Japan Display : (Delayed) Consolidated Financial Results for the Three Months of Fiscal Year 2019 (Japanese GAAP)

August 9, 2019

Japan Display Inc.

Consolidated Financial Results for the Three Months of 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:	Yoshiyuki Tsukizaki, Representative Director and President, CEO
Contact:	Minoru Kikuoka, Managing Executive Officer, CFO
Phone:	[phone]

Filing of 1Q-FY2019 quarterly securities report:	August 9, 2019
Commencement of dividend payments:	-
Supplementary materials for the 1Q-FY2019 earnings results: Available
Briefing for 1Q-FY2019 results:	August 9, 2019

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

1. Consolidated results of operations for the three months ended June 30, 2019

(1) Results of operations			(Millions of yen, except per share amounts)
				3 mo. ended	YoY	3 mo. ended	YoY
				Jun. 30, 2019	(%)	Jun. 30, 2018	(%)
		Net sales ·················································	90,421	(12.5)	103,281	(45.2)
		Operating profit (loss) ·································	(27,475)	-	(9,806)	-
		Ordinary profit (loss) ··································	(31,617)	-	(12,713)	-
		Net income (loss) attributable to owners of the parent	(83,274)	-	(1,771)	-
		Net income (loss) per share
		-Basic ·················································	(98.41)		(2.27)
		-Diluted ···············································		-		-
		(Reference) Comprehensive income·················	(84,247)	-	(2,852)	-
(2) Financial position	(Millions of yen, except shareholders' equity ratio)
			Jun. 30, 2019	Mar. 31, 2019
		Total assets ·········································	410,520		545,376
		Net assets···········································	(77,237)		7,023
		Shareholders' equity ratio (%) ···················	(19.3)			0.9
		(Reference) Shareholders' equity ···············	(79,346)		4,997

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2. Dividends

	Jun. 30	Sep. 30	Dec. 31	FY-end	Total
Year ended Mar. 31, 2019·················	-	0.00	-	0.00	0.00
Year ending Mar. 31, 2020················	-
Year ending Mar. 31, 2020 (forecast)····		0.00		0.00	0.00

Notes: Changes from the most recently announced dividend forecast: None

3. Earnings forecast for the first half of FY 2019 (April 1, 2019 - September 30, 2019)

JDI forecasts that consolidated net sales for the first half of FY 2019 will increase YoY. Details are shown in the attached "1. Quarterly Results Information, (3) Notice Concerning the Forecast of Consolidated Financial Results"

Notes:

(1) Changes to scope of consolidation:

None

1. Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: Yes

For details, please refer to the attached "2. (3) Notes pertaining to the Consolidated Financial Statements c) Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements"

(3) Accounting changes in consolidated financial statements.
	a) Changes in accounting policy in accordance with amendments to accounting standards:	Yes
	b)	Changes in accounting policy other than a) above:			None
	c)	Changes in accounting estimates:			None
	d)	Retrospective restatement:			None
(4) Number of shares outstanding (common shares)
			Jun. 30, 2019	Mar. 31, 2019
	Number of shares outstanding (incl. treasury shares) ······	846,165,800	846,165,800
	Number of treasury shares ·····································	3		3
			3 mo. ended	3 mo. ended
			Jun. 30, 2019	Jun. 30, 2018
	Average number of shares outstanding ·······················	846,165,797	781,615,320

* This financial statement is not subject to quarterly review 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

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Attachments

1. Quarterly Results Information

(1) Overview of Results of Operations

Consolidated Results of Operations for the First Quarter of FY 2019 (April 1 - June 30, 2019)

Year on year comparison (YoY)					(Millions of yen)
	1Q-FY 2018	1Q-FY 2019	YoY
	Change	(%)
Mobile Device Category	62,576		53,683		(8,892)	(14.2%)
Automotive Category	28,935		25,519		(3,416)	(11.8%)
Non-Mobile Device Category	11,769		11,217		(551)	(4.7%)
Net sales	103,281		90,421		(12,860)	(12.5%)
Gross profit (loss)	1,195		(17,272)		(18,468)	-
Operating profit (loss)	(9,806)		(27,475)		(17,668)	-
Ordinary profit (loss)	(12,713)		(31,617)		(18,904)	-
Net income (loss) attributable to	(1,771)		(83,274)		(81,502)	-
owners of the parent
EBITDA*	2,031		(20,160)		(22,192)	-
Notes:* EBITDA = Operating profit + Depreciation (operating costs) + Amortization of goodwill
Quarter on quarter comparison (QoQ)					(Millions of yen)
	4Q-FY 2018	1Q-FY 2019	QoQ
	Change	(%)
Mobile Device Category	127,466		53,683		(73,782)	(57.9%)
Automotive Category	28,852		25,519		(3,332)	(11.6%)
Non-Mobile Device Category	15,011		11,217		(3,793)	(25.3%)
Net sales	171,330		90,421		(80,908)	(47.2%)
Gross profit (loss)	(7,618)		(17,272)		(9,653)	-
Operating profit (loss)	(20,363)		(27,475)		(7,111)	-
Ordinary profit (loss)	(24,426)		(31,617)		(7,191)	-
Net income (loss) attributable to	(98,571)		(83,274)		15,297	-
owners of the parent
EBITDA*	(9,340)		(20,160)		(10,819)	-
Notes:* EBITDA = Operating profit + Depreciation (operating costs) + Amortization of goodwill

JDI's consolidated net sales in the first quarter (April 1-June 30, 2019) were lower YoY in each of the company's product categories due to lower demand. The following is an overview of JDI's performance in each of the JDI's application categories in the first quarter of FY 2019.

Mobile Device Category

This category includes displays for smartphones and tablets. Net sales for the first three months in this category were ¥53,683 million (down 14.2% YoY and down 57.9% QoQ), accounting for 59.4% of total net sales.

Sales of displays for smartphones were stagnant owing to greater smartphone usage saturation and longer

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smartphone replacement cycles. Meanwhile, the competitive environment is intensifying as competing display manufacturers in China have become more aggressive due to their rapid catch-up of technologies including OLED.

Under the above circumstances, and also given the effects of US-China trade tensions and customer inventory adjustments in the first quarter of FY 2019, the sales in this category were lower on both a YoY and QoQ basis.

Automotive Category

This category includes net sales of automotive displays. Net sales for the first three months in this category were ¥25,519 million (down 11.8% YoY and down 11.6% QoQ), accounting for 28.2% of total net sales.

In the automotive display market, the number of displays mounted on vehicles and display sizes are both increasing. However, in light of slowing automobile sales mainly in China but also in Europe and the US, these displays experienced both YoY and QoQ sales declines.

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. Net sales for the first three months in this category were ¥11,217 million (down 4.7% YoY and down 25.3% QoQ), accounting for 12.4% of total net sales.

Sales in the non-mobile segment in the first quarter of FY 2019 fell by YoY and QoQ due to market contraction causing a decline in display sales for digital cameras and due to US-China trade tension driven decrease in shipments of displays for high-end notebook PCs.

As a result of the foregoing, net sales for the first three months came to ¥90,421 million, down 12.5% YoY and down 47.2% QoQ. Operating loss came to ¥27,475 million, compared to an operating loss of ¥9,806 million a year earlier and an operating loss of ¥20,363 million in the previous quarter. The operating loss was worse both YoY and QoQ and resulted from a fall in net sales as well as gross profit due to deterioration in the cost rate under the impact of lower plant utilization rate. Ordinary loss of ¥31,617 million, compared with an ordinary loss of ¥12,713 million a year earlier and an ordinary loss of ¥24,426 million in the previous quarter, was partly due to a booking of ¥2,031 million share of loss of entities accounted for using equity method. The net loss attributable to owners of the parent was ¥83,274 million, due to recognizing ¥51,693 million in business structure improvement expenses that mainly consisted of an impairment loss in connection with smartphone display- related production facilities (mainly at the Hakusan plant). In comparison, the net loss attributable to owners of the parent was ¥1,771 million a year earlier and ¥98,571 million in the previous quarter.

In the first quarter of FY 2019, in order to implement structural changes that will further reduce fixed costs, JDI

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decided to downsize the mobile business, which has no prospect of a significant recovery in demand going forward. Thus JDI has decided to temporarily suspend operations at the Hakusan Plant (Ishikawa Site, Hakusan City, Ishikawa Prefecture) from July to September 2019 and to close the Mobara Plant back-end production line (V2 line, Mobara City, Chiba Prefecture) in September 2019. Other measures were also decided, including reducing the number of employees and lowering executive compensation and employee salaries, as well as reforming the execution of business operations from October this year. The restart of the Hakusan Plant and other matters will be decided by the end of September 2019 based on future customer demand trends.

Given this situation, JDI has agreed with a major customer that the customer will defer 75% of the amount of their recoupment (i.e. offset of JDI's accounts receivable by JDI's obligation to repay the customer's prepayment.) The agreement is provided under the conventional terms and conditions, for a period of two years, and aims to support and reinforce JDI's financial situation in the short term. In addition, JDI and the customer have agreed that the customer will work with JDI in good faith to increase the volume of purchase orders placed by the customer. JDI believes that these agreements will not only reduce the burden on its working capital for the time being, but also represent the customer's intention to maintain a good relationship with JDI as a continued important supplier of displays.

In addition, regarding the capital and business alliance with Suwa Investment Holdings, LLC ("Suwa") on which JDI is working in order to proceed with the financial and business improvement, on April 12, 2019, JDI entered into a CAPITAL AND BUSINESS ALLIANCE AGREEMENT with Suwa. However, since that time, circumstances have changed, some of which are that the expected investors have withdrawn from their positions as expected investors in Suwa and that there has been a change in the total amount of preferred shares to be issued by JDI to INCJ, Ltd. ("INCJ"), which is JDI's largest shareholder, through third-party allotment. Based on these changed circumstances, JDI has held discussions with Suwa and, as a result of such discussions, on August 7, 2019, entered into an AMENDED AND RESTATED CAPITAL AND BUSINESS ALLIANCE AGREEMENT with Suwa (the "Amended and Restated Capital and Business Alliance Agreement"), which modifies part of the CAPITAL AND BUSINESS ALLIANCE AGREEMENT. Based on the Amended and Restated Capital and Business Alliance Agreement, JDI plans to hold an extraordinary general meeting of shareholders on September 27, 2019 regarding the related proposals.

(2) Overview of Financial Position

Assets

At the end of the first quarter of the FY 2019, current assets were ¥211,601 million, a decrease of ¥79,278 million from the end of the previous fiscal year. This was mainly due to decreases of ¥25,301 million in cash and deposits, ¥31,374 in accounts receivable-trade and ¥9,457 in accounts receivable-other. Noncurrent assets were ¥198,918 million, down ¥55,578 million from the end of the previous fiscal year. This was due to decreases of ¥51,770 million in property, plant and equipment, ¥1,730 million in intangible assets and ¥2,076 million in investments and other assets.

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