Koito Manufacturing : Consolidated Earnings Report for the First Quarter of Fiscal 2021

Consolidated Earnings Report for the First Quarter of Fiscal 2021

[Japanese GAAP]

July 28, 2020

Company Name:	KOITO MANUFACTURING CO., LTD.
Stock Listing:	First Section, Tokyo Stock Exchange
Code Number:	7276
URL:	https://www.koito.co.jp
Representative Director:	Hiroshi Mihara, President
Inquiries:	Hideharu Konagaya, Senior Managing Director
Tel:	[phone]
Filing of Quarterly Securities Report:	August 3, 2020
Scheduled Payment of Dividends:	－
Supplementary explanatory materials prepared:	None
Explanatory meeting:	None

(¥ millions are rounded down)

1. Consolidated Results for the First Quarter of Fiscal 2021 (April 1, 2020 to June 30, 2020)

(1) Consolidated Operating Results		(¥ millions; percentage figures represent year-on-year changes)
First Quarter	Net sales	Operating income	Recurring profit	Profit attributable to
owners of parent
Fiscal 2021	108,296	△45.0%	△7,405	－	△5,993	－	△4,938	－
Fiscal 2020	197,048	2.7%	19,546	△9.9%	20,142	△14.2%	13,959	△11.3%

Note: Comprehensive income or loss : June 30, 2020: ¥△314 million (－%), June 30, 2019: ¥9,325 million (△40.1%)

First Quarter	Net income	Net income
per share (¥)	per share (diluted) (¥)
Fiscal 2021	△30.72	－
Fiscal 2020	86.85	86.82
(2) Consolidated Financial Position			(¥ millions)
	Total assets	Net assets	Equity ratio	Net assets
	(%)	per share (¥)
June 30, 2020	696,670	508,064	68.3	2,960.73
March 31, 2020	729,715	513,524	65.8	2,989.43

Note: Equity: June 30, 2020: ¥ 475,890 million, March 31, 2020: ¥ 480,503 million

2. Dividends

						Dividend per share (¥)
		First	Quarter	Second Quarter		Third Quarter	Year End	Full Year
Fiscal 2020	－	52.00		－	20.00	72.00
Fiscal 2021	－
Fiscal 2021 (forecast)				－		－	－	－

Notes: 1. Revisions to recent dividend forecasts: None

2. The dividend record dates are September 30 and March 31, as prescribed by KOITO's Articles of Incorporation; the dividend forecast for the September 30, 2020 and March 31, 2021 record date are currently undecided.

3. Forecast of Consolidated Results for Fiscal 2021 (April 1, 2020 to March 31, 2021)

				(¥	millions; percentage figures represent year-on-year changes)
							Profit attributable to	Net income
	Net sales	Operating income	Recurring profit	per share
	owners of parent
							(¥)
First half	267,000	△33.1%	△2,000	－	0	－	△2,500	－	△15.55
Full year	620,000	△22.6%	18,000	△78.2%	21,000	△75.4%	10,000	△82.8%	62.21

Note: Revisions to recent consolidated business forecasts: Yes

For details, please refer to the "Announcement Regarding the Business Results Forecast for Fiscal 2021" announced today.

*Notes

1. Changes to important subsidiaries during the first quarter of fiscal 2021 (changes in specified subsidiaries resulting in revised scope of consolidation): Yes

Excluded Company: 1; KI HOLDINGS CO., LTD.

Note: For details, please refer to the attached material P.9 "2. Quarterly Consolidated Financial Statement and Notes (4)Note on Quarterly Consolidated Financial Statements (Changes to important subsidiaries during the first quarter of fiscal 2021)".

1. Application of special accounting methods in the preparation of quarterly consolidated financial statements: None
2. Changes in accounting principles, accounting estimates and restatements

① Changes in accounting policies in conjunction with revisions to accounting standards: None

②Other changes: None

③Changes in accounting estimates: None

④Restatements: None

(4) Number of shares issued (common stock)

① Number of shares issued (including treasury stock):

②Number of treasury stock:

③Average number of stock during the first quarter:

Fiscal 2021, 1Q	160,789,436	Fiscal 2020	160,789,436
Fiscal 2021, 1Q	55,461	Fiscal 2020	55,390
Fiscal 2021, 1Q	160,734,000	Fiscal 2020, 1Q	160,731,216

*This quarterly financial report is not subject to the quarterly audit procedure to be conducted by certified public accountants or auditing firms.

*Explanations concerning proper use of business forecasts and other noteworthy matters (Notes on future assumptions)

The above forecasts are based on information available, and certain assumptions that are judged to be reasonable, at the time of the release of this report. KOITO is not promising that the Company will achieve these forecasts. Actual results could differ from forecasts due to a variety of factors.

• For Reference Only 》

Forecast of Non-consolidated Result for Fiscal 2021 (April 1, 2020 to March 31, 2021)

(¥ millions; percentage figures represent year-on-year changes)

	Net sales	Operating income	Recurring profit	Net income	Net income
	per share (¥)
First half	121,000	△33.1%	△1,000	－	11,500	△60.7%	17,500	△25.4%	108.88
Full year	267,000	△25.1%	2,000	△92.2%	18,500	△60.4%	22,000	△47.2%	136.87

Note: Revisions to recent non-consolidated business forecasts: Yes

For details, please refer to the "Announcement Regarding the Business Results Forecast for Fiscal 2021" announced today.

Table of Contents of Supplementary Materials

1. Qualitative Information Concerning Quarterly Financial Statements and Other Matters……………………………….	2
	2
(1) Explanation Regarding Consolidated Operating Results……………………………………………………………	22
(2) Explanation Regarding Consolidated Financial Position…..……………………………………………………..…	22
(3) Explanation Regarding Forecast of Consolidated Results for Fiscal 2021 and Other Future Projections………………3
2. Quarterly Consolidated Financial Statements and Notes…………………………………………………………………	4
(1) Quarterly Consolidated Balance Sheets………………………………………………………………………………	5
	4
(2) Quarterly Consolidated Statements of Income and Comprehensive Income……………………………………………6
First quarter, for the three months ended June 30………………………………………………………………………6
(3) Quarterly Consolidated Statements of Cash Flows………………………………………………………………………
(4) Notes on Quarterly Consolidated Financial Statements………………………………………………………………	8
9
(Going Concern Assumption) ………………………………………………………………………………………	9
(Note Regarding Significant Changes in Shareholders' Equity)	9
(Changes to important subsidiaries during the first quarter of fiscal 2021)…………………………………………	9
(Segment Information)………………………………………………………………………………………………	10

1

1. Qualitative Information Concerning Quarterly Financial Statements and Other Matters

(1) Explanation Regarding Consolidated Operating Results

During the first quarter of fiscal 2021, the period under review, with the worldwide spread of the novel coronavirus, global economic activity stagnated and confused significantly due to lockdowns in overseas cities and a state of emergency declared by the Japanese government. As a result, consumer spending was sluggish, corporate earnings and employment situation deteriorated, and the global economy experienced rapid recession which led to economic downturn in Japan, the U.S., Europe, and Asian countries, and sluggish growth in China.

In the auto industry, the slowdown of automobile sales volume for both domestic and overseas, and the impact of the spread of the novel coronavirus resulted in worldwide temporary suspension of automobile production. In Japan, the automobile production volume for both domestic and overseas decreased significantly year on year. Overseas, although the automobile production volume in China showed a trend of recovery, production volume decreased in Americas, Europe, ASEAN countries and India. As a result, the global automobile production volume decreased drastically year on year.

In this climate, the KOITO Group's net sales for the first quarter of fiscal 2021 decreased 45.0% year on year to ¥108.2 billion due to the significant decrease in sales in mainstay automotive lighting equipment segment caused by a decrease in the automobile production volume.

Results by geographical segment are outlined as follows.

〔Japan〕

Sales in Japan decreased 36.3% year on year to ¥57.4 billion. This was attributable to a production reduction resulted from a significant decrease in the automobile production volume.

〔North America〕

Sales in North America decreased 65.5% year on year to ¥16.4 billion due to a steep decrease in the automobile production volume and the suspension of production at subsidiaries in the U.S. and Mexico.

〔China〕

Despite the automobile production volume showed a trend of recovery, sales in China decreased 9.3% year on year to ¥20.6 billion due to the effect of currency exchange.

〔Asia〕

Sales in Asia decreased 55.3% year on year to ¥11.1 billion. This was attributable to a production suspension and production reduction at Asian subsidiaries resulted from a decrease in automobile production volume.

〔Europe〕

Sales in Europe decreased 74.1% year on year to ¥2.6 billion due to a decrease in automobile production volume and the suspension of production at subsidiaries in the U.K. and Czech Republic.

〔Other regions〕

Sales in the other region decreased 96.7% year on year to ¥48 million due to the suspension of production at Brazilian subsidiary.

On the earnings front, although the KOITO Group companies' aggressive efforts on rationalization, including cutting costs, operating loss was ¥7.4 billion, recurring loss was ¥5.9 billion, and loss attributable to owners of parent was ¥4.9 billion. This was attributable to a rapid and significant decrease in global automobile production volume.

1. Explanation Regarding Consolidated Financial Position -1.Analysis of assets, liabilities and net assets
   Total assets as of June 30, 2020 decreased ¥33.0 billion to ¥696.6 billion. This was mainly due to a decrease in trade notes and accounts receivable.
   Total liabilities as of June 30, 2020 decreased ¥27.5 billion to ¥188.6 billion due to a decrease in account payable, and debt.
   Net assets as of June 30, 2020 decreased ¥5.4 billion to ¥508.0 billion due to a decrease in retained earnings caused by net loss attributable to owners of parent and dividends paid.

2

-2. Analysis of cash flows

Operating activities provided net cash of ¥10.5 billion after payment of taxes, mainly reflecting depreciation of ¥8.5 billion. Investing activities acquired net cash of ¥14.7 billion, mainly reflecting acquisition of property and equipment of ¥8.2

billion while acquiring a time deposits reimburse of ¥44.9 billion.

Financing activities used net cash of ¥10.6 billion, the result mainly of reflecting dividends paid of ¥3.9 billion.

As a result, cash and cash equivalents as of June 30, 2020 were ¥118.8 billion, ¥14.6 billion higher than on March 31, 2020.

(3) Explanation Regarding Forecasts for Fiscal 2021 and Other Future Projections

The business climate surrounding KOITO is extremely challenging, as the Japanese and global economies are expected to show a significant recession due to sluggish consumer spending, deteriorating corporate earnings and employment situation caused by the expansion of the novel coronavirus pandemic, and intensifying trade dispute between the U.S. and China.

In the automobile industry, global automobile production volume is expected to decrease significantly year on year due to sluggish demand for automobiles, and the impact of production suspension and production reduction in the first half of the fiscal year.

Regarding KOITO's business forecast for fiscal 2021, the year ending March 31, 2021, net sales are expected to decrease year on year, despite an increase in new orders and a shift in automobile lamps to LED in the mainstay automotive lighting equipment segment, due largely to the significant impact of decrease in global automobile production volume.

On the earnings front, operating income, recurring profit, and profit attributable to owners of parent are all expected to decrease due mainly to a decrease in sales, the effect of currency exchange and an increase in depreciation cost.

In addition to strengthening its order winning marketing activities, the KOITO group will aggressively promote cost-cutting and other rationalization measures, and continue efforts to improve its business performance.

For details of the forecasts, please refer to the "Announcement Regarding the Business Results Forecast for Fiscal 2021" announced today.

3

2. Quarterly Consolidated Financial Statements and Notes

(1) Quarterly Consolidated Balance Sheets

			(¥ millions)
		Fiscal 2020	First Quarter of Fiscal 2021
		As of March 31, 2020	As of June 30, 2020
Assets
Current assets:
Cash and time deposits	271,774	265,301
Trade notes and accounts receivable	107,872	74,939
Electronically recorded monetary claims-operating	12,816	10,173
Inventories	65,544	74,225
Other current assets	34,505	31,807
Allowance for doubtful accounts	△ 362	△371
Total current assets	492,150	456,075
Non-current assets:
Property, plant and equipment:
Buildings and structures (net)	49,552	49,406
Machinery and transportation equipment (net)	66,417	66,414
Fixtures, equipment and tools (net)	17,050	17,978
Land	16,028	16,505
Construction in progress	21,033	20,368
Total property, plant and equipment	170,082	170,673
Intangible fixed assets	3,193	2,985
Investments and other assets:
Investment securities	45,701	47,813
Claims provable in bankruptcy, claims provable in	59	59
rehabilitation and other
Deferred income tax assets	14,711	15,359
Assets for retirement benefits	1,599	1,605
Other investments	2,504	2,383
Allowance for doubtful accounts	△ 288	△287
Total investments and other assets	64,288	66,934
Total non-current assets	237,564	240,594
Total assets		729,715	696,670

4

			(¥ millions)
		Fiscal 2020	First Quarter of Fiscal 2021
		As of March 31, 2020	As of June 30, 2020
Liabilities
Current liabilities:
Trade notes and accounts payable	85,737	67,596
Electronically recorded monetary obligations-operating	8,692	6,062
Short-term loans	29,171	22,499
Accrued expenses	21,073	21,557
Income taxes payable	7,147	2,869
Allowance for employees' bonuses	5,332	8,747
Reserve for product warranties	2,517	2,450
Allowance for expenses for damages	91	－
Allowance for environmental strategies	40	－
Other current liabilities	13,888	15,011
Total current liabilities	173,690	146,794
Non-current liabilities:
Long-term debt	355	229
Deferred income tax liabilities	6,221	5,578
Allowance for directors' and corporate auditors'	266	278
retirement benefits
Reserve for product warranties	5,796	5,832
Allowance for environmental strategies	4	4
Net defined liability for retirement benefits	28,027	27,983
Other non-current liabilities	1,827	1,905
Total non-current liabilities	42,500	41,811
Total liabilities	216,190	188,606
Net assets
Shareholders' equity:
Common stock	14,270	14,270
Additional paid-in capital	13,373	13,373
Retained earnings	449,031	440,810
Treasury common stock, at cost	△53	△53
Total shareholders' equity	476,622	468,401
Accumulated other comprehensive income:
Valuation adjustment on investment securities	14,822	16,695
Translation adjustments	△ 9,333	△7,742
Adjustments in defined benefit plans	△ 1,608	△1,464
Total accumulated other comprehensive income	3,880	7,488
Subscription rights to shares	231	231
Non-controlling interests	32,789	31,942
Total net assets	513,524	508,064
Total liabilities and net assets		729,715	696,670

5

1. Quarterly Consolidated Statements of Income and Comprehensive Income (First quarter, for the three months ended June 30)

		(¥ millions)
	First Quarter of Fiscal 2020	First Quarter of Fiscal 2021
	April 1, 2019	April 1, 2020
	to June 30, 2019	to June 30, 2020
Net sales	197,048	108,296
Cost of sales	164,421	106,565
Gross profit	32,626	1,731
Selling, general and administrative expenses	13,080	9,136
Operating income or loss	19,546	△7,405
Non-operating income:
Interest income	386	306
Dividends	591	498
Other non-operating income	496	1,104
Total non-operating income	1,474	1,909
Non-operating expenses
Interest expenses	235	168
Shares of loss of entities accounted for using	2	146
equity method
Foreign exchange losses	453	121
Other non-operating expenses	187	61
Total non-operating expenses	879	497
Recurring profit or loss	20,142	△5,993
Extraordinary gains:
Gain on sales of property and equipment	5	2
Gain on sales of investment securities	－	0
Total extraordinary gains	5	2
Extraordinary losses:
Loss on sales and disposal of property and equipment	139	191
Loss on valuation of investment securities	14	－
Total extraordinary losses	154	191
Income or loss before income taxes	19,993	△6,182
Total income taxes	5,027	△1,285
Net income or loss	14,965	△4,896
(Break down)
Profit or loss attributable to owners of parent	13,959	△4,938
Profit attributable to non-controlling interests	1,006	41

6

		(¥ millions)
	First Quarter Fiscal 2020	First Quarter Fiscal 2021
	April 1, 2019	April 1, 2020
	to June 30, 2019	to June 30, 2020
Other comprehensive income
Valuation adjustment on marketable securities	△696	1,874
Translation adjustments	△4,783	2,583
Adjustments in defined benefit plans	△160	144
Share of other comprehensive income of entities	－	△20
accounted for using equity method

Total other comprehensive income Comprehensive income

(Break down)

Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests

△5,639	4,582
9,325	△314
9,027	△1,330
298	△1,015

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(3) Quarterly Consolidated Statements of Cash Flows

			(¥ millions)
		First Quarter of Fiscal 2020	First Quarter of Fiscal 2021
		April 1, 2019 to	April 1, 2020 to
		June 30, 2019	June 30, 2020
Cash flows from operating activities
Income or loss before income taxes	19,993	△6,182
Depreciation	7,580	8,548
Equity in earnings of affiliated companies	2	146
Provision for allowance for doubtful accounts	19	7
Increase or decrease in retirement benefit asset and liability	△495	97
Provision for reserve for bonuses	3,511	3,391
Reserve for product warranties	－	△31
Interest and dividends received	△978	△805
Interest payments	235	168
Gain on sale of marketable and investment securities	－	△0
Loss on valuation of marketable and investment securities	14	－
Loss on sale of property and equipment	133	188
Decrease in trade notes and accounts receivable	16,441	35,944
Increase or decrease in inventories	130	△8,461
Increase or decrease in other current assets	△4,716	2,728
Decrease in trade notes and accounts payable	△3,497	△20,947
Increase in accrued expenses and other current liabilities	2,197	368
Others	△39	△597
Sub total	40,533	14,563
Interest and dividends received	978	805
Interest paid	△235	△168
Expenses for damages	－	△91
Income taxes paid	△6,798	△4,584
Net cash provided by operating activities	34,477	10,525
Cash flows from investing activities
Payments into time deposits	△40,937	△22,580
Proceeds from time deposits	45,703	44,961
Payments for purchase of marketable and investment	△118	△171
securities
Proceeds from sale of marketable and investment securities	0	418
Purchase of shares of subsidiaries and associates	△2,668	－
Acquisition of property and equipment	△14,121	△8,216
Proceeds from sale and disposal of property and equipment	35	163
Payments for new loans	△0	△3
Proceeds from loan repayments	2	1
Others	△132	139
Net cash used in investing activities		△12,237	14,713

8

	(¥ millions)
First Quarter of Fiscal 2020	First Quarter of Fiscal 2021
April 1, 2019 to	April 1, 2020 to
June 30, 2019	June 30, 2020

Cash flows from financing activities

Increase or decrease in short-term loans Increase in long-term debt Repayment of long-term debt Payments for repurchase of treasury stock

Purchase of shares in subsidiaries resulting in change in scope of consolidation

Dividends paid by parent company Dividends paid to non-controlling interests

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents Increase in cash and cash equivalents

Cash and cash equivalents at beginning of quarter Cash and cash equivalents at end of quarter

1. Notes on Quarterly Consolidated Financial Statements (Going Concern Assumption)
   None

(Note Regarding Significant Changes in Shareholders' Equity) None

△303	2,164
159	－
△2,008	△8,838
－	△0
△7,950	－
△7,724	△2,970
△1,440	△1,020
△19,269	△10,665
△745	78
2,226	14,651
97,993	104,202
100,219	118,854

(Changes to important subsidiaries during the first quarter of fiscal 2021)

In April 1, 2020, KOITO has implemented an absorption-type merger in which KOITO as the surviving company and KI HOLDINGS CO., LTD., which was our wholly-owned subsidiary, as the absorbed company. As a result, from the first quarter of fiscal 2021, KI HOLDINGS CO., LTD. is excluded from KOITO's scope of consolidation.

9

(¥ millions)

(Segment Information)
【Segment Information】
I. First Quarter of Fiscal 2020 (April 1, 2019 to June 30, 2019)
1. Information Concerning Net Sales and Operating Income for Each Segment			(¥	millions)
									Amount
									recorded on
	Japan	North	China	Asia	Europe	Other	Total	Adjustment	quarterly
	consolidated
	America	regions	(Note 1)
						financial
									statements
									(Note 3)
Net sales
Sales to outside	90,127	47,711	22,794	24,831	10,124	1,459	197,048	－		197,048
customers
Inter-segment	5,994	16	2,765	1,286	21	4	10,089	(10,089)		－
sales and transfers
Total	96,121	47,727	25,559	26,117	10,146	1,464	207,137	(10,089)		197,048
Segment operating	10,731	3,771	3,051	2,723	632	△45	20,865	(1,318)		19,546
income or loss (△)
Notes 1. The ¥△1,318	million adjustment in segment operating income includes ¥231 million in intersegment eliminations
and ¥△1,550 million in unallocated expenses. Unallocated expenses comprise expenses related to management
divisions such as administrative and accounting divisions of the head office of the parent company.

1. 2. The breakdown of countries and regions other than Japan and China is as follows:

   1. North America: United States and Mexico
   2. Asia: Thailand, Indonesia, Taiwan, India and Malaysia
   3. Europe: United Kingdom and Czech Republic
   4. Other regions: Brazil

   3. Segment operating income or loss is adjusted to operating income in the quarterly consolidated financial statements.

2. First Quarter of Fiscal 2021 (April 1, 2020 to June 30, 2020)
   1. Information Concerning Net Sales and Operating Income for Each Segment

									Amount
									recorded on
	Japan	North	China	Asia	Europe	Other	Total	Adjustment	quarterly
	consolidated
	America	regions	(Note 1)
						financial
									statements
									(Note 3)
Net sales
Sales to outside	57,404	16,443	20,680	11,102	2,617	48	108,296	－	108,296
customers
Inter-segment	5,225	170	1,268	1,472	1	－	8,138	(8,138)	－
sales and transfers
Total	62,630	16,614	21,949	12,574	2,619	48	116,435	(8,138)	108,296
Segment operating	△1,158	△4,791	1,335	△800	△1,352	△248	△7,016	(388)	△7,405
income or loss (△)
Notes 1. The ¥△388 million adjustment in segment operating income or loss includes ¥852 million in intersegment

eliminations and ¥△1,241 million in unallocated expenses. Unallocated expenses comprise expenses related to management divisions such as administrative and accounting divisions of the head office of the parent company.

2. The breakdown of countries and regions other than Japan and China is as follows:

1. North America: United States and Mexico
2. Asia: Thailand, Indonesia, Taiwan, India and Malaysia
3. Europe: United Kingdom and Czech Republic
4. Other regions: Brazil

3. Segment operating income or loss is adjusted to operating income in the quarterly consolidated financial statements.

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