Consolidated Financial Results
for the Nine Months Ended September 30, 2022 (Japanese GAAP)
November 8, 2022
Company name:
Stock code:

Earth Corporation
4985

Representative:

Katsunori Kawabata, President and Representative Director, Chairman of the Board of Directors ofeach group company
Tsuyoshi Mitsuzuka, Senior Executive Officer, Director General, Group Management Headquarters+81-3-5207-7458

Contact:
Tel:

Listing Stock Exchange: Tokyo
URL: https://corp.earth.jp/en/index.html

Scheduled date for quarterly report submission:
Scheduled date for dividend payment:
Preparation of supplemental explanatory materials:
Results briefing to be held:
1.

November 11, 2022
—
Yes
Yes

Consolidated Financial Results for the Nine Months Ended September 30, 2022
(January 1 to September 30, 2022)(1) Consolidated operating results
Sales(Percentages indicate YoY change)
Net income attributable
Ordinary income
to owners of parent

Operating income

Million yen%

Million yen%

Million yen%

Million yen%

Nine months ended
124,445
12,013
12,899
8,635
－
－
－
－
September 30, 2022
Nine months ended
165,167
4.4
20,35313.3
20,815
15.0
13,83815.5
September 30, 2021
Note: Comprehensive income for the nine months ended September 30, 2022 was 9,994 million yen (－%), and comprehensive income
for the nine months ended September 30, 2021 was 13,456 million yen (-2.5%)
Net income per share

Diluted net income
per share

Yen

Yen

Nine months ended
391.57－
September 30, 2022
Nine months ended
627.20－
September 30, 2021
Note: Due to the adoption of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29), etc. from the beginning of
the fiscal year ending December 31, 2022, the figures for the third quarter of the fiscal year under review reflect impact stemmingfrom the adoption of this standard, and hence, no year-on-year comparison figures have been provided.

(2) Consolidated financial position
Total assets
Million yen

Net assets
Million yen

Equity ratio%

Nine months ended
134,940
71,29249.2
September 30, 2022
Fiscal year ended
120,715
64,596
49.7
December 31, 2021
Reference: Equity capital amounted to 66,445 million yen as of September 30, 2022 and 59,958 million yen as of December 31, 2021.

2.

Dividends
Dividend per share
End of Q1

End of Q2

Yen

End of Q3

Yen

Year-end

Yen

Total
Yen

Yen

Fiscal year ended
0.00
118.00－－December 31, 2021
Fiscal year ending
0.00－－
December 31, 2022
Fiscal year ending
December 31, 2022
118.00(forecast)
Note: No revisions have been made to the Company’s most recently announced dividend forecast.

3.

118.00118.00Consolidated Earnings Forecast for the Fiscal Year Ending December 31, 2022
(January 1, 2022 to December 31, 2022)

Sales
Full-year

Operating income(Percentages indicate YoY change)
Net income
per share

Net income attributableto owners of parent

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen%

Yen155,000－

10,750－

11,150

－

7,280

－

330.30Note: No revisions have been made to the Company’s most recently announced consolidated earnings forecast.
Note: Due to the adoption of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29), etc. from the beginning of
the fiscal year ending December 31, 2022, the consolidated earnings forecast above reflects impact stemming from the adoptionof this standard, and hence, no year-on-year comparison figures have been provided.

*Notes(1) Changes in significant subsidiaries during the period under review:
None(Transfers of specified subsidiaries associated with changes in the Company’s scope of consolidation)
Newly subsidiaries added:
None
Subsidiaries excluded:
None(2) Distinctive accounting methods applied when preparing quarterly consolidated financial statements: None
(3) Changes in accounting policies and accounting estimates and retrospective restatements
1. Accounting policy changes due to accounting standard revisions, etc.:Yes
2. Other accounting policy changes:
None
3. Changes in accounting estimates:
None
4. Retrospective restatements:
None(4) Number of shares outstanding (common stock)
1. Shares outstanding(including treasury stock)

As of September
30, 2022

22,077,500

As of December
31, 2021

22,077,500

2. Treasury shares outstanding

As of September
30, 2022

13,759As of December
31, 2021

36,939

3. Cumulative average number ofsharesNine months ended
September 30,
2022

22,052,738

Nine months ended
September 30,
2021

22,063,183*The financial information in this quarterly report is not subject to review by certified public accountants or auditing firms.
*Appropriate use of earnings forecast and other special notes
The earnings forecasts and other forward-looking statements contained in this document are based on information currently available
to the Company, and certain assumptions it considers reasonable, but are not intended to be a promise that the Company will achieve.
Actual results may vary materially from forecasts due to a variety of factors. For more information regarding assumptions made when
formulating earnings projections and matters to note when using these projections, please see “1. Qualitative Information on Quarterly
Financial Performance (3) Explanation of Consolidated Earnings Forecasts and Other Projections” on page five of the accompanying
materials.

Accompanying Materials ― Contents

1. Qualitative Information on Quarterly Financial Performance ............................................................................................................ 2(1) Explanation of Operating Results..................................................................................................................................................... 2(2) Explanation of Financial Position .................................................................................................................................................... 5(3) Explanation of Consolidated Earnings Forecasts and Other Projections .......................................................................................... 5
2. Quarterly Consolidated Financial Statements and Primary Notes ..................................................................................................... 6(1) Consolidated Balance Sheet ............................................................................................................................................................. 6(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income........................................................... 8
Consolidated Statement of Income .................................................................................................................................................... 8
Consolidated Statement of Comprehensive Income........................................................................................................................... 9(3) Notes to Quarterly Financial Statements ........................................................................................................................................ 10(Notes to going concern assumptions) ............................................................................................................................................. 10(Notes in the event of significant changes in shareholders’ equity) ................................................................................................. 10(Changes to accounting policies) ..................................................................................................................................................... 10(Application of Accounting Standard for Fair Value Measurement, etc.) ........................................................................................ 11(Significant subsequent events) ....................................................................................................................................................... 11―1―

1. Qualitative Information on Quarterly Financial Performance(1) Explanation of Operating Results
Effective from the beginning of the first three months (hereafter, “Q1”) of the fiscal year ending December 31, 2022, the Company
has adopted the Accounting Standard for Revenue Recognition (Accounting Standard Board of Japan [ASBJ] Statement No. 29;
March 31, 2020), etc. As a result, revenue recognition standards applied to results for the first nine months (hereafter, “Q3”) of the
fiscal year under review differ from those applied to results for the same period of the previous fiscal year, and hence, no year-onyear comparison figures (% changes) have been provided in the explanation of operating results below.
During Q3 of the fiscal year ending December 31, 2022, the Japanese economy moved into a new stage of coexistence with
COVID-19, as activity restrictions were eased and no new policies were implemented, despite the spread of the seventh wave of
infection. Meanwhile, the outlook for the Japanese economy remained uncertain due to the protracted conflict in Ukraine, soaring
resource and energy prices, and the sharp depreciation of the yen. Looking at the Asian region, a key region for the Group's businessexpansion, economic activities in China have yet to normalize due to a series of lockdowns and power shortages in major cities,
even after the lifting of the long-running lockdown in Shanghai. However, in Thailand, the state of emergency has been lifted, andin Vietnam, regulations are being eased, as social activities are shifting toward coexistence with the virus.
Under these economic conditions, the Company announced its medium-term management plan, “Act For SMILE–COMPASS
2023–” in February 2021. In accordance with the Company’s corporate philosophy, “We act to live in harmony with the Earth,” theplan includes four fundamental policies: “Reform Corporate Compass & Infrastructure,” “Expand Profit Foundation in Asia,”“ESG/Open Innovation,” and “Generate Cost Synergies.” The Company continues to implement priority measures associated withthese policies in the fiscal year ending December 31, 2022.
Sales generated during Q3 of the fiscal year ending December 31, 2022 amounted to 124,445 million yen. Sales of domestic
insecticides and repellents in the Household Products Business were sluggish due to unfavorable weather, but overseas sales
increased, and sales in the General Environment and Sanitation Business also expanded. Meanwhile, due to higher-than-expected
cost-of-sales ratio resulting from changes in the sale mix, in addition to soaring raw material prices and exchange rate fluctuations,as well as an increase in sales promotion expenses, operating income came to 12,013 million yen, ordinary income 12,899 million
yen, net income before income taxes 12,845 million yen, and net income attributable to owners of parent 8,635 million yen.
Consolidated results for Q3 of the fiscal year ending December 31, 2022

(Millions of yen)(Ref.)
Consolidated Q3
Consolidated Q3
Consolidated Q3
YoY change, excl. theresults for the fiscal results for the fiscal
results, excl. theimpact of accounting
year ended December year ending December
impact of accounting
standard change
31, 2021
31, 2022
standard change

Sales

165,167

124,445

169,566

2.7%

Operating income

20,35312,013

16,701(17.9%)

Ordinary income

20,815

12,89917,587(15.5%)Net income before income taxes
20,633
12,845
17,533(15.0%)
Note: Due to the adoption of the Accounting Standard for Revenue Recognition, etc. from the beginning of Q1of the fiscal year
under review, sales were reduced by 45,120 million yen and all profit categories from the operating income line down werereduced by 4,687 million yen.
Results by segment were as follows.
[Household Products Business]
In the Household Products Business, the Company strived to revitalize corresponding markets through advertising, the creationof attractive sales areas, and other means of communication with customers while cultivating new customers with the launch of
new products and updating existing products to improve their value. We also worked to improve profitability by reducing
manufacturing costs and costs for sales.
Sales generated through the Household Products Business in Q3 of the fiscal year ending December 31, 2022 amounted to112,966 million yen, mainly due to contributions from new products and increased sales of deodorizing air fresheners, althoughsales of insecticides and repellents were sluggish due to unfavorable weather. Meanwhile, segment income in the Household Product―2―

Business was 10,802 million yen, owing to higher-than-expected cost of sales ratio caused by changes in the sales mix, as well as
the effects of soaring raw material prices and exchange rate fluctuations, despite efficient expense management within the plan.
(Millions of yen)

Consolidated Q3 results
for the fiscal year ended
December 31, 2021

Sales

(Ref.)
Consolidated Q3 YoY change,
Consolidated Q3 results
results, excl. the excl. the impact
for the fiscal year ending
impact ofof accounting
December 31, 2022
accounting standard change
standard change

153,816

112,966

158,070

2.8%

Segment income (operating income)
19,151
10,802
15,480(19.2%)
Notes: 1. Sales include internal sales and transfers made within and between segments, which amounted to 9,196 million yen
during Q3 of the fiscal year ended December 31, 2021 and 9,540 million yen during Q3 of the fiscal year ending
December 31, 2022.
2. Due to the adoption of the Accounting Standard for Revenue Recognition, etc. from the beginning of Q1 of the fiscal
year under review, sales decreased by 45,103 million yen and segment income decreased by 4,677 million yen.
Insecticides and repellents
In Japan, the market size shrank compared to the previous year due to unstable weather, including heavy rainfall caused bytyphoons, despite higher temperatures from July onward and lingering summer heat. As a result, sales in the main categories of
insecticides and repellents for flies and mosquitoes and those for cockroaches declined. Although sales of new high-end products
launched this spring, such as MAMO ROOM and Iyana Mushi ZEROdeKNIGHT contributed to sales growth, and sales of products
to combat ticks and other unpleasant pests, which have been growing in recent years, increased, they were not enough to offset
the decline in sales in the main categories. On the other hand, overseas sales in Thailand and Vietnam remained strong as themarket recovered, and sales increased.
As a result of the above, sales in this category totaled 56,517 million yen.
Household products
Sales of oral hygiene products totaled 5,910 million yen, as sales of the regular type Mondahmin fell below the previous year’slevel, but sales of the high-performance type Mondahmin Premium Care performed well.
Meanwhile, the bath salts market, which has expanded as a result of COVID-19, has maintained the scale of expansion overthe past two years. In this market environment, sales of the granular form Kikiyu and Nihon no Meito in small packages increased,
while shipments of the new product Awappi, launched in the fall season, were steady, resulting in sales of 17,519 million yen.
Sales of other household products amounted to 26,300 million yen, thanks to contributions from the Sukki-ri! series of
deodorizing air fresheners, Raku Hapi series of cleaning products, Kaiteki Guard protective face masks, and Ice-non cold packs.
As a result of the above, sales in this category totaled 49,730 million yen.
Pet products and others
In the pet products category, sales of cat litter, towels, cleaners, and other pet care products increased as more customers started
owning pets during the COVID-19 pandemic and as they spent more time at home, leading to better communication with theirpets. On the other hand, sales of insecticides and repellents were down from the same period of the previous year due tounseasonable weather, and amounted to 6,718 million yen.
[General Environment and Sanitation Business]
In the General Environment and Sanitation Business, the Company is enhancing its in-house hygiene management as relevantlaws in Japan are revised and safety standards for food, pharmaceutical products, and medical care are adjusted on an international
scale. Accordingly, the Company observed growth in demand among core customers (food, pharmaceutical, and packing material
factories) for its high-quality hygiene management services, which leverage the Company's specialized knowledge, skills, andexpertise.

―3―

Under these circumstances, we endeavored to maintain and expand our contracts by providing standout quality assurance services
through the enhancement of our technological development capabilities. At the same time, we actively invested in the constructionof an internal framework that facilitates the prompt fulfillment of customer needs associated primarily with software development
aimed at improving operational efficiency and recruiting and training human resources. Along with these efforts, we intensified our
initiatives in the pharmaceutical and regenerative medicine industries and efforts associated with auditing and consulting services
related to food safety management.
Consequently, sales in the General Environment and Sanitation Business amounted to 21,139 million yen, while segment income(operating income) was 1,208 million yen due to increases in personnel expenses for more hiring.
(Millions of yen)

Consolidated Q3 results
for the fiscal year ended
December 31, 2021

(Ref.)
Consolidated Q3 YoY change,
Consolidated Q3 results
results, excl. the excl. the impact
for the fiscal year ending
impact ofof accounting
December 31, 2022
accounting standard change
standard change

Sales

20,65021,13921,156

2.5%

Segment income (operating income)

1,237

1,208

1,218

(1.5%)

Notes: 1. Sales include internal sales and transfers made within and between segments, which amounted to 102 million yen in Q3of the fiscal year ended December 31, 2021 and 119 million yen in Q3 of the fiscal year ending December 31, 2022.
2. Due to the adoption of the Accounting Standard for Revenue Recognition, etc. from the beginning of Q1 of the fiscal
year under review, sales decreased by 17 million yen and segment income decreased by 10 million yen.

―4―(2) Explanation of Financial Position(1) Assets, Liabilities and Net Assets
As of September 30, 2022, total assets amounted to 134,940 million yen, up 14,225 million yen from December 31, 2021, due
primarily to increases in cash and deposits, accounts receivable, and construction in progress.
Meanwhile, total liabilities as of September 30, 2022, came to 63,648 million yen, up 7,530 million yen from December 31, 2021,
due chiefly to increases in trade payables, income taxes payable, and refund liabilities despite a decrease in accounts payable andlong-term borrowings.
Net assets amounted to 71,292 million yen as of September 30, 2022, rising 6,695 million yen compared to December 31, 2021,
mainly because of an increase in retained earnings due to net income attributable to owners of parent.
The Company’s equity ratio was 49.2% as of September 30, 2022, down 0.5 points from December 31, 2021.
(2) Cash Flows
The Company has not prepared a statement of cash flows for the period ended September 30, 2022, so disclosure is omitted.

(3) Explanation of Consolidated Earnings Forecasts and Other Projections
The Company has made no changes to its full-year earnings forecast for the financial year ending December 31, 2022, which
was announced on February 14, 2022.
This forecast is based on information available to the Company at the time of its formulation. Actual results may differ
substantially from the projections included within due to potential changes affecting a variety of factors.

―5―

2. Quarterly Consolidated Financial Statements and Primary Notes(1) Consolidated Balance Sheet
Fiscal year ended
December 31, 2021
(as of December 31, 2021)(Millions of yen)
Nine months ended
September 30, 2022
(as of September 30, 2022)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims operating
Merchandise and finished goods

21,027
21,21025,322
24,385

1,730

3,028

21,622

23,538Work in process
Raw materials and supplies

1,315
4,564

1,143
4,670

Other
Allowance for doubtful accounts

2,568
(20)

3,131
(26)

Total current assets

74,01885,19329,489(15,884)

29,656(16,223)

Buildings and structures, net

13,604

13,432

Machinery, equipment and vehicles

16,536

17,295(12,426)(13,161)

Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation and impairment

Accumulated depreciation and impairment

4,110

4,134

Land

Machinery, equipment and vehicles, net

7,873

7,788

Leased assets
Accumulated depreciation and impairment

255
(79)

300
(118)

Leased assets, net

176

181

Construction in progress
Other

253
9,198

1,770
9,535

Accumulated depreciation and impairment(7,666)(7,959)Other, net

1,532

1,575

27,551

28,882

Total property, plant and equipment
Intangible assets
Goodwill

423

620

Other

3,853

4,248

Total intangible assets

4,276

4,868

Investments and other assets
Investment securities

6,025

5,920

Retirement benefit asset
Deferred tax assets

6,114
1,132

6,391
1,521

Other
Allowance for doubtful accounts

1,612
(16)

2,181
(18)

Total investments and other assets

14,86815,995

46,69649,747

120,715

134,940

Total non-current assets
Total assets―6―

Fiscal year ended
December 31, 2021
(as of December 31, 2021)(Millions of yen)
Nine months ended
September 30, 2022
(as of September 30, 2022)

Liabilities
Current liabilities
Notes and accounts payable - trade
Electronically recorded obligations - operating

22,617
9,832

22,996
13,471

Short-term borrowings
Current portion of long-term borrowings

1,480
1,018

1,000
960

Accounts payable - other
Income taxes payable

10,721
1,520

6,343
3,193

Accrued consumption taxes
Provision for bonuses

526
255

1,582
1,612

Provision for sales returns
Refund liabilities

434

－
3,223

Other

－
3,892

Total current liabilities

52,30061,211

Non-current liabilities
Long-term borrowings

1,200

480

Deferred tax liabilities
Retirement benefit liability

1,178
382

623
332

Asset retirement obligations
Other

516
540

476
525

Total non-current liabilities

3,818

2,437

56,11863,648

Shareholders' equity
Share capital

9,895

9,895

Capital surplus
Retained earnings

9,928
37,9299,917
43,229Treasury shares

(215)

(78)

Total shareholders' equity

Total liabilities

6,828

Net assets

57,53762,963

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment

1,297

1,208

(22)

1,338

Remeasurements of defined benefit plans

1,146

935

Total accumulated other comprehensive income

2,421

3,482

Non-controlling interests

4,638

4,846

Total net assets

64,596

71,292

120,715

134,940

Total liabilities and net assets―7―

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income
Nine months ended
September 30, 2021
(from January 1, 2021
to September 30, 2021)
165,167
94,536
70,631(Millions of yen)
Nine months ended
September 30, 2022
(from January 1, 2022
to September 30, 2022)
124,445
71,36253,083

5,049
5,686
11,546
10
11,334
1,219
784
936
1,413
1,066
2,032
9,197
50,278

5,439
5,593
751
6
12,121
1,183
953
1,089
439
1,111
2,152
10,22741,069Operating income
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Commission income
Rental income from buildings
Other

20,35312,013

54
107
32
20
34
260

88
42
535
12
35
205

Total non-operating income
Non-operating expenses
Interest expenses
Compensation for damage
Other

510

920

12
27
8

23
－
9

Total non-operating expenses
Ordinary income

48
20,81533
12,899

115
32
147

25
－
25

6
12
311
－
329

3
76
－
0
80

Net income before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes

20,633
6,191
278
6,469

12,845
4,538
(636)
3,901

Net income
Net income attributable to non-controlling interests

14,164
325

8,944
308

Net income attributable to owners of parent

13,838

8,635

Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Transportation and storage costs
Advertising expenses
Promotion expenses
Provision of allowance for doubtful accounts
Salaries and allowances
Provision for bonuses
Travel and transportation expenses
Depreciation
Amortization of goodwill
Rent expenses on land and buildings
Research and development expenses
Other
Total selling, general and administrative expenses

Extraordinary income
Gain on sale of non-current assets
Gain on sale of investment securities
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Impairment losses
Loss on valuation of investment securities
Total extraordinary losses―8―Consolidated Statement of Comprehensive Income
Nine months ended
September 30, 2021
(from January 1, 2021
to September 30, 2021)
14,164(Millions of yen)
Nine months ended
September 30, 2022
(from January 1, 2022
to September 30, 2022)
8,944

Valuation difference on available-for-sale securities
Foreign currency translation adjustment(1,068)
464

(88)
1,359

Remeasurements of defined benefit plans, net of tax

(104)

(220)

Total other comprehensive income

(707)

1,050

Comprehensive income

13,456

9,994(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

13,117

9,695

338

298

Net income
Other comprehensive income―9―(3) Notes to Quarterly Financial Statements(Notes to going concern assumptions)None to be reported.

(Notes in the event of significant changes in shareholders’ equity)
None to be reported.

(Changes to accounting policies)(Adoption of the Accounting Standard for Revenue Recognition, etc.)
Effective from the beginning of Q1 of the fiscal year ending December 31, 2022, the Earth Group has adopted the
Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020) and Implementation Guidance on
Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30; March 26, 2021). As a result, the Group now
recognizes revenue at the time of transfer of control of promised goods or services to the customer, in the amount it expects
to receive in exchange for said goods or services.
In light of this, the Group has made the following changes.
(1) Change in the timing of revenue recognition
In the Household Products Business, the Company (parent) and some of its consolidated subsidiaries previously recognizedrevenue for sales of products at the time the products were shipped. Under the new accounting standards, however, revenue
is recognized when the products are shipped to the destination designated by the customer and handed over to the customer,
as this is when control of the products is transferred to the customer.
Under the previous accounting standards, for some transactions in the General Sanitary Management Business, revenue
was recognized over the period in which services promised in the contract were provided. Under the new accounting
standards, however, the Group identifies services that are performance obligations as promised in the contract, and since theperformance obligations are deemed satisfied when the services identified as such have been provided in full, the Group
recognizes revenue at the time of the completion of the services.
(2) Considerations payable to customers
From the fiscal year under review, the Group deducts a portion of sales promotion expenses and other considerations
payable to customers from revenue as it has identified performance obligations in contracts with customers. Under theprevious accounting standards, some sales promotion expenses and other considerations payable to customers were recorded
as SG&A expenses at the time the Group determined these payables were highly likely to occur. However, under the new
accounting standards, the Group makes a reasonable estimate of the variable portion of the transaction price based on pastrecords and only deducts from revenue the portion that is highly likely to not result in a substantial reduction in revenue.
(3) Products sales with rights of return
Under the previous accounting standards, the Group recorded provisions for product returns in the amount equivalent toanticipated losses resulting from the product returns based on the past rate of returns and gross profit margin. Under the new
accounting standards, however, the Group deducts from revenue the estimated amount of refunds payable to customers as an
obligation to refund the amount of consideration received for the products expected to be returned and recognizes refund
liabilities for the products in questions. Further, the Group records return assets and makes corresponding adjustments(deductions) to the cost of sales for its right to recover products from customers when the refund liabilities are settled.
(4) Revenue recognition for agent transactions
For the purchase and sales transactions involving denture-related products and toothpaste and toothbrush-related productswith GlaxoSmithKline Consumer Healthcare Japan Co., Ltd. (hereafter “GSKCHJ”), the Company previously recorded thetotal amount of consideration it expected to receive from customers as revenue. However, under the new accounting standards,
since the Company’s role of providing these products to customers is classified as that of an agent, the Company records a
net amount obtained by subtracting the amount it pays to GSKCHJ, the supplier, from the amount billed to the customer as―10―

revenue.
The Group has applied the Accounting Standard for Revenue Recognition, etc. in accordance with the transitional treatment
stipulated in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition. The cumulative amount of
impact of retroactively applying the new accounting policy to periods prior to the beginning of Q1 of the fiscal year underreview has been added to or subtracted from retained earnings at the beginning of said period, and the new accounting policy
has been applied from the balance at the beginning of said period.
However, in accordance with the methods prescribed in Paragraph 86 of the Accounting Standard for Revenue Recognition,
the Group has not retroactively applied the new accounting policy to contracts prior to Q1 of the fiscal year under review
where nearly all revenue amounts were recorded based on the previous accounting standards.
As a result, in Q3 of the fiscal year under review, sales were reduced by 45,120 million yen, cost of sales by 28,035 million
yen, and SG&A expenses by 12,397 million yen, and operating income, ordinary income, and net income before income taxes
were each reduced by 4,687 million yen. Further, the balance of retained earnings at the beginning of the period under review
was down by 608 million yen.
As a result of the application of the Accounting Standard for Revenue Recognition, etc., provisions for sales returns shown
under the current liabilities section of the consolidated balance sheet for the fiscal year ended December 31, 2021 are shown
as return assets included in other under the current assets section and as refund liabilities under the current liabilities sectionof the balance sheet for Q1 of the fiscal year under review. Note that in accordance with the transitional treatment stipulated
in Paragraph 89-2 of the Accounting Standard for Revenue Recognition, the Group has not reclassified the amounts reported
in the previous fiscal year using the new representation method. Further, in accordance with the transitional treatment set
forth in Paragraph 28-15 of the Accounting Standard for Quarterly Financial Reporting (ASBJ Statement No. 12; March 31,2020), the Group has not included the breakdown of revenue from contracts with customers in Q3 of the previous fiscal year.
(Application of Accounting Standard for Fair Value Measurement, etc.)
Effective from the beginning of Q1 of the fiscal year under review, the Group has adopted the Accounting Standard for
Fair Value Measurement (ASBJ Statement No. 30; July 4, 2019). In accordance with the transitional treatment stipulated in
Paragraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the Accounting Standard for
Financial Instruments (ASBJ Statement No. 10; July 4, 2019), the Group has decided to prospectively apply the new
accounting policy prescribed in the Accounting Standard for Fair Value Measurement, etc. Please note that this has no impact
on the Group’s quarterly consolidated financial results.
(Significant subsequent events)(Business acquisition)
At a meeting held on November 8, 2022, the Board of Directors of the Group resolved to acquire the BARTH brandbusiness from TWO Inc., and on the same day, concluded a business transfer (acquisition) agreement in this regard with TWO.
1. Purpose of business acquisition
Through the acquisition of the BARTH brand which has built strong brand loyalty and personnel involved in cultivating
the brand, the Group expects to not only develop the brand but also generate synergies by combining the marketing expertiseof the BARTH brand personnel with that of its own.
2. Description of business to be acquired
Development, manufacture, and sale of products containing neutral bicarbonate including medicinal BARTH neutral
bicarbonate bath salt, and other BARTH brand products, and any other business related to these operations.
3. Assets and liabilities to be acquired
Inventory and intangible fixed assets related to the business to be acquired―11―

4. Value of assets and liabilities to be acquired
To be determined.
5. Business acquisition cost
Undisclosed due to agreement between the involved parties.
6. Business transferring company(1) Company name: TWO Inc.
(2) Main business: Planning of, and manufacture and sales in the Well-being business(3) Capital: 100 million yen
7. Scheduled date of acquisition
March 1, 2023

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