Member, Financial Accounting Standards Foundation

Consolidated Financial Results for the Second Quarter Ending September 30, 2019

November 11, 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 Report
November 13, 2019
Scheduled date of Commencement of annual dividend payments Quarterly Financial results supplementation
Yes
Quarterly Financial results SeminarYes
1. Consolidated Financial Results for the Second Quarter Ending September 30, 2019 (April 1, 2019 – September 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%
nd42,109
(
9.9
)
(
1,905
)
(
1,811
)
(
1,866
)
－
－
－
2 Quarter FY2019
46,731650(1,645) －(181)(35.2)－－
2nd Quarter FY2018(Note) Comprehensive Income
2nd Quarter FY2019 ending September 30, 2019 (2,408) million yen (－%)
2nd Quarter FY2018 ending September 30, 2018 1,982 million yen (－%)
Net Income(loss)
Per Share
2nd Quarter FY2019
2nd Quarter FY2018

Net Income Per Shareon a Fully Diluted Basis
Yen(54.71)
19.07

Yen
－
－

(2) Consolidated Financial Position
Total Assets
77,037
83,293As of September 30,2019
As of March 31,2019

Net Assets
Million yen

51,65354,057

Equity Ratio
Million yen

%

67.0
64.9

2. Dividends
Dividend per Share
1Q End2Q Endyen

yen

Fiscal Year 2018

－

0.00

Fiscal Year 2019

－

0.00

Fiscal Year 2019
(Forecast)

3Q EndYear-Endyen

Annual
yen

yen

－

0.00

0.00

－

－

－

(Note) Revision of Annual Dividends Forecast in this first Quarter: No
The Company’s articles of incorporation stipulate that Funai Electric can pay an interim dividend, with on September
30 as the record date. However, it decided not to pay any dividend for the 2nd Quarter of the fiscal year ending March
31, 2020. Furthermore, Funai Electric has not determined its dividend forecast for the fiscal year ending March 31,
2020, since fluctuations in exchange rates give great impact on the its consolidated net assets. Management will
announce its dividend forecast for the fiscal year ending March 31, 2020 immediately after the Company determinesit.

3. Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2020 (April 1, 2019 - March 31, 2020)(% shows year on year rates)Net
Net Income(loss)
Ordinary
Operating
Income(loss)
attributable to
Net Sales
Income(loss)
Income(loss)
owners of parent
Per Share
Million yen%
Million yen%
Million yen%
Million yen
%
Yen
－
－
－
85,000(19.5)(3,000)(3,100)(3,200)(93.79)Full Year
(Note) Revision to consolidated financial Forecast : No
*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) As of September 30, 2019
As of March 31, 2019
As of September 30, 2019
2. Number of shares of treasury stock
As of March 31, 2019
On September 30, 2018
3. The Average number of outstanding shares
On September 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 second quarter of the consolidated fiscal year ending March 31, 2020 (April 1, 2019 to September 30, 2019),
the personal consumption grew steadily in the United States, the Company’s main market, on the back of a strong
employment environment, etc. However, the U.S. central bank lowered its official interest rates three times in a row
to prop up economic growth, since corporate capital investment and exports lost momentum caused by the tradedisputes, such as imposition of tariff increase on Chinese imports (4th round of tariffs) in September 2019. The
economic prospects depended on the development of trade disputes and remained uncertain. In China, the economic
expansion continued to slow down, since the economic growth weighed down by the trade friction between the U.S,
and China. However, the economy is expected to hit bottom within this year, supported by the Government stimulus
measures.
Meanwhile, in Japan, the economy continued to recover modestly owing to strong consumer spending, although
exports remained weak. Furthermore, there was a last-minute demand ahead of a hike in the consumption tax ratein October 2019. However, there was a concern that the economy would lose momentum due to f risks, such as thepossible impact of trade conflicts between the U.S. and China on the global economy and uncertainty over the trendof the overseas economy including the Chinese economy, and governments’ policies.
Under these circumstances, the Funai Electric Group recorded net sales of ¥42,109 million, a decrease of 9.9% year
on year. The decrease was mainly attributable to the following factors: in the first quarter, sales of the Company’s
LCD TVs were sluggish due to the impact of 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 Trumpadministration (4th round) and Chinese producers increased exports because demand for LCD TVs were weak in the
Chinese market; and the Company failed to make up the decrease in sales also in the second quarter. Furthermore,
LCD panel prices declined since demand for LCD TVs didn’t catch up with a high level of LCD panel supply by the
Chinese LCD panel manufacturers and the product market prices continued to fall. This also affected the Group’s sales.
Meanwhile, the Group posted an operating loss of ¥1,905 million (versus an operating loss of ¥1,645 million in theprevious year) due to the aforementioned fall in net sales and drop in sales prices as well as the increase in expenses,
such as sales cooperation money to cope with excessive inventory in the distribution channel. Ordinary loss amounted
to ¥1,811 million (versus an ordinary loss of ¥181 million in the previous year) and loss attributable to owners of theparent stood at ¥1,866 million (versus a ¥650 million profit attributable to owners of the parent in the previous year).
Results by regioni) Japan
Sales of the FUNAI brand products, such as flat TVs and BD recorders, grew almost in line with the initial plan. Thiswas mainly due to the following reasons: the Company’s efforts to renew and expand a lineup of its high-end
products including organic electroluminescent display (OELD) TVs; the launch of CureNel, a nail art printer, in June
1, 2019; and contribution of the last-minute increase in demand ahead of a hike in the consumption tax rate in
October 2019. Consequently, the Company posted net sales of ¥16,774 million, a decrease of 1.2% year on year,
and segment loss (operating loss) of ¥2,181 million, versus a segment loss (operating loss) of ¥1,399 million a year
earlier.
ii) Americas
In the first quarter, imports of LCD TVs from China increased sharply, since shipments to the U.S. were frontloaded
ahead of the imposition of additional tariffs on Chinese imports—Made in China LCD TVs were a subject to thetariffs. Furthermore, Chinese producers increased exports because demand for LCD TVs decreased in the Chinese
market. This trend continued in the second quarter.
As demand for LCD TVs didn’t catch up with a high level of LCD panel supply by the Chinese LCD panel manufacturers,
LCD panel prices declined, causing the product market prices to fall further.
These factors resulted in the pile-up of inventories in the distribution channel, including LCD TVs in the North
American market. As a result, sales of new models stagnated and sales prices declined accordingly, leading to a
sharp decrease in sales. In addition, prices of LCD TVs plunged, and expenses, such as sales cooperation money tocope with excessive inventory, increased. Consequently, the Company posted net sales of ¥25,285 million, adecrease of 12.6% year on year, and segment income (operating income) of ¥212 million, versus a segment loss
(operating loss) of ¥166 million a year earlier.
iii) Asia
As sales of components continued to decrease, the Company posted net sales of ¥50 million, a decrease of 93.6%
year on year, and segment loss (operating loss) of ¥236 million, versus a segment income (operating income) of¥202 million a year earlier.

iv) Others
As the Company terminated sales of ink-cartridge in Europe, it did not record any sales in this segment. Accordingly,
segment loss (operating loss) amounted to ¥7 million, versus a ¥9 million of segment loss (operating loss) in theprevious 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 a fall in sales prices caused bydeclining LCD panel prices.
Furthermore, overall sales of audiovisual equipment decreased, since the market of DVD and BD related products
became smaller due to the spread of video streaming services and sales fell at power center retailers. As a result,net sales of audiovisual equipment amounted to ¥37,841 million (down 9.9% 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 printersand sales of label printers, although the launch of new products, such as nail art printers and CISS (large-capacity
cartridge ink-jet printers), contributed to an increase in sales. As a result, net sales of information equipment
amounted to ¥1,848 million (down 4.2% year on year).
iii) Other Products
In other equipment segment, overall sales decreased due to a fall in sales of components, although sales ofautomotive backlight units and medical and healthcare-related products, including CT for dental clinics andmodules for the nursing care beds, increased. As a result, net sales of other products amounted to ¥2,419 million,
down 13.2% year on year.
(2) Overview of Business Performance
Total assets decreased by ¥6,256 million from the end of the previous consolidated fiscal year. This was mainly due toan increase of ¥4,606 million in notes and accounts receivable - trade and a rise of ¥1,939 million in raw materials andsupplies and a decrease of ¥11,403 million in cash and deposits and a fall of ¥1,155 million in merchandise and finishedgoods.
Liabilities decreased by ¥3,852 million from the end of the previous consolidated fiscal year, mainly due to an increaseof ¥597 million in accounts payable - other and a decrease of ¥3,547 million in notes and accounts payable - trade.
Net assets decreased by ¥2,403 million from the end of the previous consolidated fiscal year, mainly due to a decreaseof ¥1,867 million in retained earnings and a fall of ¥482 million in foreign currency translation adjustment.

(3) Consolidated Financial Forecast
The Group did not revise its forecast for consolidated financial results for the fiscal year ending March 31, 2020,
which it 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)

2nd Quarter FY2019(As of September 30, 2019)ASSETS;
Current Assets
Cash and deposits

35,41724,013

Notes and accounts receivable - trade

7,724

12,330

Merchandise and finished goods

13,517

12,361681

469

Raw materials and supplies

11,05912,999

Other

2,276

2,449

Allowance for doubtful accounts

(718)

(676)

69,95863,947

8,159

8,077

68

493

Net defined benefit asset

1,881

1,866

Other

3,294

2,716

Allowance for doubtful accounts

(68)

(64)

Total investments and other assets

5,107

4,518

13,335

13,08983,29377,037

Notes and accounts payable - trade15,61812,071

Accounts payable included in other

8,287

8,885

126

168

Provision for product warranties

1,056

1,368

Other

3,033

1,967

Total current liabilities

28,121

24,461

Provision for directors' retirement benefits

27

28

Net defined benefit liability

33

14

Other

1,053

879

Total noncurrent liabilities

1,114

922

29,23625,383Work in process

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

Total noncurrent assets
TOTAL ASSETSLIABILITIES;Current Liabilities

Income taxes payableNoncurrent Liabilities

TOTAL LIABILITIES

2nd Quarter FY2019(As of September 30, 2019)

Fiscal year 2018
(As of March 31, 2019)
NET ASSETS;
Shareholders' equity
Capital stock

31,30731,307

Capital surplus

33,60333,603Retained earnings

24,58322,716

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

Total shareholders' equity

65,15363,2851(12)Foreign currency translation adjustment(11,609)(12,091)

Remeasurements of defined benefit plans

480

434

(11,127)(11,669)31

37

54,05751,653

83,29377,037

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

(2) Consolidated Quarterly Statements of Income and Comprehensive Income(Consolidated Quarterly Statements of Income)(Units: Million Yen)
2nd Quarter FY2018

2nd Quarter FY2019(from April 1, 2018
to September 30, 2018)(from April 1, 2019
to September 30, 2019)

Net sales

46,731

42,109

Cost of sales

42,01237,598Gross profit

4,718

4,511

Selling, general and administrative expenses

6,363

6,416

Operating income (loss)(1,645)(1,905)Interest income

203

136

Dividends income

73

Dividends received

—

187

1,247

—

Payment compensation reversal

—

110

Other

122

51

1,581

489

Interest expenses

113Foreign exchange losses—

145

Compensation expenses

12

233

Compensation for damage

51

－

Other

41

12

Total non-operating expenses

117

395

(181)

(1,811)Gain on sales of non-current assets

11

104

Gain on reversal of subscription rights to shares

3

1

Other

—

1

Total extraordinary income

15

106

Loss on disposal of noncurrent assets

43

74

Total extraordinary loss

43

74

Income (loss) before income taxes(210)(1,778)

Income taxes

(860)

87

Income (loss) before minority interests

650(1,866)

Net income (loss) attributable to owners of parent

650(1,866)

Non-operating income

Foreign exchange gains

Total non-operating income
Non-operating expenses

Ordinary income (loss)
Extraordinary income

Extraordinary loss

(Units: Million Yen)

(Consolidated Quarterly Statement of Comprehensive Income)

Income (loss) before minority interest adjustment

2nd Quarter FY2018

2nd Quarter FY2019(from April 1, 2018 toSeptember 30, 2018)
650(from April 1, 2019 to
September 30, 2019)(1,866)

(8)

(13)

1,339

(482)

0

(46)

1,331

(542)

1,982

(2,408)1,982(2,408)Other comprehensive Income
Valuation difference on available-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) Consolidated Quarterly Statements of Cash Flows(Units: Million Yen)
2nd Quarter FY2018(from April 1, 2018 toSeptember 30, 2018)

2nd Quarter FY2019(from April 1, 2019 to
September 30, 2019)

Cash flows from operating activities
Income (Loss) before income taxes and minority interests(210)(1,778)Depreciation

377

570

Increase (decrease) in allowance for doubtful accounts

(299)

13

(0)

0

(210)

(140)

Interest expenses

11

3

Loss on retirement of property, plant and equipment

074

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

31

(104)

Loss (gain) on sales of investment securities—(1)

Decrease (increase) in notes and accounts receivable - trade

2,163(4,762)

Decrease (increase) in inventories(578)(1,226)

Increase (decrease) in notes and accounts payable - trade

5,811(3,224)

Increase (decrease) in notes and accounts payable - other
Other, net(1,592)(1,534)698(1,148)Subtotal

3,969(11,026)

Interest and dividend income received

209

139

Interest expenses paid

(12)

(3)

Income taxes paid
Income taxes refund

(364)
235

(15)
203

Net cash provided by (used in) operating activities

4,037(10,703)

Payments into time deposits

(891)

—

Proceeds from withdrawal of time deposits

382

1,176

Purchase of property, plant and equipment

(802)

(515)

Proceeds from sales of property, plant and equipment

502

137

Purchase of intangible assets

(3)

(66)

Proceeds from sales of investment securities

—
20

32
30

(791)

793

(120)
(0)

(127)
—

Net increase (decrease) in cash and cash equivalents

3,743(10,182)

Cash and cash equivalents at beginning of period

30,65033,544

Cash and cash equivalents at end of period

34,39323,361

Increase (decrease) in net defined benefit liability
Interest and dividend income

Cash flows from investing activities

Other, net
Net cash provided by (used in) investment activities
Cash flows from financing activities
Repayments of lease obligations
Purchase of treasury shares
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

(120)
617

(127)

(145)

(4) 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)(Adoption of Lease (IFRS 16))
The Company’s overseas consolidated subsidiaries, excluding the United States, have adopted Lease, International
Financial Reporting Standards (IFRS) 16, from the first quarter of the current consolidated fiscal year. For the
adoption of IFRS 16, the Company employed the method of recognizing the cumulative impact due to theadoption of the standard on the commencement date of adoption, which is permitted as an interim measure.
The adoption of this accounting standard had an immaterial impact on the consolidated quarterly financial statements.
(Adoption of Revenue from Contracts with Customers (US GAAP Topic 606))
The Company’s overseas consolidated subsidiaries that apply US GAAP have adopted Revenue from Contracts with
Customers (US GAAP Topic 606) from the first quarter of the current consolidated fiscal year. For the adoption of
Topic 606, the Company employed the method of recognizing the cumulative impact due to the adoption of thestandard on the commencement date of adoption, which is permitted as an interim measure.
As a result of the adoption of this accounting standard, notes and accounts receivable - trade increased ¥804
million and other in current liabilities increased ¥804 million on the quarterly consolidated balance sheet at the endof the second quarter of the current consolidated fiscal year. The adoption of this accounting standard had animmaterial impact on earnings for the second quarter of the current consolidated fiscal year.

(Segment Information)
I. Second Quarter of the last fiscal year (April 1, 2018 to September 30, 2018)
Information Regarding Net Sales and Profit/Loss Conditions by Reporting Segment
Others(Note1)Japan

Americas

Asia

Total

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

16,97423,01028,943891

788
25,23946,70649,141

24—

46,73149,141(49,141)—

46,731

Total

39,98429,83426,02895,84824

95,873(49,141)

46,731

Segment Income (Loss)(1,399)202(1,364)(9)(1,373)(271)(1,645)

(166)

Total

(Units: Million Yen)
Adjustments Consolidated(Note2)(Note3)—Note:
1. The “Others” category is a business segment not included in the reportable segment and is Europe.
2. Adjustment of (¥271 million) in segment loss includes the elimination of inter-segment transactions of ¥3 million,
corporate expenses of ¥233 million that are not allocated to each reportable segment, and adjustment of (¥508
million) for inventories. Corporate expenses are mainly general and administrative expenses that are not
attributable to reportable segments.
3. 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, 2019 to September 30, 2019)
1. Information Regarding Net Sales and Profit/Loss Conditions by Reporting Segment(Units: Million Yen)
Japan

Americas

Asia

Total

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

Others(Note1)

16,774
22,63225,2854,581

50
25,764

42,10952,978——42,10952,978—42,109(52,978)—

Total

39,407

29,86725,81495,088—95,088(52,978)

42,109Segment Income (Loss)(2,181)

212

(236)

(2,205)(7)(2,212)307(1,905)

Total

Adjustments Consolidated(Note2)(Note3)Note:
1. The “Others” category is a business segment not included in the reportable segment and is Europe.
2. Adjustment of (¥307 million) in segment loss includes the elimination of inter-segment transactionsof (¥3 million), corporate expenses of (¥399 million) that are not allocated to each reportablesegment, and adjustment of ¥710 million for inventories. Corporate expenses are mainly general andadministrative expenses that are not attributable to reportable segments.

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 second quarter of the previous fiscal year is based on the reportable segmentclassification for the second quarter of the current fiscal year.

3. Others(Important Information about Going Concern Assumption)
The Funai Electric Group posted operating income, ordinary income, income attributable to owners of the parent andpositive operating cash flow in the consolidated fiscal year ending March 31, 2019. However, the Group recorded asignificant operating loss, ordinary loss, loss attributable to owners of the parent and negative operating cash flow inthe consolidated fiscal year ending March 31, 2018 and posted operating loss, ordinary loss, loss attributable to ownersof the parent and negative operating cash flow also in the second quarter of this fiscal year. Therefore, at the present
moment, there are events or circumstances where significant doubt arises as to the going concern assumption.
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.
Furthermore, basing on its medium-term management policy formulated in the previous consolidated fiscal year, theGroup has implemented the below-mentioned measures in stages in line with each business unit’s policy. Thus, theGroup believes that we will be able to eliminate the above-mentioned events or circumstances.
(1) Display business (LCD-TVs) Further increase its market share at new power center retailers and enhance its overall competitiveness in terms of
quality and cost.
 Reduce returns and disposals by strengthening its efforts to boost sales during the Christmas shopping season in North
America and improving its business processes for services in Japan and overseas.
 Recover its market share by focusing on sales of advanced BS broadcast-compatible TVs in Japan and restructuring its
business model in Mexico.
(2) Digital Media business (DVD and BD-related equipment) Capture market share by pursuing a niche strategy with BD players in the North America market where competitors
withdrew from the business.
 Strengthen cooperation with OEM suppliers in the Japanese market and expand the lineup of FUNAI brand products.
(3) Printing Solution business (Printer-related equipment) Improve profitability by expanding sales of nail art printers under OEM brands and own brand.
 Expand sales of label printers and large-capacity inkjet printers
 Expand sales by launching derivative products that employ microfluidics (trace fluid control technology)(4) New businesses Expand sales by vehicle-mounted products, such as backlights for automotive applications (edge type and direct type).
 Expand sales of medical and healthcare-related modules as well as dental CTs and secure revenue base.
 Strengthen its alliance strategy through EV business and begin mass production and sales of new display-related
products for business use.
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 2nd quarter of this fiscal year under review.