セイコーホールディングス（8050） – Consolidated Financial Results for the Fiscal Year Ended MARCH 31, 2022(Under Japanese GAAP)

Consolidated Financial Resultsfor the Fiscal Year Ended MARCH 31, 2022(Under Japanese GAAP)SEIKO HOLDINGS CORPORATION8050Shuji Takahashi, PresidentShimesu Takizawa, Executive Director and Chief Financial OfficerURL: https://www.seiko.co.jp/en/Company name: Securities code: Representative:Inquiries:Scheduled date of annual general meeting of shareholders:Scheduled date to commence dividend payments:Scheduled date to file annual securities report:Preparation of supplementary material on financial results:Holding of financial results briefing:June 29, 2022June 30, 2022June 29, 2022 (in Japanese)AvailableScheduled (for institutional investors and analysts)May 10, 2022Listing: TokyoTelephone: +81-3-3563-2111(Yen amounts are rounded down to millions, unless otherwise noted.)1. Consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022)(1) Consolidated operating resultsNet salesOperating profitOrdinary profitFiscal year endedMarch 31, 2022March 31, 2021Note: Comprehensive income%Millions of yenMillions of yen17.1237,3828,7702,194(15.3)202,671For the fiscal year ended March 31, 2022:For the fiscal year ended March 31, 2021:%299.7(64.2)\\Millions of yen9,939633millionmillion11,87010,855[9.4%][-%]( Percentages indicate year-on-year changes.)Profit attributable toowners of parent%-(91.0)Millions of yen6,4153,475%84.62.4Basic earningsper shareDiluted earningsper shareReturn on equityYenFiscal year ended155.56March 31, 202284.30March 31, 2021Reference: Share of profit (loss) of entities accounted for using equity methodFor the fiscal year ended March 31, 2022:For the fiscal year ended March 31, 2021:Yen155.5684.30\\898(1,826)millionmillionRatio of ordinaryprofit to total assets%3.10.2%5.53.2Ratio of operatingprofit to net sales%3.71.1(2) Consolidated financial positionAs ofMarch 31, 2022March 31, 2021Reference: Equity(3) Consolidated cash flows Fiscal year endedMarch 31, 2022March 31, 20212. Cash dividendsFiscal year endedMarch 31, 2021Fiscal year endedMarch 31, 2022Fiscal year endingMarch 31, 2023(Forecast)Total assetsNet assetsEquity-to-asset ratioNet assets per shareMillions of yen327,533319,671Millions of yen121,624113,082\\As of March 31, 2022:As of March 31, 2021:120,067111,695millionmillion%36.734.9Yen2,911.172,709.17Cash flows fromoperating activitiesCash flows frominvesting activitiesCash flows fromfinancing activitiesCash and cash equivalentsat end of periodMillions of yen20,3582,874Millions of yen(9,318)(7,838)Millions of yen(13,909)10,465Millions of yen30,73832,340Annual dividends per shareFirstquarter-endYenSecondquarter-endYenThirdquarter-endYenFiscalyear-endTotalYenYenMillions of yen%Total cashdividends(Total)Payout ratio(Consolidated)—12.5025.0037.50—25.0037.5025.0050.0037.5075.001,5502,06744.532.141.2Ratio ofdividends tonet assets(Consolidated)%1.41.83. Consolidated financial forecast for the fiscal year ending March 31, 2023 (From April 1, 2022 to March 31, 2023)Net salesOperating profitOrdinary profit( Percentages indicate year-on-year changes.)Profit attributable toowners of parentBasic earningsper shareFiscal year ending March 31, 2023Millions of yen245,000% Millions of yen10,0003.2% Millions of yen10,50014.0% Millions of yen7,5005.6%16.9Yen181.85* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): Applicable 　Newly included: 　Not applicable Excluded: 　Applicable (SEIKO Clock Inc.) (Note) Refer to Changes in significant subsidiaries during the period, (5) Notes to Consolidated Financial Statements, 3. Consolidated Financial Statements and Major Notes, for detail.(2) Changes in accounting policies, changes in accounting estimates, and restatement　　i) Changes in accounting policies due to revisions to accounting standards and other regulations　　ii) Changes in accounting policies due to other reasons　　iii) Changes in accounting estimates　　iv) Restatement: Applicable: Not applicable: Not applicable: Not applicable (Note) Refer to Changes in accounting policies, (5) Notes to Consolidated Financial Statements, 3. Consolidated Financial Statements and Major Notes, for detail.(3) Number of issued shares (common shares) i) Total number of issued shares at the end of the period (including treasury shares)41,404,261 ii) Number of treasury shares at the end of the periodAs of March 31, 2022shares /As of March 31, 2022160,535 shares / iii) Average number of shares outstanding during the period Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021As of March 31, 202141,404,261sharesAs of March 31, 2021175,589shares41,240,65941,226,940(Note) For the purpose of calculating the number of treasury shares at the end of period and the average numbers of shares issued during the period,treasury shares held in the Board Benefit Trust (BBT) are included in the treasury shares deducted in the calculation.sharesshares[Reference] Overview of non-consolidated financial results 1. Non-consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022)(1) Non-consolidated operating results( Percentages indicate year-on-year changes.)Net salesOperating profitOrdinary profitProfitMillions of yen12,04311,301%6.6(6.1)Millions of yen(288)436% Millions of yen(473)809-(81.8)%-(73.3)Millions of yen3,2571,560%108.7(50.1)Fiscal year endedMarch 31, 2022March 31, 2021 Fiscal year endedMarch 31, 2022March 31, 2021As ofMarch 31, 2022March 31, 2021Reference: Equity(2) Non-consolidated financial positionBasic earningsper shareDiluted earningsper shareYen78.9437.83Yen–Total assetsNet assetsEquity-to-asset ratioNet assets per shareMillions of yen187,644192,853Millions of yen57,12055,495As of March 31, 2022:As of March 31, 2021:\\57,12055,495%30.428.8millionmillionYen1,384.231,345.36* Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.* Proper use of earnings forecasts, and other special matters(Cautionary statements with respect to financial forecast)The financial forecasts which appear in this report have been prepared based solely on the information which was available to the Company as of thedate on which the report was released and the Company does not in any way guarantee the achievement of the forecasts. Actual results may differsignificantly from the forecasted figures due to a number of factors. For assumptions used in the financial forecasts and instructions to use thefinancial forecasts, refer to (4) Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2023 (FY2022), 1. Business Results, for detail.SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 3/26 Contents 1. Business Results (1) Overview ……………………………………………………………………………………………….. (2) Financial Condition …………………………………………………………………………………. (3) Overview of Cash Flows ………………………………………………………………………….. (4) Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2023 4 7 7 (FY2022) ………………………………………………………………………………………………. 8 Basic Policy on Adoption of Accounting Standards …………………………………………. 10 Consolidated Financial Statements and Major Notes (1) Consolidated Balance Sheets ……………………………………………………………………. 11 (2) Consolidated Statements of Income and Comprehensive Income ………………….. 14 (3) Consolidated Statements of Changes in Equity …………………………………………… 16 (4) Consolidated Statements of Cash Flows …………………………………………………….. 18 (5) Notes to Consolidated Financial Statements ……………………………………………….. 20 (Going concern assumption) ……………………………………………………………………… 20 (Changes in significant subsidiaries during the period) …………………………………. 20 (Changes in accounting policies) ……………………………………………………………….. 20 (Segment information) ……………………………………………………………………………… 22 (Per share information) ……………………………………………………………………………… 25 (Significant subsequent events) ………………………………………………………………….. 26 2. 3. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 4/26 1. Business Results (1) Overview In the world economy during the fiscal year ended March 31, 2022, many countries showed signs of a recovery from the sudden economic declines caused by the spread of the novel coronavirus during the previous fiscal year. In the U.S. economy, although the pace of growth in employment and consumption began to slow due to the impact of a resurgence of infections and labor shortages, a trend toward recovery continued. In Europe, economic activity was significantly affected mainly by an intensification of restrictions on movement prompted by the rapid spread of the Omicron variant. In China as well, although the economy progressed steadily, growth was slowed by factors such as the impact of the government’s “zero-COVID” policy and a sluggish real estate market. The Japanese economy experienced cycles of activity restrictions and easing due to the spread of infections of mutant strains, but maintained a recovery trend. Personal consumption, which had been subdued, showed signs of a recovery after the declaration of a state of emergency was lifted in September. Net sales Operating profit Ordinary profit % % % USD EUR FY2019 FY2020 FY2021 Variance Variance (a) (b) ① ① – (a) ① – (b) 239,150 202,671 237,382 (1,768) 34,711 (Millions of yen) 6,134 2.6% 7,004 2.9% 3,394 1.4% 108.7 120.8 2,194 1.1% 633 0.3% 3,475 1.7% 106.1 123.8 8,770 3.7% 9,939 4.2% 6,415 2.7% 112.4 130.6 2,638 1.1pt 2,935 1.3pt 3,020 1.3pt 3.7 9.8 6,576 2.6pt 9,306 3.9pt 2,939 1.0pt 6.3 6.8 Profit attributable to owners of parent Exchange rate (v. JPY) Amid these circumstances, the Company promoted the strategies of the Seventh Mid-Term Management Plan, while paying close attention to the health and safety of stakeholders, given the rapid spread of infections of mutant strains. In the Watches Business, net sales rose significantly especially for overseas markets, thanks to progress in efforts to expand Global Brands (GB), centered on Grand Seiko (GS) and Seiko Prospex. The Electronic Devices Business steadily captured favorable demand in fields such as the medical field, and efforts by the Systems Solutions Business to diversify business and expand the stock business proved successful. As a result, sales posted for both of these business segments exceeded those of the previous fiscal year and two years prior, before the spread of SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 5/26 the novel coronavirus. As a result, for the fiscal year ended March 31, 2022, the Group reported consolidated net sales of 237.3 billion yen, a year-on-year increase of 17.1%. On an overall consolidated basis, domestic net sales came to 124.4 billion yen (a year-on-year increase of 10.0%), and overseas net sales were 112.9 billion yen (a year-on-year increase of 26.1%). Overseas net sales comprised 47.6% of net sales overall. Advertising and promotion expenses for the fiscal year ended March 31, 2022 increased by approximately 7% from the previous fiscal year, but fell by approximately 15% from two years prior. Other selling, general and administrative expenses also generally returned to usual levels as business activities normalized and also due to an increase resulting from the impact of changes in accounting standards. However, operating profit improved by 6.5 billion yen year on year to 8.7 billion yen (a year-on-year increase of 299.7%), as a result of a recovery in net sales and improvements in profitability. Non-operating income and expenses improved year on year, primarily due to share of profit of entities accounted for using equity method and foreign exchange gains and losses, and ordinary profit increased by 9.3 billion yen year on year to 9.9 billion yen (ordinary profit of 0.6 billion yen in the previous fiscal year). Subsidy income of 0.1 billion yen was posted as extraordinary income, and a total loss of 1.1 billion yen, including a loss relating to the novel coronavirus, was posted as extraordinary losses. As a result, profit attributable to owners of parent minus income taxes and profit attributable to non-controlling interests was 6.4 billion yen (a year-on-year increase of 84.6%) The average exchange rates for the current fiscal year were 112.4 yen to 1 US dollar and 130.6 yen to 1 euro. Results by Segment Results for each segment are as follows: a. Watches Business Net sales under the Watches Business came to 125.7 billion yen, a year-on-year increase of 20.6 billion yen, or 19.7%, and a decrease of 7.2% from two years prior. Although net sales of completed watches in Japan slightly fell short of the plan for the fiscal year ended March 31, 2022 due to the spread of infections of mutant strains, they entered a recovery trend from the third quarter. GS showed favorable performance, driven primarily by the 140th Anniversary commemorative model as well as a model that features a dial depicting a majestic white birch forest, and sales increased year on year. Net sales also grew for Seiko Astron. On a distribution channel basis, sales were steady for department stores and watch stores, which were supported by vigorous purchasing by wealthy customers. Net sales of GB increased not only year on year, but also from two years prior in all regions overseas, driven by GS. In the U.S., sales during the Christmas season showed favorable performance, and sales centered on GS and Seiko Prospex grew significantly year on year and also from two years prior. In Europe as well, sales of GB such as GS grew in the U.K., France, and many other countries. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 6/26 In China, from the summer onward, social unease such as growing concerns regarding the default of a real estate company led to a decline in consumer sentiment, and net sales fell year on year. Due to the spread of infections of mutant strains, net sales in other Asian countries remained roughly the same as those of the previous year. However, sales in Australia showed favorable performance, centered on GB. The watch movements business was sluggish for the Asian market. Operating profit increased by 2.0 billion yen year on year, resulting in operating profit of 7.6 billion yen (a year-on-year increase of 36.4%) in conjunction with the increase in net sales, despite expenses returning to normal levels year on year following a recovery in business activities. b. Electronic Devices Business Net sales under the Electronic Devices Business came to 64.6 billion yen, a year-on-year increase of 28.8%. Operating profit was 5.8 billion yen, a year-on-year increase of 347.4%. Business results were affected by delays in the supply of components and materials for thermal printers and some precision devices. However, favorable performance continued for micro batteries for medical equipment and quartz crystals, as well as oscillators, high-performance metals for semiconductor production equipment, precision components for automobiles and data centers, and other products. As a result, both revenue and profits grew significantly year on year. c. Systems Solutions Business Net sales under the Systems Solutions Business came to 34.4 billion yen, a year-on-year increase of 0.9%. Operating profit was 3.9 billion yen, a year-on-year increase of 11.5%. Some industries, such as food service, were affected by the coronavirus pandemic, and there were difficulties in procuring components and materials for some products. However, capturing the rising tide of the digitalization of society, there was growth in the digital contract-related business, IIM’s performance management and security-related business, network-related business for 5G for the public sector and communications industry, and other businesses, resulting in continued year-on-year growth in both revenue and profits for 24 consecutive quarters. d. Time Creation, WAKO and other Businesses Net sales under the Time Creation, WAKO and other Businesses amounted to 27.3 billion yen, a year-on-year increase of 2.4 billion yen, or 9.8%. Operating profit was 0.7 billion yen (compared to operating losses of 40 million yen in the previous fiscal year). Having shown signs of picking up, personal consumption in Japan recovered steadily from the third quarter. In the fourth quarter, the Company succeeded in maintaining favorable performance, with limited impact from the quasi-state of emergency measures implemented from January 2022 in Tokyo and other areas. Overseas clock sales also increased year on year in line with a market recovery from the impact of the spread of the novel coronavirus. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 7/26 (2) Financial Condition -Assets- Total assets at the close of the fiscal year ended March 31, 2022 amounted to 327.5 billion yen, an increase of 7.8 billion yen from the close of the previous fiscal year. Total current assets came to 154.7 billion yen, an increase of 4.7 billion yen from the close of the previous fiscal year. This was due to a decrease of 1.8 billion yen in cash and deposits and an increase of 4.6 billion yen in inventories including merchandise and finished goods, together with increases of 1.5 billion yen in a total of notes receivable – trade, accounts receivable – trade, and contract assets in comparison to notes and accounts receivable – trade as of the end of the previous fiscal year. Total non-current assets came to 172.7 billion yen, an increase of 3.1 billion yen from the close of the previous fiscal year. This was mainly due to increases of 1.9 billion yen in total property, plant and equipment and 2.1 billion yen in total investments and other assets, and a decrease of 0.9 billion yen in total intangible assets. -Liabilities- For liabilities, total borrowings came to 116.1 billion yen, due to decreases of 8.9 billion yen in short-term borrowings and 6.5 billion yen in long-term borrowings, and an increase of 6.4 billion yen in current portion of long-term borrowings. In addition, notes and accounts payable – trade increased by 1.7 billion yen, electronically recorded obligations – operating increased by 1.0 billion yen, and accounts payable – other increased by 2.0 billion yen. As a result, total liabilities amounted to 205.9 billion yen, a decrease of 0.6 billion yen from the close of the previous fiscal year. -Net assets- With regard to net assets, total net assets increased by 8.5 billion yen over the close of the previous fiscal year to 121.6 billion yen, mainly owing to increases of 3.1 billion yen in shareholders’ equity and 4.0 billion yen in foreign currency translation adjustment. (3) Overview of Cash Flows The balance of cash and cash equivalents at the end of the fiscal year ended March 31, 2022 came to 30.7 billion yen, a decrease of 1.6 billion yen relative to the end of the previous fiscal year. Free cash flow, the sum of cash flows from operating and investing activities, amounted to 11.0 billion yen. This is primarily due to the following factors: -Cash flows from operating activities Net cash provided by operating activities came to positive 20.3 billion yen (compared to a positive cash flow of 2.8 billion yen for the previous fiscal year), an increase of 17.4 billion yen year on year. This was the result of the Company posting 8.8 billion yen in income before income taxes, factoring in depreciation amounting to 10.8 billion yen, as well as a 1.7 billion-yen increase (decrease) in retirement benefit liability (posted as a decrease), a 1.4 billion-yen decrease (increase) in trade receivables (posted as an increase), and adjusted 2.0 billion yen decrease (increase) in inventories SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 8/26 (posted as a decrease), and others. -Cash flows from investing activities Net cash used in investing activities came to negative 9.3 billion yen (compared to a negative cash flow of 7.8 billion yen for the previous fiscal year) due to cash outflows consisting mainly of 8.7 billion yen in purchase of property, plant and equipment (posted as a decrease). -Cash flows from financing activities Net cash provided by financing activities came to negative 13.9 billion yen (compared to a positive cash flow of 10.4 billion yen for the previous fiscal year) due mainly to repayments and borrowings of long- and short-term borrowings that combined for a net amount of 9.6 billion yen (posted as a decrease), as well as 1.7 billion yen in repayments of finance lease obligations (posted as a decrease) and 2.0 billion yen in cash dividends paid (posted as a decrease). (4) Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2023 (FY2022) With respect to the impact of the novel coronavirus, while there is an increasing trend to prioritize economic activities in many countries, lockdowns have been prolonged in some countries. In addition, Russia invaded Ukraine on February 24, 2022, which caused a growing sense of economic slowdown worldwide. Furthermore, there are concerns regarding the impact on the Japanese economy due to the sudden depreciation of the yen. Going forward, semiconductor shortages and soaring prices of components, materials, transportation, etc., which are partly due to these factors, are expected to grow even more severe. The Company has launched the five-year Eighth Mid-Term Management Plan, “SMILE145,” which begins in the fiscal year ending March 31, 2023. Under SMILE145, our main business targets will be the improvement of the gross profit margin and operating profit with the aim of establishing a sustainable corporate structure. In the fiscal year ending March 31, 2023, the first fiscal year of the Mid-Term Management Plan, our target is to raise the gross profit margin by one percentage point from the actual result in the previous fiscal year, to 42.8%, and to reach 10.0 billion yen in operating profit. The financial forecasts for the fiscal year ending March 31, 2023, including business targets other than those described above, are as follows. Note that the exchange rates for the financial forecast are as follows: 1 US dollar = 120.0 yen; 1 euro = 130.0 yen. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 9/26 ■Forecast for the consolidated business results for FY2022 (Billions of yen) FY2022 (forecast) Year-on-year change (%) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Earnings per share 181.85 yen 245.0 10.0 10.5 75.0 3.2 14.0 5.6 16.9 ■Forecasted results by segment for FY2022 The Group has established three strategic domains based on business strategies under the Eighth Mid-Term Management Plan, SMILE145. Accordingly, disclosure segments have been changed from the fiscal year ending March 31, 2023 as follows. The previous Watches Business and some of the businesses included in the previous Electronic Devices Business, together with the Time Creation Business and WAKO Business in the Time Creation, WAKO and other Businesses, now make up the Emotional Value Solutions Business. The Devices Solutions Business will consist of the businesses previously in the Electronic Devices Business, other than those that have been changed to the Emotional Value Solutions Business. There are no changes from the previous business in the Systems Solutions Business. (Billions of yen) Net Sales Operating Profit FY2022 (forecast) FY2022 (forecast) Emotional Value Solutions Business Devices Solutions Business Systems Solutions Business Total for reported segments Others Consolidated total 155.0 65.0 36.0 256.0 2.5 245.0 9.7 5.8 4.5 20.0 0.1 10.0 Note: Consolidated total represents figures after consolidation adjustment such as the elimination of inter-segment sales. The forecasted results which appear in this report have been prepared based solely on the information which was available to us as of the date on which the report was released. As a result, actual results may differ from the forecasted figures due to a number of factors, such as changes in the business environment in the future. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 10/26 2. Basic Policy on Adoption of Accounting Standards The Group prepares its consolidated financial statements in accordance with Japanese GAAP in order to ensure comparability with peer companies in Japan and in consideration of the burden of establishing a system to prepare consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 11/26 3. Consolidated Financial Statements and Major Notes (1) Consolidated Balance Sheets (Millions of yen) As of March 31, As of March 31, 2021 2022 Assets Current assets Cash and deposits Notes and accounts receivable – trade Notes receivable – trade Accounts receivable – trade Contract assets Merchandise and finished goods Work in process Raw materials and supplies Accounts receivable – other Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Machinery, equipment and vehicles Tools, furniture and fixtures Other Land Construction in progress Total property, plant and equipment Intangible assets Goodwill Other Total intangible assets Investments and other assets Investment securities Retirement benefit asset Deferred tax assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets – – – 32,611 37,185 42,365 13,878 12,180 4,932 8,306 (1,421) 150,039 74,459 79,098 34,183 8,831 54,409 2,422 103,177 7,336 8,493 15,830 41,463 391 2,273 6,605 (109) 50,625 169,632 319,671 – 30,740 2,730 35,694 343 42,847 16,376 13,823 4,437 9,102 (1,310) 154,786 77,046 82,590 35,782 9,909 54,056 1,942 105,100 6,453 8,391 14,844 43,536 773 2,200 6,397 (106) 52,802 172,747 327,533 Accumulated depreciation (150,227) (156,227) SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 12/26 (Millions of yen) As of March 31, As of March 31, 2021 2022 Liabilities Current liabilities Notes and accounts payable – trade Electronically recorded obligations – operating Short-term borrowings Current portion of bonds payable Current portion of long-term borrowings Accounts payable – other Income taxes payable Contract liabilities Provision for bonuses Provision for goods warranties Provision for loss on lease contracts Provision for business restructuring Other provisions Asset retirement obligations Other Total current liabilities Non-current liabilities Bonds payable Long-term borrowings Lease liabilities Deferred tax liabilities Deferred tax liabilities for land revaluation Provision for loss on lease contracts Provision for stock benefits Provision for long-term goods warranties Provision for retirement benefits for directors (and other officers) Provision for gift certificate exchange losses Other provisions Retirement benefit liability Asset retirement obligations Other Total non-current liabilities Total liabilities 19,310 6,048 72,611 350 17,315 9,266 1,478 – 3,634 367 348 414 – 6 14,528 145,679 450 35,263 4,499 3,346 3,614 785 161 86 35 152 21 9,402 729 2,361 60,909 206,589 21,027 7,138 63,709 150 23,719 11,359 1,546 6,574 4,174 409 348 136 245 – 13,873 154,413 300 28,752 4,096 3,069 3,614 436 232 90 19 – 29 7,617 1,070 2,166 51,494 205,908 SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 13/26 (Millions of yen) As of March 31, As of March 31, 2021 2022 Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets 10,000 7,245 75,909 (315) 92,839 (133) 8,190 1,055 (687) 18,856 1,387 113,082 319,671 10,000 7,245 79,075 (292) 96,028 (331) 8,190 5,116 120 24,038 1,557 121,624 327,533 10,431 10,942 SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 14/26 (2) Consolidated Statements of Income and Comprehensive Income a. Consolidated Statements of Income Share of profit of entities accounted for using equity method Selling, general and administrative expenses Net sales Cost of sales Gross profit Operating profit Non-operating income Interest income Dividend income Foreign exchange gains Royalty income Other Total non-operating income Non-operating expenses Interest expenses Other Total non-operating expenses Ordinary profit Extraordinary income Subsidy income Share of loss of entities accounted for using equity method Gain on sale of investment securities Gain on sale of non-current assets Gain on liquidation of subsidiaries and associates Total extraordinary income Extraordinary losses Loss on the spread of infectious disease Business restructuring 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 (Millions of yen) FY2020 FY2021 202,671 122,804 79,866 77,672 2,194 237,382 138,203 99,178 90,408 8,770 55 771 – 278 324 885 2,315 899 1,826 1,149 3,876 633 618 7,603 1,043 140 9,406 3,614 – 3,614 6,424 1,682 1,088 2,771 3,653 177 3,475 67 774 898 699 420 696 896 – 3,557 1,492 2,388 9,939 133 133 974 221 1,196 8,876 2,138 125 2,264 6,611 196 6,415 – – – SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 15/26 b. Consolidated Statements of Comprehensive Income (Millions of yen) FY2020 FY2021 3,653 6,611 Profit Other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax Share of other comprehensive income of entities accounted for using equity method Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests 5,245 (144) 1,878 553 (330) 7,202 10,855 10,617 296 (198) 3,308 680 1,171 5,258 11,870 11,597 238 272 SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 16/26 (3) Consolidated Statements of Changes in Equity Previous fiscal year (From April 1, 2020 to March 31, 2021) Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares (Millions of yen) Total shareholders’ equity Balance at beginning of period 10,000 7,245 74,418 (328) 91,335 10,000 7,245 74,501 (328) 91,418 Cumulative effects of changes in accounting policies Restated balance Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Disposal of treasury stock by ownership plan trust Other Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Balance at beginning of period Cumulative effects of changes in accounting policies Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Disposal of treasury stock by ownership plan trust Other Net changes in items other than shareholders’ equity Total changes during period (0) – – 82 (2,067) 3,475 – 10,000 (0) 7,245 1,408 75,909 12 (315) 1,420 92,839 Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Remeasur-ements of defined benefit plans Total accumulated other compre-hensive income Non-controlling interests Total net assets 5,486 11 8,190 (804) (1,169) 11,714 1,223 104,273 Restated balance 5,486 11 8,190 (804) (1,169) 11,714 1,223 104,356 (0) 0 13 (0) (2,067) 3,475 82 (0) 0 13 (0) (2,067) 3,475 82 (0) 0 13 (0) 4,944 (144) 1,859 482 7,141 163 7,305 4,944 (144) 1,859 482 7,141 163 8,726 Balance at end of period 10,431 (133) 8,190 1,055 (687) 18,856 1,387 113,082 SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 17/26 Current fiscal year (From April 1, 2021 to March 31, 2022) Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Balance at beginning of period 10,000 7,245 (315) 92,839 10,000 7,245 (315) 91,657 Cumulative effects of changes in accounting policies Restated balance Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Disposal of treasury stock by ownership plan trust Other Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Balance at beginning of period Cumulative effects of changes in accounting policies Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Disposal of treasury stock by ownership plan trust Other Net changes in items other than shareholders’ equity Total changes during period 75,909 (1,182) 74,727 (2,067) 6,415 (0) – – – 10,000 (0) 7,245 4,348 79,075 Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Remeasur-ements of defined benefit plans Non-controlling interests Total net assets Total accumulated other compre-hensive income 10,431 (133) 8,190 1,055 (687) 18,856 1,387 113,082 Restated balance 10,431 (133) 8,190 1,055 (687) 18,856 1,387 111,900 (Millions of yen) Total shareholders’ equity (1) 0 24 0 23 (292) (1,182) (2,067) 6,415 (1) 0 24 0 4,371 96,028 (1,182) (2,067) 6,415 (1) 0 24 0 511 (198) 4,061 807 5,182 170 5,352 511 (198) 4,061 807 5,182 170 9,723 Balance at end of period 10,942 (331) 8,190 5,116 120 24,038 1,557 121,624 SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 18/26 (4) Consolidated Statements of Cash Flows (Millions of yen) FY2020 FY2021 6,424 10,690 65 (1,152) (827) 899 74 1,826 (7,603) (1,043) 192 (911) (1,552) (3,889) 1,118 4,311 827 127 (898) (1) (1,492) 2,874 8,876 10,879 (167) (1,796) (842) 896 (485) (898) – – 304 1,496 (2,048) 176 6,060 22,452 842 176 (897) – (2,215) 20,358 Cash flows from operating activities Profit before income taxes Depreciation Increase (decrease) in allowance for doubtful accounts Increase (decrease) in retirement benefit liability Interest and dividend income Interest expenses Foreign exchange losses (gains) Share of loss (profit) of entities accounted for using equity method Loss (gain) on sale of investment securities Loss (gain) on sale of non-current assets Loss on retirement of non-current assets Decrease (increase) in trade receivables Decrease (increase) in inventories Increase (decrease) in trade payables Other, net Subtotal Interest and dividends received Dividends received from entities accounted for using equity method Interest paid Extra retirement payments Income taxes paid Net cash provided by (used in) operating activities SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 19/26 (Millions of yen) FY2020 FY2021 (17,735) 1,864 (200) 10,624 (806) 790 (1,365) (1,008) (7,838) – 20,800 (19,172) (1,798) (2,067) (265) 10,465 727 6,228 26,111 32,340 (8,797) 642 (34) 301 (487) 693 218 (1,854) (9,318) – 18,600 (19,045) (1,716) (2,067) (453) (13,909) 1,267 (1,601) 32,340 30,738 1,451,815 (1,438,848) 1,267,894 (1,277,121) Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of investment securities Proceeds from sale of investment securities Loan advances Proceeds from collection of loans receivable Purchase of shares of subsidiaries resulting in change in scope of consolidation Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation Net cash provided by (used in) investing activities Other, net Cash flows from financing activities Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Repayments of lease liabilities Dividends paid Other, net Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 20/26 (5) Notes to Consolidated Financial Statements (Going concern assumption) Not applicable. (Changes in significant subsidiaries during the period) During the first quarter of the fiscal year ended March 31, 2022, SEIKO Clock Inc., the Company’s consolidated subsidiary, ceased to exist through an absorption-type merger with the Company’s consolidated subsidiary, SEIKO Time Systems Inc. as the surviving company. The surviving company, SEIKO Time Systems Inc. then changed its corporate name to SEIKO Time Creation Inc. (Changes in accounting policies) (Application of the Accounting Standard for Revenue Recognition, etc.) The Company has applied the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020; hereinafter, the “Revenue Recognition Accounting Standard, etc.”), etc., effective from the beginning of the fiscal year ended March 31, 2022, and recognizes revenue in the amount expected to be received in exchange for promised goods or services at the time when control of these goods or services is transferred to customers. Accordingly, as a result of determining the role of the Group (as an agent or a principal) in providing goods or services to customers, the Company has changed its method to recognize revenue at a net amount, for transactions in which it is determined that the Group acted as an agent. In addition, for transactions in which the Group acts as the principal, the Company has changed its method to recognize revenue, which had previously been recognized at a net amount after deducting the amount equivalent to commissions for distributors from the amount to be received from the customers, at a gross amount. In sales transactions in which goods are expected to be returned, the Company does not recognize revenue at the time of sales, but instead recognizes the amount of compensation for merchandise and finished goods that are expected to be returned as refund liabilities in “Other” under “Current liabilities,” and the assets that are recognized as the right to recover merchandise and finished goods from customers at the time of settlement of refund liabilities as return assets in “Other” under “Current assets.” The application of the Revenue Recognition Accounting Standard, etc. is subject to the transitional treatment provided for in the proviso to Paragraph 84 of the Revenue Recognition Accounting Standard. The cumulative effect of the retroactive application of the new accounting policy, assuming that it has been applied to periods prior to the beginning of the fiscal year ended March 31, 2022, is added to or subtracted from retained earnings at the beginning of the current fiscal year, and the new accounting policy is applied from the beginning balance. “Notes and accounts receivable – trade,” which had been presented under “Current assets” in the consolidated balance sheets of the previous fiscal year, has been included in “Notes receivable – trade,” “Accounts receivable – trade,” and “Contract assets” from the current fiscal year. “Other,” SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 21/26 which had been presented under “Current liabilities” in the consolidated balance sheets of the previous fiscal year, has been included in “Contract liabilities” and “Other” from the current fiscal year. In accordance with the transitional treatment provided for in Paragraph 89-2 of the Revenue Recognition Accounting Standard, the Company has not reclassified financial statements for the previous fiscal year using the new presentation method. As a result, compared to before the application of the Revenue Recognition Accounting Standard, etc., accounts receivable – trade decreased by 396 million yen, contract assets increased by 343 million yen, merchandise and finished goods decreased by 4 million yen, raw materials and supplies increased by 27 million yen, other in current assets increased by 1,313 million yen, investment securities increased by 26 million yen, deferred tax assets increased by 358 million yen, accounts payable – other decreased by 39 million yen, contract liabilities increased by 6,311 million yen, other in current liabilities decreased by 3,610 million yen, the balance of retained earnings decreased by 993 million yen in the consolidated balance sheets for the current fiscal year. Net sales increased by 2,834 million yen, cost of sales decreased by 282 million yen, and selling, general and administrative expenses increased by 2,881 million yen in the consolidated statements of income for the current fiscal year. Accordingly, operating profit increased by 235 million yen, and ordinary profit and profit before income taxes increased by 299 million yen, respectively. In the consolidated statements of cash flows for the current fiscal year, profit before income taxes increased by 299 million yen, decrease (increase) in trade receivables increased by 304 million yen, decrease (increase) in inventories increased by 53 million yen, and other, net in cash flows from operating activities decreased by 656 million yen. Due to the cumulative effects to net assets at the beginning of the current fiscal year, the beginning balance of retained earnings in the consolidated statements of changes in net assets decreased by 1,182 million yen. For the current fiscal year, net assets per share decreased by 24.09 yen, and basic earnings per share and diluted earnings per share increased by 4.52 yen. (Application of the Accounting Standard for Fair Value Measurement, etc.) 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”), etc., effective from the beginning of the fiscal year ended March 31, 2022. In accordance with the transitional treatment provided for in Paragraph 19 of the Fair Value Measurement Accounting Standard and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), the Company will apply the new accounting policy prescribed by the Fair Value Measurement Accounting Standard, etc. into the future. However, this application has no impact on the consolidated financial statements. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 22/26 (Segment Information) 1. Outline of the reported segments The Company’s reported segments are business units of the Company for which discrete financial information is available and for which the Board of Directors regularly conducts a review for the purpose of making decisions about management resources to be allocated to the segments and assessing the segment’s performance. As a holding company, the Company has a business structure for consolidating and managing each operating subsidiary, which is responsible for comprehensively developing domestic and global strategies as well as engaging in business activities for the merchandise, finished goods and associated services. In view of this, the Company is comprised of segments centered around a core company of each business classified by merchandise and finished goods. Three reported segments are specified; namely the Watches Business, Electronic Devices Business and Systems Solutions Business. The main merchandise and finished goods belonging to each reported segment are as follows: Reported Segment Main merchandise and finished goods Watches Business Watches and watch movements Electronic Devices Business Crystal oscillators, micro batteries and materials, printers, and precision components Systems Solutions Business Wireless communication equipment, information network systems, Time Creation, WAKO and other Businesses data services, and computer performance management software Clocks / High-end jewelry, apparel and fashion accessories / System clocks / etc. 2. Explanation of measurements of sales, profit (loss), asset, liability, and other items for each reported segment The accounting method for the reported segments is the same as basis of preparation for the consolidated financial statements. Intersegment transactions are primarily based on market prices. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 23/26 3. Amount of sales, profit (loss), and asset for each reported segment For the fiscal year ended March 31, 2021 (From April 1, 2020 to March 31, 2021) Watches Business Reported segments Electronic Devices Business Systems Solutions Business Total Others Grand total Adjustment Sales Revenues from external customers 103,136 Transactions with other segments Net sales Segment profit (loss) Segment asset 45,075 32,486 180,698 21,972 202,671 202,671 1,918 5,141 1,628 8,688 2,909 11,598 (11,598) 105,054 50,217 34,114 189,386 24,882 214,269 (11,598) 202,671 5,600 1,302 3,538 10,441 (40) 10,401 (8,207) 2,194 108,863 73,697 23,912 206,474 38,134 244,608 75,062 319,671 (Millions of yen) Figures in consolidated statements of income – – Notes: 1. The “Others” category denotes operating segments not included among reported segments, such as the Clocks Business. 2. Adjustments are as follows: (1) Adjustments to segment profit (loss) in the amount of -8,207 million yen include -566 million yen in the amortization of goodwill, 303 million yen that mainly consists of the elimination of transactions with other segments, and -7,944 million yen in company-wide expenses not appropriated to each operating segment. Company-wide expenses primarily consist of expenses incurred at headquarters, unallocated to operating segments. (2) Adjustments to segment assets in the amount of 75,062 million yen include -85,914 million yen in the elimination of inter-segment liabilities, 211,958 million yen in company-wide assets not appropriated to each reported segment, and -50,980 million yen that mainly consists of the elimination of investments and equity. Company-wide assets consist of surplus funds and long-term investment funds (investment securities) at headquarters, etc. Segment profit (loss) has been adjusted for alongside operating profit on the consolidated statements of income. 3. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 24/26 For the fiscal year ended March 31, 2022 (From April 1, 2021 to March 31, 2022) Reported segments Watches Business Electronic Devices Business Systems Solutions Business Total Time Creation, WAKO and other Businesses Grand total Adjustment Sales Revenues from external customers 123,074 Transactions with other segments 58,168 32,511 213,754 23,627 237,382 237,382 2,669 6,505 1,901 11,077 3,685 14,762 (14,762) Net sales 125,744 64,674 34,413 224,831 27,313 252,144 (14,762) 237,382 Segment profit 7,638 5,828 3,946 17,413 705 18,119 (9,348) 8,770 Segment asset 110,534 79,863 24,799 215,198 39,208 254,406 73,126 327,533 (Millions of yen) Figures in consolidated statements of income – – Notes: 1. During the first quarter of the fiscal year ended March 31, 2022, SEIKO Clock Inc., the Company’s consolidated subsidiary, ceased to exist through an absorption-type merger with the Company’s consolidated subsidiary, SEIKO Time Systems Inc. as the surviving company. The surviving company, SEIKO Time Systems Inc. then changed its corporate name to SEIKO Time Creation Inc. Accordingly, the segment that had previously been presented as “Others” has been renamed “Time Creation, WAKO and other Businesses,” in an effort to provide a more accurate description of the segment. There is no change to the scope of aggregation due to this change. 2. Adjustments are as follows: (1) Adjustments to segment profit in the amount of -9,348 million yen include -566 million yen in the amortization of goodwill, 10 million yen that mainly consists of the elimination of transactions with other segments, and -8,792 million yen in company-wide expenses not appropriated to each operating segment. Company-wide expenses primarily consist of expenses incurred at headquarters, unallocated to operating segments. (2) Adjustments to segment assets in the amount of 73,126 million yen include -72,545 million yen in the elimination of inter-segment liabilities, 212,462 million yen in company-wide assets not appropriated to each reported segment, and -66,790 million yen that mainly consists of the elimination of investments and equity. Company-wide assets consist of surplus funds and long-term investment funds (investment securities) at headquarters, etc. Segment profit has been adjusted for alongside operating profit on the consolidated statements of income. 3. 4. Matters related to changes, etc. in reported segments As stated in changes in accounting policies, the Company has applied the Revenue Recognition Accounting Standard, etc., effective from the beginning of the fiscal year ended March 31, 2022, and changed accounting methods related to revenue recognition. Accordingly, the Company has similarly changed the calculation method of profit or loss of business segments. As a result of this change, for the current fiscal year, revenues from external customers increased by 3,413 million yen in the Watches Business and decreased by 579 million yen revenues in segments other than the Watches Business, compared to the previous method. Segment profit increased by 174 million yen in the Watches Business and by 60 million yen in segments other than the Watches Business. In addition, segment assets increased by 1,571 million yen in the Watches Business and by 96 million yen in segments other than the Watches Business. SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 25/26 (Yen) Current fiscal year (from April 1, 2021 to March 31, 2022) (Per share information) Net assets per share Basic earnings per share Diluted earnings per share (Notes) 1. For the purpose of calculating the basic earnings per share and diluted earnings per share, the treasury shares remaining in trust posted as treasury shares in the “Shareholders’ equity” section are included in the treasury shares deducted in the calculation of the average number of shares during the fiscal year (82 thousand shares for the current fiscal year). For the purpose of calculating the net assets per share, the treasury shares so remaining in trust are included in the treasury shares deducted from the total number of shares issued and outstanding at the end of the fiscal year (78 thousand shares for the current fiscal year). 2. Calculation basis of net assets per share is as follows: (Millions of yen) Current fiscal year (as of March 31, 2022) Total net assets Amounts deducted from total net assets Of which, non-controlling interests Net assets at the end of the fiscal year related to common shares The number of common shares at the end of the fiscal year used to calculate net assets per share (Thousands of shares) 2,911.17 155.56 155.56 121,624 1,557 1,557 120,067 41,243 SEIKO HOLDINGS CORPORATION Consolidated Financial Statements: FY2021 Page 26/26 3. Calculation basis of basic earnings per share and diluted earnings per share is as follows: (Millions of yen) Current fiscal year (from April 1, 2021 to March 31, 2022) Basic earnings per share: Profit attributable to owners of parent Profit attributable to owners of parent pertaining to common stock Average number of shares of common stock outstanding during the period (Thousands of shares) Diluted earnings per share: Adjustments to profit attributable to owners of parent Of which, adjustments by potential shares of affiliates accounted for by the equity method The increased number of common shares (Thousands of shares) Overview of potential shares that are not included in the calculation of diluted earnings per share due to absence of dilutive effects (Significant subsequent events) Current fiscal year (from April 1, 2021 to March 31, 2022) Not applicable. 6,415 6,415 41,240 (0) (0) – – ***