Member, Financial Accounting Standards Foundation

Consolidated Financial Results for the Third Quarter Ended December 31, 2017
February 13, 2018
Listed company name
Funai Electric Co., Ltd.
Stock exchange listing
Tokyo First Section
Securities code
6839
URL http://www2.funai.co.jp/en/
Representative
President and CEO
Hideaki Funakoshi
Inquiries
General Manager
Makoto Ueshima
TEL: +81-72- 870-4395
Scheduled date of Quarterly ReportFebruary 14, 2018
Scheduled date of Commencement of Annual Dividend Payment －Quarterly Financial Results Supplementation
Yes
Quarterly Financial Results SeminarNo
1. Consolidated Financial Results for the Third Quarter Ended December 31, 2017 (April 1, 2017 – December 31, 2017)(1) Consolidated Operating Results(% shows year on year rates)
Net Sales

Net Income(Loss)

Operating

Ordinary

Income(Loss)

Income(Loss)

Net Assets

Equityattributable to ownersof parent
Million yen %Million yen%
Million yen%
Million yen%rd108,763
5.2(5,882)(5,866)(15,509)－－－
3 Quarter FY2017
rd103,416 (22.4)(4,609)(4,861)(5,319)－－－3 Quarter FY2016
rd(Reference) Comprehensive Income 3 Quarter FY 2017 ended December 31, 2017 (15,660) million yen (－%)
rd
3 Quarter FY 2016 ended December 31, 2016
(3,548) million yen (－%)
Net Income(loss)
Net Income(loss) Per SharePer Shareon a Fully Diluted Basis
Yen
Yen
rd
(454.57)－
3 Quarter FY2017rd(155.91)－
3 Quarter FY2016(2) Consolidated Financial Position

As of December 31,2017
As of March 31,2017

Total Assets
Million yen
94,182
108,685

Million yen
60,51876,656Equity Ratio

Million yen
60,50576,507

%
64.2
70.4

2. Dividends
Dividend per Sharestnd

1 Quarterrd2 Quarteryen

3 Quarteryen

Year-Endyen

Fiscal Year 2016

－

0.00

－

Fiscal Year 2017

－

0.00

－

Annualyen

Fiscal Year 2017
(Forecast)

yen

10.00

10.00

－

－

rd

(Note) Revision of Annual Dividends Forecast in this 3 Quarter: No
The dividend for FY 2017 has been undecided. The company’s dividend policy of DOE is unchanged. Because of the highimpact stemmed from the recent fluctuations in exchange rates give to the consolidated net assets, the dividend is to bedisclosed at the time disclosure has become possible to public.

3. Consolidated Financial Forecast for the Fiscal 2017 (April 1, 2017 - March 31, 2018)
Operating
Income(loss)

Net Sales

Full Year

Million yen%

Million yen

140,000

4.6(8,400)(Note) Revision to consolidated financial forecast: No

Ordinary
Income(loss)% Million yen－%(8,000) －(% shows year on year rates)Net
Net Income(loss)
Income(loss)
Attributable toowners of parent
Per Share
Million yen %Yen(17,400) －(509.98)

*Note(1) Changes in Consolidated Subsidiaries (Changes in Scope of Consolidation): No
In (Company name: －)Out (Company name: －)(2) Adoption of special accounting methods of Quarterly consolidated financial statements: Yes(3) Changes in accounting policies and estimates
1. Changes in accounting policies from revision of accounting standards: No
2. Changes in accounting policies from other reason: No
3. Changes in accounting estimates: No
4. Restatement: No(4) Number of Shares Outstanding (Ordinary Shares)
1. Number of shares outstanding (including treasury stock)
2. Number of shares of treasury stock
3. The Average number of outstanding shares

As of December 31, 2017
As of March 31, 2017
As of December 31, 2017
As of March 31, 2017
On December 31, 2017
On December 31, 2016

36,130,796
36,130,796
2,011,765
2,011,765
34,119,031
34,119,107* The Recording of Implementation Conditions Regarding Quarterly Review ProceduresThis quarterly financial summary does not fall within the scope of the Quarterly Review Procedures referenced in the
Financial Instruments and Exchange Act. At the time of disclosure of the quarterly financial summary, the Group was in
the process of implementing the quarterly review procedures for its quarterly financial statements.

Disclaimer;This document contains forward-looking statements and projections regarding business performance
which are not historical facts. Please note that these statements are based on information relating to factorsthat may impact future business performance that was available for analysis at the time this document was
printed. These factors include industry trends relating to the business areas of Funai Electric Co., Ltd. or
the Funai Group, such as audio-visual devices and information communication equipment, the economic
conditions of both domestic and international markets, and fluctuations in currency exchange rates. Actual
performance may greatly differ from projections included in this document because of the impacts ofuncertainty in such areas as the competitive conditions of the electronics industry, market trends, currency
exchange rate, introduction and success of new products, and various other global conditions that may
affect the tax system and other systems.

1.Qualitative Information(1) Consolidated Financial Results
In the nine-month period ended December 31, 2017, the United States, the Company’s main market, saw continued
mild economic recovery as evidenced in the increase in companies’ capital expenditure, improvement in theemployment situation, and a rise in personal consumption. Europe continues to see high growth, with companies inmajor companies posting strong results. Meanwhile in China, there are signs of economic slowdown, as major
economic indicators such as the consumer price index show a downward trend. In Japan, the economy maintained amoderate recovery, supported by robust employment and income as well as an increase in exports.
Under these circumstances, net sales amounted to ¥108,763 million, up 5.2% compared to the same quarter of thelast fiscal year. Despite an increase in net sales, the Group posted an operating loss of ¥5,882 million (an operating
loss of ¥4,609 million in the same quarter of the last fiscal year), due to high price of components such as memories,
as well as price intense competition in Americas.
Ordinary loss amounted to ¥5,866 million (an ordinary loss of ¥4,861 million in the same quarter of the last fiscal
year). Quarterly net loss attributable to owners of parent amounted to ¥15,509 million (a quarterly net loss
attributable to owners of parent of ¥5,319 million in the same quarter of the last fiscal year), due to impairment
losses in the second quarter consolidated accounting period.
Results by regioni) Japan
Electronic reception devices decreased due to excluding the DX Antenna Co., Ltd. from the scope of
consolidation by transfer of this all shares held by the Company. However, LCD TVs and BD-recorder increased
due to good sales. As a result, net sales amounted to ¥29,245 million, up 31.1% year on year, and segment loss
(operating loss) amounted to ¥2,588 million (a segment loss of ¥4,001 million in the same quarter of the last
fiscal year).
ii) Americas
LCD TVs and BD-players increased due to good sales. However, DVD related equipment and ink-cartridge
decreased. As a result, net sales amounted to ¥79,111 million, down 1.7% year on year, and segment loss
amounted to ¥1,072 million (a segment loss of ¥205 million in the same quarter of the last fiscal year).
iii) Asia
Net sales amounted to ¥310 million, up 60.6% year on year due to increase on LCD TVs. Segment loss (operatingloss) amounted to ¥2,688 million (a segment profit of ¥10 million in the same quarter of the last fiscal year).
iv) Europe
Ink-jet printers and ink-cartridge decreased. As a result, net sales amounted ¥96 million, down 79.5% year on
year, and segment loss (operating loss) amounted to ¥58 million, (a segment loss of ¥19 million in the samequarter of the last fiscal year).
Results by product Segmenti) Audiovisual Equipment
DVD-Player and DVD-recorder decreased. However, LCD TVs and BD-recorder increased due to good sales. As aresult net sales amounted to ¥103,533 million, up 15.1% year on year.
ii) Information Equipment
Ink-jet printers and ink-cartridge decreased. As a result, net sales of information equipment amounted to ¥2,602
million, down 26.3% year on year.
iii) Other ProductsElectronic reception devices decreased due to excluding the DX Antenna Co., Ltd. from the scope of
consolidation by transfer of this all shares held by the Company. As a result, net sales of other products
amounted to ¥2,627 million, down 73.6% year on year.

(2) Consolidated Financial Position
Total assets decreased by ¥14,503 million compared to the end of the last fiscal year. The primary components of thechange were as follows: Decrease of ¥6,720 million in cash and deposits, and ¥3,254 million in notes and accounts receivable-trade, and¥4,138 million in property, plant and equipment, and ¥3,237 million in intangible assets, and ¥1,986 million in
long-term prepaid expenses included in others in investment and other assets.
 Increase of ¥3,036 million in merchandise and finished goods, and ¥3,174 million in raw materials and supplies.
Total liabilities increased by ¥1,634 million compared to the end of the last fiscal year. The primary components ofthe change were as follows: Decrease of ¥3,515 million in notes and accounts payable-trade.
 Increase of ¥2,825 million in short-term loans payable, and ¥2,433 million in accounts payable-other.
Net assets decreased by ¥16,137 million compared to the end of the last fiscal year. The primary components of thechange were decrease of ¥15,850 million in retained earnings and ¥232 million in the foreign currency translation
adjustment.

(3) Consolidated Financial Forecast
There is no change in the consolidated financial results forecast for full year forecasts announced on November 6,
2017.
Note: The above forecasts are based on information currently available to the Group and contain risk and uncertainty. Actual
results may differ from these forecasts due to various factors including changes in the economic conditions of overseas markets
such as the United States, and significant fluctuations in product prices and foreign exchange.

2. Consolidated Financial Statements and Notes(1) Consolidated Statement of Financial Position(Units : Million Yen)

Fiscal year 2016
(As of March 31, 2017)

3rd Quarter FY2017(As of December 31, 2017)

ASSETS;
Current Assets
Cash and deposits

40,13633,415

Notes and accounts receivable - trade15,571

12,316Merchandise and finished goods

15,45918,496Work in process

1,149

662

Raw materials and supplies

9,644

12,818

Other

4,390

4,178

Allowance for doubtful accounts(847)(1,225)85,50380,661

Property, plant and equipment

12,963

8,825

Intangible assets

3,342

105

Net defined benefit asset

1,543

1,528

Other

5,583

3,364

Allowance for doubtful accounts

(252)

(303)

Total current assets
Noncurrent Assets

Investments and other assets

Total investments and other assets

6,875

4,590

23,181

13,521

108,685

94,182

18,60315,087

-

2,825

7,280

9,714

Income taxes payable

813

223

Provision for bonuses

916

Total noncurrent assets
TOTAL ASSETSLIABILITIES;Current Liabilities
Notes and accounts payable - trade
Short-term loans payable
Accounts payable included in other

Provision for product warranties

481

986

Other

2,386

2,634

Total current liabilities

29,57531,488

1,047

1,024

Noncurrent Liabilities
Provision for directors' retirement benefits
Net defined benefit liability

15

7

Other

1,391

1,142

Total noncurrent liabilities

2,453

2,174

32,02833,663TOTAL LIABILITIESFiscal year 2016
(As of March 31, 2017)

3rd Quarter FY2017(As of December 31, 2017)

NET ASSETS;
Shareholders' equity
Capital stock

31,30731,307

Capital surplus

33,60333,603Retained earnings

47,02031,170Treasury shares(24,341)(24,341)

Total shareholders' equity

87,59071,7391112Foreign currency translation adjustment(11,206)(11,438)

Remeasurements of defined benefit plans

111

191

(11,082)(11,233)

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

Total accumulated other comprehensive income
Subscription rights to shares

149

13

Total net asset
TOTAL LIABILITIES AND NET ASSETS

76,65660,518

108,685

94,182

(2) Consolidated Quarterly Statements of Income and Comprehensive Income(Consolidated Quarterly Statements of Income)(Units : Million Yen)
3rd Quarter FY2016

3rd Quarter FY2017( from April 1, 2016
to December 31, 2016)
103,416( from April 1, 2017
to December 31, 2017)
108,763

Cost of sales

87,51498,808Gross profit

15,901

9,954

Selling, general and administrative expenses

20,511

15,836

Operating income (loss)(4,609)(5,882)

Interest income

155

183

Dividends income

18

2

Other

142

177

Total non-operating income

316

363

124

56

Equity in losses of affiliates

1-

Foreign exchange losses

361

5Compensation expenses

-

225

Other

82

60

Total non-operating expenses

568

347

(4,861)(5,866)

217

6

0

145

Other

154

9

Total extraordinary income

372

161

47

11

60

Notes.1 10,009

107

10,020(4,595)(15,725)

721

(216)

(5,316)(15,509)3-(5,319)(15,509)

Net sales

Non-operating income

Non-operating expenses
Interest expenses

Ordinary income (loss)
Extraordinary income
Gain on sales of non-current assets
Gain on reversal of subscription rights to shares

Extraordinary loss
Loss on disposal of noncurrent assets
Impairment loss
Total extraordinary loss
Income (loss) before income taxes
Income taxes
Income (loss) before minority interests
Minority interests in income (loss)
Net income (loss) attributable to owners of parent

Notes.1

(Consolidated Quarterly Statement of Comprehensive Income)

Income (loss) before minority interest adjustment(Units : Million Yen)

3rd Quarter FY2016

3rd Quarter FY2017( from April 1, 2016
to December 31, 2016)( from April 1, 2017
to December 31, 2017)(5,316)(15,509)

(25)

1

1,821

(232)

0

79

(27)

-

1,767

(151)

(3,548)(15,660)

Comprehensive income attributable to owners of parent(3,645)(15,660)

Comprehensive income attributable to minority interests

97-

Other comprehensive Income
Valuation difference on avaiable-for-sale securities
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)(3) Consolidated Quarterly Statements of Income(Notes for Continuing Enterprises)
Not Applicable(Notes of remarkable changes in Shareholders Equity)
Not Applicable(Adoption of special accounting methods of Quarterly consolidated financial statements)[Calculate tax expense]
Tax expenses are calculated by multiplying income before income taxes by a reasonably estimated effective tax rate
for income before income taxes after application of deferred tax accounting.
(Additional Information)[About anti-tax haven law]
The Group received a reassessment notice from the Osaka Regional Taxation Bureau on June 29, 2011. The Bureau
determined that our Hong Kong subsidiary does not meet the requirements for exemption under the anti-tax havenrules. In addition, they imposed a tax on us adding up with the Hong Kong subsidiary’s income for the three fiscal
years ended March 31, 2008 through 2010, which deems as our income.
We objected to this reassessment of income taxes, and filed a request for examination to the Osaka National Tax
Tribunal on August 25, 2011. However, we received written verdicts that reject our petition on July18, 2012. The
Group filed a suit for cancellation of reassessment to the Tokyo District Court on January 17, 2013, but on
September 28, 2016 a ruling to dismiss our request was made. The Group appealed to the Tokyo High Court on
October 12, 2016, because we cannot accept the decision, but we received a ruling to dismiss our request on
October 26, 2017. In response to this decision, the Group did not file a final appeal and a petition for accepting thefinal appeal, so the appeal trial judgment was finalized on November 10, 2017.
The additional tax amount is totally ¥825 million including corporate, enterprise and residence taxes (¥935 million
including incidental taxes). We recorded this additional tax as “prior year’s taxes” in the fiscal year ended March 31,
2012. Also, the financial impact, when applying this tax rules has been recorded in the fiscal year ended March 31,
2011 when tax investigation was completed.
(Consolidated quarterly statements of income)*Notes.1 Impairment loss
The Group recorded losses on impairment in the following asset groups.
In principle, the Group group’s business assets on the basis of legal units that strive to maintain an ongoingunderstanding of income and expenses. The idle assets are grouped by individual asset. The idle assets aregrouped by individual asset.
Third Quarter of the last fiscal year (April 1, 2016 to December 31, 2016)
Use
Location
Type
Machinery,
Assets scheduled for
Funai Electric Cebu, Inc.
equipment andretirement
vehiclesSince acquiring the shares of the manufacturing subsidiary (now Funai Electric Cebu, Inc.) from Lexmark
International, Inc., the company has undertaken the production of ink cartridges from the company. However,as production ends for some models, the Group reduced the carrying amount to the recoverable value of
assets scheduled for retirement, which were previously grouped as assets for business use, and recorded such
reduction (60 million yen) as impairment loss.
The recoverable value of the asset is calculated based on the net selling price based on the disposal price.

The Group group’s business assets on the basis in management accounting of consolidated group. The idle
assets are grouped by individual asset.
Third Quarter of this fiscal year (April 1, 2017 to December 31, 2017)
Use
Location

Business Assets

Business Assets

Business Assets

Business Assets

Business Assets

Business Assets

Business Assets

Business Assets

Funai Electric Co., Ltd.

FUNAI ELECTRIC (H.K.), LTD.

FUNAI (THAILAND) CO., LTD.

Funai Electric Philippines Inc.

Funai Electric Cebu, Inc.

FEP REAL ESTATE, INC.

FUNAI CORPORATION, INC.

Funai Trading Corp.

Business Assets

Funai Lexington Technology
Corporation

Business Assets

Funai Manufacturing, S.A. DE C.V.

Type

Impairment loss
(million yen)Tools, furniture andfixtures130

Lease assets (fixed)

4

Patent right
Software
Long-term prepaid
expenses
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Land

2,451
75

Software
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Software

2,918
19
29
468
568
136
198
56
1
473
333
207
34

Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Software

540

Land

42

Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Lease assets (tangible)
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
SoftwareMachinery, equipment
and vehicles
Tools, furniture andfixtures
Software0

Buildings and structures

599
67
33

2
1
296
4
27
33
55
136
5
3
11

Use

Business Assets

LocationType

Impairment loss
(million yen)

Machinery, equipment
and vehicles
Tools, furniture andfixtures
SoftwareMachinery, equipment
and vehicles
Tools, furniture andfixtures
SoftwareP&F MEXICANA, S.A. DE C.V.

Total

4
4
8
3
1
13
10,009The Group reduced the carrying amount to the recoverable value of business assets whose profitability has
markedly decreased, and recorded such reduction (10,009 million yen) as impairment loss for the Second
Quarter of this fiscal year.
The recoverable value of the asset is measured based on the net selling price for buildings and structures andland, and the net selling price based on the valuation calculated rationally by a real estate appraiser etc. is used,
assets other than those mentioned above are measured based on the net selling price and the net selling priceis calculated as zero.
(Segment Information)
I.

Third Quarter of the last fiscal year (April 1, 2016 to December 31, 2016)
Information Regarding Net Sales and Profit/Loss Conditions by Reporting Segment
Japan

Americas

Asia

Europe

Total(Units: Million Yen)
Adjustments Consolidated(Note 1)
(Note 2)Net Sales(1) Outside customers(2) Inter-segment sales

22,31367,02480,440868

193
68,829469-

103,416
136,722(136,722)

103,416-

Total

89,33881,30869,022

469

240,138(136,722)

103,416

Segment Income (Loss)(4,001)

(205)

10

(19)

(4,216)(392)(4,609)Note:
1. ¥ -392 million adjustment amount under segment income includes items such as ¥ -2 million relating to thecancellation of inter-segment transactions, ¥ -584 million of overall Group expenses that are not apportioned toeach reporting segment, and ¥ 195 million adjustment relating to inventory assets. Overall Group expenses arecomprised of general administrative expenses that do not belong to a specific reporting segment.
2. Segment income has been adjusted to operating income noted on the third quarter consolidated income
statement.
II.

Third Quarter of this fiscal year (April 1, 2017 to December 31, 2017)
Information Regarding Net Sales and Profit/Loss Conditions by Reporting Segment(Units: Million Yen)
Japan

Americas

Asia

Europe

Total

Adjustments Consolidated(Note 1)
(Note 2)Net Sales(1) Outside customers(2) Inter-segment sales

29,24574,47079,111
1,578

310
85,56996-

108,763
161,618(161,618)

108,763-

Total

103,716

80,68985,87996

270,381(161,618)

108,763

Segment Income (Loss)(2,588)(1,072)(2,688)(58)(6,407)525(5,882)Note:
1. ¥ 525 million adjustment amount under segment income includes items such as the ¥ -23 million relating to thecancellation of inter-segment transactions, ¥ -592 million of overall Group expenses that are not apportioned toeach reporting segment, and the ¥ 1,141 million adjustments relating to inventory assets. Overall Group
expenses are comprised of general administrative expenses that do not belong to a specific reporting segment.
2. Segment income has been adjusted to operating income noted on the third quarter consolidated income
statement.

3. Others(Important Information about Going Concern Assumption)
Since the Group recorded a significant operating loss, ordinary loss, net loss attributable to owners of the parent,
and negative operating cash flow in the previous consolidated fiscal year and a significant operating loss, ordinary
loss, and net loss attributable to owners of the parent in the third quarter of this fiscal year, events or circumstancesthat cast significant doubt on the going concern assumption exist now.
Since the Group’s balance of cash and deposits is sufficient to cover working capital and other requirements forsome time, there is no significant concern about fundraising.
Since the Group is formulated "FY2017-FY2019 New policy and strategy" in the previous consolidated fiscal year andalready implementing the following countermeasures in stages based on this policy, the Group believes that a
resolution of the matter can be achieved.
①

Display Business (LCD-TV business)②

・Increase sales in the U.S market: Increase sales with existing customers and open up new customers byintroducing multiple models for large UHD.
・Enter the Japanese market: Increase share in the Japanese market through exclusive business with Yamada
Denki Co., Ltd.
Digital Media Business (DVD, BD business)③

・Increase sales of UHD-BD players in the U.S market.
・Enter the Japanese market: Increase share in the Japanese market through exclusive business with Yamada
Denki Co., Ltd.
Office Solution Business (information equipment-related business)④

・Improve profit margin by increasing sales of high value-added printer products.
・Review the investment in microfluidic control technology.
New Business・Increase sales by developing and launching new products related to health care, medical, and theautomotive market.
Accordingly, the Company judges that there is no significant uncertainty related to the going concern
assumption as of March 31, 2018 and has omitted the Notes on Going Concern Assumption from theconsolidated financial statements.