Member, Financial Accounting Standards Foundation

Consolidated Financial Results for the First Quarter Ended June 30, 2019
August 5, 2019
Listed company name
Funai Electric Co., Ltd.
Stock exchange listing
Tokyo first section
Securities code
6839
URL https://www2.funai.co.jp/en/
Representative
President and CEO
Hideaki Funakoshi
Inquiries
Officer General Manager
Makoto Ueshima
TEL: +81-72- 870-4395
Scheduled date of Quarterly ReportAugust 8, 2019
Scheduled date of Commencement of annual dividend payments Quarterly Financial results supplementation
Yes
Quarterly Financial results SeminarNo
1. Consolidated Financial Results for the First Quarter Ended June 30, 2019 (April 1, 2019 – June 30, 2019)(1) Consolidated Operating Results(% shows year on year rates)
Net Income(loss)
attributableto owners
Net Sales
Operating Income(loss) Ordinary Income(loss)of parent
Million yen%
Million yen%
Million yen%
Million yen%
15,644(27.8)(902) －
(1,140) －(1,188)－
1st Quarter FY2019
21,663(32.5)(1,233) －(915) －
(19)－
1st Quarter FY2018(Note)

1st Quarter FY2019 ended June 30, 2019
1st Quarter FY2018 ended June 30, 2018

Comprehensive Income

Net Income(loss)
Per Share(1,855) million yen (－%)
494 million yen (－%)

Net Income Per Shareon a Fully Diluted Basis
Yen

st

Yen
－
－

(34.83)(0.56)

1 Quarter FY2019
1st Quarter FY2018(2) Consolidated Financial Position

Net Assets

Total Assets
Million yen
79,477
83,293As of June 30,2019
As of March 31,2019

EquityMillion yen
52,20454,057

Equity Ratio

Million yen
52,16954,025

65.6
64.9

%

Year-End

Annual

2. Dividends
Dividend per Share
1Q End2Q Endyen

Fiscal Year 2018－

Fiscal Year 2019－

Fiscal Year 2019
(Forecast)

3Q End
yen

yen

yen

yen

0.00

－

0.00

0.00

－

－

－

－

(Note) Revision of Annual Dividends Forecast in this first Quarter: No
The dividend forecast for FY 2019 is undetermined; because the high impact stemmed from the recent fluctuations in
exchange rates give to the consolidated net assets. The dividend forecast for FY 2019 will be announced as soon as it isdetermined.

3 Consolidated Financial Forecast for the Fiscal Year Ended March 31, 2020 (April 1, 2019 - March 31, 2020)(% shows year on year rates)Net
Net Income(loss)
Operating
Ordinary
Income(loss)
Net Sales
attributable to
Income(loss)
Income(loss)
owners of parent
Per Share
Million yen%
Million yen% Million yen% Million yen%
Yen
40,000(14.4)(1,900)(1,900)(1,900)(55.69)－－－The First Half
85,000(19.5)(3,000)(3,100)(3,200)(93.79)－－－Full Year
(Note) Revision to consolidated financial Forecast : Yes*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: 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 March 31, 2019
As of June 30, 2019
As of March 31, 2019
As of June 30, 2019
On June 30, 2018
On June 30, 201936,130,796
36,130,796
2,011,830
2,011,830
34,118,967
34,118,966

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. Business Performance and Financial Position(1) Overview of Business Performance
In the first quarter of the consolidated fiscal year ending March 31, 2020 (April 1, 2019 to June 30, 2019), theeconomy grew steadily in the United States, the Company’s main market, due to an increase in private consumption
and corporate capital investment. However, the economic prospects remained uncertain due to the development oftrade disputes, impact of the future government policy and financial situation. In China, the economic expansion
continued to slow down due to the worsening of consumer sentiment and a fall in corporate capital expenditurescaused by the trade friction between the U.S, and China.
Meanwhile, in Japan, the economy modestly recovered owing to an improvement in employee and incomes, despitesluggish exports and production activities. However, there was a concern that the economy would lose momentum
due to uncertainties, including the possible impact of trade conflicts between the U.S. and China on the global
economy, the outlook for the Chinese economy, the trend of the global economy, and governments’ policies.
Under these circumstances, the Funai Electric Group recorded net sales of ¥15,644 million, a decrease of 27.8% year
on year. The decrease was attributable to the following reasons: sales of our LCD TVs were sluggish due to the impactof a rise in imports of LCD TVs from China, since Chinese manufacturers rushed to frontload shipments to the U.S.
because LCD TVs became a subject to a tariff increase by the Trump administration (4th round) and Chinese
producers increased exports because demand for LCD TVs were weak in the Chinese market; and sales prices of LCD
TVs decreased due to a fall in LCD panel prices. Meanwhile, the Group posted an operating loss of ¥902 million(versus an operating loss of ¥1,233 million in the previous year), since the increase of burdens, such as sales
cooperation money due to the aforementioned fall in net sales and drop in sales prices, squeezed profits. Ordinary
loss amounted to ¥1,140 million (versus an ordinary loss of ¥915 million in the previous year) due to foreignexchange losses and loss attributable to owners of the parent stood at ¥1,188 million (versus a ¥19 million loss
attributable to owners of the parent in the previous year).
Results by regioni) JapanThree years passed from the start of exclusive sales of the “FUNAI brand” products, such as flat TVs and BD
recorders, through Yamada Denki. Our products, including high-end organic electroluminescent display (OELD) TVs,
sold robustly. Furthermore, as we launched the sales of “CureNel,” a nail art printer, in June 1, 2019, overall
domestic sales were almost in line with our initial plan. Consequently, the Company posted net sales of ¥7,234
million, a decrease of 3.3% year on year, and segment loss (operating loss) of ¥833 million, versus a segment loss
(operating loss) of ¥473 million a year earlier.
ii) Americas
A huge amount of Chinese LCD TVs flowed into the U.S. market in the short term since shipments to the U.S. were
frontloaded ahead of the imposition of additional tariffs on Chinese imports (4th round of tariffs)—“Made in
China” LCD TVs were a subject to the tariffs—which was postponed in the end. Furthermore, Chinese producers
increased exports because demand for LCD TVs decreased in the Chinese market. Consequently, imports of LCD
TVs from China increased sharply. In addition, prices of LCD TVs plunged since LCD panel prices declined due tointensifying competition in the market caused by the oversupply of LCD panels (exceeding demand for LCD TVs) by
Chinese manufacturers. These factors resulted in the pile-up of inventories, including LCD TVs, in the North
American market, the Company’s main market. As a result, our sales stagnated and sales prices declined, leading
to a sharp decrease in sales. Consequently, net sales amounted to ¥8,373 million, a drop of 36.8% year on year,
and segment income (operating income) was ¥97 million (versus a segment loss (operating loss) of ¥257 million ayear earlier).
iii) Asia
Net sales totaled ¥37 million, a decline of 96.0% year on year. This was decrease in component sales. Segment loss
(operating loss) was ¥80 million (versus a segment loss (operating loss) of ¥129 million a year earlier.)iv) Others
As the Company did not have any sales of ink-cartridge in Europe, it did not record any sales in this segment.
Accordingly, segment loss (operating loss) amounted to ¥5 million, versus a ¥5 million of segment loss (operatingloss) in the previous year. Meanwhile, this segment had been categorized as Europe till the previous consolidated
fiscal year. However, as its importance decreased, the segment has been excluded from the reportable segment
and classified as “Other” since the first quarter of the consolidated fiscal year ending March 31, 2020.

Results by product segmenti) Audiovisual Equipment
In the audiovisual equipment segment, sales of LCD TVs decreased due to excessive inventories in the North
American market caused by the trade friction between the U.S. and China and due to the fall in sales prices
caused by declining LCD panel prices. Furthermore, sales of BD related products declined at large massmerchandisers since the spread video streaming services have been cutting into sales of BD related products. Dueto these reasons, overall sales fell in the segment. As a result, net sales amounted to ¥13,583 million, down 28.0%
year on year.
ii) Printing Solutions
In the information equipment segment, overall sales decreased due to a fall in sales of cartridges for ink-jet
printers, a slowdown of sales of label printers, and a delay in the launch of CISS (large-capacity cartridge ink-jet
printers), although the introduction of nail art printers, our new product, contributed to an increase in sales. As aresult, net sales amounted to ¥760 million, down 25.2% year on year.

iii) Other Products
In other equipment segment, sales of automotive backlight units and CT for dental clinics increased. Meanwhile,
sales of medical and healthcare-related products and components, such as modules for the nursing care beds,
decreased. As a result, net sales of other products amounted to ¥1,301 million, a decrease of 27.3% year on year.
(2) Overview of Business Performance
Total assets decreased by ¥3,816 million compared to the end of the last fiscal year. The primary components of thechange were as follows: Increase of ¥1,718 million in merchandise and finished goods, and ¥2,504 million in raw materials and inventory
goods.
 Decrease of ¥6,234 million in cash and deposits, and ¥2,144 million in notes and accounts receivable-trade.
Total liabilities decreased by ¥1,963 million compared to the end of the last fiscal year. The primary components ofthe change were as follows: Increase of ¥410 million in accounts payable-other.
 Decrease of ¥1,898 million in notes and accounts payable-trade.
Net assets decreased by ¥1,852 million compared to the end of the last fiscal year. The primary components of thechange were decrease of ¥1,189 million in retained earnings and increase of ¥633 million in the foreign currencytranslation adjustment.

(3) Consolidated Financial Forecast
There is change in the consolidated financial results forecast for first half consolidated fiscal year and full year
forecasts announced in "FY2018 Financial Report" on May 13, 2019. For details, please see the “Notice Regarding
Revision of Consolidated Earnings Forecast” announced on August 5, 2019.
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 2018
(As of March 31, 2019)

Fiscal Year 2019
(As of June 30, 2019)ASSETS;
Current Assets
Cash and deposits

35,417

29,182

Notes and accounts receivable - trade

7,724

5,580

Merchandise and finished goods

13,517

15,235681

478

Raw materials and supplies

11,05913,564

Other

2,276

2,935

Allowance for doubtful accounts

(718)

(680)

69,95866,295

8,159

8,137

68

490

Net defined benefit asset

1,881

1,874

Other

3,294

2,748

(68)

(68)

Work in process

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

Allowance for doubtful accounts
Total investments and other assets

5,107

4,554

13,335

13,182

83,29379,477

Notes and accounts payable - trade15,61813,719Accounts payable included in other

8,287

8,697

126

109

Provision for product warranties

1,056

922

Other

3,033

2,570

Total current liabilities

28,121

26,019Provision for directors' retirement benefits

27

25

Net defined benefit liability

33

9

1,053

1,217

Total noncurrent assets
TOTAL ASSETSLIABILITIES;Current Liabilities

Income taxes payableNoncurrent Liabilities

Other
Total noncurrent liabilities
TOTAL LIABILITIES

1,114

1,253

29,23627,273

Fiscal year 2018
(As of March 31, 2019)

Fiscal Year 2019
(As of June 30, 2019)

NET ASSETS;
Shareholders' equity
Capital stock

31,30731,307

Capital surplus

33,60333,603Retained earnings

24,58323,394

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

Total shareholders' equity

65,15363,9631(9)Foreign currency translation adjustment(11,609)(12,243)

Remeasurements of defined benefit plans

480

458

(11,127)(11,794)

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

31

34

54,05752,204

83,29379,477

(2) Consolidated Quarterly Statements of Income and Comprehensive Income(Consolidated Quarterly Statements of Income)(Units : Million Yen)
Fiscal Year 2018

Fiscal Year 2019

( from April 1, 2018
to June 30, 2018)
21,663( from April 1, 2019
to June 30, 2019)
15,644

Cost of sales

20,113

13,632Gross profit

1,550

2,012

Selling, general and administrative expenses

2,783

2,915

Operating income (loss)(1,233)(902)

Interest income

106

76

Dividends income

4

3

169

－

Payment compensation reversal

－

110

Other

63

27

Total non-operating income

343

217

Interest expenses

52Foreign exchange losses－

208

Compensation expenses

12

232

Other

6

11

Total non-operating expenses

25

454

(915)

(1,140)Gain on sales of non-current assets

5

9

Other

0

1

Total extraordinary income

610Loss on disposal of noncurrent assets

019

Total extraordinary loss

019

Income (loss) before income taxes(910)(1,148)

Income taxes

(890)

39

Income (loss) before minority interests(19)(1,188)Net income (loss) attributable to owners of parent(19)(1,188)Net sales

Non-operating income

Foreign exchange gains

Non-operating expenses

Ordinary income (loss)
Extraordinary income

Extraordinary loss(Consolidated Quarterly Statement of Comprehensive Income)

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

Fiscal Year 2018

Fiscal Year 2019

( from April 1, 2018
to June 30, 2018)( from April 1, 2019
to June 30, 2019)(19)(1,188)

(8)

(10)

521

(633)

0

(22)

513

(666)

494

(1,855)494(1,855)

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

(3) Notes on Consolidated Financial Statements(Notes on Going Concern Assumption)
Not Applicable(Notes on significant changes in the amount of shareholders' equity)
Not Applicable(Application of accounting methods specific to the preparation of quarterly consolidated financial statements)(Calculation of tax expense)
For tax expenses, rationally estimate the effective tax rate after applying tax effect accounting for the current net
income before tax for the fiscal year including the first quarter of the current consolidated fiscal year, and multiply
the quarterly net income before tax by the estimated effective tax rate. It is calculated.
(Changes in accounting policies)(“Lease” (Application of International Financial Reporting Standards IFRS 16))
At overseas consolidated subsidiaries excluding the United States, “Lease” (International Financial ReportingStandards IFRS 16) has been applied since the first quarter of the current consolidated fiscal year. When adopting
IFRS 16, the cumulative effect of adopting this standard, recognized as a transitional measure, is recognized on thedate of initial application.
The impact of applying these accounting standards on the consolidated financial statements is immaterial.
(“Revenue from Contracts with Customers” (US GAAP Topic 606))
Overseas consolidated subsidiaries adopting US GAAP have adopted “Revenue from Contracts with Customers” (USGAAP Topic 606) from the current first quarter. In applying Topic606, the cumulative effect of applying thisstandard, recognized as a transitional measure, is recognized on the date of initial application.
As a result of the application of this accounting standard, notes and accounts receivable increased ¥ 777 million andother current liabilities increased ¥ 777 million on the quarterly consolidated balance sheet at the end of the firstquarter. The effect of this change on profit and loss for the first quarter of the current fiscal year is immaterial.

(Segment Information)
I.

First Quarter of the last fiscal year (April 1, 2018 to June 30, 2018)
Information Regarding Net Sales and Profit/Loss Conditions by Reporting Segment
Japan

Americas

Asia

Others(Note 1)

Total

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

7,478
9,705

13,254502

922
11,520

7-

21,663
21,728－(21,728)

21,663－

Total

17,184

13,757

12,443

7

43,392(21,728)

21,663

(473)

(257)

(129)

(5)

(865)

(367)

(1,233)

Segment Income (Loss)

Note:
1. The “Others” category is a business segment not included in the reportable segment and is Europe.
2. ¥ -367 million adjustment amount under segment income includes items such as ¥ -9 million relating to thecancellation of inter-segment transactions, ¥ -204 million of overall Group expenses that are not apportioned toeach reporting segment, and ¥ -153 million adjustment relating to inventory assets. Overall Group expenses arecomprised of general administrative expenses that do not belong to a specific reporting segment.
3. Segment income has been adjusted to operating income noted on the third quarter consolidated income
statement.
II. First Quarter of this fiscal year (April 1, 2019 to June 30, 2019)
1. Information Regarding Net Sales and Profit/Loss Conditions by Reporting Segment(Units: Million Yen)
Japan

Americas

Asia

Others(Note 1)

Total

Adjustments Consolidated(Note 2)
(Note 3)

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

7,234
10,089

8,373
1,887

37
12,246－－

15,64424,223－(24,223)

15,644－

Total

17,323

10,26012,283－39,868(24,223)

15,644

(833)

97

(80)

(5)

(821)

(81)

(902)

Segment Income (Loss)

Note:
1. The “Others” category is a business segment not included in the reportable segment and is Europe.
2. ¥ -81 million adjustment amount under segment income includes items such as ¥ -7 million relating to thecancellation of inter-segment transactions, ¥ -206 million of overall Group expenses that are not apportioned toeach reporting segment, and ¥ 132 million adjustment relating to inventory assets. Overall Group expenses arecomprised of general administrative expenses that do not belong to a specific reporting segment.
3. Segment income has been adjusted to operating income noted on the third quarter consolidated income
statement.
2. Matters concerning report segment changes
From the first quarter of the current consolidated fiscal year, “Europe”, which was previously classified as areportable segment, has become insignificant.
The segment information for the first quarter of the previous fiscal year is based on the reportable segmentclassification for the first quarter of the current fiscal year.

3. Others(Important Information about Going Concern Assumption)
Given the Group recorded operating income, ordinary income, income attributable to owners of the parent and positive
operating cash flow in FY2018 but a significant operating loss, ordinary loss, loss attributable to owners of the parent
and negative operating cash flow in FY 2017. The Group recorded operating loss, ordinary loss, loss attributable toowners of the parent and negative operating cash flow in the First Quarter of this fiscal year too, at this stage there are
events and circumstances that cast significant doubt on the Company’s viability as a going concern.
There are no significant concerns about fundraising as the current balance of cash and deposits will sufficiently satisfy
working capital needs for the time being. In addition, the Group formulated a medium-term management policy, forwhich FY2018 is the first year of implementation. Moreover, the Company aims to gradually implement measures in linewith the following policies for each of its businesses going forward. In light of this, the Group believes that a resolutionof the matter can be achieved.
(1) Display business (LCD-TV business)
・Further expand market share at new mass retailers and enhance total competitiveness such as quality and cost
・Reduce returns and discards by strengthening efforts to the North American Christmas sales battle and improving
internal and external service business processes
・The Japanese market sells TVs with built-in advanced BS tuners, and gains market share in the Mexican market by
restructuring business models(2) Digital media business (DVD and BD business)・Develop a niche strategy with BD players that other companies withdrew in the North American market and capture
market share
・Strengthen cooperation with OEMs in the Japanese market and strengthen lineup of FUNAI brand products(3) Printing solution business (Printer equipment-related business)
・Improve profitability by expanding sales of OEM and own brand of nail art printer・Expand sales of label printers and high-capacity inkjet printers
・Expand sales by bringing to market derivative products that make use of microfluidics (microflow control technology)(4) New businesses
・Expanded sales channels for automotive backlights (existing edge type and new direct type)・Sales expansion of medical and healthcare related module products in addition to dental CT and securing of revenue
base・Strengthen alliance strategy through EV business and start mass production and sales of new products for commercial
display
As a result of the foregoing, it has been determined that significant uncertainty concerning the assumptions of the going
concern is not deemed to exist as of the end of the 1st quarter of this fiscal year under review.