Member, Financial Accounting Standards Foundation

Consolidated Financial Results for the Third Quarter Ended December 31, 2018
February 12, 2019
Listed company name
Funai Electric Co., Ltd.
Stock exchange listing
Tokyo First Section
Securities code
6839
URL http://www2.funai.co.jp/en/index.html
Representative
President and CEO
Hideaki Funakoshi
Inquiries
Director and Officer
Makoto Ueshima
TEL: (072) 870-4395
Scheduled date of Quarterly ReportFebruary 13, 2019
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, 2018 (April 1, 2018 – December 31, 2018)(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%
81,021 (25.5)( 484)
( 96)
702
－
－
－
3rd Quarter FY2018
108,763
5.2(5,882)(5,866)(15,509)－－－
3rd Quarter FY2017(Reference) Comprehensive Income 3rd Quarter FY 2018 ended December 31, 2018
1,196 million yen (－%)
3rd Quarter FY 2017 ended December 31, 2017 (15,660) million yen(－%)
Net Income(loss)
Net Income(loss) Per SharePer Shareon a Fully Diluted Basis
Yen
Yen
rd
20.60
－
3 Quarter FY2018(454.57)－
3rd Quarter FY2017(2) Consolidated Financial Position

As of December 31,2018
As of March 31,2018

Total Assets
Million yen
82,53980,265

Million yen
51,92350,717

Equity Ratio

Million yen
51,89550,699

%
62.9
63.2

2. Dividends
Dividend per Share
1st Quarter

2nd Quarteryen
Fiscal Year 2017－

Fiscal Year 2018－

3rd Quarteryen

Year-End

yen

yen

－

0.00
0.00

AnnualFiscal Year 2018
(Forecast)

yen

0.00

0.00

－

－

rd

(Note) Revision of Annual Dividends Forecast in this 3 Quarter: No
The dividend for FY 2018 has been undecided. The company’s dividend policy of DOE is unchanged. Because of the high impact
stemmed from the recent fluctuations in exchange rates give to the consolidated net assets, the dividend is to be disclosed at
the time disclosure has become possible to public.

3. Consolidated Financial Forecast for the Fiscal 2018 (April 1, 2018 - March 31, 2019)
Net Sales

Full Year

Operating
Income(loss)

Ordinary
Income(loss)

Million yen%

Million yen%

Million yen%

105,000(19.3)

400

－

400

－

(Note) Revision to consolidated financial forecast: No(% shows year on year rates)Net
Net Income(loss)
Income(loss)
Attributable toowners of parent
Per Share
Million yen %Yen
1,200 －
35.17

*Note(1) Changes in Consolidated Subsidiaries (Changes in Scope of Consolidation): Yes
In (Company name: －)Out (Company name: FUNAI CORPORATION,INC.)(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: Yes
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, 2018
As of March 31, 2018
As of December 31, 2018
As of March 31, 2018
On December 31, 2018
On December 31, 201736,130,796
36,130,796
2,011,830
2,011,829
34,118,966
34,119,031* 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
During the first nine months of the consolidated fiscal year under review (April 1, 2018 to December 31, 2018),
the economy in the United States, the Group’s mainstay market, continued recovering steadily, supported by anincrease in private consumption and capital investment and improvement in employment environment including afall in the unemployment rate. In Japan, the economy continued recovering gradually, buoyed by a pickup in
consumer spending and improvement in corporate earnings and environment environments. However, risks rosethat economic activity in Japan would slow down, with uncertainties increasing, such as the direction and impactof the trade war between the U.S. and China and the outlook for the economy in the Southeast Asia including China.
In Europe, environment surrounding the economy deteriorated day by day due to concerns over the UK’s exist fromthe EU (“BREXIT”) and the slowdown in the economic growth rate in Italy.
Under these circumstance, the Group reported net sales of ¥81,021 million (down 25.5% year on year) in the firstnine months of the current consolidated fiscal year. This was attributable to moves by retailers in North America,
the Group’s mainstay market, to reduce inventories in the distribution channels in the first quarter of the year ended
June 30, 2018. Retailers, mainly large mass merchandisers, focused on the sales of excessive inventories instead of
new products, leading to a fall in the Group’s net sales.
With regard to operating income, the Group saw earnings improve compared to the previous consolidated fiscal
year. This was due to the following reasons: component prices, such as LCD panels for LCD TVs, declined from theprevious fiscal year; it reviewed sales of unprofitable products; and its efforts to reduce manufacturing costs andselling, general and administrative expenses paid off to some extent.
However, the Group reported operating loss of ¥484 million (an operating loss of ¥5,882 million in thecorresponding period of the previous year). This was due to an increase in the inventory of LCD TVs, its mainstay
product, and a factor related to consolidated adjustment, such as a squeeze in operating income caused by a rise inunrealized gains due to the improvement of earnings.
The Group reported ordinary loss of ¥96 million (an ordinary loss of ¥5,866 million in the corresponding period of
the previous year) due to the posting of foreign exchange gains and an increase in interest received. The Group’s
profit attributable to owners of the parent amounted to ¥702 million (a loss attributable to owners of the parent of¥15,509 million in the corresponding period of the previous year), because it posted income taxes - deferred (profit)
associated with the merger of sales companies in North America.
Results by regioni) Japan
Following the previous fiscal year, the Company began marketing its high-end products, such as FUNAI brandnew products including organic electroluminescent display (OELD) TVs, through Yamada Denki from July 14, 2018.
However, as it delayed the launching date by around one month compared to the previous fiscal year (thelaunching date was June 2), the Company saw net sales decrease from the previous year in the third quarter
ended December 31, 2018. As a result, net sales amounted to ¥27,391 million, down 6.3% year on year, andsegment loss (operating loss) was ¥68 million (a segment loss of ¥2,588 million in the same quarter of theprevious fiscal year).
ii) Americas
In the current fiscal year, the Company struggled to expand sales of LCD TVs, since large mass merchandisers
gave priority to the disposal of inventories because excessive inventories continued remaining in the North
America market from the previous fiscal year. Furthermore, demand of DVD and BD related equipment decreased
owing to the impact of moving video distribution services via the Internet, resulting in a fall in the Company’s net
sales. Consequently, net sales amounted to ¥52,803 million, down 33.3% year on year, and segment profit(operating profit) was ¥78 million (a segment loss of ¥1,072 million in the same quarter of the previous fiscal
year).
iii) Asia
Although the Company terminated sales of LCD TVs after reviewing sales of unprofitable products, sales ofcomponents increased. As a result, net sales amounted to ¥803 million, up 159.0% year on year, and segment
profit (operating profit) was ¥605 million (a segment loss of ¥2,688 million in the same quarter of the previous
fiscal year).
iv) Europe
Sales of ink-cartridge decreased. Consequently, net sales amounted to ¥23 million, down 76.0% year on year,and segment loss (operating loss) was ¥18 million (a segment loss of ¥58 million in the same quarter of theprevious fiscal year).
Results by product Segmenti) Audiovisual Equipment
In the audiovisual equipment segment, sales decreased from the previous year, particularly due to a fall in sales
of LCD TVs and DVD and BD related products caused by the reduction of unwanted inventory in the distribution
channel in the North America market. As a result, net sales amounted to ¥74,424 million, down 28.1% year onyear.
ii) Information Equipment
In the information equipment segment, sales increased from the previous year, since the Company continued
marketing ink cartridges for ink jet printers (despite it reduced sales of unprofitable ink jet printers) and started
marketing coupon printers, nail art printers, and sales of commercial-use ink cartridges grew. Consequently, net
sales amounted to ¥2,624 million, up 0.8% year on year.
iii) Other Products
In other equipment segment, sales of medical and healthcare-related products, such as automotive backlight
unit, CT for dental clinics and bed modules for the nursing care field, increased from the previous year. As a result,net sales amounted to ¥3,972 million, up 51.2% year on year.

(2) Consolidated Financial Position
Total assets increased by ¥2,274 million compared to the end of the last fiscal year. The primary components of thechange were as follows: Increase of ¥1,060 million in cash and deposits, and ¥907 million in merchandise and finished goods.
 Decrease of ¥998 million in raw materials and inventory goods.
Total liabilities increased by ¥1,068 million compared to the end of the last fiscal year. The primary components of thechange were as follows: Increase of ¥3,984 million in notes and accounts payable-trade.
 Decrease of ¥1,152 million in accounts payable-other.
Net assets increased by ¥1,206 million compared to the end of the last fiscal year. The primary components of thechange were increase of ¥702 million in retained earnings and increase of ¥504 million in the foreign currencytranslation adjustment.
Also, the company apply to Partial Amendments etc. to "Accounting standard for tax effect accounting" (Corporate
Accounting Standards No. 28, 16 February 2018) since beginning of the year of the first quarter consolidated accounting
period. As for the financial condition, we compare by the retroactive processed numerical value at the end of theprevious consolidated fiscal year.

(3) Consolidated Financial Forecast
There is no change in the consolidated financial results forecast for first half consolidated fiscal year and full year
forecasts announced in "FY2018 Financial Report" on November 5, 2018.
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 2017
(As of March 31, 2018)

3rd Quarter FY2018(As of December 31, 2018)ASSETS;
Current Assets
Cash and deposits

32,39033,450Notes and accounts receivable - trade

9,953

10,270

Merchandise and finished goods

13,251

14,158

516

818

9,841

8,843

Other

2,379

2,165

Allowance for doubtful accounts(1,021)(749)

Total current assets

67,31068,958

8,193

8,491

93

75

Net defined benefit asset

1,840

1,822

Other

3,065

3,416

Allowance for doubtful accounts

(239)

(224)

Work in process
Raw materials and supplies

Noncurrent Assets
Property, plant and equipment
Intangible assets
Investments and other assets

Total investments and other assets

4,667

5,014

12,954

13,58180,26582,539Notes and accounts payable - trade

11,80815,793

Accounts payable included in other

10,372

9,219

Income taxes payable

664

205

Provision

990

1,064

Other

3,007

3,098

Total current liabilities

26,842

29,380

1,025

25

3

13

1,676

1,197

Total noncurrent assets
TOTAL ASSETSLIABILITIES;Current Liabilities

Noncurrent Liabilities
Provision
Net defined benefit liability
Other
Total noncurrent liabilities
TOTAL LIABILITIES

2,705

1,236

29,54830,616

Fiscal year 2017
(As of March 31, 2018)

3rd Quarter FY2018(As of December 31, 2018)

NET ASSETS;
Shareholders' equity
Capital stock

31,30731,307

Capital surplus

33,60333,603Retained earnings

21,97022,673

Treasury shares(24,341)(24,341)

Total shareholders' equity

62,53963,242130Foreign currency translation adjustment(12,305)(11,801)

Remeasurements of defined benefit plans

451

453

(11,840)(11,347)

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

Total accumulated other comprehensive income
Subscription rights to shares
Total net asset
TOTAL LIABILITIES AND NET ASSETS

17

27

50,71751,92380,26582,539(2) Consolidated Quarterly Statements of Income and Comprehensive Income(Consolidated Quarterly Statements of Income)(Units : Million Yen)
3rd Quarter FY2017

3rd Quarter FY2018( from April 1, 2017
to December 31, 2017)
108,763( from April 1, 2018
to December 31, 2018)
81,021

Cost of sales

98,80870,955Gross profit

9,954

10,066

Selling, general and administrative expenses

15,836

10,550Operating income (loss)(5,882)(484)

Interest income

183

307

Dividends income27Foreign exchange gains

-

280

Other

177

177

Total non-operating income

363

772

Interest expenses

56

16

Compensation expenses

225

247

Other

65

120

Total non-operating expenses

347

385

(5,866)

(96)

6

35

145

3

9

-

161

39

11

43

10,009-10,02043(15,725)

(101)

(216)

(804)

Income (loss) before minority interests(15,509)702

Net income (loss) attributable to owners of parent(15,509)702

Net sales

Non-operating income

Non-operating expenses

Ordinary income (loss)
Extraordinary income
Gain on sales of non-current assets
Gain on reversal of subscription rights to shares
Other
Total extraordinary income
Extraordinary loss
Loss on disposal of noncurrent assets
Impairment loss
Total extraordinary loss
Income (loss) before income taxes
Income taxes

Notes.1

(Consolidated Quarterly Statement of Comprehensive Income)

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

3rd Quarter FY2017

3rd Quarter FY2018( from April 1, 2017
to December 31, 2017)( from April 1, 2018
to December 31, 2018)(15,509)

702

1

(13)

(232)

504

79

2

(151)

493

(15,660)

1,196(15,660)

1,196

Other comprehensive Income
Valuation difference on avaiable-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive Income
Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of parent

(4) Consolidated Quarterly Statements of Income(Notes for Continuing Enterprises)
Not Applicable(Notes of remarkable changes in Shareholders Equity)
Not Applicable(Changes in scope of consolidation or scope of application of equity method)(Significant changes in scope of consolidation)
Since the first quarter consolidated accounting period, FUNAI CORPORATION, INC., which was a consolidated
subsidiary, was excluded from the scope of consolidation due to the disappearance of the consolidated subsidiary
P&F USA, Inc. as a surviving company.
The trade name of P&F USA, Inc. has been changed to FUNAI CORPORATION, INC.
(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.
(Changes in accounting policies)
Overseas consolidated subsidiaries except Americas apply IFRS No. 15 (Revenue from Contracts with Customers)
since the first quarter consolidated accounting period.
The impact of application of the accounting standards on consolidated financial statements is slight.
(Additional Information)[Application of Partial Amendments etc. to "Accounting standard for tax effect accounting"]
The company apply to Partial Amendments etc. to "Accounting standard for tax effect accounting" (Corporate
Accounting Standards No. 28, 16 February 2018) since beginning of the year of the first quarter consolidated
accounting period. Therefore, Deferred Tax Assets is presented division of Investments and other assets andDeferred Tax Liabilities is presented division of Noncurrent liabilities.

(Consolidated quarterly statements of income)*Notes.1 Impairment loss
The Group recorded losses on impairment in the following asset groups for third quarter of last fiscal year.
3rd Quarter of last Fiscal year 2017 (April 1, 2017 to December 31, 2017)
Use
LocationType
Impairment loss
(million yen)Tools, furniture130
and fixtures
Lease assets
4(fixed)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.

Patent right

2,451

Software75

Long-term
prepaid expenses
Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures
Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures

Business Assets

Funai Electric Cebu, Inc.

FEP REAL ESTATE, INC.

19
29
468
568
136
198

Land

56

Software1

Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures
SoftwareBusiness Assets

2,918

Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures

473
333
207
34
540
599
67

Software

33

Land

42

Use

Business Assets

Location

FUNAI CORPORATION, INC.

Type
Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures
Lease assets(tangible)

Business Assets

Business Assets

Funai Trading Corp.

Funai Lexington Technology
Corporation

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

P&F MEXICANA, SA. DE. C.V.

1
296

Software55

Machinery,equipment andvehiclesTools, furnitureand fixtures

Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures

Machinery,equipment andvehiclesTools, furnitureand fixtures
Software

Total

2

27

SoftwareBusiness Assets

0

Buildings andstructures
Machinery,equipment andvehiclesTools, furnitureand fixtures

SoftwareBusiness Assets

Impairment loss
(million yen)

4

33

136
5
3
11
4
4
8
3
1
13
10,009The Group group’s business assets on the basis in management accounting, the idle assets are grouped byindividual asset.
The 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 First half of
this fiscal year.
The recoverable value of buildings and structures is measured using net sales value that is based on appraisal
value reasonably calculated by real estate appraisers. The recoverable value of assets other than the
aforementioned ones is measured using net sales value that is estimated at zero.

(Segment Information)
I.

3rd Quarter of the last fiscal year (April 1, 2017 to December 31, 2017)
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

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 ¥ -23 million relating to thecancellation of inter-segment transactions, ¥ -592 million of overall Group expenses that are not apportioned toeach reporting segment, and ¥ 1,141 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.

3rd Quarter of this fiscal year (April 1, 2018 to December 31, 2018)
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

27,391
48,18752,8033,063

803
47,37823－

81,021
98,630－(98,630)

81,021－

Total

75,57955,86748,181

23

179,651(98,630)

81,021

(68)

78

605

(18)

597

(1,081)(484)

Segment Income (Loss)Note:
1. ¥ -1,081 million adjustment amount under segment income includes items such as the ¥ 7 million relating to thecancellation of inter-segment transactions, ¥ 52 million of overall Group expenses that are not apportioned toeach reporting segment, and the ¥ -1,140 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, and negative operating cash flow in theprevious consolidated fiscal year and the third quarter of this fiscal year, events or circumstances that castsignificant doubt on the going concern assumption exist now.
Since the Group’s balance of cash and deposits is sufficient to cover working capital for some time, there is no
significant concern about fundraising.
Since the Group conducts the following countermeasures step by step based on the medium-term management
policy formulated in the previous consolidated fiscal year, the Group believes that a resolution of the matter can beachieved.
①

Display Business (LCD-TV business)②

・Increase sales at existing customers in the North American market and develop new customers.
・Concentration of management resources in developing FUNAI brand products and OEM products in theJapanese market.
Digital Media Business (DVD, BD business)③

・Development of product-focused niche strategy in the North American market.
・Enhancement of FUNAI brand products and development of new OEMs in the Japanese market.
Office Solution Business (information equipment-related business)④

・Improve profit margin by increasing sales of high value-added printer products.
・Development of derivative business utilizing of microfluidic control technology.
New Business・Increase sales by developing and launching new products related to health care, medical, and theautomotive market.
Accordingly, Funai judges that there is no significant uncertainty related to the going concern assumption as ofthe end of the third quarter consolidated accounting period and has omitted the Notes on Going Concern
Assumption from the consolidated financial statements.