FOR IMMEDIATE RELEASE
Kurita Water Industries Reports Earnings for the Three Months Ended June 30, 2020
Tokyo, Japan, August 6, 2020—Kurita Water Industries Ltd. (TSE Securities Code 6370) announced
net sales of 60,980 million yen and profit attributable to owners of parent of 4,028 million yen, or
35.87 yen per share, for the three months ended June 30, 2020 (April 1, 2020 – June 30, 2020).
Results of Operations
Total consolidated orders for the Kurita Group in the three months ended June 30, 2020 fell 10.0%
from the level of the year-ago period, to 65,426 million yen, and net sales decreased 5.2%, to 60,980
million yen. Business profit* was increased 3.8%, to 5,897 million yen, operating profit was 6,128
million yen, down 40.1% versus the year-ago period, profit before tax was 5,964 million yen, declined
42.8%, and profit attributable to owners of parent amounted to 4,028 million yen, down 44.9%.
Operating profit, profit before tax and profit attributable to owners of parent declined due to the postingof a gain on the sale of fixed assets of 4,764 million yen in other income in the same period of theprevious fiscal year.
Operating results of Pentagon Technologies Group, Inc. (water treatment facilities business) in the
United States, which had been an equity method affiliate, were newly consolidated due to acquisitionof its additional shares by the Group to make it a consolidated subsidiary in the first quarter underreview.
With regard to the market conditions surrounding the Group, exports sharply fell and the production
activities of the manufacturing industry declined significantly in Japan, reflecting the spread ofcoronavirus worldwide. Companies also strengthened their cautious stance on capital expenditures
following their deteriorated corporate earnings. Overseas, while the economy was under harshconditions overall in Europe, the United States and Asia, there were signs of improvement as economic
activities were resumed in stages.
In this environment, the Group consistently provided products and services essential for thecontinuation of business activities of customers and accelerated the development of total solutions byfocusing on proposal activities that would help solve customer issues such as the reduction of theenvironmental impact, energy saving and an improvement in productivity based on deep insight intosocial and customer issues.
* Business profit is the Group’s own indicator that measures constant business performance. It is net
sales less cost of sales and selling, general and administrative expenses. Although business profit is
not defined by IFRS, the Group voluntarily discloses it, believing that it is beneficial for users of its
financial statements.
Segment Information
The Group consists of two reportable segments in its segment information: Water Treatment
Chemicals and Water Treatment Facilities.
Water Treatment Chemicals
Total Group orders for the Water Treatment Chemicals segment were 25,723 million yen, down 11.1%
versus the same period of the fiscal year ended March 31, 2020, while net sales fell 12.5%, to 24,512
million yen.
In terms of profits, business profit amounted to 2,798 million yen, an increase of 7.9% year on year,
and operating profit rose to 2,770 million yen, up 14.1% year on year, because the Group offset a
reduction in sales by its efforts to improve the cost of sales ratio and reduce expenses.
Both orders and net sales declined in Japan due to a fall in capacity utilization at plants of customers,
except for some customers such as the electronics industry, affected by stagnant economic activities
due to the spread of coronavirus.
Overseas, both orders and net sales decreased partly due to the effect of a reduction in sales at1

overseas subsidiaries in yen equivalent because of a stronger yen, in addition to the impact of the
spreading coronavirus, despite the new consolidation of operating results (for two months) of U.S.based Avista Technologies, Inc. and U.K.-based Avista Technologies (UK) Ltd., which were acquiredin the previous fiscal year.
Water Treatment Facilities
Total Group orders for the Water Treatment Facilities segment were 39,703 million yen, down 9.3%
versus the same period of the previous fiscal year. Net sales increased 0.5%, to 36,467 million yen.
Business profit fell to 3,111 million yen, down 1.6% year on year, affected by a fall in sales ofexisting businesses excluding new consolidation, and operating profit decreased to 3,362 million yen,a fall of 57.5% year on year, reflecting the absence of a gain on the sale of fixed assets of 4,746 million
yen (posted in other income) posted in the same period of the previous fiscal year.
In Japan, while orders for water treatment facilities for the electronics industry increased, net sales
declined significantly due to the completion of large projects. While orders for maintenance services
decreased sharply in reaction to orders for large projects posted in the same period of the previous
fiscal year, net sales remained almost flat due to progress in the construction of projects for which
orders were posted in the previous fiscal year.
For water treatment facilities for general industries, although orders declined in reaction to theposting of orders for large projects in the same period of the previous fiscal year, net sales increased
with progress in the construction of large projects. Orders for maintenance services fell significantly,
reflecting customers’ move to postpone the implementation of maintenance of their facilities due tothe spread of the coronavirus, but net sales rose slightly thanks to progress in the construction ofprojects for order backlog. Both orders for and net sales from water treatment facilities for the electric
power industry and soil remediation services decreased because orders for and net sales from large
projects had run their courses.
Overseas, both orders and net sales increased mainly due to the new consolidation of operating
results (for three months) of Pentagon Technologies Group, Inc., although the posting of orders forand net sales from large projects for the electronics industry in East Asia had concluded.
Total net sales in the ultrapure water supply business in Japan and overseas increased partly due toa contract that began in the previous fiscal year.
Financial Condition
Condition of assets, liabilities and equity
1) Total assets: 380,449 million yen, a decrease of 7,300 million yen from the end of the previous
fiscal year)
Current assets totaled 147,761 million yen at the end of the first quarter (June 30, 2020), a decrease of
15,086 million yen from the end of the previous fiscal year (March 31, 2020). This was mainly
attributable to a decrease in cash and cash equivalents of 8,653 million yen, chiefly reflecting the partial
repayment of the commitment line contracts, and in trade and other receivables of 7,610 million yen
due to the smooth collection of accounts receivable – trade.
Non-current assets totaled 232,688 million yen at the end of the first quarter, an increase of 7,786
million yen from the end of the previous fiscal year. Goodwill increased 9,408 million yen while
investments accounted for using equity method decreased 4,958 million yen due to the conversion ofPentagon Technologies Group, Inc. (water treatment facilities business), which had been an equity
method affiliate, to a consolidated subsidiary in the first quarter under review. Other financial assets
rose 4,690 million yen owning to an increase in unrealized gains mainly caused by a rise in the market
value of shares held.

22) Liabilities: 142,432 million yen, a decrease of 1,208 million yen from the end of the previous fiscal
year.
Current liabilities totaled 82,153 million yen at the end of the period, a decrease of 12,255 million yen
from the end of the previous fiscal year. This was mainly due to a decrease in borrowings of 9,938
million yen resulting from the partial repayment of the commitment line contracts.
Non-current liabilities totaled 60,278 million yen at the end of the period, an increase of 11,046
million yen from the end of the previous fiscal year. This was chiefly attributable to an increase inother financial liabilities of 10,918 million yen mainly resulting from the initial recognition of thepresent value of the expected value of shares to be transferred in the future based on the forward
contract concluded between Kurita America Holdings Inc., a wholly owned subsidiary of the Company
and non-controlling shareholders of Pentagon Technologies Group, Inc.
3) Equity: 238,017 million yen, a decrease of 6,091 million yen from the end of the previous fiscal
yearThis mainly reflected a fall in capital surplus of 10,605 million yen, mainly as a result of initialrecognition related to the aforementioned forward contract for shares in Pentagon Technologies Group,
Inc., while other components of equity increased 2,768 million yen due to a rise in fair value measured
through other comprehensive income associated with a rise in the market value of shares held.
Cash Flows
Consolidated net cash and cash equivalents at the end of the first quarter (June 30, 2020) totaled 41,561
million yen, a decrease of 8,653 million yen from the end of the previous fiscal year (March 31, 2020).
The various cash flows and related factors are outlined below.
1) Cash Flows from Operating Activities
Net cash provided by operating activities during the first quarter ended June 30, 2020 totaled 13,713
million yen, an increase of 9,882 million yen from the same period of the previous fiscal year. Thiswas chiefly due to inflows from a decrease in trade and other receivables of 9,386 million yen, profit
before tax of 5,964 million yen and depreciation and amortization of 4,945 million yen.
2) Cash Flows from Investing Activities
Net cash used in investing activities totaled 7,088 million yen, a decrease of 15,570 million yen fromthe same period of the previous fiscal year. Cash was used mainly for the acquisition of subsidiaries
of 4,605 million yen (after deducting cash and cash equivalents included in acquired assets) andpurchases of property, plant and equipment of 1,699 million yen.
3) Cash Flows from Financing Activities
Net cash used in financing activities totaled 15,454 million yen, an increase of 31,156 million yen fromthe same period of the previous fiscal year. Cash was used mainly for a net decrease in short-termborrowings of 10,001 million yen and dividends paid of 4,007 million yen.
The Group’s basic policy is to constantly secure the liquidity necessary for business operations andestablish a stable funds-raising system. Short-term working capital is basically supplied by the Group’s
own funds. Capital investment and other investments in growth fields depend chiefly on the Group’s
own funds, but the Group considers financing through bank loans as needed. As of the end of the firstquarter under review, the Group has concluded commitment line contracts with four financial
institutions (executed and unexecuted borrowings within the commitment line were 25,000 million
yen and 45,600 million yen, respectively).

34) Forecasts for the Fiscal Year Ending March 31, 2021
Regarding the impact of the COVID-19 coronavirus, while the scale of infection and projections onwhen it will be resolved are still uncertain, the Company assumes that the economy will headmoderately recover toward the end of the current fiscal year, given that economic activities have been
resumed in stages around the world.
Therefore, the Group considers that consolidated earnings forecasts for the fiscal year ending March
31, 2021 will be consistent with the forecast for the first half of the fiscal year ending March 31, 2021
and for the full fiscal year stated in the “Fourth Quarter Financial Results of the Fiscal Year Ended
March 31, 2020” released on May 18, 2021.

4

Condensed quarterly consolidated financial statements(1) Condensed quarterly consolidated statement of financial position(Million yen)
As of March 31, 2020

As of June 30, 2020

AssetsCurrent assets
Cash and cash equivalents

50,21541,561

Trade and other receivables

96,97489,364

Other financial assets

2,562

2,608

Inventories

9,247

10,651Other current assets

3,847

3,575

Total current assets

162,847

147,761

Property, plant and equipment

106,358

106,498

Right-of-use assets

17,784

17,906

Goodwill

47,03356,441Intangible assets

13,381

13,106

Non-current assets

Investments accounted for using equity method

7,469

2,511

Other financial assets

28,46533,155

Deferred tax assets

4,295

2,956

Other non-current assets

113

111

Total non-current assets

224,902232,688387,749

380,449

Total assets

5

(Million yen)
As of March 31, 2020

As of June 30, 2020

Liabilities and equity
Current liabilities
Trade and other payables

35,68035,779Borrowings

35,371

25,433

Lease liabilities

4,234

4,406

219

216

Income taxes payable

1,998

2,374

Provisions

1,557

1,455

Other current liabilities

15,345

12,487

Total current liabilities

94,40882,153

Other financial liabilities

Non-current liabilities
Borrowings

1,305

1,672

Lease liabilities

13,701

13,824

Other financial liabilities

2,562

13,480Retirement benefit liability

16,913

17,306

Provisions

499

499

Deferred tax liabilities

1,346

1,283

Other non-current liabilities

12,903

12,212

Total non-current liabilities

49,23260,278143,640

142,432

13,45013,450Total liabilities
EquityShare capital
Capital surplus

8,212(2,393)

Treasury shares(10,893)(10,894)

Other components of equity

216

2,984

Retained earnings

231,456

232,027

Total equity attributable to owners of parent

242,442

235,175

1,666

2,842

Total equity

244,108

238,017

Total liabilities and equity

387,749

380,449

Non-controlling interests6(2) Condensed quarterly consolidated statement of profit or loss
(Million yen)Three months ended
June 30, 2019
Net sales
Cost of sales
Gross profit

Three months ended
June 30, 2020

64,30560,98042,15639,321

22,14921,659Selling, general and administrative expenses

16,46915,762Other income

4,855

714

Other expenses

298

483

Operating profit

10,236

6,128

Finance income

258

297

Finance costs

94

459

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

31

(2)

10,431

5,964

3,135

1,774

7,296

4,189

7,305

4,028

Profit before tax
Income tax expense
Profit for the period
Profit attributable to
Owners of parent
Non-controlling interests
Profit for the period

(9)

161

7,296

4,189

65.07

35.87

‒

‒

Earnings per share
Basic earnings per share (yen)Diluted earnings per share (yen)7(3) Condensed quarterly consolidated statement of comprehensive income(Million yen)Three months ended
June 30, 2019
Profit for the period

Three months ended
June 30, 2020

7,296

4,189

Net change in the fair value of financial assets measured
through other comprehensive income

(359)

3,031

Remeasurements of defined benefit plans

(20)

(24)

Total of items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss

(379)

3,007

Exchange differences on translation of foreign operations(3,358)(129)

Cash flow hedges

104

(65)

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

55

(39)

Total of items that may be reclassified to profit or loss

(3,198)(234)

Other comprehensive income, net of tax(3,578)2,772

Comprehensive income for the period

3,717

6,962

3,746

6,772

(29)

189

3,717

6,962

Other comprehensive income
Items that will not be reclassified to profit or loss

Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income8(4) Condensed quarterly consolidated statement of changes in equity
Three months ended June 30, 2019 (April 1, 2019 - June 30, 2019)(Million yen)
Equity attributable to owners of parent
Other components of equity

Share capital

Balance as of April 1, 2019

Capital surplus Treasury shares

Exchangedifferences ontranslation offoreign
operations

Cash flow
hedgesFinancial assets
measured at fairvalue throughothercomprehensive
income13,45010,265(10,932)(4,671)

310

Profit for the period

‒

‒

‒

‒

‒

‒

Other comprehensive income

‒

‒

‒

(3,284)

104

(359)

Total comprehensive income for the period

9,199

‒

‒

‒

(3,284)

104

(359)

Purchase of treasury shares

‒

‒

(0)

‒

‒

‒

Dividends

‒

‒

‒

‒

‒

‒

Share-based payment transactions

‒

29

‒

‒

‒

‒

Changes in ownership interests in subsidiaries

‒

(4)

‒

‒

‒

‒

Increase (decrease) by business combination

‒

‒

‒

‒

‒

‒

Liabilities pertaining to forward contracts
concluded with non-controlling shareholders

‒

‒

‒

‒

‒

‒

Transfer from other components of equity toretained earnings

‒

‒

‒

‒

‒

(227)

Other

‒

‒

‒

‒

‒

‒

‒

24

(0)

‒

‒

(227)

13,450

10,290(10,933)(7,955)

415

8,611

Total transactions with owners
Balance as of June 30, 2019

(Million yen)
Equity attributable to owners of parent
Other components of equity
Remeasurementsof defined
benefit plans

Retainedearnings

Total

Non-controllinginterests

Total

Total

Balance as of April 1, 2019

‒

4,838

219,660

237,282

1,902

Profit for the period

‒

‒

7,305

7,305

(9)

7,296

(18)

(3,558)‒(3,558)(19)(3,578)
3,717

Other comprehensive income
Total comprehensive income for the period

239,184(18)(3,558)

7,305

3,746

(29)

Purchase of treasury shares

‒

‒

‒

(0)

‒

(0)

Dividends‒‒(3,040)(3,040)(9)(3,049)

Share-based payment transactions

‒

‒

‒

29

2

31

Changes in ownership interests in subsidiaries

‒

‒

‒

(4)

(56)

(60)

Increase (decrease) by business combination

‒

‒

‒

‒

‒

‒

Liabilities pertaining to forward contracts
concluded with non-controlling shareholders

‒

‒

‒

‒

‒

‒

Transfer from other components of equity toretained earnings

18

(208)

208

‒

‒

‒

‒

‒

5

5

‒

5

Total transactions with owners

Other

18

(208)

(2,826)(3,010)(63)(3,074)

Balance as of June 30, 2019

‒

1,071

224,139

238,018

1,809

239,8289

Three months ended June 30, 2020 (April 1, 2020 - June 30, 2020)(Million yen)
Equity attributable to owners of parent
Other components of equity

Share capital

Balance as of April 1, 2020

Capital surplus Treasury shares

Exchangedifferences ontranslation offoreign
operations

Cash flow
hedgesFinancial assets
measured at fairvalue throughothercomprehensive
income13,4508,212(10,893)(9,033)

503

Profit for the period

‒

‒

‒

‒

‒

‒

Other comprehensive income

‒

‒

‒

(197)

(65)

3,031

Total comprehensive income for the period

8,747

‒

‒

‒

(197)

(65)

3,031

Purchase of treasury shares

‒

‒

(0)

‒

‒

‒

Dividends

‒

‒

‒

‒

‒

‒

Share-based payment transactions

‒

28

‒

‒

‒

‒

Changes in ownership interests in subsidiaries

‒

‒

‒

‒

‒

‒

Increase (decrease) by business combination

‒

‒

‒

‒

‒

‒

Liabilities pertaining to forward contracts
concluded with non-controlling shareholders‒(10,578)

‒

‒

‒

‒

Transfer from other components of equity toretained earnings

‒

‒

‒

‒

‒

‒

Other

‒

(55)

‒

‒

‒

‒

‒

(10,605)

(0)

‒

‒

‒

13,450(2,393)(10,894)(9,231)437

11,778

Total transactions with owners
Balance as of June 30, 2020

(Million yen)
Equity attributable to owners of parent
Other components of equity
Remeasurementsof defined
benefit plans

Retainedearnings

Total

Non-controllinginterests

Total

Total

Balance as of April 1, 2020‒

216

231,456

242,442

1,666

244,108

Profit for the period

‒

‒

4,028

4,028

161

4,189

(23)

2,744

‒

2,744

28

2,772

(23)

2,744

4,028

6,772

189

6,962

Purchase of treasury shares

‒

‒

‒

(0)

‒

(0)

Dividends‒‒(3,481)(3,481)(532)(4,013)

Share-based payment transactions

‒

‒

‒

28

0

28

Changes in ownership interests in subsidiaries

‒

‒

‒

‒

‒

‒

Increase (decrease) by business combination

‒

‒

‒

‒

1,517

1,517

Liabilities pertaining to forward contracts
concluded with non-controlling shareholders

‒

‒

‒

(10,578)‒(10,578)

Transfer from other components of equity toretained earnings

23

23

(23)

‒

‒

‒

Other comprehensive income
Total comprehensive income for the period

‒

‒

47

(7)

‒

(7)

Total transactions with owners

Other

23

23

(3,457)(14,039)985(13,053)

Balance as of June 30, 2020

‒

2,984

232,027

235,175

2,842

238,01710

(5) Condensed quarterly consolidated statement of cash flows(Million yen)Three months ended
June 30, 2019

Three months ended
June 30, 2020

Cash flows from operating activities
Profit before tax

10,431

5,964

Depreciation and amortization

3,919

4,945

(31)

2

(4,762)(2)

Share of loss (profit) of investments accounted for using
equity method
Loss (gain) on sale of fixed assets
Decrease (increase) in inventories

(925)

(963)

Decrease (increase) in trade and other receivables

1,655

9,386

Increase (decrease) in trade and other payables(1,055)(2,317)83(1,832)

Other

9,316

15,183

Interest received

Subtotal

1

32

Dividends received

197

169

Interest paid

(6)

(15)

Income taxes paid

(5,677)(1,655)

Net cash provided by (used in) operating activities

3,831

13,713

(604)

(450)

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits

295

282

Purchase of property, plant and equipment(6,904)(1,699)Proceeds from sale of property, plant and equipment

496

3

Purchase of intangible assets

(325)

(318)

Payments for acquisition of a subsidiary (after deductionof cash and cash equivalents included in acquired assets)(8,326)(4,605)Purchase of investments in associates(5,799)‒Other(1,490)(299)

Net cash provided by (used in) investing activities(22,658)(7,088)19,999(10,001)

Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings

(216)

(260)

Repayments of lease liabilities(1,110)(1,189)Dividends paid

(2,910)(4,007)

(60)

‒

‒

4

15,702(15,454)

Purchase of shares of subsidiaries not resulting in change
in scope of consolidation
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

(620)

175

Net increase (decrease) in cash and cash equivalents(3,745)(8,653)

Cash and cash equivalents at beginning of period

35,54750,215

Cash and cash equivalents at end of period

31,801

41,56111

Notes to Consolidated Financial Statements(Notes on the Going-concern Assumption)
Three months ended June 30, 2020 (April 1, 2020 – June 30, 2020)
Not applicable(Segment Information)(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial information is available.
These segments are subject to periodic review to enable the Company’s board of directors to decide how to allocate
resources and assess performance.
The Group plans comprehensive strategies for the products that it handles in Japan and overseas, and develops a business.
The Group’s operations are therefore classified into two reportable segments, the Water Treatment Chemicals segment andthe Water Treatment Facilities segment.
The Water Treatment Chemicals segment manufactures and sells water treatment chemicals and equipment and provides
maintenance services. The Water Treatment Facilities segment manufacturers and sells water treatment system andfacilities, supplies ultrapure water, chemical cleaning, tool cleaning, soil and groundwater remediation services, andprovides maintenance services that encompass operation, maintenance, and management of water treatment facilities.
(2) Information of reportable segments
Three months ended June 30, 2019 (April 1, 2019 – June 30, 2019)(Million yen)
Reportable Segments

Sales
Sales to outside customers
Inter-segment sales and transfers
Total
Segment income

Adjustments(note 1)

Amounts
reported on thecondensed
quarterly
consolidated
statement of
profit or loss
(note 2)Water
Treatment
Chemicals

Water
Treatment
Facilities

28,023
174

36,281356

64,305
531

‒
(531)

64,305‒28,19836,63864,836(531)

64,305

2,427

7,903

10,331(94)

10,236

Total

Finance income

258

Finance costs

94

Share of profit (loss) of investments accounted for using equity method
Profit before tax

31
10,431(Notes) 1. Segment income: Amount resulting from eliminations of inter-segment transactions.
2. Segment income is shown at the operating profit level.

12Three months ended June 30, 2020 (April 1, 2020 – June 30, 2020)(Million yen)
Reportable Segments

Sales
Sales to outside customers
Inter-segment sales and transfers
Total
Segment income

Adjustments(note 1)

Amounts
reported on thecondensed
quarterly
consolidated
statement of
profit or loss
(note 2)Water
Treatment
Chemicals

Water
Treatment
Facilities

24,512
81

36,467435

60,980
517

‒
(517)

60,980‒24,59436,90361,498(517)

60,980

2,770

3,362

6,132

(4)

6,128

Total

Finance income

297

Finance costs

459

Share of profit (loss) of investments accounted for using equity method(2)

Profit before tax

5,964(Notes) 1. Segment income: Amount resulting from eliminations of inter-segment transactions.
2. Segment income is shown at the operating profit level.

(Business Combination and Acquisition of Non-Controlling Interests)(Acquisition of Pentagon Technologies Group, Inc.)On April 1, 2020, Kurita America Holdings Inc., a wholly owned subsidiary of the Company, acquired an additional 26%
stake in Pentagon Technologies Group, Inc. (“Pentagon Technologies”), a tool cleaning company operating in the UnitedStates in which Kurita America Holdings Inc. held a 25% stake as of the end of the previous fiscal year. As a result, theproportion of equity interest Kurita America Holdings Inc. has in Pentagon Technologies increased to a total of 51%, andPentagon Technologies became a consolidated subsidiary of the Company.
The Company will make Pentagon Technologies its subsidiary to have a base for overseas service in the electronics
industry, which the Company positions as one of its key business fields, and to further strengthen its competitiveness inthe market. The Company also aims to accelerate its growth and offer new value by acquiring the cutting-edge toolcleaning technologies and expertise of Pentagon Technologies and creating synergies with the tool cleaning business that
the Kurita Group has been developing in Japan.
(1) Acquisition cost and a breakdown
Consideration for acquisition
Fair value on the date of acquisition of the shares in the acquiredcompany held immediately before the date of acquisition
Fair value of the additional shares in the acquired company
acquired on the date of acquisition
Total

5,379 million yen
5,594 million yen
10,974 million yen(2) Gain on remeasurement relating to business combinations
As a result of remeasuring equity interest in the acquired company held immediately before the date of acquisition at fairvalue, the Company has recognized gain on remeasurement relating to business combinations of 463 million yen due tothe business combination. The gain is recorded in “Other income” in the condensed quarterly consolidated statement of
profit or loss.

13

(3) Assets acquired and liabilities assumed
The fair value of identifiable assets acquired and liabilities assumed of Pentagon Technologies Group, Inc. on the date ofacquisition are shown below.
(Million yen)
Fair value of consideration
10,974
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents
989
Trade receivables
1,707
Other current assets
433
Non-current assets
2,152
Trade payables and other payables(1,351)
Non-current liabilities(992)
Fair value of assets acquired and liabilities assumed (net)2,938
Non-controlling interests
1,517
Goodwill
9,554
The amount of goodwill that occurred was 9,554 million yen, which reflects expected excess earning power.
We do not expect any amounts related to recognized goodwill to be deductible expenses from tax perspective.
Net sales and profit for the period of Pentagon Technologies included in the condensed quarterly consolidated statementof profit or loss for the first quarter under review are 2,695 million yen and 361 million yen respectively.
The amount of goodwill is provisionally determined because the allocation of the acquisition cost is still ongoing as theidentification of identifiable assets and liabilities as of the time of business combination and the estimation of their market
values have yet to be completed given that the period from the date of business combination to the closing date is short.
Non-controlling interests are measured using the proportion of non-controlling interests to the fair value of identifiable
net assets of the acquired company.
(4) Transactions that are accounted for separately from business combination
Expenses related to the acquisition for the business combination were 171 million yen. The amount is posted in “Other
expenses” in the condensed quarterly consolidated statement of profit or loss.
(5) Forward contract concluded with non-controlling shareholders
With regard to the remaining 49% of shares in Pentagon Technologies, a forward contact has been concluded between
Kurita America Holdings Inc. and non-controlling shareholders of Pentagon Technologies, and it has been agreed that
Pentagon Technologies will become a wholly owned subsidiary of Kurita America Holdings Inc. with June 30, 2022 as
the target date.
The present value of expected value of shares to be transferred based on the forward contract which is 10,578 million
yen, is initially recognized as “Other financial liabilities,” and the same amount is deduced from “Capital surplus.” Afterthe initial recognition, the present value is measured at amortized cost based on the effective interest method, in principle,
and the amount of subsequent changes is recognized in profit or loss.

14