Member, Financial Accounting Standards Foundation

Consolidated Financial Results for the Second Quarter Ended September 30, 2017
November 13, 2017
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: (072) 870-4395
Scheduled date of Quarterly Report
November 14, 2017
Scheduled date of Commencement of Annual Dividend Payment －Quarterly Financial Results Supplementation
Yes
Quarterly Financial Results SeminarYes
1. Consolidated Financial Results for the Second Quarter Ended September 30, 2017 (April 1, 2017 – September 30, 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%
nd72,132
9.1(4,037)(3,649)(13,083)－－－
2 Quarter FY2017
nd
66,104 (23.6)(3,606)(7,490)(7,648)－－－2 Quarter FY2016
nd(Reference) Comprehensive Income 2 Quarter FY 2017 ended September 30, 2017 (13,347) million yen (－%)
nd
2 Quarter FY 2016 ended September 30, 2016
(9,866) million yen (－%)
Net Income(loss)
Net Income(loss) Per SharePer Shareon a Fully Diluted Basis
Yen
Yen
nd
(383.48)－
2 Quarter FY2017
nd(224.18)－
2 Quarter FY2016(2) Consolidated Financial Position

As of September 30,2017
As of March 31,2016

Total Assets
Million yen
112,334
108,685

Million yen
62,82876,656Equity Ratio

Million yen
62,81876,507

%
55.9
70.4

2. Dividends
Dividend per Sharestnd

1 Quarteryen
Fiscal Year 2016－

Fiscal Year 2017－rd

2 Quarter

3 Quarteryen

Year-End

yen

0.00

Fiscal Year 2017
(Forecast)

Annual
yen

yen

－

10.00

10.00

－

－

－

nd

(Note) Revision of Annual Dividends Forecast in this 2 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) －(509.86)

*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 September 30, 2017
As of March 31, 2017
As of September 30, 2017
As of March 31, 2017
On September 30, 2017
On September 30, 2016

36,130,796
36,130,796
2,011,765
2,011,765
34,119,031
34,119,109* 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 second quarter of the consolidated fiscal year ended September 30, 2017, the United States, the Company’s
main market, saw business sentiment, employment, and personal consumption remain strong, but the outlook for
inflation (as measured by the consumer price index) stayed at a low level. In Europe, the economy, mainly domestic
demand, continued recovering, supported by monetary easing policy. Meanwhile in China, since main economic
indicators including the consumer price index showed a downward trend, the economic slowdown continued. In
Japan, the economy maintained a moderate recovery, supported by the recovery of production activity andconsumer spending, although the export volume index leveled off.
Under these circumstances, net sales amounted to ¥72,132 million, up 9.1% compared to the same quarter of thelast fiscal year. Despite an increase in net sales, the Group posted an operating loss of ¥4,037 million (an operating
loss of ¥3,606 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 ¥3,649 million (an ordinary loss of ¥7,490 million in the same quarter of the last fiscal
year). Quarterly net loss attributable to owners of parent amounted to ¥13,083 million (a quarterly net loss
attributable to owners of parent of ¥7,648 million in the same quarter of the last fiscal year).
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 ¥20,232 million, up 47.1% year on year, and segment loss
(operating loss) amounted to ¥782 million (a segment loss of ¥2,326 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 ¥51,595 million, down 0.7% year on year, and segment loss
amounted to ¥762 million (a segment loss of ¥1,337 million in the same quarter of the last fiscal year).
iii) Asia
Net sales amounted to ¥237 million, up 66.4% year on year due to increase on LCD TVs. Segment loss (operatingloss) amounted to ¥2,462 million (a segment profit of ¥148 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 ¥66 million, down 75.2% year on
year, and segment loss (operating loss) amounted to ¥41 million, (a segment loss of ¥9 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 ¥68,521 million, up 19.2% year on year.
ii) Information Equipment
Ink-jet printers and ink-cartridge decreased. As a result, net sales of information equipment amounted to ¥1,880
million, down 11.0% 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 ¥1,730 million, down 73.5% year on year.

(2) Consolidated Financial Position
Total assets increased by ¥3,649 million compared to the end of the last fiscal year. The primary components of thechange were as follows: Increase of ¥9,919 million in merchandise and finished goods, and ¥9,316 million in raw materials and supplies.
 Decrease of ¥5,882 million in cash and deposits, and ¥4,463 million in property, plant and equipment, and¥3,225 million in intangible assets, and ¥2,098 million in long-term prepaid expenses included in others ininvestment and other assets.
Total liabilities increased by ¥17,477 million compared to the end of the last fiscal year. The primary components ofthe change were as follows: Increase of ¥9,342 million in notes and accounts payable-trade, and ¥5,636 million in short-term loans payable.
Net assets decreased by ¥13,828 million compared to the end of the last fiscal year. The primary components of thechange were decrease of ¥13,425 million in retained earnings and ¥323 million in the foreign currency translation
adjustment.

(3) Consolidated Financial Forecast
The Group has revised consolidated financial results forecast announced in "FY2016 Financial Report" on May 15,
2017. For details, please refer to the release announced in “Notice on Extraordinary Losses and Revisions to theConsolidated Financial Forecasts for the First Six Months and Full Year” 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)

2nd Quarter FY2017(As of September 30, 2017)

ASSETS;
Current Assets
Cash and deposits

40,13634,253

Notes and accounts receivable - trade15,571

16,454Merchandise and finished goods

15,45925,379Work in process

1,149

953

Raw materials and supplies

9,644

18,960

Other

4,390

4,393

Allowance for doubtful accounts(847)(1,131)85,50399,263

Property, plant and equipment

12,9638,500

Intangible assets

3,342

116

Net defined benefit asset

1,543

1,535

Other

5,583

3,220

Allowance for doubtful accounts

(252)

(302)

Total current assets
Noncurrent Assets

Investments and other assets

Total investments and other assets

6,875

4,453

23,181

13,070108,685

112,334

18,60327,945-

5,636

Income taxes payable

813

338

Provision

491

920

Other

9,667

12,247

Total current liabilities

29,57547,089

1,047

1,021

15

16

1,391

1,378

Total noncurrent assets
TOTAL ASSETSLIABILITIES;Current Liabilities
Notes and accounts payable - trade
Short-term loans payableNoncurrent Liabilities
Provision
Net defined benefit liability
Other
Total noncurrent liabilities
TOTAL LIABILITIES

2,453

2,417

32,02849,506

Fiscal year 2016
(As of March 31, 2017)

2nd Quarter FY2017(As of September 30, 2017)

NET ASSETS;
Shareholders' equity
Capital stock

31,30731,307

Capital surplus

33,60333,603Retained earnings

47,02033,595

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

Total shareholders' equity

87,59074,16511

18(11,206)(11,529)

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

Foreign currency translation adjustment
Remeasurements of defined benefit plans

111

164

(11,082)(11,346)

Subscription rights to shares

149

9

Total net asset
TOTAL LIABILITIES AND NET ASSETS

76,65662,828

108,685

112,334

Total accumulated other comprehensive income

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

2nd Quarter FY2017( from April 1, 2016
to September 30, 2016)
66,104( from April 1, 2017
to September 30, 2017)72,132

Cost of sales

56,10965,456Gross profit

9,995

6,675

Selling, general and administrative expenses

13,601

10,712

Operating income (loss)(3,606)(4,037)

Interest income

102

121

Dividends income

16

2

-

417

Other

85

127

Total non-operating income

204

669

Interest expenses

80

17Equity in losses of affiliates

1-

Foreign exchange losses

3,868

-

Compensation expenses

-

225

137

38

4,088

281

(7,490)(3,649)184

6

Gain on reversal of subscription rights to shares

0

145

Other

45

9

Total extraordinary income

230

161

46

11

Net sales

Non-operating income

Foreign exchange gains

Non-operating expenses

Other
Total non-operating expenses
Ordinary income (loss)
Extraordinary income
Gain on sales of non-current assets

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

59

Notes.1

9,991

105

10,002(7,364)(13,490)

284

(406)

(7,649)(13,083)

0-(7,648)(13,083)

(Consolidated Quarterly Statement of Comprehensive Income)

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

2nd Quarter FY2016

2nd Quarter FY2017( from April 1, 2016
to September 30, 2016)( from April 1, 2017
to September 30, 2017)(7,649)(13,083)(31)

6(2,135)(323)

Share of other comprehensive income of entities
accounted for using equity method

(24)

-

Remeasurements of defined benefit plans, net of tax

(25)

53

(2,216)(263)(9,866)(13,347)

Comprehensive income attributable to owners of parent(9,855)(13,347)

Comprehensive income attributable to minority interests

(10)

-

Other comprehensive Income
Valuation difference on avaiable-for-sale securities
Foreign currency translation adjustment

Total other comprehensive Income
Comprehensive income(Comprehensive income attributable to)(3) Consolidated quartely statements of cash flows(Million Yen)
2nd Quarter FY2016

2nd Quarter FY2017( from April 1, 2016
to September 30, 2016)( from April 1, 2017
to September 30, 2017)

Cash flows from operating activities
Income (Loss) before income taxes and minority interests(7,364)(13,490)

Depreciation

1,967

1,881

Impairment loss

59

9,991

Increase (decrease) in allowance for doubtful accounts

345

324

Increase (decrease) in net defined benefit liability

(16)

18

Interest and dividend income

(118)

(124)

Interest expenses

80

17

Share of (profit) loss of entities accounted for using equity method

1-

Loss on retirement of property, plant and equipment

46

5

Loss (gain) on sales of property, plant and equipment

(184)

(6)

Loss (gain) on sales of investment securities

(31)

(9)

Decrease (increase) in notes and accounts receivable - trade

4,419

(720)

Decrease (increase) in inventories

3,609(18,647)

Increase (decrease) in notes and accounts payable - trade

3,605

9,218

Increase (decrease) in notes and accounts payable - other(23,506)

1,321

Other, net(1,292)

262

Subtotal(18,380)(9,956)

Interest and dividend income received

121

116

Interest expenses paid

(80)

(18)

Income taxes paid

(36)

(174)

Income taxes refund

49

61(18,326)(9,972)(4,399)(1,350)Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits

8,747

-

Purchase of property, plant and equipment(1,534)(979)

Proceeds from sales of property, plant and equipment

187

18

Purchase of intangible assets

(51)

(298)

Purchase of investment securities(5)-

Proceeds from sales of investment securities

54

316

Other, net

8

38

3,006

(2,255)

Net increase (decrease) in short-term loans payable(2,556)

5,564

Cash dividends paid

Net cash provided by (used in) investment activities
Cash flows from financing activities(1,023)(341)

Payments from changes in ownership interests in subsidiaries that do
not result in change in scope sf consolidation fin cash flows

(188)

-

Other, net

(109)

(122)

(3,876)

5,100

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

3,168

(153)

Net increase (decrease) in cash and cash equivalents(16,027)(7,280)Cash and cash equivalents at beginning of period

47,11638,971

Cash and cash equivalents at end of period

31,08831,690(4) 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 for first quarter of this fiscal year.
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.
Second Quarter of the last fiscal year (April 1, 2016 to September 30, 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 (59 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.
Second Quarter of this fiscal year (April 1, 2017 to September 30, 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
2,918
19
29
466
566
135
197
56

Software
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Software1
471

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

538

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

332
207
34
597
67
33

2
1
295
4
27
33
55
136
5
3
11

Use

Business Assets

LocationType

P&F MEXICANA, S.A. DE C.V.

Impairment loss
(million yen)

Machinery, equipment
and vehicles
Tools, furniture andfixtures
SoftwareMachinery, equipment
and vehicles
Tools, furniture andfixtures
Software

Total

4
4
8
3
1
13
9,991

The Group reduced the carrying amount to the recoverable value of business assets whose profitability has
markedly decreased, and recorded such reduction (9,991 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.

Second Quarter of the last fiscal year (April 1, 2016 to September 30, 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

13,75544,86751,938586

142
45,068

268-

66,104
90,521(90,521)

66,104-

Total

58,62352,52445,210268

156,626(90,521)

66,104

Segment Income (Loss)(2,326)(1,337)148(9)(3,525)(81)(3,606)Note:
1. ¥ -81 million adjustment amount under segment income includes items such as ¥ 23 million relating to thecancellation of inter-segment transactions, ¥ -399 million of overall Group expenses that are not apportioned toeach reporting segment, and ¥ 294 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.

Second Quarter of this fiscal year (April 1, 2017 to September 30, 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

20,23253,52051,595869

237
63,56966-

72,132
117,959(117,959)

72,132-

Total

73,75352,46563,806

66

190,092(117,959)

72,132

(782)

(762)

(2,462)(41)(4,048)11(4,037)

Segment Income (Loss)Note:
1. ¥ 11 million adjustment amount under segment income includes items such as the ¥ 2 million relating to thecancellation of inter-segment transactions, ¥ -395 million of overall Group expenses that are not apportioned toeach reporting segment, and the ¥ 404 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 the second quarter of this fiscal year,
events or circumstances that 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.