Japan Display : Consolidated Financial Results for Fiscal Year 2019 (Japanese GAAP)

Japan Display Inc.

Consolidated Financial Results for Fiscal Year 2019 (Japanese GAAP)

(This is an English translation of an original Japanese-language document.)

Company name:	Japan Display Inc. ("JDI")
Security code:	6740
Listing:	Tokyo Stock Exchange (First Section)
Website:	https://www.j-display.com/english
Representative:	Minoru Kikuoka, President and CEO
Contact:	Akihito Okochi, Executive Officer and CFO
Phone:	[phone]

June 30, 2020

Annual general meeting of shareholders:	August 26, 2020
Filing of FY 2019 securities report:	August 26, 2020
Commencement of dividend payments:	-
Supplementary materials for FY 2019 earnings results:	Available
Briefing for FY 2019 results:	June 30, 2020 (for security analysts)

(Figures in this earnings report are rounded down to the nearest million yen.)

1. Consolidated Financial Results for FY 2019 (April 1, 2019 to March 31, 2020)

(1) Results of operationsNet sales ························································· Operating profit (loss) ········································· Ordinary profit (loss) ········································ Net income (loss) attributable to owners of the parent ···· Net income (loss) per share

-Basic (yen) ················································

-Diluted (yen) ··············································

Return on equity (%) ············································ Ordinary income (loss) to total assets (%) ·················· Operating income (loss) to net sales (%) ···················· Comprehensive income ········································ Share of loss of entities accounted for using equity method

(Millions of yen, except per share amounts, %)

FY 2019

YoY Chg.

FY 2018

YoY Chg.

504,022 (38,536) (57,758) (101,417)

(20.8%)

- - - - - - - - - -

636,661 (27,230) (40,367) (106,585)

(11.5%)

(406.1%)

(99,886)

(10,007)

(116.05)

-

(12.4%)

(7.6%)

(107,181)

(303.8%)

(128.41)

-

(8,862)

(7.1%)

(4.3%)

- - - - - - - - - -

(2) Financial position

(Millions of yen, except per share amounts, %)

Total assets ·························································· Net assets ··························································· Shareholders' equity ratio (%) ···································· Net assets per share ················································ (Reference) Shareholders' equity ································

Mar 31, 2020	Mar 31,2019
389,746	538,502
53,363	862
13.1%	(0.2%)
(39.91)	(1.37)
(51,103)	(1,162)

(3) Cash flows	(Millions of yen)
Mar 31, 2020	Mar 31, 2019
Cash flows from operating activities ···························	(87,111)	(6,604)
Cash flows from investing activities ····························	28,069	(36,614)
Cash flows from financing activities ····························	57,682	30,968
Cash and cash equivalents at end of period ·····················	66,380	68,988
2. Dividends
(Yen, except %)

June 30	Sep 30	Dec 31	FY-end	Total	Dividend ratio (consolidated)	% of dividends to net assets (consolidated)
FY 2018	-	0.00	-	0.00	0.00	-	-
FY 2019	-	0.00	-	0.00	0.00	-	-
FY 2020 (forecast)	-	0.00	-	0.00	0.00	-	-

3. Earnings forecast for 1Q-FY 2020 (April 1, 2020 - June 30, 2020)

Consolidated net sales for FY 2020 are expected to be down by approximately 15% - 20% YoY. For details, please refer to the attached "1. Fiscal Year Results Information (4) Business Prospects."

(Millions of yen, except %)

1Q-FY2020	QoQ Change
Sales	85,000 ~ 89,000	(6.0) ~ (1.6)
Operating Profit	(7,000) ~ (9,000)	-

Notes:

• (1) Changes in significant subsidiaries to scope of consolidation:

  Newly consolidated: -

  Removed from consolidation: -

• (2) Accounting changes in consolidated financial statements.

None

• a) Changes in accounting policy in accordance with amendments to accounting standards:

• b) Changes in accounting policy other than (a) above: None

• c) Changes in accounting estimates: None

• d) Retrospective restatement: None

Yes

(3) Number of shares outstanding (common shares)
Mar 31, 2020	Mar 31, 2019
Number of shares outstanding (incl. treasury shares) ·	846,165,800	846,165,800
Number of treasury shares ································	3	3
Average number of shares outstanding ·················	846,165,797	830,072,391
2

(Reference) Overview of Non-Consolidated Financial Results

1. Non-Consolidated Financial Results for FY 2019 (April 1, 2019 to March 31, 2020)

(1) Results of operations

FY 2019

(Millions of yen, except per share amounts, %) YoY Chg. FY 2018 YoY Chg.

Net sales ····················································· Operating income (loss) ··································· Ordinary income (loss) ···································· Net income (loss) ·········································· Net income (loss) per share

481,316

(24.1%)

(49,084)

(56,280)

(114,965)

- Basic (yen) ············································· - Diluted (yen) ·········································

(131.55)

-

- - - - -

633,893 (38,236) (42,615) (119,586)

(9.2%)

- - -

(144.07)

-

-

-

(2) Financial position

(Millions of yen, except per share amounts, %)

Mar 31, 2020

Mar 31, 2019

Total assets ··················································· Net assets ···················································· Shareholders' equity ratio (%) ····························· Net assets per share ········································· (Reference) Shareholders' equity ·························

360,392

516,395

8,761

(28,662)

2.4%

(5.6%)

(56.61)

(33.94)

8,720

(28,715)

* This financial statement is not subject to audit procedures.

Proper use of earnings forecasts and other matters warranting special mention

Forward-looking information such as earnings forecasts in this document is based on information available to the company at the time the document was prepared and management's reasonable assumptions. Such information should not be interpreted as a guarantee of future performance or results. Furthermore, forward-looking information is necessarily subject to a number of factors that may cause actual results to differ materially from those results implied by the expectations suggested by such information.

How to access and obtain the contents of a briefing of FY2019 results

JDI plan to hold a briefing session of financial results for securities analysts and the video streaming of the briefing will be posted on JDI's website on same day or the next day.

The materials of the briefing will be released on TDnet and JDI's website on June 30,2020

Attachments

1. Fiscal Year Results Information

(1) Overview of Results of Operations

Consolidated Results of Operations for FY 2019 (April 1, 2019 to March 31, 2020)

(Millions of yen, except per share amounts, %)

Fiscal year	FY 2018 (Apr. 1, 2018 to Mar. 31, 2019)	FY 2019 (Apr. 1, 2019 to Mar. 31, 2020)
Amount % of net sales	Amount % of net salesYoY (%)
Mobile Device Category Automotive Category Non-Mobile Device Category Net sales	466,873 73.3% 112,313 17.6% 57,475 9.0%	350,802 103,562 49,656 69.6% (24.9%) 20.5% (7.8%) 9.9% (13.6%)
	636,661 100.0%	504,022 100.0% (20.8%)
Operating income (loss)	(27,230)	(38,536) - -
Ordinary income (loss)	(40,367)	(57,758) - -
Net income (loss) attributable to owners of the parent	(106,585)	(101,417) - -
Net income (loss) per share	(128.41)	(116.05) - -
EBITDA*	15,732 2.5%	(19,549) - -

Notes: *. EBITDA = Operating profit + Depreciation (operating costs) + Amortization of goodwill

The business environment surrounding Japan Display Inc. ("JDI") remained difficult in FY 2019 due to sluggish growth in the smartphone market, increased adoption of OLED displays by customers and intensified competition from display manufacturers in China. In addition, the novel coronavirus disease (Covid-19) pandemic caused disruptions in the global supply chain and a rapid drop in consumer spending during the fourth-quarter accounting period. JDI's manufacturing volume suffered a decline due to a temporary suspension of production and lower capacity utilization at overseas back-end manufacturing facilities, including its manufacturing subsidiaries and EMS companies.

In response to this situation, JDI implemented structural reforms that included a significant reduction of its Japan workforce by more than 30%, a suspension of operations at the Hakusan Plant (Hakusan City, Ishikawa Prefecture), closure of the Mobara Plant back-end manufacturing line (V2) and a write-down of smartphone display production equipment (mainly business assets at the Hakusan Plant), in order to reduce fixed costs in the first half of the fiscal year. The effects of these structural reform began to be fully realized in the second half of the FY 2019, resulting in the reduction of fixed costs by approximately JPY 30 billion for the full year. It is expected that fixed costs will be additionally reduced by about JPY 20 billion in FY 2020. In December 2019, JDI started mass production shipments of its first OLED displays. Although the contribution of these displays to sales in FY 2019 was limited, a contribution to an expansion of the business portfolio from FY 2020 can be expected. Under the impact of the novel coronavirus pandemic, JDI made attempts to restart production at its overseas manufacturing facilities as quickly as possible and regain capacity utilization. However, the recovery of capacity utilization at its back-end manufacturing subsidiary in the Philippines, a country that imposed a prolonged quarantine on urban areas, was delayed, and this in particular had a major impact on display module production in the non-mobile product category.

As a result, JDI's net sales for FY 2019 decreased by 20.8% year-on-year (YoY) to JPY 504,022 million. Despite the reduction in fixed costs due to the structural reforms described above, an operating loss of JPY 38,536 million was recorded owing to the decrease in sales (in the previous fiscal year a JPY 27,230 million loss was recorded). In addition, the company recorded an share of loss of entities accounted for using equity method of JPY10,007 million as a non-operating loss in relation to JOLED Inc., a former equity-method affiliate, leading to an ordinary loss of JPY 57,758

million (a loss of JPY 40,367 million in the previous year). A net loss attributable to owners of the parent of JPY 101,417 million was recorded (a loss of JPY 106,585 million in the previous year) after accounting for an extraordinary loss of JPY 67,178 million in business restructuring expenses that included an impairment loss on fixed assets mainly in connection with the Hakusan Plant and early retirement benefits, and also a gain on the sale of investment securities of JPY 30,594 million from the transfer all shares held in JOLED Inc.

Below is an overview of sales in each of JDI's application categories in FY 2019.

Mobile Device Category

The Mobile Device Category includes displays for smartphones, tablets and other devices. Sales in FY 2019 in this category were JPY350,802 million (down 24.9% YoY) and accounted for 69.6% of company net sales.

As competition intensified due to sluggish growth in the smartphone market, the increased adoption of OLED displays by customers and increased production by competing manufacturers in China, JDI withdrew from unprofitable products and suspended operations at the Hakusan Plant. In addition, the impact of the Covid-19 pandemic led to restrictions on overseas back-end manufacturing and reduced demand from customers, leading to sales in the fourth quarter falling by 37.8% YoY to JPY79,319 million.

Automotive Category

This category contains sales of automotive displays such as cluster and head-up displays. FY 2019 sales in this category were JPY103,562 million (down 7.8% YoY), accounting for 20.5% of company net sales.

While demand for auto displays was stagnant under the impact of sluggish automobile sales in major regions due to China's economic slowdown and trade friction between the United States and China, back-end manufacturing was delayed partly due to the Covid-19 pandemic interrupting the supply of parts. For the fourth quarter, sales fell 17.0% YoY to JPY23,946 million.

Non-Mobile Category

This category includes displays for digital still cameras, wearable devices and other consumer electronics, industrial devices such as medical equipment monitors and income from patents. FY 2019 sales in this category were JPY49,656 million (down 13.6% YoY), accounting for 9.9% of net sales.

Sales of ultra-high-definition VR displays increased and sales of displays for wearable devices remained strong, but sales of displays for digital still cameras, which have a high ratio of sales, and notebook PCs, which were affected by US-China trade frictions, decreased. The back-end manufacturing of displays in the non-mobile category is mainly handled by JDI's manufacturing subsidiary in the Philippines. However, the prolonged quarantine of communities in the Philippines in response to the Covid-19 pandemic resulted in manufacturing continuing at a low operating rate even after production restarted. For the fourth quarter, sales decreased 13.5% YoY to JPY12,980 million.

Business Results for the Fourth Quarter

JDI's net sales for the fourth quarter of FY 2019 were JPY 116,246 million, a decline of JPY 55,084 million YoY that was due to lower demand in smartphone displays and the Covid-19 pandemic. While sales decreased sharply, the operating loss improved by JPY 13,896 million from the same period of the previous year to a loss of JPY 5,911 million, due to the effect of the structural reforms implemented in the first half of the FY 2019. An ordinary loss of JPY 11,125 million was recorded due to an share of loss of entities accounted for using equity method of JPY 1,495 million and maintenance costs of JPY 1,293 million for the Hakusan Plant, which was under a production suspension. In addition, JPY 4,954 million in business restructuring expenses and JPY 3,638 million in costs related to improper accounting treatments were recorded, while a gain on the sale of investment securities due to the transfer of JOLED Inc. shares of JPY 30,594 million result was recorded as extraordinary income. As a result, net income attributable to owners of the parent was JPY 9,468 million.