Summary of Financial Results for the Third Quarter of Fiscal Year 2018
(Nine Months Ended September 30, 2018)[Japanese GAAP]
October 26, 2018

Company name: SENSHUKAI CO.,LTD.

Stock exchange: Tokyo Stock Exchange, First Section
8165
URL: https://www.senshukai.co.jp
Mr. Hiroyuki Hoshino, President and Representative Director
Mr. Takeshi Naito, Director, Executive Officer, in charge of Corporate Planning
Tel: +81-6-6881-3220
Scheduled date of filing of Quarterly Report: November 13, 2018
Scheduled date of payment of dividend: Preparation of supplementary materials for quarterly financial results: None
Holding of quarterly financial results meeting: None
Stock code:
Representative:
Inquiries:(All amounts are rounded down to the nearest millions of yen)

1. Consolidated Financial Results for the 3rd Quarter of 2018 (January 1, 2018 – September 30, 2018)(1) Consolidated operating results (cumulative)(Percentages represent changes from the same period of the previous fiscal year)
Profit attributable toOperating profit
Ordinary profit
owners of parent

Net sales

Millions of yen%

3Q 2018
81,025 (10.3)(4,476)
3Q 2017
90,330(2.9)(2,777)
Note: Comprehensive income (millions of yen) 3Q 2018: (4,896) (-%)

Millions of yen%-

Millions of yen

Net income per share

Diluted net income per share

Yen

Yen

(101.85)(149.66)-

3Q 2018
3Q 2017%

Millions of yen%(4,623)(7,786)-(4,232)(2,254)
3Q 2017: (7,771) (- %)(2) Consolidated financial position
Total assets

Net assets

Millions of yen

Equity ratio

Millions of yen

3Q 2018
76,68036,791
Fiscal Year 2017
90,441
41,548Reference: Shareholders’ equity (millions of yen) 3Q 2018: 36,709

Net assets per share
%

Yen

47.9
45.9
Fiscal Year 2017: 41,473

738.02797.13

2. Dividends
1Q-endDividend per share
3Q-end2Q-endYen

Yen

Year-end

Yen

Total
Yen

Yen

Fiscal Year 2017
0.00
0.00
0.00
Fiscal Year 2018
0.00
Fiscal Year 2018 (forecasts)
0.00
0.00
Notes: 1. Revision to the most recently announced dividend forecast: Yes
For more information, please refer to “Notice of Revisions to Medium-term Management Plan, Start of Voluntary
Retirement Program, and Revisions to Consolidated Outlook and Dividend Forecast (Dividend Suspension)” (Japaneseversion only) that was announced today (October 26, 2018).
2. The dividend figures above show dividends for common shares. Please refer to “Dividends of classified stock”(after-mentioned) for information on dividends for shares whose rights are different from those of the Senshukaicommon shares.

3. Consolidated Outlook for Fiscal Year 2018 (January 1, 2018 – December 31, 2018)(Percentages represent changes from the same period of the previous fiscal year)
Profit attributable to Net income per
Operating profit
Ordinary profit
owners of parent
share

Net sales
Millions of yen%

Millions of yen %Millions of yen %Millions of yen %Yen(7,000)–(7,500)–(10,300)–(233.66)–
Full Year 2018
112,500 (10.7)(6,000)(6,000)(9,000)(204.17)
Notes: 1. Revision to the most recently announced consolidated outlook: Yes
For more information, please refer to “Notice of Revisions to Medium-term Management Plan, Start of Voluntary
Retirement Program, and Revisions to Consolidated Outlook and Dividend Forecast (Dividend Suspension)” (Japaneseversion only) that was announced today (October 26, 2018).
2. Figures for the consolidated outlook for fiscal year 2018 are presented in the form of a range.

* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes inscope of consolidation): None
(2) Application of special accounting methods for presenting quarterly consolidated financial statements: Yes
Note: Please refer to “2. Quarterly Consolidated Financial Statements and Notes, (3) Notes to Quarterly Consolidated
Financial Statements (Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial
Statements)” on page 8 for further information.

(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: None
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None

(4) Number of shares outstanding (common shares)
1) Number of shares outstanding at the end of the period (including treasury shares)
3Q 2018:

52,230,393 sharesFiscal Year 2017:52,230,393 sharesFiscal Year 2017:

201,588 shares

2) Number of treasury shares at the end of the period
3Q 2018:

12,042,745 shares

3) Average number of shares outstanding during the period
3Q 2018:

45,392,565 shares

3Q 2017:52,027,864 shares

Note: The Senshukai shares held by the trust that is recorded as treasury shares under shareholders’ equity is included in
the number of treasury shares, and is deducted from the number of shares that is used to calculate the average
number of shares outstanding.
* This quarterly financial report is not subject to quarterly review by certified public accountants or auditing firms.
* Cautionary statement with respect to forward-looking statements
The above projections are based on information available at the time of release of this report. Actual results could differ
significantly from these projections due to a variety of factors. For further details regarding the projections, please refer to page3, “1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Forecasts
and Other Forward-looking Statements.”(Reference) Dividends of classified stock
Breakdown of dividend per share for classified stock whose rights are different from those of common shares areshown below.
Class A preferred stock

1Q-endDividend per share
3Q-end2Q-endYen

Yen

1Q-end

Yen

-

-

-

15,178,083.00

30,356,166.00

Dividend per share
3Q-end2Q-end
Yen

Yen

Total
Yen

Fiscal Year 2017
Fiscal Year 201815,178,083.00
Fiscal Year 2018 (forecasts)
Note: Five shares of the Class A preferred stock were issued on March 30, 2018.

Class B preferred stockYear-end

Yen

Year-end

Total

Yen

Yen

Yen

-

-

-

-

-

Fiscal Year 2017
Fiscal Year 2018
Fiscal Year 2018 (forecasts)
Note: Nine shares of Class B preferred stock were issued on March 30, 2018.

(Reference) Breakdown of dividends paid from the capital surplus
Of the 2Q-end dividends for the fiscal year 2018, breakdown of dividends paid from the capital surplus are shown
below.
Record date2Q-endDividend per share (Yen)
15,178,083.00
Total dividends (Millions of yen)75
Note: Reduction rate in net assets due to the dividends paid from net assets is 0.002.

SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

3(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements

3

2. Quarterly Consolidated Financial Statements and Notes

4(1) Quarterly Consolidated Balance Sheet

4(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive
Income6

Quarterly Consolidated Statement of Income(For the Nine-month Period)

6

Quarterly Consolidated Statement of Comprehensive Income(For the Nine-month Period)7(3) Notes to Quarterly Consolidated Financial Statements

8(Going Concern Assumption)

8(Significant Changes in Shareholders’ Equity)

8(Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements)

8(Segment Information)

9(Subsequent Events)10

3. Other

12(1) Important Information about Going Concern Assumption

12(2) Changes in Directors

12

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SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
In the cumulative third quarter (January 1 to September 30) of 2018, the Japanese economy recovered slowly withthe support of improvements in corporate earnings, employment situation and other economic indicators.
However, the outlook remains uncertain in part because of concerns about how trade friction, which started with ashift in U.S. trade policies, and volatility in financial markets will affect the Japanese economy.
In Japan’s retail industry, the operating environment continued to be challenging. One reason is that people arevery budget-minded. In addition, unusual weather had a negative impact on consumer sentiment. There wasrecord-setting heat in July along with heavy rain and other natural disasters. This was followed by powerful
typhoons in August and September.
Net sales in the cumulative third quarter decreased 10.3% year-over-year to 81,025 million yen because sales in
the mail-order business have been sluggish.
There was an operating loss of 4,476 million yen compared with a loss of 2,777 million yen in the same period of
2017. This loss was attributable to a decrease in the gross profit due to lower sales and to higher cost of sales ratio
due to an increase in valuation losses on goods. There was a big reduction in inventories during the cumulative
third quarter in order to reduce the volume of merchandise as the size of the mail-order business is adjusted to theproper level for current market conditions. There was an ordinary loss of 4,232 million yen compared with a lossof 2,254 million yen in the same period of 2017. The loss attributable to owners of parent was 4,623 million yen
compared with a loss of 7,786 million yen in the same period of 2017.
Overview by segment(Mail-order Business)
Consolidated sales in the mail-order business, centered on the catalog and the Internet businesses, decreased
15.2% year-over-year to 62,092 million yen in the cumulative third quarter. There was an operating loss of 5,285
million yen compared with a loss of 3,318 million yen in the same period of 2017.
(Bridal Business)
Consolidated sales in the bridal business, centered on the house wedding business, increased 8.4% year-over-year
to 13,417 million yen. Operating profit increased 125.9% year-over-year to 505 million yen.
(Corporates Business)
Consolidated sales in the corporates business, which provides products and services to corporations, increased
6.9% year-over-year to 3,856 million yen, and operating profit decreased 22.1% year-over-year to 236 million
yen.
(Others)
Consolidated sales in other businesses, which consist of services (primarily childcare support, insurance andcredit card services), increased 50.7% year-over-year to 1,659 million yen because of the July 2017 acquisition of
Huit Laboratories, Inc. which manufactures and sells cosmetics. Operating profit increased 416.9% year-over-year
to 65 million yen.

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SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(2) Explanation of Financial Position(Balance sheet position)
Assets totaled 76,680 million yen at the end of the third quarter of 2018, a decrease of 13,760 million yen fromthe end of 2017.
Current assets decreased 10,569 million yen to 38,285 million yen. The main factors were decreases of 5,570
million yen in cash and deposits, 2,958 million yen in merchandise and finished goods and 2,010 million yen inaccounts receivable-other. Non-current assets decreased 3,191 million yen to 38,395 million yen. The factors
included decreases of 2,727 million yen in property, plant and equipment, 199 million yen in intangible assets,
and 264 million yen in investments and other assets.
Current liabilities decreased 2,697 million yen to 27,369 million yen. The main factors were decreases of 3,950
million yen in electronically recorded obligations-operating and 3,422 million yen in other, while there was anincrease of 5,000 million yen in current portion of bonds with share acquisition rights. Non-current liabilities
decreased 6,306 million yen to 12,519 million yen. The main factors were decreases of 5,000 million yen in bonds
with share acquisition rights and 1,009 million yen in long-term loans payable.
Net assets decreased 4,757 million yen to 36,791 million yen. The main factor was an increase of 6,784 million
yen in treasury shares as a result of the share repurchase through off-auction own share repurchase trading system(ToSTNeT-3), while there was an increase of 2,738 million yen in retained earnings. Capital stock and legal
capital surplus increased by 3,500 million yen each because of the March 2018 sale of newly issued preferredstock through a third-party allotment to Regional Economy Vitalization Corporation of Japan (REVIC), which ismanaged by REVIC Partners Co., Ltd. as the unlimited liability partner. Based on the Article 447, Clause 1 andArticle 448, Clause 1 of the Companies Act, Senshukai reduced capital stock and legal capital surplus by 3,500
million yen each, and transferred these amounts to other capital surplus on April 2018. Furthermore, in
accordance with the provisions of Article 452 of the Companies Act, to eliminate the retained earnings deficit, thecapital surplus decreased by 7,071 million yen and retained earnings were increased by the same amount. As aresult, the equity ratio was 47.9%.
(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements
Senshukai has revised its consolidated outlook for fiscal year 2018 (January 1, 2018 to December 31, 2018) thatwas released on July 26, 2018. For more information, please refer to “Notice of Revisions to Medium-termManagement Plan, Start of Voluntary Early Retirement Program, and Revisions to Consolidated Outlook andDividend Forecast (Dividend Suspension)” (Japanese version only) that was announced today (October 26, 2018).

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SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet(Millions of yen)
3Q 2018(As of Sep. 30, 2018)

Fiscal Year 2017
(As of Dec. 31, 2017)
AssetsCurrent assets
Cash and deposits

17,32811,757

Notes and accounts receivable-trade

5,481

5,491

Merchandise and finished goods

16,561

13,602

Accounts receivable-other

7,216

5,206

Other

2,413

2,359

(147)

(133)

48,85438,285

Buildings and structures, net

13,716

12,416Land

10,451

8,477

848

1,395

25,01622,289

1,992

1,800

Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment

Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other

715

708

2,708

2,508

Investment securities

7,630

7,620

Other

6,497

6,195

Total intangible assets
Investments and other assets

Allowance for doubtful accounts

(265)

(218)

Total investments and other assets

13,861

13,597

41,58638,39590,441

76,680Total non-current assets
Total assets-4-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(Millions of yen)
3Q 2018(As of Sep. 30, 2018)

Fiscal Year 2017
(As of Dec. 31, 2017)
Liabilities
Current liabilities
Electronically recorded obligations-operating

9,406

5,455

Accounts payable-trade

6,123

5,745

Short-term loans payable

1,416

1,477

-

5,000

Income taxes payable

222

153

Provision for sales promotion expenses

408

329

Provision for bonuses

581

721

Current portion of bonds with share acquisition rights

Other

11,907

8,485

Total current liabilities

30,06627,369Bonds with share acquisition rights

5,000

-

Long-term loans payable

10,613

9,603

Net defined benefit liability

81

90

Provision for management board incentive plan trust

7

7

Non-current liabilities

Other

3,124

2,818

Total non-current liabilities

18,826

12,51948,892

39,889Total liabilities
Net assets
Shareholders’ equity
Capital stock

22,30422,304

Capital surplus

23,86023,712Retained earnings(4,859)(2,121)

Treasury shares(149)(6,934)

41,15536,961

1,216

1,144

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

219

65

(1,056)(1,346)

(40)

(66)

Remeasurements of defined benefit plans

(19)

(48)

Total accumulated other comprehensive income

318

(251)

74

81

41,54836,79190,441

76,680Non-controlling interests
Total net assets
Total liabilities and net assets-5-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive
Income(Quarterly Consolidated Statement of Income)(For the Nine-month Period)
3Q 2017(Jan. 1, 2017 – Sep. 30, 2017)(Millions of yen)
3Q 2018(Jan. 1, 2018 – Sep. 30, 2018)

Net sales

90,33081,025

Cost of sales

49,717

46,942Gross profit

40,61334,083

Selling, general and administrative expenses

43,391

38,560Operating loss

(2,777)(4,476)

Interest income

20

23

Dividend income
Share of profit of entities accounted for using equity
methodGain on adjustment of account payable

70

43

346

233

179

211

Other

131

196

Total non-operating income

748

708

Non-operating income

Non-operating expenses
Interest expenses

116

112

Commission fee

34

268

Other

73

83

Total non-operating expenses

224

464

(2,254)(4,232)Gain on sales of non-current assets

325Gain on sales of investment securities

607

209

Subsidy income

210

46

Total extraordinary income

820

281

7

0

Ordinary loss
Extraordinary income

Extraordinary losses
Loss on sales and retirement of non-current assets
Loss on reduction of non-current assets
Impairment loss
Other
Total extraordinary losses
Loss before income taxes

198

46

4,698

438

170

89

5,075

575

(6,508)(4,526)

Income taxes

1,278

89

Loss

(7,787)(4,616)(1)

6(7,786)(4,623)

Profit (loss) attributable to non-controlling interests
Loss attributable to owners of parent-6-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(Quarterly Consolidated Statement of Comprehensive Income)(For the Nine-month Period)
3Q 2017(Jan. 1, 2017 – Sep. 30, 2017)
Loss(Millions of yen)
3Q 2018(Jan. 1, 2018 – Sep. 30, 2018)(7,787)(4,616)

Valuation difference on available-for-sale securities

(174)

(71)

Deferred gains or losses on hedges

(61)

(156)

7

(9)

245

(42)

16

(280)

(7,771)(4,896)(7,770)(4,903)(1)

6Other comprehensive income

Foreign currency translation adjustment
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests-7-

SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(3) Notes to Quarterly Consolidated Financial Statements(Going Concern Assumption)
Not applicable.
(Significant Changes in Shareholders’ Equity)
At the annual general meeting of shareholders on March 29, 2018, shareholders approved a resolution to eliminate
the retained earnings deficit. This was accomplished by first reducing the legal capital surplus by 14,809 million
yen and transferring this amount to other capital surplus, in accordance with Article 448, Clause 1 of theCompanies Act. Next, in accordance with Article 452 of the Companies Act, other capital surplus was decreased
by 7,071 million yen and this amount was transferred to retained earnings brought forward. This process
decreased the capital surplus by 7,071 million yen and increased the retained earnings by 7,071 million yen in the
cumulative third quarter of 2018.
At the same meeting, shareholders approved a resolution to issue preferred stock (Class A and Class B) for salethrough a third-party allotment and transfer the amount credited to capital stock and capital surplus for these
preferred stock to other capital surplus. Senshukai subsequently issued five shares of Class A preferred stock andnine shares of Class B preferred stock with a payment date of March 30, 2018. The issuance of this preferredstock resulted in increases of 3,500 million yen each in capital stock and legal capital surplus. Based on Article
447, Clause 1 and Article 448, Clause 1 of the Companies Act, Senshukai then reduced capital stock and legal
capital surplus by 3,500 million yen each and transferred these amounts to other capital surplus on April 13, 2018.
Consequently, the capital surplus increased 7,000 million yen in the cumulative third quarter of 2018.
On April 27, 2018, the Board of Directors approved a resolution to terminate the equity and business alliance with
J.FRONT RETAILING Co., Ltd. and to purchase treasury shares in accordance with Article 156 of the Companies
Act as applied based on Article 165, Clause 3 of this act. Based on this authorization, Senshukai repurchased
11,840,800 shares of its stock on May 1, 2018, resulting in an increase of 6,784 million yen in treasury shares
during the cumulative third quarter of 2018. The result of all these measures was capital stock of 22,304 million
yen, legal capital surplus of 23,712 million yen, retained earnings of minus 2,121 million yen and treasury sharesof 6,934 million yen at the end of the third quarter of 2018.
(Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements)(Calculation of tax expense)
The tax expenses are calculated by first reasonably estimating the effective tax rate after the application of tax
effect accounting with respect to profit before income taxes for the fiscal year in which the quarter under review
falls, and multiplying that rate by the profit before income taxes for the quarter under review. However,Senshukai uses legally stipulated effective tax rates to calculate tax expenses for cases in which using estimatedtax rates gives a noticeably irrational result.

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SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(Segment Information)
I 3Q 2017 (Jan. 1, 2017 – Sep. 30, 2017)
1. Information related to sales and profit or loss for each reportable segment
Reportable segment

Net sales
Sales to customers
Inter-segment sales
or transfers
Total
Segment profit (loss)

Corporates
Sub-total
business

Others(Note 1)

Total

(Millions of yen)Amounts shown on
Adjustment quarterly consolidated
statement of income(Note 2)
(Note 3)Mail-orderbusiness

Bridalbusiness

73,24912,374

3,605

89,2291,100

90,330-90,330

722

1

106

829

16

846

(846)

-

73,972

12,375

3,712

90,0591,117

91,177(846)

90,330(3,318)223

303(2,790)12(2,778)0(2,777)

Notes: 1. Others represent the businesses which are not included in any of the three reportable segments and consist of theservices business, which is primarily the insurance and credit card services, and childcare business.
2. The 0 million yen adjustment to segment profit (loss) is an elimination for inter-segment transactions.
3. Segment profit (loss) is adjusted to be consistent with the operating loss on the quarterly consolidated statement ofincome.

2. Information related to impairment of non-current assets, goodwill, etc. for each reportable segment(Significant impairment losses related to non-current assets)
In the mail-order business, an asset impairment loss was recorded to write down the book value of some assets
to the amount that can be recovered in order because the performance of this segment has been well below theinitial plan. This impairment loss was 4,695 million yen in 3Q 2017.
II 3Q 2018 (Jan. 1, 2018 – Sep. 30, 2018)
1. Information related to sales and profit or loss for each reportable segment
Reportable segment

Net sales
Sales to customers
Inter-segment sales
or transfers
Total
Segment profit (loss)(Millions of yen)Amounts shown on
Adjustment quarterly consolidated
statement of income(Note 2)
(Note 3)Mail-orderbusiness

Bridalbusiness

Corporates
business

Sub-total

Others(Note 1)62,092

13,417

3,856

79,366

1,659

81,025-81,025

712

0

126

839

42

881

(881)

-

62,805

13,417

3,982

80,205

1,701

81,906(881)

81,025(5,285)505

236(4,542)65(4,477)

0(4,476)

Total

Notes: 1. Others represent the businesses which are not included in any of the three reportable segments and consist of thechildcare support business, services business and manufacturing and sales of cosmetics.
2. The 0 million yen adjustment to segment profit (loss) is an elimination for inter-segment transactions.
3. Segment profit (loss) is adjusted to be consistent with the operating loss on the quarterly consolidated statement ofincome.

2. Information related to impairment of non-current assets, goodwill, etc. for each reportable segment(Significant impairment losses related to non-current assets)
In the mail-order business, an asset impairment loss was recorded to write down the book value of businessassets to the amount that can be recovered. These business assets include the business assets of Senshukai andits consolidated subsidiaries for which the recovery of the original investments is unlikely due to a decline inprofitability and business assets that Senshukai has decided to sell. This impairment loss was 430 million yen in
3Q 2018.

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SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

(Significant Subsequent Events)(Sale of part of subsidiary’s shares and third-party allotment of shares by a subsidiary resulting in a change in thescope of consolidation)
On October 12, 2018, the Board of Directors of Senshukai approved a resolution for an agreement between Belle
Neige Direct Co., Ltd. (“BND”), which is a consolidated subsidiary, and Megmilk Snow Brand Co., Ltd.
(“MSB”) for the sale of part of BND shares held by Senshukai to MSB and to use a third-party allotment to sell
newly issued BND shares to MSB.
After this sale and the third-party allotment, Senshukai will have a 33.4% equity interest in BND and thiscompany will become an equity-method affiliate of Senshukai.
1. Reason for sale part of BND shares and third-party allotment
BND operates a mail-order business for the sale of functional food products, gifts for family members and family
events, and other merchandise. Sales have been firm, but functional food products have increased significantly asa share of total sales during the past several years. MSB has been building a framework for the growth of its ownfunctional food business. As part of measures to establish this business model, MSB decided to purchaseadditional BND shares in order to make this company a subsidiary.
Following this change in the ownership structure of BND, Senshukai believes that this company can continue toconsistently capitalize on business opportunities by combining its own expertise with the knowledge andresources of Senshukai and MSB.
2. Name of transferee
MEGMILK SNOW BRAND Co., Ltd.
3. Schedule
Conclusion of share sale agreement:
Sale of shares:
BND third-party allotment:

Late December 2018
Early January 2019
Early January 2019

4. Outline of the subsidiary
Name:Business:
Relationship with Senshukai:

Belle Neige Direct Co.,Ltd.
Mail-order business and associated subcontracting, food sales
operations, household product sales operations and other activities
Some Senshukai directors are concurrently BND directors andSenshukai guarantees the debt of BND.

5. Change in ownership of BND(1) Senshukai will sell 3,324 shares of BND shares to MSB.
(2) MSB will also purchase 3,324 shares of BND shares through a third-party allotment by BND.
(3) The ownership of BND will change as follows due to these two sales of BND shares.
Before change
After change
8,895 shares
5,571 shares
Senshukai(66.6%)(33.4%)
4,460 shares
11,108 shares
MSB(33.4%)(66.6%)
Total
13,355 shares
16,679 shares* The share of voting rights held is in parentheses.
* The amount paid for BND shares is not disclosed due to an agreement with MSB.

- 10 -SENSHUKAI CO.,LTD. (8165) Financial Results for the Third Quarter of Fiscal Year 2018

6. Outlook
This matter will have only a negligible effect on consolidated financial results at this point.
(Absorption and merger of consolidated subsidiaries, merger of two consolidated subsidiaries and liquidation of aconsolidated subsidiary)
On October 26, 2018, the Board of Directors of Senshukai approved resolutions to absorb and merge withconsolidated subsidiaries Senshukai General Services Co., Ltd. and Senshukai Business Services Co., Ltd., tomerge consolidated subsidiaries Senshukai Call Center Co., Ltd. and Senshukai Service Hanbai Co., Ltd., and toliquidate consolidated subsidiary Feel Life Inc.
For more information, please refer to “Notice of Absorption and Merger of Consolidated Subsidiaries (Simple
Merger), Merger of Consolidated Subsidiaries, and Liquidation of Consolidated Subsidiary” that was announced
today (October 26, 2018).
(Voluntary early retirement program)
On October 26, 2018, the Board of Directors of Senshukai approved a resolution to start accepting applications
for participation in a voluntary early retirement program.
For more information, please refer to “Notice of Revisions to Medium-term Management Plan, Start of Voluntary
Retirement Program, and Revisions to Consolidated Outlook and Dividend Forecast (Dividend Suspension)”(Japanese version only) that was announced today (October 26, 2018).
(Revision in financial covenants for a committed credit line)
On October 26, 2018, the Board of Directors of Senshukai approved an agreement with financial institutions forthe partial revision of the terms of a committed credit line contract with the total amount of 10 billion yen.
Following this revision, if Senshukai violates either of the following financial covenants, Senshukai may berequired to repay immediately the entire amount borrowed using this credit line.
Revised financial covenants(1) Operating profit and ordinary profit in the consolidated statement of income for fiscal year 2019 and every
subsequent consolidated fiscal year must not be below the amounts in the business plan that was submitted.
(2) Net assets in the consolidated balance sheet at the end of every consolidated fiscal year must be at least
26,650 million yen.

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3. Other(1) Important Information about Going Concern Assumption
In 2017, Senshukai had a consolidated operating loss of 4,287 million yen and a consolidated loss attributable toowners of parent of 11,090 million yen. In the cumulative third quarter of 2018, there was an operating loss of
4,476 million yen and a loss attributable to owners of parent of 4,623 million yen. These losses create significant
doubts about the going concern assumption.
On October 27, 2017, the Senshukai Group announced a medium-term management plan covering the three-year
period from 2018 to 2020 with the goal of shifting from a general mail-order retailer to a specialty retail company.
However, progress has been slower than planned because of the complexity of the structure of the group’sbusiness operations. The performance of the mail-order business continued to decline as a result. Senshukai has
responded by revising the medium-term management plan and plans to take the following actions for improving
operations in order to stop the decline of the mail-order business. (1) Reduce the mail-order business to the proper
size by cutting the number of sizes and models of merchandise sold, lowering inventories and taking other actions.
(2) Improve operations by shortening lead times for producing merchandise, performing effective market
monitoring surveys to forecast merchandise orders more accurately, and taking other actions. (3) Rebuild themodel for attracting customers, centered on catalogs, by establishing a model for attracting customers thatcombines analog and digital elements, reexamine the media plan and catalog distribution method, improve thequality of customer interactions by upgrading digital marketing and Internet customer contact, and taking otheractions. (4) Reexamine the group’s organizational structure and human resource systems by making changes tosenior management, combining and eliminating organizational units, using voluntary retirement program to
reduce the workforce, and taking other actions. (5) Cut costs and reduce assets by selling the Osaka head officebuilding, centralizing activities at the new headquarters, and taking other actions. (6) Reorganize the Senshukai
Group by merging subsidiaries that perform functions, liquidating consolidated subsidiary Feel Life Inc., andtaking other actions. We are determined to use these forceful measures and other initiatives in order to achieve aquick recovery in sales and earnings and stabilize the group’s performance.
At the end of September 2018, cash and deposits were 11,757 million yen. There is also a committed credit linewith the total amount of 10 billion yen with financial institutions. An agreement was reached with these financial
institutions to partially revise the financial covenants and other terms of this credit line contract. Consequently, we
believe there are no concerns about our liquidity because we have a sufficient amount of working capital.
For these reasons, we believe there are no significant uncertainties regarding the going concern assumption.
(2) Changes in Directors
For information about changes in directors, please refer to “Notice of Changes in Representative Director,
Reduction of Compensation of Directors, Personnel Changes and Director Resignations” (Japanese version only)that was announced today (October 26, 2018).

* This financial report is solely a translation of summary of “Kessan Tanshin” (in Japanese, including attachments), which has
been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience ofreaders who prefer an English translation.

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