ジンズホールディングス（3046） – [Delayed]Quarterly Securities Report 2Q

Quarterly Securities Report (The Second Quarter of the 35th Fiscal Year) JINS HOLDINGS INC. This document was prepared based on the Company’s Quarterly Securities Report in Japanese. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. [Cover Page] [Document title] Quarterly Securities Report [Article of the applicable law requiring Article 24-4-7, Paragraph 1 of the Financial Instruments and Exchange Act submission of this document] [Filed to] [Filing date] [Fiscal year] Director-General of the Kanto Local Finance Bureau April 8, 2022 Second quarter of the 35th term (from December 1, 2021 to February 28, 2022) [Company name] JINS HOLDINGS Inc. [Company name in English] JINS HOLDINGS Inc. [Title and name of representative] Hitoshi Tanaka, CEO and Representative Director [Address of registered headquarter] 26-4 Kawaharamachi 2-chome, Maebashi-shi, Gunma (This is the address of the registered head office, but the actual business is conducted at the nearest place of contact.) [Telephone number] Not applicable. [Name of contact person] Not applicable. [Nearest place of contact] Iidabashi Grand Bloom 30th Flr., 10-2 Fujimi 2-chome, Chiyoda-ku, Tokyo [Telephone number] +81-3-5275-7001 (main number) [Name of contact person] Yukinori Arakawa, Executive Officer and General Manager of Administration [Place for public inspection] Tokyo Stock Exchange, Inc. Division (2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo) 1 Part I Company Information I. Overview of Company 1. Key financial data Net sales (millions of yen) Ordinary profit (millions of yen) Profit attributable to owners of parent (millions of yen) Comprehensive income (millions of yen) Net assets Total assets (millions of yen) (millions of yen) (yen) (yen) (%) (used in) operating (millions of yen) Earnings per share Diluted earnings per share Equity ratio Net cash provided by activities Net cash provided by activities Net cash provided by activities Cash and cash period Term Accounting period 34th term Six months ended February 28, 2021 From September 1, 2020 to February 28, 2021 35th term Six months ended February 28, 2022 From September 1, 2021 to February 28, 2022 34th term From September 1, 2020 to August 31, 2021 63,898 5,020 3,292 3,623 20,219 53,007 141.07 127.35 38.1 5,058 31,643 2,584 1,913 2,084 19,264 53,188 81.99 74.35 36.2 638 32,704 2,172 1,170 1,289 21,030 53,993 50.14 44.86 38.9 2,731 (used in) investing (millions of yen) (659) (1,988) (3,175) (used in) financing (millions of yen) (1,238) (1,214) (3,758) equivalents at the end of (millions of yen) 23,555 23,016 23,206 Term 34th term 2nd quarter 35th term 2nd quarter Accounting period From December 1, 2020 To February 28, 2021 From December 1, 2021 To February 28, 2022 Earnings per share (yen) 66.17 31.58 (Notes) 1. As the Company prepares the quarterly consolidated financial statements, the description of key financial data of the submitting company is omitted. 2. The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc., from the beginning of the first quarter and the key financial data for the six months ended February 28, 2022 and the second quarter under review are data after the said accounting standard have been applied. 2. Description of business There are no significant changes in the description of business which the Company group (the Company and the Company’s affiliates. Hereinafter, the “Group”) operates during the six months ended February 28, 2022. In addition, there are no changes in major affiliates. 2 II. Overview of Business 1. Business risks continue to monitor the situation. In addition, there were no material events. review. (1) Financial position and operating results In the six months ended February 28, 2022, there were no matters that may have a significant impact on the judgment of investors in the overview of business, financial information and other matters stated in this Quarterly Securities Report or no significant changes in “Business Risks” stated in the Annual Securities Report for the previous fiscal year. The impact of COVID-19 is as stated in “2. Management analysis of financial position, operating results and cash flows” and we will 2. Management analysis of financial position, operating results and cash flows Forward-looking statements in this document are based on the Group’s judgments as of the end of this quarter of the fiscal year under During the six months ended February 28, 2022 (September 1, 2021 to February 28, 2022), the Japanese economy experienced the continued seesawing impact of the novel coronavirus disease (COVID-19) on personal consumption, as semi-emergency coronavirus measures were declared again in mid-January due to the prevalence of variants, despite the complete lifting from October onward of the state of emergency, etc., which had been declared due to the spread of COVID-19, mainly in urban areas. Looking at the global economy, infection prevention measures, including travel restrictions, remain in place in many regions partly owing to the impact of COVID-19 variants. Particularly in China, urban areas have been intermittently locked down under the zero-Covid policy, leading to concerns about the impact on economic conditions. In addition, there are concerns about a possible worsening of economic conditions as the economic impact of the Russian invasion of Ukraine should be carefully watched and global inflation has become more apparent due to the rising price of crude oil and raw materials. The domestic retail eyewear market (eyeglasses for vision correction) continues to experience ups and downs versus the same period of the previous year, owing to the impact of COVID-19. Under this market environment, in the eyewear business, the Company and its consolidated subsidiaries (collectively, the “Group”) took such initiatives as promoting digital transformation, and strengthening development of innovative products, which they identified as management issues. In the domestic eyewear business, we worked to improve management efficiency and offer consumers a more convenient purchasing experience, including introducing a solution to improve supply and demand management with an eye on globalization using AI without relying on prior experience alone. With regard to product development, as part of our initiatives to realize “the world free from myopia,” we conducted a joint project to develop an eyeglass-shaped, violet-light-emitting medical device designed to suppress progress of myopia, and total research and development expenses were ¥110 million for the six months ended February 28, 2022. In terms of store development, the number of eyewear stores as of February 28, 2022, was 680, including 451 stores in Japan and 229 stores overseas (173 in China, 44 in Taiwan, 6 in Hong Kong, and 6 in the United States). As a result, for the six months ended February 28, 2022, the Company posted net sales of ¥32,704 million (up 3.4% year-on-year) partly thanks to the impact of new store openings despite the impact of COVID-19. Operating profit was ¥1,902 million (down 28.5% year-on-year) partly owing to the effect of changes to revenue recognition standards, etc. Ordinary profit was ¥2,172 million (down 15.9% year-on-year), and profit attributable to owners of parent was ¥1,170 million (down 38.8% year-on-year), partly due to the recording of provision of allowance for office relocation expenses related to relocation of the Tokyo head (2) Analysis and examination of operating results, etc. from management perspective office in extraordinary losses. 1) Business results by segment In the domestic eyewear business, the second release of the JINS Pokémon model, in which we incorporated Pokémon to eyewear designs through JINS’ unique point of view, was well- received. Sales were also driven by high-value-added products, including “Airframe Hingeless,” for which we eliminated the hinges connecting the front of the frame with the temples, creating 3 a unique new fit and comfort for users. In addition, membership of the JINS app reached approximately 10.14 million people as of the end of February 2022 and e-commerce sales continued to grow at a steady pace. Also, sales of contact lenses, which provide JINS 1DAY, have grown as planned. Regarding the impact of COVID-19, although there were signs of a recovery in footfall to levels prior to the outbreak of the pandemic from October onward, when the declaration of a state of emergency, etc., was lifted, customer traffic has decreased as semi-emergency coronavirus measures were declared mainly in urban areas in mid-January due to the prevalence of COVID-19 variants. As such, the situation is still seesawing. In terms of store development, the number of stores in Japan was 451 (21 openings and 4 closures) as of the end of the period As a result, net sales of the domestic eyewear business were ¥25,630 million (up 0.7% year-on-year), and segment operating under review. profit was ¥1,921 million (down 22.2% year-on-year). In the overseas eyewear business, profit significantly decreased in China as personal consumption stalled, owing partly to intermittent lockdowns of cities amid the continued strengthening of restrictions on individual movement imposed by the government as a measure to combat COVID-19, in addition to the impact of factors such as a fallback from the previous year, when there were exemptions to social security fees. In Taiwan, profit increased as performance recovered steadily from the impact of COVID-19 infections, though our business was impacted by factors such as an increase in personnel expenses to secure opticians as required by the Optometric Personnel Act. In Hong Kong, the slump in consumption due to the effects of protests resulting from political unrest and COVID-19 is on a recovery track, and business performance is also recovering steadily. In the United States, we have reopened all of our brick-and-mortar stores, which had been closed due to the impact of COVID-19, and business performance is on a recovery track. In terms of store development, the total number of stores overseas was 229 as of the end of the period under review, including 173 stores in China (9 openings and 6 closures), 44 in Taiwan (6 openings and no closures), 6 in Hong Kong (no openings or closures), and 6 in the United States (no openings or closures). As a result, net sales of the overseas eyewear business were ¥7,074 million (up 14.3% year-on-year), and segment operating loss was ¥18 million (segment operating profit was ¥191 million for the same period of the previous year). 4 2) Analysis of financial position (a) Assets Current assets decreased ¥65 million from the end of the previous fiscal year to ¥33,139 million. This was mainly due to a decrease of ¥190 million in cash and deposits. Non-current assets increased ¥1,052 million from the end of the previous fiscal year to ¥20,854 million. This was mainly due to an increase of ¥459 million in property, plant and equipment such as buildings and structures as a result of the Group’s expansion of retail stores and an increase of ¥289 million in leasehold and guarantee deposits. As a result, total assets increased ¥986 million from the end of the previous fiscal year to ¥53,993 million. Current liabilities increased ¥10,153 million from the end of the previous fiscal year to ¥20,655 million. This was mainly due to a transfer of ¥10,066 million of convertible bond-type bonds with share acquisition rights with due date within one year from non-current liabilities. Non-current liabilities decreased ¥9,978 million from the end of the previous fiscal year to ¥12,307 million. This was mainly due to a transfer of ¥10,066 million of convertible bond-type bonds with share acquisition rights with due date within one year to current liabilities. As a result, total liabilities increased ¥175 million from the end of the previous fiscal year to ¥32,963 million. (b) Liabilities (c) Net assets Net assets increased ¥810 million from the end of the previous fiscal year to ¥21,030 million. This was mainly due to the recording of ¥1,170 million in profit attributable to owners of parent, despite a decrease of ¥466 million due to the payment of dividends. 3) State of cash flows Cash and cash equivalents as of the end of the second quarter of the fiscal year under review decreased ¥190 million from the end of the previous fiscal year to ¥23,016 million. State of each cash flow and factors thereof are as follows. (a) Cash flows from operating activities Net cash provided by operating activities increased ¥2,093 million year on year to ¥2,731 million. This was mainly due to an increase in funds resulting from the recording of ¥1,829 million in profit before income taxes and ¥1,407 million in depreciation, despite a decrease in funds due to ¥437 million of income taxes paid. (b) Cash flows from investing activities Net cash used in investing activities increased ¥1,329 million year on year to ¥1,988 million. This was mainly due to a decrease in funds resulting from the use of ¥1,237 million in purchase of property, plant and equipment in line with the opening and refurnishing of stores. (c) Cash flows from financing activities Net cash used by financing activities decreased ¥24 million year on year to ¥1,214 million. This was mainly due to a decrease in funds resulting from ¥466 million in dividends paid, ¥247 million in repayments of lease obligations and ¥353 million repayments of installment payables. (3) Research and development activities Total research and development expenses were ¥110 million for the six months ended February 28, 2022. There was no material change in the Group’s research and development activities during the six months ended February 28, 2022. There was no decision or conclusion of material management contracts, etc. during the second quarter of the fiscal year under 3. Material contracts, etc. review. 5 III. Status of the Submitting Company 1. Status of Shares, etc. (1) Total number of shares, etc. 1) Total Number of Shares Common stock Class Total 73,920,000 73,920,000 Total number of authorized shares (shares) 2) Issued Shares Class As of the end of 2nd quarter of the fiscal year (shares) (February 28, 2022) As of the submission date (shares) (April 8, 2022) Common stock 23,980,000 23,980,000 Stock exchange on which the Company is listed Tokyo Stock Exchange (First Section) (as of the end of the second quarter) Prime Market (as of the filing date) Details The number of shares constituting one unit: 100 shares Total 23,980,000 23,980,000 ― ― (2) Status of Share Acquisition Rights, etc. 1) Details of the Stock Option Plan Not applicable. 2) Status of Other Share Acquisition Rights, etc. (3) Status of Exercises of Moving Strike Convertible Bonds, etc. Not applicable. Not applicable. Date From December 1, 2021 to February 28, 2022 (4) Changes in the Total Number of Shares Issued and the Amount of Common Stock, etc. Changes in the total number of shares issued (shares) Balance of the total number of shares issued (shares) Changes in common stock (millions of yen) Balance of common stock (millions of yen) Changes in legal capital surplus (millions of yen) Balance of legal capital surplus (millions of yen) ― 23,980,000 ― 3,202 ― 3,157 6 (5) Status of Major Shareholders Name Address Number of shares held (shares) As of February 28, 2022 the Percentage of number of shares held total number of shares issued (excluding treasury stock) (%) the in Hitoshi Tanaka Maebashi-shi, Gunma The Master Trust Bank of Japan, Ltd. (Trust Account) 11-3 Hamamatsucho 2-chome, Minato-ku, Tokyo MARS G.K. 10-2 Fujimi 2-chome, Chiyoda-ku, Tokyo Custody Bank of Japan, Ltd. (Trust Account) BNYM TREATY DTT 15 (Standing Proxy: Transaction Services Division, MUFG Bank, Ltd.) TAIYO FUND, L.P. (Standing Proxy: Transaction Services Division, MUFG Bank, Ltd.) 8-12 Harumi 1-chome, Chuo-ku, Tokyo 240 GREENWICH STREET, NEW YORK, 10286 U.S.A. 5300 CARILLON POINT KIRKLAND, WA 98033, USA Jupiter Corporation 10-2 Fujimi 2-chome, Chiyoda-ku, Tokyo Venus Corporation 10-2 Fujimi 2-chome, Chiyoda-ku, Tokyo Yutaka Nakamura Minato-ku, Tokyo 8,074,000 3,189,100 1,200,000 1,051,900 688,400 687,800 600,000 600,000 480,000 34.59 13.66 5.14 4.51 2.95 2.95 2.57 2.57 2.06 Total – 16,571,200 71.00 (Notes) 1. The number of shares held by The Master Trust Bank of Japan, Ltd. of 3,189,100 shares relates to trust operations. These shares include 102,100 shares held in pension trusts, 1,218,700 shares held in investment trusts, and 1,868,300 shares held in other trusts. 2. The number of shares held by Custody Bank of Japan, Ltd. of 1,051,900 shares relates to trust operations. These shares include 145,800 shares held in pension trusts, 775,800 shares held in investment trusts, and 130,300 shares held in other trusts. 3. In the statement of large-volume holdings (change report) made available for public inspection on October 21, 2021, it is stated that Nomura Securities Co., Ltd. and its joint holders Nomura International plc and Nomura Asset Management Co., Ltd. hold the following shares as of October 15, 2021. However, since the Company is unable to confirm the actual number of shares held by them as of February 28, 2022, they are not included in the above status of major shareholders. The details of the statement of large-volume holdings are as follows. Name Address Number of shares held (shares) Shareholding ratio (%) Nomura Securities Co., Ltd. 13-1 Nihonbashi, 1-chome, Chuo-ku, Tokyo 249,137 1.03 Nomura International plc 1 Angel Lane London EC4R 3AB United Kingdom 125,739 0.52 Nomura Asset Management Co., Ltd. 2-1 Toyosu 2-chome, Koto-ku, Tokyo 689,000 Total – 1,063,876 (Note) The number of shares held by Nomura Securities Co., Ltd. and Nomura International plc includes the number of latent shares held as a result of holding bonds with share acquisition rights. 2.87 4.35 7 4. In the statement of large-volume holdings (change report) made available for public inspection on December 22, 2021, it is stated that Mizuho Securities Co., Ltd. and its joint holders Asset Management One Co., Ltd. and Mizuho International plc hold the following shares as of December 15, 2021. However, since the Company is unable to confirm the actual number of shares held by them as of February 28, 2022, they are not included in the above status of major shareholders. The details of the statement of large-volume holdings are as follows. Name Address Number of shares held (shares) Shareholding ratio (%) Mizuho Securities Co., Ltd. 5-1 Otemachi 1-chome, Chiyoda-ku, Tokyo 1,217,706 4.68 Asset Management One Co., Ltd. 8-2 Marunouchi 1-chome, Chiyoda-ku, Tokyo 345,700 1.33 Mizuho International plc 30 Old Bailey, London, EC4M 7AU, United Kingdom － 1,563,406 － 6.01 Total – (Note) The number of shares held by Mizuho Securities Co., Ltd. and Mizuho International plc includes the number of latent shares held as a result of holding bonds with share acquisition rights. 5. In the statement of large-volume holdings made available for public inspection on January 5, 2022, it is stated that TAIYO PACIFIC PARTNERS LP and its joint holder TAIYO FUND, L.P. hold the following shares as of December 23, 2021. However, since the Company is unable to confirm the actual number of shares held by them as of February 28, 2022, they are not included in the above status of major shareholders. The details of the statement of large-volume holdings are as follows. Name Address Number of shares held (shares) Shareholding ratio (%) TAIYO PACIFIC PARTNERS LP 5300 CARILLON POINT KIRKLAND, WA 98033, USA 776,200 3.24 TAIYO FUND, L.P. 5300 CARILLON POINT KIRKLAND, WA 98033, USA Total – 700,200 1,476,400 2.92 6.16 8 ― ― ― ― ― ― ― Classification Number of shares (shares) Number of voting rights (units) As of February 28, 2022 Details (6) Status of Voting Rights 1) Issued Shares Shares without voting rights Shares with restricted voting rights (treasury stock, etc.) Shares with restricted voting rights (others) ― ― ― Shares with full voting rights (treasury Common stock stock, etc.) 639,700 Shares with full voting rights (others) Odd-lot shares Total number of shares issued Common stock 23,334,700 Common stock 5,600 23,980,000 ― ― ― ― ― ― 233,347 Number of shares per unit: 100 shares Total voting rights held by shareholders ― 233,347 2) Treasury Stock, etc. Name of shareholder Address of shareholder Number of shares held under own name (shares) Number of shares held under the names of others (shares) Total number of shares held (shares) As of February 28, 2022 Percentage of the number of shares held in the total number of shares issued (%) JINS HOLDINGS Kawaharamachi 2-Inc. 26-4 chome, Maebashi-shi, Gunma Total ― 639,700 639,700 2.66 639,700 639,700 2.66 ― ― 2. Status of Officers Not applicable. 9 2. Audit certification and Exchange Act. IV. Financial Information 1. Preparation methods of quarterly consolidated financial statements The quarterly consolidated financial statements of the Company are prepared based on the Regulation on the Terminology, Forms, and Preparation Methods of Quarterly Consolidated Financial Statements (Cabinet Office Order No. 64 of 2007). The Company’s quarterly consolidated financial statements for the second quarter of the fiscal year under review (from December 1, 2021 to February 28, 2022) and the six months ended February 28, 2022 (from September 1, 2021 to February 28, 2022) have received a quarterly review by Ernst & Young ShinNihon LLC, pursuant to provisions of Article 193-2, Paragraph 1 of the Financial Instruments 10 1. Quarterly consolidated financial statements (1) Quarterly consolidated balance sheets (Millions of yen) As of August 31, 2021 As of February 28, 2022 Assets Current assets Cash and deposits Notes and accounts receivable – trade Merchandise and finished goods Raw materials and supplies Other Total current assets Non-current assets Property, plant and equipment Buildings and structures, net Other, net Total property, plant and equipment Intangible assets Investments and other assets Leasehold and guarantee deposits Other Total investments and other assets Total non-current assets Total assets 23,016 3,773 4,427 438 1,483 33,139 7,347 2,004 9,351 2,294 4,803 4,404 9,207 20,854 53,993 23,206 3,794 4,515 359 1,328 33,205 7,139 1,753 8,892 2,244 4,514 4,150 8,664 19,801 53,007 11 (Millions of yen) As of August 31, 2021 As of February 28, 2022 Liabilities Current liabilities Accounts payable – trade Current portion of convertible bond-type bonds with share acquisition rights Short-term borrowings Current portion of long-term borrowings Accounts payable – other, and accrued expenses Provision for bonuses Provision for product warranties Income taxes payable Other Total current liabilities Non-current liabilities Convertible bond-type bonds with share acquisition rights Long-term borrowings Asset retirement obligations Allowance for office relocation expenses Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Common stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity Accumulated other comprehensive income Foreign currency translation adjustment Total accumulated other comprehensive income Total net assets Total liabilities and net assets 1,446 10,066 2,140 44 4,533 45 153 1,016 1,208 20,655 10,030 180 541 235 1,320 12,307 32,963 3,202 3,228 19,439 (5,002) 20,867 162 162 21,030 53,993 – 1,506 2,121 53 4,410 49 – 657 1,702 10,501 20,135 217 528 – 1,404 22,285 32,787 3,202 3,228 18,747 (5,002) 20,176 43 43 20,219 53,007 12 (2) Quarterly consolidated statements of income and comprehensive income Quarterly consolidated statements of income Six months ended February 28, 2021 and February 28, 2022 (Millions of yen) For the six months ended February 28, 2021 For the six months ended February 28, 2022 Interest expenses Share of loss of investments accounted for using equity method Selling, general and administrative expenses Net sales Cost of sales Gross profit Operating profit Non-operating income Interest income Commission income Rental income Foreign exchange gains Subsidy income Compensation income Other Total non-operating income Non-operating expenses Commission expenses Rental expenses on real estate Other Total non-operating expenses Ordinary profit Extraordinary losses Loss on retirement of non-current assets Impairment loss Loss on store closings Provision of allowance for office relocation expenses Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit attributable to non-controlling interests Profit attributable to owners of parent 31,643 6,585 25,057 *1 22,394 2,662 42 31 4 93 19 – 15 206 82 – 0 181 20 285 17 209 1 *2 – 228 2,355 758 (316) 441 1,913 – 1,913 32,704 7,148 25,555 *1 23,653 1,902 43 11 3 182 133 110 8 494 77 27 110 0 8 224 94 – 12 *2 235 342 1,829 754 (95) 659 1,170 – 1,170 2,584 2,172 13 Quarterly consolidated statements of comprehensive income Six months ended February 28, 2021 and February 28, 2022 Profit Other comprehensive income Foreign currency translation adjustment Total other comprehensive income Comprehensive income Comprehensive income attributable to: Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests 1,913 171 171 2,084 2,084 – (Millions of yen) For the six months ended February 28, 2021 For the six months ended February 28, 2022 1,170 119 119 1,289 1,289 – 14 (Millions of yen) For the six months ended February 28, 2021 For the six months ended February 28, 2022 (3) Quarterly consolidated statements of cash flows Cash flows from operating activities: Profit before income taxes Depreciation Impairment loss Amortization of goodwill Increase (decrease) in provision for bonuses Increase (decrease) in provision for product warranties Increase (decrease) in allowance for office relocation expenses Interest and dividend income Subsidy income Interest expenses Commission expenses Foreign exchange losses (gains) Share of loss (profit) of investments accounted for using equity method Loss on retirement of non-current assets Loss on store closings Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in other assets Increase (decrease) in trade payables Increase (decrease) in accrued consumption taxes Increase (decrease) in accounts payable – other Increase (decrease) in accrued expenses Increase (decrease) in other liabilities Interest and dividends received Other, net Subtotal Interest paid Commission paid Income taxes paid Proceeds from subsidy income Other, net Net cash provided by (used in) operating activities Cash flows from investing activities: Purchase of property, plant and equipment Purchase of intangible assets Loan advances Collection of loans receivable Proceeds from sale of businesses Payments of leasehold and guarantee deposits Proceeds from refund of leasehold and guarantee deposits Purchase of investment securities Net cash provided by (used in) investing activities 15 158 (1,099) 2,355 1,294 209 35 (5) – – (42) (65) – 82 0 – 17 1 (44) 42 (286) (203) (32) (5) 41 2,454 4 (84) (0) – – 638 (821) (72) (30) 23 159 (155) 236 – (659) (1,735) 1,829 1,407 – 17 (3) 152 235 (43) (133) (195) 77 0 27 94 12 63 88 (109) (74) (760) 70 (47) 286 78 3,075 4 (65) (0) (437) 133 21 2,731 (1,237) (250) (202) 26 – (399) 94 (20) (1,988) (Millions of yen) For the six months ended February 28, 2021 For the six months ended February 28, 2022 Cash flows from financing activities: Net increase (decrease) in short-term borrowings Repayments of long-term borrowings Repayments of installment payables Purchase of treasury stock Repayments of lease obligations Dividends paid Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period 154 (69) (328) (0) (411) (583) (1,238) 147 (1,112) 24,667 * 23,555 (92) (53) (353) – (247) (466) (1,214) 281 (190) 23,206 * 23,016 16 [Notes] (Changes in accounting policies, etc.) (Application of Accounting Standard for Revenue Recognition and other standards) The Company has decided to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020; hereinafter the “Revenue Recognition Accounting Standard”), etc., from the beginning of the first quarter and recognize revenue from goods or services which the Company promised to provide at an amount expected to be received in exchange for the goods or services at the time when control over the promised goods or services has been transferred to a customer. Major changes due to the application of Revenue Recognition Accounting Standard, etc., are shown below. (1) Sales with right of return The Company has changed the accounting treatment of sales with a right of return to the method of recognizing revenue and cost of sales after excluding amounts equivalent to revenue and cost of sales for products expected to be returned. Accordingly, any consideration for products expected to be returned is included in “Other” under “Current liabilities” as refund liabilities, and any assets for which the Company recognizes the right to recover products from customers on settling refund liabilities are included in “Other” under “Current assets” as return assets. (2) Revenue recognition for points from other companies Previously the Company recorded amounts equivalent to points granted to customers in accordance with the sale of products based on points programs operated by other companies as selling, general and administrative expenses. However, the Company has changed to the method of recognizing revenue after subtracting an amount equivalent to points granted from the transaction price. The application of the Revenue Recognition Accounting Standard, etc., follows the provisional treatment stipulated in the proviso of Paragraph 84 of the Revenue Recognition Accounting Standard. The cumulative effects in the case of retroactively applying the new accounting policy to before the beginning of the first quarter of the fiscal year were adjusted in retained earnings at the beginning of the first quarter of the fiscal year, and the new accounting policy is applied from this initial balance. As the impacts on profit and loss for the six months ended February 28, 2022, and retained earnings at the beginning of the period are not significant, this information has been omitted. Furthermore, in accordance with the provisional treatment stipulated in Paragraph 89-2 of the Revenue Recognition Accounting Standard, information for previous consolidated fiscal years has not been reclassified based on the new method of presentation. In addition, in accordance with the provisional treatment stipulated in Paragraph 28-15 of the Accounting Standard for Quarterly Financial Reporting (ASBJ Statement No. 12, March 31, 2020), the disaggregation of revenue from contracts with customers is not provided for the six months ended February 28, 2021. (Application of Accounting Standard for Fair Value Measurement) The Company has applied the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019, hereinafter the “Fair Value Measurement Accounting Standard”) from the beginning of the first quarter of the fiscal year. Accordingly, the Company will apply new accounting policies prescribed in the Fair Value Measurement Accounting Standard and the like in the future in accordance with the provisional treatment stipulated in Paragraph 19 of the same Standard and Paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019). The application of the accounting standard has no impact on the quarterly consolidated financial statements. 17 (Changes in accounting estimates) As announced in the “Notice of Relocation of the Tokyo Head Office” on January 14, 2022, we plan to relocate the Tokyo head office in February 2023. In accordance with this, the Company has shortened the useful lives of non-current assets that it does not expect to use after the relocation. This change will be applied going forward. In addition, the Company has made changes to asset retirement obligations for restoration costs in accordance with fixed-term building lease contracts such that the recording of expenses associated with asset retirement obligations will end by the planned relocation date. Furthermore, the impact of this change on profit and loss for the six months ended February 28, 2022, is not significant. 18 Certain subsidiaries entered into proxy deposit agreements with lessors and financial institutions regarding leasehold and Based on the agreements, the financial institutions have deposited the amounts equivalent to leasehold and guarantee deposits to the lessors, and the subsidiaries guaranteed the obligations of the lessors to refund the leasehold and guarantee deposits to the (Quarterly consolidated balance sheet) I. Liability on guarantees guarantee deposits on some leasehold properties. financial institutions. Previous consolidated fiscal year (August 31, 2021) 2nd quarter of consolidated fiscal year under review (February 28, 2022) ¥274 million ¥274 million II. Financial covenants Previous consolidated fiscal year (August 31, 2021) The Company entered into loan commitment agreements with counterparty banks to flexibly and stably procure working capital and funding for capital investments mainly for new store openings, and the said loan commitment agreements are subject to financial covenants. (1) Loan commitment agreements entered into on August 29, 2017 Total amount of loan commitments Available amount at the year-end Outstanding borrowings at the year-end Unused balance ¥8,000 million ¥4,000 million – ¥4,000 million Financial covenants on the loan commitment agreements above 1) Total net assets in the consolidated balance sheets at each year-end after the effective date of the agreement must be at least 75% of those at the year-end immediately before the effective date of the agreement or at least 75% of those at 2) The Company shall not record ordinary loss for two consecutive years in the consolidated statement of income at each the most recent year-end, whichever is higher. fiscal year-end after the effective date of the agreement. Second quarter of the consolidated fiscal year under review (February 28, 2022) The Company entered into loan commitment agreements with counterparty banks to flexibly and stably procure working capital and funding for capital investments mainly for new store openings, and the said loan commitment agreements are subject to financial covenants. (1) Loan commitment agreements entered into on August 29, 2017 Total amount of loan commitments Available amount at the period-end Outstanding borrowings at the period-end Unused balance ¥8,000 million ¥4,000 million – ¥4,000 million Financial covenants on the loan commitment agreements above 1) Total net assets in the consolidated balance sheets at each year-end after the effective date of the agreement must be at least 75% of those at the year-end immediately before the effective date of the agreement or at least 75% of those at 2) The Company shall not record ordinary loss for two consecutive years in the consolidated statement of income at each the most recent year-end, whichever is higher. fiscal year-end after the effective date of the agreement. 19 (Quarterly consolidated statements of income) *1. Major components and amounts of selling, general and administrative expenses were as follows: Six months ended February 28, 2021 Six months ended February 28, 2022 Salaries and allowances Rent expenses on land and buildings Advertising expenses Research and development expenses ¥6,628 million ¥5,427 million ¥1,482 million ¥216 million ¥7,166 million ¥5,694 million ¥1,331 million ¥110 million *2. Provision of allowance for office relocation expenses For the six months ended February 28, 2021 Not applicable. For the six months ended February 28, 2022 Relating to the decision on relocating the Tokyo head office, after relocating to the new Tokyo head office, the amount equivalent to rent expenses for the estimated period of restoration work of the former Tokyo head office was recorded as provision of allowance. (Quarterly consolidated statements of cash flows) * Reconciliation of cash and cash equivalents in the quarterly consolidated statements of cash flows and cash and deposits in the quarterly consolidated balance sheets as of February 28, 2021 and 2022 was as follows: Six months ended February 28, 2021 Six months ended February 28, 2022 Cash and deposits Time deposits with maturities over three months, etc. Cash and deposits ¥23,555 million ¥23,016 million – – ¥23,555 million ¥23,016 million (Shareholders’ equity) For the six months ended February 28, 2021 1. Dividends paid Annual General Meeting of held on November 26, 2020 Resolution Class of shares Total amount (Millions of Yen) Per share amount (Yen) Record date Effective date Source of dividends Shareholders Common stock 583 25.00 August 31, 2020 Retained earnings November 27, 2020 2. Of dividends for which the record date is during the six months ended February 28, 2021, dividends with effective dates falling after the end of the second quarter of the fiscal year Resolution Class of shares Total amount (Millions of Yen) Per share amount (Yen) Record date Effective date Source of dividends meeting held on Common stock 583 25.00 February 28, 2021 May 14, 2021 Retained earnings Board of Directors April 9, 2021 20 For the six months ended February 28, 2022 1. Dividends paid Resolution Class of shares Total amount (Millions of Yen) Per share amount (Yen) Record date Effective date Source of dividends Shareholders held Common stock 466 20.00 August 31, 2021 Retained earnings November 26, 2021 2. Of dividends for which the record date is during the six months ended February 28, 2022, dividends with effective dates falling after the end of the second quarter of the fiscal year Resolution Class of shares Total amount (Millions of Yen) Per share amount (Yen) Record date Effective date Source of dividends Common stock 396 17.00 February 28, 2022 May 13, 2022 Retained earnings Annual General Meeting of on November 25, 2021 Board of Directors meeting held on April 8, 2022 21 (Segment information, etc.) [Segment information] I. For the six months ended February 28, 2021 1. Information about net sales and profit (loss) by reportable segment Reportable segment Domestic eyewear business Overseas eyewear business Subtotal Adjustments Consolidated (Note) (Millions of yen) Net sales: Sales to outside customers Intersegment sales or transfers Total Segment profit 25,451 281 25,733 2,471 6,191 6 6,198 191 31,643 288 31,931 2,662 (288) (288) – – 31,643 – 31,643 2,662 Notes: Segment profit is reconciled to operating profit in the quarterly consolidated statements of income. 2. Information about loss on impairment of non-current assets and goodwill by reportable segment (Significant loss on impairment of non-current assets) An impairment loss of ¥209 million was recorded in the “domestic eyewear business” segment. (Significant changes in goodwill) Not applicable. Not applicable. (Significant gain on negative goodwill) 22 (Millions of yen) II. For the six months ended February 28, 2022 1. Information about net sales and profit (loss) by reportable segment and information about revenue breakdown Reportable segment Domestic eyewear business Overseas eyewear business Subtotal Adjustments Consolidated (Note) Net sales: Revenue from contracts with customers Sales to outside customers Intersegment sales or transfers Total Segment profit (loss) 25,630 25,630 233 25,864 1,921 7,074 7,074 5 7,080 (18) 32,704 32,704 239 32,944 1,902 – – – (239) (239) 32,704 32,704 – 32,704 1,902 Notes: Segment profit (loss) is reconciled to operating profit in the quarterly consolidated statements of income. 2. Information about loss on impairment of non-current assets and goodwill by reportable segment (Significant loss on impairment of non-current assets) Not applicable. Not applicable. Not applicable. (Significant changes in goodwill) (Significant gain on negative goodwill) 3. Change in reportable segments As described in Changes in accounting policies, etc., the Company has changed its accounting treatment methods in relation to revenue recognition with the application of the Accounting Standard for Revenue Recognition and other standards from the beginning of the first quarter of the fiscal year. Accordingly, the Company has made similar changes to methods of calculating business segment profit and Furthermore, the impact of these changes on segment information is not significant. loss. 23 (Revenue recognition) (Additional information) Information about breakdown of revenue from contracts with customers is as stated in “Notes (Segment information, etc.).” (Accounting estimates pertaining to the novel coronavirus disease (COVID-19)) Regarding the impact of COVID-19, the impact on personal consumption is seesawing, as semi-emergency coronavirus measures were declared again in mid-January due to the prevalence of variants, despite the complete lifting from October onward of the state of emergency, etc., which had been declared due to the spread of COVID-19, mainly in urban areas, and therefore, we believe that it is still impossible to predict future developments. Although it is difficult to forecast accurately factors including the timing when the disease is brought under control, the Group has made accounting estimates such as impairment of non-current assets and the recoverability of deferred tax assets, based on an assumption that the impact will continue for a certain period in the fiscal year ending August 31, 2022. 24 Items Six months ended February 28, 2021 Six months ended February 28, 2022 ¥81.99 ¥50.14 – – 1,170 1,170 (26) [(26)] 23,340,217 23,340,216 ¥74.35 ¥44.86 1,913 1,913 (26) [(26)] – – (Per Share Information) Basic and diluted earnings per share are calculated as follows: (1) Basic earnings per share (Basis for calculation) Profit attributable to owners of parent (millions of yen) Profit not attributable to common shareholders (millions of yen) Profit attributable to owners of parent related to common stock (millions of yen) Weighted-average number of shares of common stock outstanding during the year (shares) (2) Diluted earnings per share (Basis for calculation) Adjustments to profit attributable to owners of parent (millions [of which, other (after tax effect)] (millions of yen) of yen) rights] (Subsequent events) Not applicable. 2. Other February 28, 2022. 1) Total amount: 2) Per share amount: Increase in number of shares of common stock (shares) 2,038,886 2,156,660 [of which, convertible bond-type bonds with share acquisition [2,038,886] [2,156,660] Summary of potential shares not included in calculation of diluted earnings per share due to lack of dilutive effect, which were subject to significant change from the end of the previous fiscal year Regarding the interim dividend for the 35th term (from September 1, 2021 to August 31, 2022), at the Board of Directors meeting held on April 8, 2022, it was resolved to pay an interim dividend to shareholders who were recorded in the shareholder registry as of 3) Effective date of claim for payment and payment commencement date: May 13, 2022 ¥396 million ¥17.00 25 Part II Information on Guarantor Companies, etc. for the Submitting Company Not applicable. 26