conditions and trends;
prior
charge-off
experience;current delinquencies and delinquency trends; and
value of underlying collateral and guarantees.
The Company and its subsidiaries individually develop the allowance for credit losses for impaired loans. For
non-impaired
loans, including loans that are not individually evaluated for impairment, and net investment in leases, the Company and its subsidiaries evaluate priorcharge-off
experience as segmented by debtor’s industry and the purpose of the loans and develop the allowance for credit losses based on such priorcharge-off
experience as well as current economic conditions.In common with all portfolio segments, a deterioration of debtors’
condition
may increase the risk of delay in payments of principal and interest. For loans to consumer borrowers, the amount of the allowance for credit losses is changed by the variation of individual debtors’ creditworthiness and value of underlying collateral and guarantees, and the priorcharge-off
experience. For loans to corporate other borrowers and net investment in leases, the amount of the allowance for credit losses is changed by current economic conditions and trends, the value of underlying collateral and guarantees, and the priorcharge-off
experience in addition to the debtors’ creditworthiness.The decline of the value of underlying collateral and guarantees may increase the risk of inability to collect from the loans and net investment in leases. Particularly for
non-recourse
loans for which cash flow from real estate is the source of repayment, their collection depends on the real estate collateral value, which may decline as a result of decrease in liquidity of the real estate market, rise in vacancy rate of rental properties, fall in rents and other factors. These risks may change the amount of the allowance for credit losses. For purchased loans, their collection may decrease due to a decline in the real estate collateralvalue
and debtors’ creditworthiness. Thus, these risks may change the amount of the allowance for credit losses.In common with all portfolio segments, the Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal, mainly based upon an evaluation of the relevant debtors’ creditworthiness and the liquidation status of collateral.
F-5F-618
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following table provides information about the impaired loans as of March 31, 2019 and 2020:
March 31, 2019 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Loans individually evaluated for impairment | Unpaid principal balance | Related allowance | ||||||||||
With no related allowance recorded *1 | ¥ | 17,593 | ¥ | 17,521 | ¥ | 0 | ||||||||
Consumer borrowers | 1,158 | 1,111 | 0 | |||||||||||
Real estate loans | 589 | 542 | 0 | |||||||||||
Card loans | 0 | 0 | 0 | |||||||||||
Other | 569 | 569 | 0 | |||||||||||
Corporate borrowers | 16,329 | 16,304 | 0 | |||||||||||
Non-recourse loans | Japan | 232 | 232 | 0 | ||||||||||
The Americas | 3,404 | 3,404 | 0 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 47 | 47 | 0 | ||||||||||
Real estate companies in overseas | 840 | 840 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 975 | 950 | 0 | |||||||||||
Commercial, industrial and other companies in overseas | 10,831 | 10,831 | 0 | |||||||||||
Purchased loans | 106 | 106 | 0 | |||||||||||
With an allowance recorded *2 | 41,234 | 40,234 | 13,731 | |||||||||||
Consumer borrowers | 22,005 | 21,401 | 3,372 | |||||||||||
Real estate loans | 3,845 | 3,639 | 835 | |||||||||||
Card loans | 3,945 | 3,937 | 633 | |||||||||||
Other | 14,215 | 13,825 | 1,904 | |||||||||||
Corporate borrowers | 15,571 | 15,175 | 8,442 | |||||||||||
Non-recourse loans | Japan | 0 | 0 | 0 | ||||||||||
The Americas | 812 | 812 | 166 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,493 | 1,480 | 419 | ||||||||||
Real estate companies in overseas | 0 | 0 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 6,129 | 5,748 | 3,703 | |||||||||||
Commercial, industrial and other companies in overseas | 7,137 | 7,136 | 4,154 | |||||||||||
Purchased loans | 3,658 | 3,658 | 1,917 | |||||||||||
Total | ¥ | 58,827 | ¥ | 57,755 | ¥ | 13,731 | ||||||||
Consumer borrowers | 23,163 | 22,512 | 3,372 | |||||||||||
Real estate loans | 4,434 | 4,181 | 835 | |||||||||||
Card loans | 3,945 | 3,937 | 633 | |||||||||||
Other | 14,784 | 14,394 | 1,904 | |||||||||||
Corporate borrowers | 31,900 | 31,479 | 8,442 | |||||||||||
Non-recourse loans | Japan | 232 | 232 | 0 | ||||||||||
The Americas | 4,216 | 4,216 | 166 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,540 | 1,527 | 419 | ||||||||||
Real estate companies in overseas | 840 | 840 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 7,104 | 6,698 | 3,703 | |||||||||||
Commercial, industrial and other companies in overseas | 17,968 | 17,967 | 4,154 | |||||||||||
Purchased loans | 3,764 | 3,764 | 1,917 | |||||||||||
March 31, 2020 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Loans individually evaluated for impairment | Unpaid principal balance | Related allowance | ||||||||||
With no related allowance recorded *1 | ¥ | 36,528 | ¥ | 36,524 | ¥ | 0 | ||||||||
Consumer borrowers | 997 | 995 | 0 | |||||||||||
| Real estate loans | 584 | 582 | 0 | |||||||||||
| Card loans | 0 | 0 | 0 | |||||||||||
| Other | 413 | 413 | 0 | |||||||||||
Corporate borrowers | 35,423 | 35,421 | 0 | |||||||||||
Non-recourse loans | The Americas | 1,705 | 1,705 | 0 | ||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 2,268 | 2,267 | 0 | ||||||||||
| Real estate companies in overseas | 11,231 | 11,231 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 8,831 | 8,830 | 0 | |||||||||||
Commercial, industrial and other companies in overseas | 11,388 | 11,388 | 0 | |||||||||||
Purchased loans | 108 | 108 | 0 | |||||||||||
With an allowance recorded *2 | 49,292 | 48,936 | 13,447 | |||||||||||
Consumer borrowers | 25,536 | 25,316 | 3,602 | |||||||||||
| Real estate loans | 5,178 | 5,162 | 817 | |||||||||||
| Card loans | 3,932 | 3,924 | 632 | |||||||||||
| Other | 16,426 | 16,230 | 2,153 | |||||||||||
Corporate borrowers | 22,259 | 22,123 | 9,178 | |||||||||||
Non-recourse loans | The Americas | 761 | 761 | 228 | ||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,233 | 1,219 | 374 | ||||||||||
| Real estate companies in overseas | 1,260 | 1,260 | 486 | |||||||||||
Commercial, industrial and other companies in Japan | 3,649 | 3,527 | 2,371 | |||||||||||
Commercial, industrial and other companies in overseas | 15,356 | 15,356 | 5,719 | |||||||||||
Purchased loans | 1,497 | 1,497 | 667 | |||||||||||
Total | ¥ | 85,820 | ¥ | 85,460 | ¥ | 13,447 | ||||||||
Consumer borrowers | 26,533 | 26,311 | 3,602 | |||||||||||
| Real estate loans | 5,762 | 5,744 | 817 | |||||||||||
| Card loans | 3,932 | 3,924 | 632 | |||||||||||
| Other | 16,839 | 16,643 | 2,153 | |||||||||||
Corporate borrowers | 57,682 | 57,544 | 9,178 | |||||||||||
Non-recourse loans | The Americas | 2,466 | 2,466 | 228 | ||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 3,501 | 3,486 | 374 | ||||||||||
| Real estate companies in overseas | 12,491 | 12,491 | 486 | |||||||||||
Commercial, industrial and other companies in Japan | 12,480 | 12,357 | 2,371 | |||||||||||
Commercial, industrial and other companies in overseas | 26,744 | 26,744 | 5,719 | |||||||||||
Purchased loans | 1,605 | 1,605 | 667 | |||||||||||
| Note: | Loans held for sale are not included in the table above. |
F-
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
March 31, 2020 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Loans individually evaluated for impairment | Unpaid principal balance | Related allowance | ||||||||||
With no related allowance recorded *1 | ¥ | 36,528 | ¥ | 36,524 | ¥ | 0 | ||||||||
Consumer borrowers | 997 | 995 | 0 | |||||||||||
Real estate loans | 584 | 582 | 0 | |||||||||||
Card loans | 0 | 0 | 0 | |||||||||||
Other | 413 | 413 | 0 | |||||||||||
Corporate borrowers | 35,423 | 35,421 | 0 | |||||||||||
Non-recourse loans | The Americas | 1,705 | 1,705 | 0 | ||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 2,268 | 2,267 | 0 | ||||||||||
Real estate companies in overseas | 11,231 | 11,231 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 8,831 | 8,830 | 0 | |||||||||||
Commercial, industrial and other companies in overseas | 11,388 | 11,388 | 0 | |||||||||||
Purchased loans | 108 | 108 | 0 | |||||||||||
With an allowance recorded *2 | 49,292 | 48,936 | 13,447 | |||||||||||
Consumer borrowers | 25,536 | 25,316 | 3,602 | |||||||||||
Real estate loans | 5,178 | 5,162 | 817 | |||||||||||
Card loans | 3,932 | 3,924 | 632 | |||||||||||
Other | 16,426 | 16,230 | 2,153 | |||||||||||
Corporate borrowers | 22,259 | 22,123 | 9,178 | |||||||||||
Non-recourse loans | The Americas | 761 | 761 | 228 | ||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,233 | 1,219 | 374 | ||||||||||
Real estate companies in overseas | 1,260 | 1,260 | 486 | |||||||||||
Commercial, industrial and other companies in Japan | 3,649 | 3,527 | 2,371 | |||||||||||
Commercial, industrial and other companies in overseas | 15,356 | 15,356 | 5,719 | |||||||||||
Purchased loans | 1,497 | 1,497 | 667 | |||||||||||
Total | ¥ | 85,820 | ¥ | 85,460 | ¥ | 13,447 | ||||||||
Consumer borrowers | 26,533 | 26,311 | 3,602 | |||||||||||
Real estate loans | 5,762 | 5,744 | 817 | |||||||||||
Card loans | 3,932 | 3,924 | 632 | |||||||||||
Other | 16,839 | 16,643 | 2,153 | |||||||||||
Corporate borrowers | 57,682 | 57,544 | 9,178 | |||||||||||
Non-recourse loans | The Americas | 2,466 | 2,466 | 228 | ||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 3,501 | 3,486 | 374 | ||||||||||
Real estate companies in overseas | 12,491 | 12,491 | 486 | |||||||||||
Commercial, industrial and other companies in Japan | 12,480 | 12,357 | 2,371 | |||||||||||
Commercial, industrial and other companies in overseas | 26,744 | 26,744 | 5,719 | |||||||||||
Purchased loans | 1,605 | 1,605 | 667 | |||||||||||
| *1 | “With no related allowance recorded” represents impaired loans with no allowance for credit losses as all amounts are considered to be collectible. |
| *2 | “With an allowance recorded” represents impaired loans with the allowance for credit losses as all or a part of the amounts are not considered to be collectible. |
The Company and its subsidiaries recognize installment loans other than purchased loans and loans to consumer borrowers as impaired loans when principal or interest isratios, and other relevant available information.
past-due
90 days or more, or it is probable that the Company and its subsidiaries will be unable to collect all amounts due according to the contractual terms of the loan agreements due to various debtor conditions, including insolvency filings, suspension of bank transactions, dishonored bills and deterioration of businesses. Fornon-recourse
loans, in addition to these conditions, the Company and its subsidiaries perform an impairment review using financial covenants, acceleration clauses,loan-to-value
For purchased loans, the Company and its subsidiaries recognize them as impaired loans when it is probable that the Company and its subsidiaries will be unable to collect book values of the remaining investment due to factors such as a decline in the real estate collateral value and debtors’ creditworthiness since the acquisition of these loans.
The Company and its subsidiaries consider that loans to consumer borrowers, including
real estate
estate loans, card loans and other, are impaired when terms of these loans are modified as troubled debt restructurings.Interest payments received on impaired loans other than purchased loans are recorded as interest income unless the collection of the remaining investment is doubtful at which time payments received are recorded as reductions of principal. For purchased loans, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans regardless of whether impairment is recognized or not.
In common with all classes, impaired loans are individually evaluated for a valuation allowance based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. For
non-recourse
loans, in principle, the estimated collectible amount is determined based on the fair value of the collateral securing the loans as they are collateral-dependent. Further for certainnon-recourse
loans, the estimated collectible amount is determined based on the present value of expected future cash flows. The fair value of the real estate collateral securing the loans is determined using appraisals prepared by independent third-party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. We generally obtain a new appraisal once a fiscal year. In addition, we periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a significant change in economic and/or physical conditions which may materially affect its fair value. For impaired purchased loans, the Company and its subsidiaries develop the allowance for credit losses based on the difference between the book value and the estimated collectible amount of such loans.F-6F-640
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following table provides information about the average recorded investments in impaired loans and interest income on impaired loans for fiscal 2018, 2019 and 2020:
March 31, 2018 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Average recorded investments in impaired loans * | Interest income on impaired loans | Interest on impaired loans collected in cash | ||||||||||
Consumer borrowers | ¥ | 17,799 | ¥ | 402 | ¥ | 300 | ||||||||
Real estate loans | 4,143 | 191 | 121 | |||||||||||
Card loans | 4,081 | 60 | 52 | |||||||||||
Other | 9,575 | 151 | 127 | |||||||||||
Corporate borrowers | 30,661 | 204 | 196 | |||||||||||
Non-recourse loans | Japan | 210 | 8 | 8 | ||||||||||
The Americas | 4,972 | 6 | 6 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 3,549 | 52 | 52 | ||||||||||
Real estate companies in overseas | 2,108 | 1 | — | |||||||||||
Commercial, industrial and other companies in Japan | 10,698 | 136 | 129 | |||||||||||
Commercial, industrial and other companies in overseas | 9,124 | 1 | 1 | |||||||||||
Purchased loans | 6,304 | 18 | 3 | |||||||||||
Total | ¥ | 54,764 | ¥ | 624 | ¥ | 499 | ||||||||
March 31, 2019 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Average recorded investments in impaired loans * | Interest income on impaired loans | Interest on impaired loans collected in cash | ||||||||||
Consumer borrowers | ¥ | 20,601 | ¥ | 392 | ¥ | 356 | ||||||||
Real estate loans | 4,099 | 133 | 129 | |||||||||||
Card loans | 4,020 | 59 | 52 | |||||||||||
Other | 12,482 | 200 | 175 | |||||||||||
Corporate borrowers | 25,381 | 289 | 276 | |||||||||||
Non-recourse loans | Japan | 247 | 7 | 7 | ||||||||||
The Americas | 2,851 | 0 | 0 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,606 | 38 | 38 | ||||||||||
Real estate companies in overseas | 876 | 0 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 5,943 | 106 | 95 | |||||||||||
Commercial, industrial and other companies in overseas | 13,858 | 138 | 136 | |||||||||||
Purchased loans | 4,678 | 88 | 87 | |||||||||||
Total | ¥ | 50,660 | ¥ | 769 | ¥ | 719 | ||||||||
March 31, 2019 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Average recorded investments in impaired loans * | Interest income on impaired loans | Interest on impaired loans collected in cash | ||||||||||
Consumer borrowers | ¥ | 20,601 | ¥ | 392 | ¥ | 356 | ||||||||
| Real estate loans | 4,099 | 133 | 129 | |||||||||||
Card loans | 4,020 | 59 | 52 | |||||||||||
Other | 12,482 | 200 | 175 | |||||||||||
Corporate borrowers | 25,381 | 289 | 276 | |||||||||||
Non-recourse loans | Japan | 247 | 7 | 7 | ||||||||||
The Americas | 2,851 | 0 | 0 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,606 | 38 | 38 | ||||||||||
Real estate companies in overseas | 876 | 0 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 5,943 | 106 | 95 | |||||||||||
Commercial, industrial and other companies in overseas | 13,858 | 138 | 136 | |||||||||||
Purchased loans | 4,678 | 88 | 87 | |||||||||||
Total | ¥ | 50,660 | ¥ | 769 | ¥ | 719 | ||||||||
March 31, 2020 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Average recorded investments in impaired loans * | Interest income on impaired loans | Interest on impaired loans collected in cash | ||||||||||
Consumer borrowers | ¥ | 24,721 | ¥ | 446 | ¥ | 403 | ||||||||
| Real estate loans | 5,077 | 141 | 137 | |||||||||||
Card loans | 3,926 | 57 | 50 | |||||||||||
Other | 15,718 | 248 | 216 | |||||||||||
Corporate borrowers | 37,103 | 121 | 119 | |||||||||||
Non-recourse loans | Japan | 137 | 2 | 2 | ||||||||||
The Americas | 2,954 | 0 | 0 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,621 | 30 | 30 | ||||||||||
Real estate companies in overseas | 5,785 | 0 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 6,754 | 76 | 75 | |||||||||||
Commercial, industrial and other companies in overseas | 19,852 | 13 | 12 | |||||||||||
Purchased loans | 3,108 | 139 | 139 | |||||||||||
Total | ¥ | 64,932 | ¥ | 706 | ¥ | 661 | ||||||||
March 31, 2020 | ||||||||||||||
Millions of yen | ||||||||||||||
Portfolio segment | Class | Average recorded investments in impaired loans * | Interest income on impaired loans | Interest on impaired loans collected in cash | ||||||||||
Consumer borrowers | ¥ | 24,721 | ¥ | 446 | ¥ | 403 | ||||||||
Real estate loans | 5,077 | 141 | 137 | |||||||||||
Card loans | 3,926 | 57 | 50 | |||||||||||
Other | 15,718 | 248 | 216 | |||||||||||
Corporate borrowers | 37,103 | 121 | 119 | |||||||||||
Non-recourse loans | Japan | 137 | 2 | 2 | ||||||||||
The Americas | 2,954 | 0 | 0 | |||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 1,621 | 30 | 30 | ||||||||||
Real estate companies in overseas | 5,785 | 0 | 0 | |||||||||||
Commercial, industrial and other companies in Japan | 6,754 | 76 | 75 | |||||||||||
Commercial, industrial and other companies in overseas | 19,852 | 13 | 12 | |||||||||||
Purchased loans | 3,108 | 139 | 139 | |||||||||||
Total | ¥ | 64,932 | ¥ | 706 | ¥ | 661 | ||||||||
| Note: | Loans held for sale are not included in the table above. |
| * | Average balances are calculated on the basis of fiscal beginning and quarter-end balances. |
F-6
1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following table provides information about the credit quality indicators as of March 31, 2019 and 2020:
March 31, 2019 | ||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||
Non-performing | ||||||||||||||||||||||
Portfolio segment | Class | Performing | Loans individually evaluated for impairment | 90+ days past-due loans not individually evaluated for impairment | Subtotal | Total | ||||||||||||||||
Consumer borrowers | ¥ | 1,870,447 | ¥ | 23,163 | ¥ | 12,412 | ¥ | 35,575 | ¥ | 1,906,022 | ||||||||||||
Real estate loans | 1,593,005 | 4,434 | 1,388 | 5,822 | 1,598,827 | |||||||||||||||||
Card loans | 239,523 | 3,945 | 1,671 | 5,616 | 245,139 | |||||||||||||||||
Other | 37,919 | 14,784 | 9,353 | 24,137 | 62,056 | |||||||||||||||||
Corporate borrowers | 1,269,021 | 31,900 | 0 | 31,900 | 1,300,921 | |||||||||||||||||
Non-recourse loans | Japan | 48,881 | 232 | 0 | 232 | 49,113 | ||||||||||||||||
The Americas | 45,699 | 4,216 | 0 | 4,216 | 49,915 | |||||||||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 287,311 | 1,540 | 0 | 1,540 | 288,851 | ||||||||||||||||
Real estate companies in overseas | 65,358 | 840 | 0 | 840 | 66,198 | |||||||||||||||||
Commercial, industrial and other companies in Japan | 259,572 | 7,104 | 0 | 7,104 | 266,676 | |||||||||||||||||
Commercial, industrial and other companies in overseas | 562,200 | 17,968 | 0 | 17,968 | 580,168 | |||||||||||||||||
Purchased loans | 12,652 | 3,764 | 0 | 3,764 | 16,416 | |||||||||||||||||
Direct Financing leases | 1,140,825 | 0 | 14,807 | 14,807 | 1,155,632 | |||||||||||||||||
Japan | 787,081 | 0 | 6,158 | 6,158 | 793,239 | |||||||||||||||||
Overseas | 353,744 | 0 | 8,649 | 8,649 | 362,393 | |||||||||||||||||
Total | ¥ | 4,292,945 | ¥ | 58,827 | ¥ | 27,219 | ¥ | 86,046 | ¥ | 4,378,991 | ||||||||||||
March 31, 2020 | ||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||
Non-performing | ||||||||||||||||||||||
Portfolio segment | Class | Performing | Loans individually evaluated for impairment | 90+ days past-due loans not individually evaluated for impairment | Subtotal | Total | ||||||||||||||||
Consumer borrowers | ¥ | 2,134,342 | ¥ | 26,533 | ¥ | 10,264 | ¥ | 36,797 | ¥ | 2,171,139 | ||||||||||||
Real estate loans | 1,877,227 | 5,762 | 1,370 | 7,132 | 1,884,359 | |||||||||||||||||
Card loans | 218,011 | 3,932 | 1,708 | 5,640 | 223,651 | |||||||||||||||||
Other | 39,104 | 16,839 | 7,186 | 24,025 | 63,129 | |||||||||||||||||
Corporate borrowers | 1,371,253 | 57,682 | 0 | 57,682 | 1,428,935 | |||||||||||||||||
Non-recourse loans | Japan | 48,566 | 0 | 0 | 0 | 48,566 | ||||||||||||||||
The Americas | 81,049 | 2,466 | 0 | 2,466 | 83,515 | |||||||||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 297,483 | 3,501 | 0 | 3,501 | 300,984 | ||||||||||||||||
Real estate companies in overseas | 119,403 | 12,491 | 0 | 12,491 | 131,894 | |||||||||||||||||
Commercial, industrial and other companies in Japan | 242,831 | 12,480 | 0 | 12,480 | 255,311 | |||||||||||||||||
Commercial, industrial and other companies in overseas | 581,921 | 26,744 | 0 | 26,744 | 608,665 | |||||||||||||||||
Purchased loans | 11,613 | 1,605 | 0 | 1,605 | 13,218 | |||||||||||||||||
Net investment in leases | 1,065,618 | 0 | 15,346 | 15,346 | 1,080,964 | |||||||||||||||||
Japan | 741,636 | 0 | 5,971 | 5,971 | 747,607 | |||||||||||||||||
Overseas | 323,982 | 0 | 9,375 | 9,375 | 333,357 | |||||||||||||||||
Total | ¥ | 4,582,826 | ¥ | 85,820 | ¥ | 25,610 | ¥ | 111,430 | ¥ | 4,694,256 | ||||||||||||
March 31, 2020 | ||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||
Non-performing | ||||||||||||||||||||||
Portfolio segment | Class | Performing | Loans individually evaluated for impairment | 90+ days past-due loans not individually evaluated for impairment | Subtotal | Total | ||||||||||||||||
Consumer borrowers | ¥ | 2,134,342 | ¥ | 26,533 | ¥ | 10,264 | ¥ | 36,797 | ¥ | 2,171,139 | ||||||||||||
| Real estate loans | 1,877,227 | 5,762 | 1,370 | 7,132 | 1,884,359 | |||||||||||||||||
| Card loans | 218,011 | 3,932 | 1,708 | 5,640 | 223,651 | |||||||||||||||||
| Other | 39,104 | 16,839 | 7,186 | 24,025 | 63,129 | |||||||||||||||||
Corporate borrowers | 1,371,253 | 57,682 | 0 | 57,682 | 1,428,935 | |||||||||||||||||
Non-recourse loans | Japan | 48,566 | 0 | 0 | 0 | 48,566 | ||||||||||||||||
| The Americas | 81,049 | 2,466 | 0 | 2,466 | 83,515 | |||||||||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 297,483 | 3,501 | 0 | 3,501 | 300,984 | ||||||||||||||||
| Real estate companies in overseas | 119,403 | 12,491 | 0 | 12,491 | 131,894 | |||||||||||||||||
Commercial, industrial and other companies in Japan | 242,831 | 12,480 | 0 | 12,480 | 255,311 | |||||||||||||||||
Commercial, industrial and other companies in overseas | 581,921 | 26,744 | 0 | 26,744 | 608,665 | |||||||||||||||||
Purchased loans | 11,613 | 1,605 | 0 | 1,605 | 13,218 | |||||||||||||||||
Net investment in leases | 1,065,618 | 0 | 15,346 | 15,346 | 1,080,964 | |||||||||||||||||
| Japan | 741,636 | 0 | 5,971 | 5,971 | 747,607 | |||||||||||||||||
| Overseas | 323,982 | 0 | 9,375 | 9,375 | 333,357 | |||||||||||||||||
Total | ¥ | 4,582,826 | ¥ | 85,820 | ¥ | 25,610 | ¥ | 111,430 | ¥ | 4,694,256 | ||||||||||||
Notes | ||
have been reclassified to net investment in leases. |
In common with all classes, the Company and its subsidiaries monitor the credit quality indicators as performing and
non-performing
assets. The category ofnon-performing
assets includes financing receivables for debtors who have filed for insolvency proceedings, whose bank transactions are suspended, whose bills are dishonored, whose businesses have deteriorated, whose repayment ispast-due
90 days or more, financing receivables modified as troubled debt restructurings, and performing assets include all other financing receivables. Regarding purchased loans, they are classified asnon-performing
assets when considered impaired, while all the other loans are included in the category of performing assets.Out of
non-performing
assets, the Company and its subsidiaries consider smaller balancehomogeneous
loans, including real estate loans, card loans and other, which are not restructured and net investment in leases, as 90 days or morepast-due
financing receivables not individually evaluated for impairment, and consider the others as loans individually evaluated for impairment. After the Company and its subsidiaries have set aside provision for thosenon-performing
assets, the Company and its subsidiaries continue to monitor at least on a quarterly basis the quality of any underlying collateral, the status of management of the debtors and other important factors in order to report to management and develop additional provision as necessary.F-6F-672
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ORIX Corporation and Subsidiaries
The following table provides information about the2019 and 2020:
non-accrual
andpast-due
financing receivables as of March 31, March 31, 2019 | ||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||
Past-due financing receivables | ||||||||||||||||||||||
Portfolio segment | Class | 30-89 dayspast-due | 90 days or more past-due | Total past-due | Total financing receivables | Non-accrual | ||||||||||||||||
Consumer borrowers | ¥ | 5,783 | ¥ | 15,647 | ¥ | 21,430 | ¥ | 1,906,022 | ¥ | 15,647 | ||||||||||||
Real estate loans | 1,721 | 2,654 | 4,375 | 1,598,827 | 2,654 | |||||||||||||||||
Card loans | 548 | 2,127 | 2,675 | 245,139 | 2,127 | |||||||||||||||||
Other | 3,514 | 10,866 | 14,380 | 62,056 | 10,866 | |||||||||||||||||
Corporate borrowers | 4,960 | 13,753 | 18,713 | 1,300,921 | 27,979 | |||||||||||||||||
Non-recourse loans | Japan | 0 | 0 | 0 | 49,113 | 0 | ||||||||||||||||
The Americas | 2,925 | 2,457 | 5,382 | 49,915 | 3,818 | |||||||||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 0 | 552 | 552 | 288,851 | 552 | ||||||||||||||||
Real estate companies in overseas | 2 | 0 | 2 | 66,198 | 840 | |||||||||||||||||
Commercial, industrial and other companies in Japan | 78 | 4,656 | 4,734 | 266,676 | 4,656 | |||||||||||||||||
Commercial, industrial and other companies in overseas | 1,955 | 6,088 | 8,043 | 580,168 | 18,113 | |||||||||||||||||
Direct fin leasesancing | 7,181 | 14,807 | 21,988 | 1,155,632 | 14,807 | |||||||||||||||||
Japan | 679 | 6,158 | 6,837 | 793,239 | 6,158 | |||||||||||||||||
Overseas | 6,502 | 8,649 | 15,151 | 362,393 | 8,649 | |||||||||||||||||
Total | ¥ | 17,924 | ¥ | 44,207 | ¥ | 62,131 | ¥ | 4,362,575 | ¥ | 58,433 | ||||||||||||
March 31, 2020 | ||||||||||||||||||||||
Millions of yen | ||||||||||||||||||||||
Past-due financing receivables | ||||||||||||||||||||||
Portfolio segment | Class | 30-89 dayspast-due | 90 days or more past-due | Total past-due | Total financing receivables | Non-accrual | ||||||||||||||||
Consumer borrowers | ¥ | 6,604 | ¥ | 13,607 | ¥ | 20,211 | ¥ | 2,171,139 | ¥ | 13,607 | ||||||||||||
Real estate loans | 1,863 | 2,469 | 4,332 | 1,884,359 | 2,469 | |||||||||||||||||
Card loans | 595 | 2,114 | 2,709 | 223,651 | 2,114 | |||||||||||||||||
Other | 4,146 | 9,024 | 13,170 | 63,129 | 9,024 | |||||||||||||||||
Corporate borrowers | 3,365 | 26,999 | 30,364 | 1,428,935 | 44,622 | |||||||||||||||||
Non-recourse loans | Japan | 0 | 0 | 0 | 48,566 | 0 | ||||||||||||||||
The Americas | 0 | 2,466 | 2,466 | 83,515 | 2,466 | |||||||||||||||||
Other than Non-recourse loans | Real estate companies in Japan | 0 | 586 | 586 | 300,984 | 586 | ||||||||||||||||
Real estate companies in overseas | 1 | 12,386 | 12,387 | 131,894 | 12,491 | |||||||||||||||||
Commercial, industrial and other companies in Japan | 226 | 2,409 | 2,635 | 255,311 | 2,409 | |||||||||||||||||
Commercial, industrial and other companies in overseas | 3,138 | 9,152 | 12,290 | 608,665 | 26,670 | |||||||||||||||||
Net investment in leases | 13,702 | 15,346 | 29,048 | 1,080,964 | 15,346 | |||||||||||||||||
Japan | 2,755 | 5,971 | 8,726 | 747,607 | 5,971 | |||||||||||||||||
Overseas | 10,947 | 9,375 | 20,322 | 333,357 | 9,375 | |||||||||||||||||
Total | ¥ | 23,671 | ¥ | 55,952 | ¥ | 79,623 | ¥ | 4,681,038 | ¥ | 73,575 | ||||||||||||