Artnature : Consolidated Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

Consolidated Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021 [J-GAAP]

			July 30, 2020
Name of listed company:	ARTNATURE INC.	Listed on: Tokyo Stock Exchange
Securities code:	7823	URL: https://www.artnature.co.jp/english/index.html
Representative:	Yoshikata Igarashi, Chairman and President
Contact:	Hiroaki Inoue, General Manager, Finance & Accounting Division	TEL: [phone]
	Corporate Officer
Scheduled date of filing the quarterly financial report:	August 6, 2020
Scheduled date to start dividends distribution:	―
Supplementary quarterly materials prepared:	No
Explanation meeting for quarterly financial results:	No

(Figures shown are rounded down to the nearest million yen.)

1. Consolidated results for the first quarter ended June 30, 2020 (April 1, 2020 - June 30, 2020)

(1) Consolidated operating results

(Percentage figures show changes from the previous year.)

Operating income

Ordinary income

Net income (loss)

Net sales

attributable to owners

(loss)

(loss)

of the parent company

Millions of

%

Millions of

%

Millions of

%

Millions of

%

yen

yen

yen

yen

Three months ended June 30, 2020

5,414

(37.0)

(1,971)

―

(1,963)

―

(1,439)

―

Three months ended June 30, 2019

8,598

1.2

365

(30.0)

371

(34.2)

207

(43.4)

Note: Comprehensive income (loss): Three months ended June 30, 2020: ¥-1,398 million (―%)

Three months ended June 30, 2019: ¥250 million (-0.6%)

Net income (loss) per

Diluted net income

share

per share

Yen

Yen

Three months ended June 30, 2020

(44.46)

―

Three months ended June 30, 2019

6.38

6.35

(2) Consolidated financial position

Total assets

Net assets

Shareholders' equity

Net assets per share

ratio

Millions of yen

Millions of yen

%

Yen

As of June 30, 2020

44,139

23,486

52.9

720.74

As of March 31, 2020

43,163

25,337

58.3

777.92

(Reference) Equity capital: As of June 30, 2020: ¥23,329 million

As of March 31, 2020: ¥25,179 million

2. Dividends

Dividends per share

First quarter-

Second

Third quarter-

Year-end

Annual

end

quarter-end

end

Yen

Yen

Yen

Yen

Yen

Year ended March 31, 2020

―

14.00

―

14.00

28.00

Year ending March 31, 2021

―

Note: The dividend forecast for the fiscal year ending March 31, 2021 is undetermined.

As of June 30, 2020

As of June 30, 2020

Three months ended June 30, 2020

3. Consolidated financial forecast for the fiscal year ending March 31, 2021 (April 1, 2020 - March 31, 2021)

Consolidated financial forecast and the dividend forecast for the fiscal year ending March 31, 2021 are undetermined, as estimating reasonably the impact of the global COVID-19 outbreak on the domestic economy and the Group's earnings is problematic at this stage. The

Company plans to disclose its forecasts as soon as conditions allow.

Notes:

1. Significant changes to subsidiaries during the period (Transfers of specific subsidiaries with changes in the scope of consolidation): No
2. Application of specific accounting methods for preparing the quarterly consolidated financial statements: No
3. Changes in accounting policies and accounting estimates, and restatement of revisions
4. 1. Changes in accounting policies due to revision of accounting standards, etc.: No

2)	Changes in accounting policies other than 1):	No
3)	Changes in accounting estimates:	No
4)	Restatement of revisions:	No

(4) Number of outstanding shares (common stock):

1) Number of shares issued and outstanding (including treasury shares)

2) Number of treasury shares

3) Average number of shares issued and outstanding in each period

34,393,200	shares	As of March 31, 2020	34,393,200	shares
2,025,139	shares	As of March 31, 2020	2,026,239	shares
32,367,442	shares	Three months ended June	32,554,402	shares
30, 2019

• This quarterly kessan tanshin document is outside the scope of audit procedures conducted by certified public accountants or the independent auditor.
• Explanation of appropriate use of forecasts of financial results; other important items
  (Cautionary statement with regard to the forward-looking statements, etc.)
  Consolidated financial forecasts have not been provided, as the Company is currently unable to formulate reasonable estimates. For more details, please refer to page 2 of the supplementary materials, "1. Analysis of operating results and financial position, (3) Qualitative information on consolidated financial forecasts."

ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

Contents
1. Analysis of operating results and financial position ..............................................................................................................	2
(1)	Analysis of operating results ................................................................................................................................................	2
(2)	Analysis of financial position ...............................................................................................................................................	2
(3)	Qualitative information on consolidated financial forecasts ................................................................................................	2
2. Quarterly consolidated financial statements and related notes............................................................................................	3
(1)	Quarterly consolidated balance sheets..................................................................................................................................	3
(2)	Quarterly consolidated statements of income and comprehensive income ..........................................................................	5
	(Quarterly consolidated statements of income) ....................................................................................................................	5
	(Quarterly consolidated statements of comprehensive income) ...........................................................................................	6
(3)	Notes on quarterly consolidated financial statements ..........................................................................................................	7
	(Notes on the going concern assumption) ............................................................................................................................	7
	(Notes on significant fluctuation in amounts of shareholders' equity) .................................................................................	7

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ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

1. Analysis of operating results and financial position

(1) Analysis of operating results

Operating results for the first three months of fiscal 2021

In the first three months of fiscal 2021 (April - June 2020), economic conditions in Japan and overseas deteriorated sharply due to the impact of the global COVID-19 outbreak, the state of emergency declared in Japan and other developments. The outlook for the Japanese economy also remains highly uncertain.

Against this backdrop, ARTNATURE INC. and its consolidated subsidiaries (the ARTNATURE Group) formulated and launched a new three-yearmedium-term management plan called "ARTNATURE Challenge Plan," starting in fiscal 2021. Under the plan, we aim to strengthen the ARNATURE Group's position in existing business fields and further expand new businesses to build the foundations for a new ARTNATURE capable of opening up the next phase in the Group's history. Specifically, we are implementing six priority challenge initiatives: (1) grow the Group's earnings, (2) develop new business fields, (3) reinforce recruitment, (4) cultivate human resources, (5) encourage dialogue with capital markets, and (6) drive business innovation.

Despite those efforts, consolidated net sales in the first three months declined 37.0% year on year to ¥5,414 million, reflecting the impact of the COVID-19 outbreak, which temporarily halted production activities in the Philippines and led to the closure of some stores in Japan. The Group took steps to curb advertising costs and other selling expenses and found savings in other administrative expenses, but that was insufficient to offset the impact of the large decline in sales. As a result, the Group reported an operating loss of ¥1,971 million, versus operating income of ¥365 million a year earlier, an ordinary loss of ¥1,963 million, versus ordinary income of ¥371 million a year earlier, and net loss attributable to owners of the parent company of ¥1,439 million, versus net income of ¥207 million a year earlier.

Business results by segment are as follows.

< Men's business >

Sales in the men's business declined 32.8% year on year to ¥3,265 million, mainly reflecting a slump in sales of custom- made wigs due to the temporary closure of production sites in the Philippines amid the COVID-19 outbreak and other factors.

< Ladies' business >

Sales in the ladies' business fell 52.0% year on year to ¥1,330 million. In addition to the temporary closure of production sites in the Philippines, the ladies' business was also affected by the reduced store opening hours, a decline in customer traffic and other factors.

< Ladies' ready-made wigs business >

Sales in the ladies' ready-made wigs business declined 28.3% year on year to ¥521 million, reflecting factors such as the temporary closure of retail facilities in which the Company's stores are located.

1. Analysis of financial position Assets, liabilities and net assets

(Assets)

As of the end of the first quarter, total assets were ¥44,139 million, an increase of ¥976 million compared with the end of the previous fiscal year. Current assets increased ¥337 million, mainly due to a rise in cash and deposits, while non-current assets increased ¥639 million, primarily reflecting an increase in investments and other assets.

(Liabilities)

As of the end of the first quarter, liabilities totaled ¥20,653 million, an increase of ¥2,827 million compared with the end of the previous fiscal year. Although accounts payable - other and income taxes payable declined, current liabilities rose ¥2,789 million, mainly due to increases for short-term borrowings and advances received.

(Net Assets)

As of the end of the first quarter, net assets were ¥23,486 million, a decrease of ¥1,850 million from the end of the previous fiscal year. This largely reflected a decrease in retained earnings.

(3) Qualitative information on consolidated financial forecasts

Consolidated financial forecasts for fiscal 2021 are undetermined, as estimating reasonably the impact of the global COVID-19 outbreak on the Group's earnings is problematic at this stage. The Company plans to disclose its forecasts as soon as conditions allow.

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ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

2. Quarterly consolidated financial statements and related notes

(1) Quarterly consolidated balance sheets

(Millions of yen)

				As of March 31,		As of June 30, 2020
				2020
	Assets
	Current assets
	Cash and deposits			17,096			17,688
	Accounts receivable - trade	2,887		2,379
	Securities			22			22
	Merchandise and finished goods	2,095		2,326
	Work in process			143			152
	Raw materials and supplies	1,312		1,291
	Others			1,003			1,036
	Allowance for doubtful accounts	(6)		(6)
	Total current assets			24,553			24,890
	Non-current assets
	Property, plant and equipment
	Buildings and structures, net	5,015		5,135
	Others, net			4,083			4,070
	Total property, plant and equipment		9,099		9,205
	Intangible assets
	Goodwill	774		712
	Others			648			618
	Total intangible assets	1,422		1,330
	Investments and other assets
	Others	8,143		8,771
	Allowance for doubtful accounts			(55)			(58)
	Total investments and other assets		8,087		8,712
	Total non-current assets			18,610			19,249
	Total assets		43,163		44,139

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ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

(Millions of yen)

				As of March 31,		As of June 30, 2020
				2020
	Liabilities
	Current liabilities
	Accounts payable - trade			218			299
	Short-term borrowings	―	3,000
	Accounts payable - other			2,140			776
	Income taxes payable	574		68
	Advances received			5,270			6,655
	Provision for bonuses	954		1,363
	Provision for directors' bonuses			100			137
	Provision for product warranties	38		30
	Provision for point card certificates			96			99
	Others	1,130		881
	Total current liabilities			10,523			13,312
	Non-current liabilities
	Net defined benefit liability			3,935			3,949
	Asset retirement obligations	1,452		1,467
	Others			1,914			1,923
	Total non-current liabilities		7,302		7,340
	Total liabilities			17,825			20,653
	Net assets
	Shareholders' equity
	Capital stock	3,667		3,667
	Capital surplus			3,558			3,558
	Retained earnings	19,141		17,249
	Treasury shares			(1,099)			(1,098)
	Total shareholders' equity		25,268		23,376
	Accumulated other comprehensive income
	Valuation difference on available-for-sale securities	(49)		10
	Foreign currency translation adjustment			37			7
	Remeasurements of defined benefit plans	(76)		(66)
	Total accumulated other comprehensive income			(89)			(47)
	Subscription rights to shares		145		145
	Non-controlling interests			13			12
	Total net assets	25,337		23,486
	Total liabilities and net assets			43,163			44,139

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ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

1. Quarterly consolidated statements of income and comprehensive income (Quarterly consolidated statements of income)

					(Millions of yen)
				Three months ended	Three months ended
				June 30, 2019	June 30, 2020
	Net sales			8,598	5,414
	Cost of sales	2,868	2,601
	Gross profit			5,729	2,813
	Selling, general and administrative expenses	5,364	4,784
	Operating income (loss)			365	(1,971)
	Non-operating income
	Interest income			17	14
	Others	12	9
	Total non-operating income			29	23
	Non-operating expenses
	Interest expenses			0	0
	Foreign exchange losses	11	0
	Guarantee commission			9	8
	Others	2	5
	Total non-operating expenses			23	15
	Ordinary income (loss)	371	(1,963)
	Extraordinary income
	Gain on sales of non-current assets	―	0
	Total extraordinary income			―	0
	Extraordinary losses
	Impairment loss			5	―
	Total extraordinary losses	5	―
	Income (loss) before income taxes			365	(1,962)
	Income taxes - current	211	37
	Income taxes - deferred			(53)	(560)
	Total income taxes		157	(522)
	Net income (loss)			208	(1,440)
	Net income (loss) attributable to non-controlling interests	0	(0)
	Net income (loss) attributable to owners of the parent company			207	(1,439)

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ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

(Quarterly consolidated statements of comprehensive income)

			(Millions of yen)
		Three months ended	Three months ended
		June 30, 2019	June 30, 2020
Net income (loss)		208	(1,440)
Other comprehensive income
Valuation difference on available-for-sale securities		13	60
Foreign currency translation adjustment	18	(29)
Remeasurements of defined benefit plans		10	10
Total other comprehensive income		41	41
Comprehensive income (loss)		250	(1,398)
(Comprehensive income (loss) attributable to)
Owners of the parent company		246	(1,397)
Non-controlling interests	3	(0)

- 6 -

ARTNATURE INC. (7823) Financial Results for the First Quarter of the Fiscal Year Ending March 31, 2021

1. Notes on quarterly consolidated financial statements (Notes on the going concern assumption)
   There is no related information.

(Notes on significant fluctuation in amounts of shareholders' equity) There is no related information.

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