ハードオフコーポレーション（2674） – [Delayed]Consolidated Financial Results for the Fiscal year ended March 31, 2022

May 11, 2022 Consolidated Financial Results for the Fiscal year ended March 31, 2022 (Under Japanese GAAP) Company name: Listing: Securities code: URL: Representative: Inquiries: HARD OFF CORPORATION Co., Ltd. Tokyo Stock Exchange 2674 https://www.hardoff.co.jp/ Taro Yamamoto, Representative Director and President Tsuyoshi Nagahashi, Senior Managing Director, General Manager of president’s office, and General Manager of Management Administration Headquarters +81-254-24-4344 Telephone: Scheduled date of annual general meeting of shareholders: Scheduled date to commence dividend payments: Scheduled date to file securities report:: Preparation of supplementary material on financial results: Holding of financial results briefing: June 22, 2022 June 23, 2022 June 23, 2022 Yes Yes (For institutional investors and analysts) (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 results Net sales (Percentages indicate year-on-year changes.) Operating profit Ordinary profit Profit attributable to owners of parent Fiscal year ended March 31, 2022 March 31, 2021 Note: Comprehensive income Millions of yen 24,507 21,270 % Millions of yen 1,530 795 15.2 9.9 % Millions of yen 1,668 886 92.4 (4.3) % Millions of yen 1,041 348 88.2 (8.6) % 199.3 (10.6) Fiscal year ended March 31, 2022: Fiscal year ended March 31, 2021: ¥1,196 million ¥657 million [81.9%] [134.0%] Basic earnings per share Diluted earnings per share Return on Equity Return on Assets Fiscal year ended March 31, 2022: March 31, 2021 Yen 75.06 25.60 Yen – – % 7.8 2.7 Reference: Share of profit and loss of entities accounted for using equity method Fiscal year ended March 31, 2022: Fiscal year ended March 31, 2021: – ¥(17) million Operating profit on net sales % 6.2 3.7 % 9.1 5.2 (2) Consolidated financial position Total assets Millions of yen As of March 31, 2022 March 31, 2021 Reference: Equity As of March 31, 2022: As of March 31, 2021: ¥13,693 million ¥12,996 million Net assets Equity-to-asset ratio Net assets per share 18,736 18,105 Millions of yen 13,750 13,039 % 73.1 71.8 Yen 986.56 936.32 – 1 – (3) Consolidated cash flows Fiscal year ended March 31, 2022 March 31, 2021 2. Cash dividends Operating activities Investing activities Financing activities Cash and cash equivalents at end of period Millions of yen Millions of yen Millions of yen Millions of yen 1,484 1,130 (219) (312) (899) (480) 2,604 2,197 Annual dividends First quarter-end Second quarter-end Third quarter-end Fiscal year-end Total Yen Yen – Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ending March 31, 2023 (Forecast) Notes: Breakdown of year-end dividends for the fiscal year ended March 31, 2022 40.00 35.00 40.00 Yen – Yen 0.00 0.00 0.00 – – – – Total dividends paid (annual) Payout ratio (consolidated) Dividend on equity (consolidated) Yen Millions of yen 35.00 40.00 485 555 % 136.7 53.3 % 3.7 4.2 40.00 50.5 3. Consolidated earnings forecasts for the fiscal year ending March 31, 2023 (from April 1, 2022 to March Net sales Operating profit Ordinary profit Millions of yen % Millions of yen % 610 33.9 690 31.8 420 1,620 5.8 1,750 4.9 1,100 (Percentages indicate year-on-year changes.) Profit attributable to owners of parent Millions of yen Basic earnings per share % 4.9 5.6 Yen 30.26 79.25 Ordinary dividends: ¥35.00 Commemorative dividends: ¥5.00 31, 2023) Six months ending September 30, 2022 Fiscal year ending March 31, 2023 Millions of yen 12,200 25,300 % 3.9 3.2 – 2 – * Notes (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None (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: Yes (ii) Changes in accounting policies due to other reasons: None (iii) Changes in accounting estimates: None (iv) Restatement: None (3) Number of issued shares (common shares) (i) Total number of issued shares at the end of the period (including treasury shares) (ii) Number of treasury shares at the end of the period As of March 31, 2022 As of March 31, 2021 As of March 31, 2022 As of March 31, 2021 (iii) Average number of shares outstanding during the period Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 13,954,000 shares 13,954,000 shares 73,979shares 73,979shares 13,880,021 shares 13,598,350 shares * Financial results report is out of scope of financial audit by certified public accountants or an audit corporation. * Proper use of earnings forecasts, and other special matters (Caution regarding forward-looking statements and others) Forward-looking statements, including the earnings forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. These forward-looking statements are not guarantees of future performance. Actual results may differ materially from these forecasts due to a variety of reasons. Please refer to “1. Summary of consolidated financial results, etc (4) Business forecasts” on page 7 for forecast assumptions and notes of caution for usage. (How to obtain supplementary material on financial results) Supplementary material on financial results was disclosed on the same day on TDnet. – 3 – Attached Material Index 1. Summary of consolidated financial results, etc..…………………………………………………………………………… (1) Summary of operating results for the fiscal year under review………………………………………………………… (2) Summary of financial position for the fiscal year under review ………………………………………………………… (3) Summary of cash flows for the fiscal year under review………………………………………………………………… (4) Business forecasts………………………………………………………………………………………………………… (5) Fundamental policy for allocation of profit and dividends for the fiscal 2022 and 2023………………………………… 2. Basic concept of selecting accounting standards …………………………………………………………………………… 3. Consolidated financial statements and significant notes thereto …………………………………………………………… (1) Consolidated balance sheet……………………………………………………………………………………………… (2) Consolidated statement of income and consolidated statement of comprehensive income……………………………… Consolidated statement of income …………………………………………………………………………………… 12 Consolidated statement of comprehensive income ………………………………………………………………… (3) Consolidated statement of changes in equity …………………………………………………………………………… (4) Consolidated statement of cash flows …………………………………………………………………………………… (5) Notes to consolidated financial statements ……………………………………………………………………………… Notes on premise of going concern …………………………………………………………………………………… Changes in accounting policies ………………………………………………………………………………………… Segment information.…………………………………………………………………………………………………… Per-share information …………………………………………………………………………………………………… 25 Significant subsequent events ………………………………………………………………………………………… 25 5 5 7 7 7 9 9 10 10 12 13 14 16 18 18 19 20 – 4 – 1. Summary of consolidated financial results, etc. (1) Summary of operating results for the fiscal year under review During the fiscal year ended March 31, 2022, the Japanese economy showed some signs of recovery as the severe impact of the novel coronavirus disease (COVID-19) gradually eased. Under such conditions, HARD OFF CORPORATION Co., Ltd. (the “Company”) had been pushing ahead with the enhancement of human resource development and expansion of the procurement channel while setting “Work in Real-Time -Back to the Basics, Have Fun and Smile-” as the annual theme. By carrying out initiatives such as establishing the Pickup Buying Center for the Metropolitan Area and promoting procurement activities at temporary locations for a limited period of time in areas without permanent stores, the Company aimed to enhance its procurement capability, which was a key factor for the Secondhand Business. With respect to the opening of secondhand stores during the fiscal year ended March 31, 2022, the Company opened thirteen directly operated stores, closed seven directly operated stores, opened four franchised stores, and closed nine franchised stores. Moreover, one OFF HOUSE store was transferred from a franchised store to a directly operated store. As a result, the total number of secondhand stores was 914, which was comprised of 396 directly operated stores and 518 franchised stores. The number of stores by business category as of March 31, 2022 is shown in the following table. (Stores) Total number of secondhand stores HARD OFF OFF HOUSE MODE OFF Garage OFF Hobby OFF Liquor OFF BOOK OFF Overseas BOOK ON 133 [+4] 233 [+1] 366 [+5] 125 [+5] 197 [-5] 322 [±0] 18 [-4] 2 [-1] 20 [-5] 11 [±0] 5 [±0] 16 [±0] 50 [+3] 73 [-1] 123 [+2] 4 [±0] 1 [±0] 5 [±0] 50 [-1] – 50 [-1] 5 [±0] 7 [±0] 12 [±0] 396 [+7] 518 [-6] 914 [+1] 2 [-1] – 2 [-1] Notes: 1. Figures in square brackets [ ] indicate the increase or decrease in the number of stores during the period. 2. The stores operated by the Company’s subsidiaries HARD OFF Family Co., Ltd. and ecoplus Co., Ltd. are included in the 3. The stores operated by the Company’s subsidiaries HARD OFF TAIWAN INC. and ECO TOWN USA INC. are included number of directly operated stores. in the number of directly operated overseas stores. With respect to the operating results for the fiscal year ended March 31, 2022, net sales remained strong, up 5.2% year on year for existing stores in Japan, and up 27.5% year on year for Internet sales. Outside of Japan, three stores in the U.S. have returned to or above the pre-COVID-19 level (fiscal year ended March 31, 2020), and two stores in Taiwan continued the strong performance from the previous year. Due to the full-year contribution from the 12 new stores in Japan from the previous year and the 60 stores of the subsidiary ecoplus Co., Ltd., which was included in the scope of consolidation from the third quarter ended December 31, 2021, consolidated net sales amounted to ¥24,507 million (up 15.2% year on year). In terms of profit, as a result of improving gross profit margin by 0.2%, gross profit totaled ¥16,843 million (up 15.6% year on year), and selling, general and administrative expenses totaled ¥15,312 million (up 11.2% year on year), operating profit amounted to ¥1,530 million (up 92.4% year on year) and ordinary profit amounted to ¥1,668 million (up 88.2% year on year). Furthermore, as a result of recording ¥108 million from gain on sale of investment securities and others as extraordinary income, ¥169 million from impairment losses on non-current assets of stores as extraordinary losses, profit attributable to owners of parent amounted to ¥1,041 million (up 199.3% year on year) and the Company achieved significant increases in the profit items. 1) Secondhand Business Net sales in Secondhand Business amounted to ¥23,251 million (up 16.1% year on year). 2) FC Business Sales of merchandise, franchise fees, royalty income, and other revenues in FC Business amounted to ¥1,224 million (up 2.0% year on year). – 5 – Number of stores Directly operated stores Franchised stores Total – 6 – (2) Summary of financial position for the fiscal year under review Total current assets amounted to ¥9,783 million, an increase of ¥714 million compared with the end of the previous fiscal year. This was primarily due to an increase of ¥407 million in cash and deposits and an increase of ¥262 million in merchandise. Total non-current assets amounted to ¥8,952 million, a decrease of ¥84 million compared with the end of the previous fiscal year. This was primarily due to an increase of ¥29 million in property, plant and equipment, an increase of ¥28 million in intangible assets, and a decrease of ¥141 million in investments and other assets. Accordingly, total assets amounted to ¥18,736 million, an increase of ¥630 million compared with the end of the previous fiscal Liabilities Total current liabilities amounted to ¥3,869 million, a decrease of ¥94 million compared with the end of the previous fiscal year. This was primarily due to a decrease of ¥220 million in short-term borrowings and an increase of ¥111 million in accrued expenses. Total non-current liabilities amounted to ¥1,116 million, an increase of ¥14 million compared with the end of the previous fiscal year. This was primarily due to an increase of ¥49 million in asset retirement obligations and a decrease of ¥28 million in lease obligations. Accordingly, total liabilities amounted to ¥4,985 million, a decrease of ¥80 million compared with the end of the previous fiscal Assets year. year. Net assets Total net assets amounted to ¥13,750 million, an increase of ¥710 million compared with the end of the previous fiscal year. This was primarily due to an increase of ¥556 million in retained earnings and an increase of ¥114 million in valuation difference on available-for-sale securities. (3) Summary of cash flows for the fiscal year under review Cash and cash equivalents (the “funds”) at the end of the fiscal year ended March 31, 2022 amounted to ¥2,604 million due to profit before income taxes of ¥1,607 million, which was partly offset by income taxes paid and other factors. The following is a summary of cash flows and major components during the fiscal year ended March 31, 2022. (Cash flows from operating activities) Funds provided by operating activities for the fiscal year ended March 31, 2022 totaled ¥1,484 million (prior year ¥1,130 million provided). Contributing factors mainly included profit before income taxes of ¥1,607 million. (Cash flows from Investing activities) Funds used in investing activities for the fiscal year ended March 31, 2022 totaled ¥219 million (prior year ¥312 million used). Contributing factors mainly included purchase of property, plant and equipment of ¥307 million, purchase of intangible assets of ¥213 million, and proceeds from sales of investment securities of ¥315 million. (Cash flows from financing activities) (4) Business forecasts Funds used in financing activities for the fiscal year ended March 31, 2022 totaled ¥899 million (prior year ¥480 million used). Contributing factors mainly included dividends paid of ¥485 million and repayments of short-term borrowings of ¥220 million. The Company has established the following new long-term vision starting with the fiscal year 2019. Be the only one that no one else comes close to imitating, by refining our philosophy-based management. “Re”NK CHANNEL will be created with a focus on powerful stores, and contribute to the creation of a recycling-oriented society as the overwhelming leading secondhand company, not only in Japan but also overseas. *“Re”NK CHANNEL: HARD OFF’s omni-channel strategy, that integrates various channels of stores and the Internet. During the fiscal 2023, the Company has reviewed its medium-term plan and set a new target of “1,000 stores by 2025,” aiming to brush up existing stores and actively open new stores. Leveraging both store and internet operations, the Company is committed to achieving its plans. For fiscal 2023, the Company plans to open eleven directly operated stores and fifteen franchised stores, for a total net increase of twenty six stores. – 7 – As a result, for the fiscal year ending March 31, 2023, the Company forecasts net sales of ¥25,300 million (up 3.2% year on year), operating profit of ¥1,620 million (up 5.8% year on year), ordinary profit of ¥1,750 million (up 4.9% year on year), and profit attributable to owners of parent of ¥1,100 million (up 5.6% year on year). – 8 – (5) Fundamental policy for allocation of profit and dividends for the fiscal 2022 and 2023 1) Fundamental policy for allocation of profit The Company considers “the return of profits to shareholders” as one of its priority management policies. The Company’s policy is to strengthen its management base and financial position by improving earnings per share, return on equity (ROE), and cash flows and by promoting aggressive business development to increase corporate value, and to pay stable dividends backed by our business performance, with a target consolidated payout ratio of approximately 50%. 2) Dividend of surplus for the fiscal 2022 For the fiscal year ended March 31, 2022, the Company plans pay a year-end dividend of ¥40 per share, consisting of an ordinary dividend of ¥35.00 per share plus a commemorative dividend of ¥5.00 per share for the 50th anniversary of the Company’s founding, comprehensively taking into consideration the business performance, retained earnings, and other factors for the fiscal 2022. 3) Dividend of surplus for the fiscal 2023 For the fiscal year ending March 31, 2023, the Company plans to pay an annual dividend of ¥40 per share. 2. Basic concept of selecting accounting standards The Group intends to prepare its consolidated financial statements in accordance with Japanese Accounting Standards (Japanese GAAP) for now, considering the comparability of consolidated financial statements between different accounting periods and different companies. Furthermore, the Group continues to consider conditions in both Japan and abroad and appropriately respond with regards to the potential implementation of International Financial Reporting Standards (IFRS). – 9 – 3. Consolidated financial statements and significant notes thereto (1) Consolidated balance sheet (Thousands of yen) As of March 31, 2021 As of March 31, 2022 Assets Current assets Cash and deposits Accounts receivable – trade Merchandise Work in process Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Land Leased assets Accumulated depreciation Leased assets, net Construction in progress Other Accumulated depreciation Other, net Total property, plant and equipment Intangible assets Software in progress Other Total intangible assets Investments and other assets Investment securities Deferred tax assets Leasehold deposits Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 2,197,245 774,764 5,618,336 459 480,456 (2,312) 9,068,949 6,795,906 (4,790,400) 2,005,505 970,044 1,681,445 (1,389,600) 291,844 8,855 789,085 (736,960) 52,125 3,328,376 17,022 521,330 538,353 2,436,524 539,620 1,497,131 707,542 (10,685) 5,170,133 9,036,863 18,105,812 2,604,860 836,176 5,881,313 447 463,718 (3,066) 9,783,449 6,925,529 (4,938,173) 1,987,355 970,044 1,792,431 (1,461,862) 330,568 6,715 816,983 (754,014) 62,968 3,357,652 728 565,672 566,401 2,401,942 478,546 1,482,886 674,627 (9,475) 5,028,527 8,952,581 18,736,031 – 10 – (Thousands of yen) As of March 31, 2021 As of March 31, 2022 Liabilities Current liabilities Accounts payable – trade Short-term borrowings Lease obligations Income taxes payable Accounts payable – other Accrued expenses Lease obligations Other Total current liabilities Non-current liabilities Lease obligations Asset retirement obligations Long-term accounts payable – other Other Total non-current liabilities Total liabilities 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 Foreign currency translation adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets 32,981 1,980,000 169,942 271,917 322,143 783,910 – 403,112 3,964,008 358,041 433,437 218,136 92,651 1,102,267 5,066,275 1,676,275 1,895,362 8,960,344 (37,603) 12,494,378 536,233 (34,487) 501,745 43,412 13,039,536 18,105,812 56,501 1,760,000 158,719 354,283 337,122 894,991 12,671 294,723 3,869,013 329,855 482,610 216,704 87,665 1,116,834 4,985,847 1,676,275 1,895,362 9,516,445 (37,603) 13,050,480 651,093 (8,074) 643,018 56,685 13,750,184 18,736,031 – 11 – (2) Consolidated statement of income and consolidated statement of comprehensive income Consolidated statement of income (Thousands of yen) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Dividend income Rental income from land and buildings Net foreign exchange gains Income from recycling Grant income Other Total non-operating income Non-operating expenses Interest expenses Share of loss of entities accounted for using equity method Other Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of investment securities Gain on sale of non-current assets Subsidy income Compensation income Gain on step acquisitions Gain on bargain purchase Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on tax purpose reduction entry of non-current assets Impairment losses Loss on disaster Loss on valuation of investment securities Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit (loss) attributable to non-controlling interests Profit attributable to owners of parent 21,270,193 6,700,089 14,570,103 13,774,517 795,586 27,217 25,537 1,383 24,613 21,032 45,558 145,343 12,137 17,590 24,427 54,156 886,773 127,169 – – 66,699 19,066 13,382 226,317 – – 369,313 – 9,871 379,184 733,906 397,654 (11,578) 386,075 347,830 (288) 348,119 24,507,275 7,664,105 16,843,170 15,312,422 1,530,748 25,265 30,436 16,577 25,205 26,121 27,960 151,566 11,253 – 2,155 13,409 1,668,905 105,118 27 3,245 – – – 108,391 1,809 3,245 139,232 18,799 6,642 169,728 1,607,567 547,660 10,671 558,331 1,049,236 7,334 1,041,901 – 12 – Consolidated statement of comprehensive income (Thousands of yen) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Profit Other comprehensive income Valuation difference on available-for-sale securities 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 347,830 335,627 (25,574) 310,053 657,884 659,039 (1,155) 1,049,236 114,860 32,351 147,211 1,196,448 1,183,175 13,273 – 13 – (3) Consolidated statement of changes in equity Previous consolidated fiscal year (April 1 to March 31, 2021) (Thousands of yen) Shareholders’ equity Balance at beginning of period Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Balance at beginning of period 1,676,275 1,769,327 9,371,294 (178,291) 12,638,606 Disposal of treasury shares 126,035 328,150 454,186 Total changes during period 126,035 (410,950) 140,688 (144,227) – Balance at end of period 1,676,275 1,895,362 8,960,344 (37,603) 12,494,378 Balance at beginning of period Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Accumulated other comprehensive income Non-controlling interests Total net assets Balance at beginning of period 200,051 (9,780) 190,270 – 12,828,877 (539,440) 348,119 (219,629) (539,440) 348,119 (219,629) (187,462) (187,462) (539,440) 348,119 (219,629) (187,462) 454,186 336,181 (24,707) 311,474 43,412 354,886 Total changes during period 336,181 (24,707) 311,474 43,412 210,659 Balance at end of period 536,233 (34,487) 501,745 43,412 13,039,536 Changes during period Dividends of surplus Profit attributable to owners of parent Changes in the scope of consolidation Purchase of treasury shares Net changes in items other than shareholders’ equity Changes during period Dividends of surplus Profit attributable to owners of parent Changes in the scope of consolidation Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity – 14 – Current consolidated fiscal year (April 1 to March 31, 2022) (Thousands of yen) Balance at beginning of period Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Balance at beginning of period 1,676,275 1,895,362 8,960,344 (37,603) 12,494,378 Shareholders’ equity (485,800) 1,041,901 (485,800) 1,041,901 Total changes during period – – 556,101 – 556,101 Balance at end of period 1,676,275 1,895,362 9,516,445 (37,603) 13,050,480 Balance at beginning of period Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Accumulated other comprehensive income Non-controlling interests Total net assets Balance at beginning of period 536,233 (34,487) 501,745 43,412 13,039,536 – – – – (485,800) 1,041,901 114,860 26,412 141,273 13,273 154,546 Total changes during period 114,860 26,412 141,273 13,273 710,647 Balance at end of period 651,093 (8,074) 643,018 56,685 13,750,184 Changes during period Dividends of surplus Profit attributable to owners of parent Changes in the scope of consolidation Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Changes during period Dividends of surplus Profit attributable to owners of parent Changes in the scope of consolidation Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity – 15 – (4) Consolidated statement of cash flows (Thousands of yen) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Cash flows from operating activities Profit before income taxes Depreciation Impairment losses Compensation income Amortization of goodwill Gain on bargain purchase Increase (decrease) in allowance for doubtful accounts Interest and dividend income Interest expenses Share of loss (profit) of entities accounted for using equity method Loss (gain) on sale and valuation of investment securities Decrease (increase) in trade receivables Decrease (increase) in inventories Increase (decrease) in trade payables Increase (decrease) in accrued consumption taxes Increase (decrease) in accounts payable – other Increase (decrease) in accrued expenses Other Subtotal Interest and dividends received Interest paid Proceeds from compensation Income taxes paid Net cash provided by (used in) operating activities Cash flows from Investing activities Purchase of investment securities Proceeds from sale of investment securities Purchase of property, plant and equipment Purchase of intangible assets Loan advances Payments of guarantee deposits Payments of leasehold deposits Proceeds from refund of leasehold deposits Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation Other Net cash provided by (used in) investing activities 733,906 489,960 369,313 (66,699) 3,841 (13,382) (1,645) (30,517) 12,137 17,590 (117,298) (95,269) 37,714 (81,943) 26,163 (37,002) 58,096 88,759 1,393,726 29,900 (12,137) 66,699 (347,955) 1,130,232 – 135,763 (200,787) (258,841) (2,000) (13,726) (62,411) 64,789 15,106 9,473 (312,634) 1,607,567 522,463 139,232 (3,245) – – (455) (27,748) 11,253 – (98,476) (61,076) (252,554) 22,351 (46,677) 8,287 110,069 142 1,931,133 25,511 (11,161) 3,829 (465,294) 1,484,017 (16,830) 315,151 (307,261) (213,134) – (10,168) (53,880) 67,033 – (455) (219,544) – 16 – (Thousands of yen) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Cash flows from financing activities Proceeds from short-term borrowings Repayments of short-term borrowings Purchase of treasury shares Repayments of lease obligations Dividends paid 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 Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation Cash and cash equivalents at end of period 500,000 (60,000) (187,462) (192,894) (540,438) (480,795) 7,284 344,086 1,528,428 324,730 2,197,245 – (220,000) – (193,914) (485,778) (899,692) 42,834 407,614 2,197,245 – 2,604,860 – 17 – (5) Notes to consolidated financial statements Notes on premise of going concern Not applicable. – 18 – Changes in accounting policies Application of Accounting Standard for Revenue Recognition, Etc. The Company has adopted the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) (the “Revenue Recognition Accounting Standard”) and relevant revised ASBJ regulations from the beginning of the fiscal year ended March 31, 2022, and it has recognized revenue at the time the control of promised goods or services is transferred to the customer at the amount expected to be received upon exchange of said goods or services. Due to this application, the awarding of points for sales to customers, which had previously been recognized as selling, general and administrative expenses, has now been changed to a method of recognizing such points under revenue as sales discounts. The Company has adopted the Revenue Recognition Accounting Standard and relevant revised ASBJ regulations in accordance with the transitional treatment set forth in paragraph 84 of the Revenue Recognition Accounting Standard. Therefore, cumulative effects of retrospective application of the new accounting standard prior to the beginning of the fiscal year ended March 31, 2022 has been added to or deducted from retained earnings at the beginning of the fiscal year ended March 31, 2022, and the new accounting standard has been adopted since the beginning balance of the current first year. However, the new accounting policies have not been retroactively adopted to contracts in which almost all of the revenue amount was recognized because the Company had adopted the method set forth in paragraph 86 of the Revenue Recognition Accounting Standard in accordance with the previous transitional treatment prior to the beginning of the fiscal year ended March 31, 2022. As a result, the impact from these changes in accounting policies on the consolidated financial statements is immaterial. Moreover, there is no impact on the beginning balance of retained earnings. Application of Accounting Standard, Etc. for Fair Value Measurement The Company has adopted the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019) (the “Fair Value Measurement Accounting Standard”) and relevant revised ASBJ regulations from the beginning of the fiscal year ended March 31, 2022, and has prospectively adopted the new accounting policies stipulated by the Fair Value Measurement Accounting Standard and relevant revised ASBJ regulations 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). There is no impact on the consolidated financial statements. – 19 – Segment information, etc. [Segment information] 1. Overview of reportable segments The Group’s reportable segments are components of the Company and its subsidiaries for which independent financial information is available and which are subject to regular examination by the Board of Directors for the purpose of determining the allocation of management resources and evaluating performance. The Group’s business activities consist mainly of the purchase and sale of secondhand goods, and are classified into the “Secondhand Business” and “FC Business” segments based on the type of business. Therefore, these two businesses are considered as reportable segments. The Secondhand Business operates reused stores of HARD OFF, OFF HOUSE, MODE OFF, Garage OFF, Hobby OFF, Liquor OFF, and BOOK OFF (franchisee). The FC Business operates franchise chains of HARD OFF, OFF HOUSE, MODE OFF, Garage OFF, Hobby OFF, and Liquor OFF. 2. Calculation methods for net sales, profit/loss, assets, and other items by reportable segments The accounting methods for each reported segment are similar to those described in the “Significant Accounting Policies for Preparing the Consolidated Financial Statements.” Profits for reportable segments are operating profit figures. Inter-segment transactions are based on prevailing market prices. – 20 – 3. Information on net sales, profit/loss, assets, and other items by reportable segments Previous consolidated fiscal year (April 1 to March 31, 2021) (Thousands of yen) Reportable segments Secondhand Business FC Business Total Other (Note 1) Total Adjustment (Note 2) Amount in consolidated financial statements (Note 3) Net sales 20,035,395 1,200,458 21,235,854 34,338 21,270,193 – 21,270,193 – 190,921 190,921 102,879 293,800 (293,800) – Total 20,035,395 1,391,379 21,426,775 137,217 21,563,993 (293,800) 21,270,193 1,944,260 637,276 2,581,537 22,646 2,604,183 (1,808,597) 795,586 11,437,430 323,847 11,761,278 20,382 11,781,660 6,324,152 18,105,812 Other items Depreciation 350,693 3,424 354,118 299 354,417 135,542 489,960 3,841 3,841 3,841 3,841 – – Net sales to external customers Inter-segment net sales or transfers Segment profit Segment assets Amortization of goodwill Increase of property, plant and equipment and intangible assets 281,547 10,403 291,950 291,950 325,034 616,985 Notes: 1. “Other” is a business segment excluded from the reportable segments and includes the system development business. 2 Adjustments are as follows. (1) ¥(1,808,597) thousand in segment profit adjustments consist of ¥4,593 thousand in inter-segment eliminations and ¥(1,813,190) thousand in company-wide expenses not allocated to any specific reportable segment. (2) ¥6,324,152 thousand in segment assets adjustments are company-wide expenses not allocated to any specific reportable segment. (3) Inter-segment net sales or transfers is presented separately. 3 Segment profit is adjusted for operating profit in the consolidated financial statements. – – – 21 – Current consolidated fiscal year (April 1 to March 31, 2022) (Thousands of yen) Reportable segments Secondhand Business FC Business Total Other (Note 1) Total Adjustment (Note 2) Amount in consolidated financial statements (Note 3) Net sales 23,251,453 1,224,626 24,476,080 31,195 24,507,275 – 24,507,275 – 283,281 283,281 141,772 425,053 (425,053) – Total 23,251,453 1,507,907 24,759,361 172,967 24,932,329 (425,053) 24,507,275 2,923,064 645,972 3,569,037 23,234 3,592,271 (2,061,523) 1,530,748 11,760,211 289,616 12,049,828 18,579 12,068,408 6,667,623 18,736,031 Depreciation 317,087 4,691 321,778 241 322,019 200,444 522,463 – – – – – – Net sales to external customers Inter-segment net sales or transfers Segment profit Segment assets Other items Amortization of goodwill Increase of property, plant and equipment and intangible assets 505,612 3,369 508,981 508,981 238,601 747,583 Notes: 1. “Other” is a business segment excluded from the reportable segments and includes the system development business. 2 Adjustments are as follows. reportable segment. (1) ¥(2,061,523) thousand in segment profit adjustments consist of ¥94,124 thousand in inter-segment eliminations and ¥(2,155,648) thousand in company-wide expenses not allocated to any specific (2) ¥6,667,623 thousand in segment assets adjustments are company-wide expenses not allocated to any specific reportable segment. (3) Inter-segment net sales or transfers is presented separately. 3 Segment profit is adjusted for operating profit in the consolidated financial statements. – – – 22 – [Related Information] Previous consolidated fiscal year (April 1 to March 31, 2021) 1. Information by product and service The Group purchases and sells secondhand goods. Description is omitted as net sales to external customers in a single product/service category exceed 90% of net sales in the consolidated statements of income. 2. information by region (1) Net sales Information is omitted as net sales to external customers in Japan exceed 90% of net sales in the consolidated statements of income. (2) Property, plant and equipment Information is omitted as the amount of property, plant and equipment located in Japan exceeds 90% of the amount of property, plant and equipment in the consolidated balance sheet. 3. Information by major customers consolidated statements of income. Information is omitted as there are no sales to specific customers representing 10% or more of net sales in the Current consolidated fiscal year (April 1 to March 31, 2022) 1. Information by product and service The Group purchases and sells secondhand goods. Description is omitted as net sales to external customers in a single product/service category exceed 90% of net sales in the consolidated statements of income. 2. information by region (1) Net sales statements of income. (2) Property, plant and equipment 3. Information by major customers Information is omitted as net sales to external customers in Japan exceed 90% of net sales in the consolidated Information is omitted as the amount of property, plant and equipment located in Japan exceeds 90% of the amount of property, plant and equipment in the consolidated balance sheet. Information is omitted as there are no sales to specific customers representing 10% or more of net sales in the consolidated statements of income. – 23 – [Information related to impairment losses of non-current assets for each reportable segment] Previous consolidated fiscal year (April 1 to March 31, 2021) Impairment losses 369,313 – 369,313 – 369,313 Secondhand Business FC Business Total Company-wide / amortization Secondhand Business FC Business Total Company-wide / amortization (Thousands of yen) Amount in consolidated financial statements (Thousands of yen) Amount in consolidated financial statements Current consolidated fiscal year (April 1 to March 31, 2022) Impairment losses 139,232 – 139,232 – 139,232 [Information related to goodwill amortization and the unamortized balance for each reportable segment] Previous consolidated fiscal year (April 1 to March 31, 2021) (Thousands of yen) Secondhand Business FC Business Total Company-wide / amortization Amount in consolidated financial statements 3,841 – – – 3,841 – – – 3,841 – Amount of amortization for the fiscal year Balance at end of period Current consolidated fiscal year (April 1 to March 31, 2022) Not applicable. [Information related to gain on bargain purchase for each reportable segment] Previous consolidated fiscal year (April 1 to March 31, 2021) Negative goodwill was recognized in the “Other” segment due to the consolidation of ReNK CHANNEL Co., Ltd. as a consolidated subsidiary from the fiscal year ended March 31, 2022. The amount of gain on bargain purchase resulting from this event posted ¥13,382 thousand. Note that gain on bargain purchase was extraordinary income and therefore excluded from the segment profit shown above. Current consolidated fiscal year (April 1 to March 31, 2022) Not applicable. – 24 – Per-share information Previous consolidated fiscal year (April 1 to March 31, 2021) Current consolidated fiscal year (April 1 to March 31, 2022) Net assets per share Basic earnings per share 936.32 yen 25.60 yen 986.56 yen 75.06 yen Notes: 1. Diluted earnings per share is not shown in the above table, as there are no potential shares. 2. Basis of calculating net assets per share is as follows. As of March 31, 2021 As of March 31, 2022 Total net assets Deduction on total net assets ¥13,039,536 thousand ¥13,750,184 thousand ¥43,412 thousand ¥56,685 thousand (of which, non-controlling interests) (¥43,412 thousand) (¥56,685 thousand) Net assets at year-end applicable to common shares Number of common shares calculated for net assets per share at year-end ¥12,996,124 thousand ¥13,693,498 thousand 13,880 thousand shares 13,880 thousand shares 3. Basis of calculating basic earnings per share is as follows. Previous consolidated fiscal year (April 1 to March 31, 2021) Current consolidated fiscal year (April 1 to March 31, 2022) Basic earnings per share Profit attributable to owners of parent ¥348,119 thousand ¥1,041,901 thousand Profit not available to common shares Profit attributable to owners of parent applicable to common shares Average number of shares outstanding during the period – – ¥348,119 thousand ¥1,041,901 thousand 13,598 thousand shares 13,880 thousand shares Significant subsequent events Not applicable. – 25 –