Consolidated Financial Results
for the Three Months Ended March 31, 2022 (Japanese GAAP)May 11, 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.

May 13, 2022—
Yes
Yes (For securities analysts and institutional investors)

Consolidated Financial Results for the Three Months Ended March 31, 2022
(January 1, 2022 to March 31, 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%

Three months ended
38,603
5,323
5,648
3,766
－
－
－
－
March 31, 2022
Three months ended
49,278
8.4
8,050
56.0
8,206
59.5
5,575
64.6
March 31, 2021
Note: Comprehensive income for the three months ended March 31, 2022 was 3,995 million yen (－%), and comprehensive income forthe three months ended March 31, 2021 was 5,558 million yen (47.2%)
Net income per share

Diluted net income
per share

Yen

Yen

Three months ended
170.89－March 31, 2022
Three months ended
252.83－
March 31, 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 2022, results for the first three months of the fiscal year under review are based on the new
accounting standards and hence the rates of year-on-year changes are not provided.

(2) Consolidated financial position
Total assets

Net assets

Million yen

Million yen

Equity ratio%

Three months ended
132,333
64,92945.7
March 31, 2022
Fiscal year ended
120,715
64,596
49.7
December 31, 2021
Reference: Equity capital amounted to 60,421 million yen as of March 31, 2022 and 59,958 million as of December 31, 2021.

―1―

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－
December 31, 2022
Fiscal year ending
December 31, 2022
0.00
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(Percentage indicates YoY change for full-year and quarters)
Net income attributable
Net income
Ordinary income
to owners of parent
per share

Operating income

Million yen%

Million yen%

Million yen%

Million yen

%

Yen

1H

91,500－13,300－13,400

－

9,280

－

421.04Full-year

155,000－

10,750－

11,150

－

7,280

－

330.30Notes: No revisions have been made to the Company’s most recently announced consolidated earnings forecast.
From the beginning of the fiscal year ending December 31, 2022, the Company adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29). Therefore, the above consolidated forecasts were the amount after adopting these standards
and YoY and QoQ changes are not listed.

―2―

*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 March 31,
2022

22,077,500

As of December
31, 2021

22,077,500

2. Treasury shares outstanding

As of March 31,
2022

54,949As of December
31, 2021

36,939

3. Cumulative average number ofsharesThree months
ended March 31,
2022

22,039,961

Three months
ended March 31,
2021

22,052,434*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 four of the accompanying
materials.

―3―

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(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) ....................................................................................................................................................... 12―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 the results for Q1 of the fiscal year under review differ
from those applied to those for the same period of the previous fiscal year, and hence, no year-on-year comparison figures (%changes) have been provided in the below explanation of operating results.
During Q1 of the fiscal year ending December 31, 2022, the Japanese economy appeared to temporarily recover from the impactof the COVID-19 pandemic. However, a rise in infections stemming from new variants (Omicron) resulted in more areas adopting
measures to prevent the spread of the virus and ongoing reduced consumer spending and company activities. Further, there remain
uncertainties about the future due to the sudden depreciation of the Japanese yen and concerns surrounding geopolitical risks as
Russia invaded Ukraine in February.
In the Asia region, where the Group focuses expansion, there remain concerns about the ongoing COVID-19 pandemic, inflationin raw material and resource costs from delayed supply chains, and the impact of the Russian invasion of Ukraine. Therefore, theGroup must continue to pay close attention to these developments.
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,”the plan includes four fundamental policies: “Reform Corporate Compass & Infrastructure,” “Expand Profit Foundation in Asia,”“ESG/Open Innovation,” and “Generate Cost Synergies.” The Company strove to implement priority measures associated withthese policies in Q1 of the fiscal year ending December 31, 2022.
During Q1 of the fiscal year ending December 31, 2022, customer demand in the Household Products Business continued as new
lifestyles formed due to the COVID-19 pandemic. The General Environment and Sanitation Business also saw growth. As a result,sales were 38,603 million yen. On the profit front, foreign exchange effects and sales promotion expenses associated with improved
management precision resulted in operating income of 5,323 million yen, ordinary income of 5,648 million yen, net income before
income taxes of 5,617 million yen, and net income attributable to owners of parent reached 3,766 million yen.
Consolidated results for Q1 of the fiscal year ending December 31, 2022

(Millions of yen)(Ref.)
Consolidated Q1
Consolidated Q1
Consolidated Q1
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

49,27838,60351,472

4.5%

Operating income

8,050

5,323

7,194

(10.6%)

Ordinary income

8,206

5,648

7,518

(8.4%)Net income before income taxes
8,201
5,617
7,488
(8.7%)
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 12,869 million yen and all profit categories from the operating income line down werereduced by 1,870 million yen.
Results by segment were as follows.
[Household Products Business]
Through its Household Products Business, the Company endeavored to rejuvenate corresponding markets through advertising,
the creation of appealing sales areas, and other means of communicating with customers while pursuing new customers with thelaunch of new products and updating existing products to improve their value. The Company strove to improve profitability andreduce manufacturing costs and costs for sales.
In Q1 of the fiscal year ending December 31, 2022, early sales of insecticides and repellents were sluggish due to lower
temperatures compared to last year and ongoing inclement weather. On the other hand, the addition of high added value new
products and changing customer demand due to the COVID-19 pandemic resulted in higher sales and a larger market size for bath―2―

salts. As a result, sales generated through the House Products Business amounted to 35,669 million yen. Meanwhile, segment
operating profit was 4,960 million yen due to changes in cost to sales ratio resulting from changes in sales mix and the depreciationof the Japanese yen in overseas purchasing as well as booking sales promotion expenses to improve the accuracy of grasping thestatus of usage corresponding with sales.
Results in the Household Products Business(Millions of yen)

Consolidated Q1 results
for the fiscal year ended
December 31, 2021

Sales

(Ref.)
Consolidated Q1 YoY change,
Consolidated Q1 results
results, excl. the excl. the impact
for the fiscal year ending
impact ofof accounting
December 31, 2022
accounting standard change
standard change

46,35435,66948,5684.8%

Segment income (operating income)
7,968
4,960
6,850
(14.0%)
Notes: 1. Sales include internal sales and transfers made within and between segments, which amounted to 3,377 million yen
during Q1 of the fiscal year ended December 31, 2021 and 3,454 million yen during Q1 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 12,898 million yen and segment income decreased by 1,889 million yen.
Insecticides and repellents
In Japan, early sales were sluggish due to lower temperatures compared to the previous year and ongoing inclement weather.
However, sales were boosted by adding high added value new products such as MAMO ROOM and Iya na Mushi Zero de Night.
Overseas, sales were strong in Vietnam and Thailand, where recovery has been seen in some economic activities. As a results,
sales for this segment were 17,684 million yen.
Household products
Shifts in customer demand in response to the COVID-19 pandemic saw the market for bath salts expand. Bath salt sales were
6,201 million yen due to continuing favorable performance from products such as Onpo tablets and packaged bath salts Nihonno Meito and Iiyu Tabidachi.
In the oral hygiene product area, the all-in-one mouthwash Mondahmin Premium Care Sensitive continued to perform wellwhile Mondahmin NEXT Gums Care was sluggish, resulting in sales of 1,769 million yen.
Sales of the indoor virus and anti-bacteria product Areru Block were lower due to the backlash of higher stay-at-home demandlast fiscal year. However, sales of other household products were 7,863 million yen, with the new Sukki-ri! Brand product Sukkiri! CORK + STICK Puriture and Kuruma no Sukki-ri! contributing to sales.
Segment sales amounted to 15,834 million yen.
Pet products and others
Sales of pet products and other miscellaneous products rose to 2,150 million yen, driven primarily by an increase in customers
who began to keep pets during the COVID-19 pandemic and growth in sales of cleaning towels and other pet care products, aswell as pet food, that occurred as people spent more time at home and developed more deep communication with their pets.
[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.
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―3―

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 6,414 million yen, while segment income(operating income) was 299 million yen due to increases in personnel expenses for more hiring.
Results in the General Environment and Sanitation Business(Millions of yen)

Consolidated Q1 results
for the fiscal year ended
December 31, 2021

(Ref.)
Consolidated Q1 YoY change,
Consolidated Q1 results
results, excl. the excl. the impact
for the fiscal year ending
impact ofof accounting
December 31, 2022
accounting standard change
standard change

Sales

6,334

6,414

6,385

0.8%

Segment income (operating income)

332

299

279

(15.9%)

Notes: 1. Sales include internal sales and transfers made within and between segments, which amounted to 33 million yen in Q1of the fiscal year ended December 31, 2021 and 27 million yen in Q1 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 increased by 29 million yen and segment income increased by 19 million yen.

―4―(2) Explanation of Financial Position(1) Assets, Liabilities and Net Assets
As of March 31, 2022, total assets amounted to 132,333 million yen, up 11,618 million yen from December 31, 2021. This wasprimarily due to increases in trade receivables and inventories, which offset a decrease in cash and deposits.
Meanwhile, total liabilities as of March 31, 2022 came to 67,404 million yen, up 11,285 million yen from December 31, 2021.
This was mainly due to increases in short-term borrowings and trade payables, which offset a decrease in deferred tax liabilities.
Net assets amounted to 64,929 million yen as of March 31, 2022, rising 332 million yen compared to December 31, 2021. Thiswas mainly due to an increase in retained earnings resulting from the posting of net income attributable to owners of parent.
The Company’s equity ratio was 45.7% as of March 31, 2022, down 4.0 points from December 31, 2021.
(2) Cash Flows
The Company has not prepared a statement of cash flows for the period ended March 31, 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)Three months ended
March 31, 2022
(as of March 31, 2022)

AssetsCurrent assets
21,027
21,21016,221
31,543

1,730

1,905

21,622
1,315

27,870
1,157

4,564
2,568

4,820
2,926

(20)
74,018(35)
86,40929,489(15,884)

29,969(16,404)

Buildings and structures, net

13,604

13,565

Machinery, equipment and vehicles
Accumulated depreciation and impairment

16,536(12,426)

16,803(12,737)

Machinery, equipment and vehicles, net

4,110

4,065

7,873
255

7,906
267

(79)

(92)

176

175

Accumulated depreciation and impairment

253
9,198
(7,666)407
9,421(7,844)

Other, net

1,532

1,576

27,551

27,698423

Cash and deposits
Notes and accounts receivable - trade
Electronically recorded monetary
operatingMerchandise and finished goods

claims-Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation and impairment

Land
Leased assets
Accumulated depreciation and impairment
Leased assets, net
Construction in progress
Other

Total property, plant and equipment
Intangible assets
Goodwill
Other

3,853

－
3,966

Total intangible assets

4,276

3,966

Investments and other assets
Investment securities

6,025

5,338

Retirement benefit asset
Deferred tax assets

6,114
1,132

6,203
1,256

Other
Allowance for doubtful accounts

1,612
(16)

1,479
(17)

Total investments and other assets

14,86814,26046,69645,924

120,715

132,333

Total non-current assets
Total assets―6―

Fiscal year ended
December 31, 2021
(as of December 31, 2021)(Millions of yen)Three months ended
March 31, 2022
(as of March 31, 2022)

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

22,617
9,832

24,805
13,206

Short-term borrowings
Current portion of long-term borrowings

1,480
1,018

9,593
980

Accounts payable - other
Income taxes payable

10,721
1,520

4,795
2,278

Accrued consumption taxes
Provision for bonuses

526
255

717
1,470

Provision for sales returns
Refund liabilities

434

－
806

Other

－
3,892

5,818

Total current liabilities

52,30064,474Non-current liabilities
Long-term borrowings

1,200

960

Deferred tax liabilities
Retirement benefit liability

1,178
382

551
371

Asset retirement obligations
Other

516
540

517
529

Total non-current liabilities

3,818

2,930

56,11867,404

Shareholders' equity
Share capital

9,895

9,895

Capital surplus
Retained earnings

9,928
37,9299,928
38,354

Treasury shares

(215)

(315)

Total shareholders' equity

Total liabilities
Net assets

57,53757,862

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

1,297

927

(22)

555

Remeasurements of defined benefit plans

1,146

1,076

Total accumulated other comprehensive income

2,421

2,558

Non-controlling interests

4,638

4,508

Total net assets

64,59664,929120,715

132,333

Total liabilities and net assets―7―

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income
Three months ended
March 31, 2021
(from January 1, 2021
to March 31, 2021)
49,27827,497
21,780(Millions of yen)Three months ended
March 31, 2022
(from January 1, 2022
to March 31, 2022)
38,603
21,236
17,367

1,414
672
2,861
13
3,109
904
217
309
477
349
650
2,750
13,729

1,557
698
289
15
3,325
939
251
346
423
362
664
3,169
12,043Operating income
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Commission income
Rental income from buildings
Other

8,050

5,323

18
47
68
7
11
36

33
3
248
4
11
31

Total non-operating income
Non-operating expenses
Interest expenses
Other
Total non-operating expenses

190

333

5
28
33

7
1
8

8,206

5,648

—
—

0
0

1
2
1
5

3
26
0
30

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

8,201
2,235
289
2,524

5,617
2,087
(331)
1,756

Net income
Net income attributable to non-controlling interests

5,676
101

3,861
94

Net income attributable to owners of parent

5,575

3,766

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

Ordinary income
Extraordinary income
Gain on sale of non-current assets
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Loss on valuation of investment securities
Total extraordinary losses―8―Consolidated Statement of Comprehensive Income

Three months ended
March 31, 2021
(from January 1, 2021
to March 31, 2021)
5,676(Millions of yen)Three months ended
March 31, 2022
(from January 1, 2022
to March 31, 2022)
3,861

Other comprehensive income
Valuation difference on available-for-sale securities

(502)

(370)

Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax

420
(35)

578
(73)

Total other comprehensive income

(118)

133

5,558

3,995

5,453

3,903

104

91

Net income

Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests―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 Q1 of the fiscal year under revenue, sales were reduced by 12,869 million yen, cost of sales by 8,047 million
yen, and SG&A expenses by 2,951 million yen, and operating income, ordinary income, and net income before income taxes
were each reduced by 1,870 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 Q1 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.

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(Significant subsequent events)
Business combination through acquisition(1) Overview of business combination① Name and business of acquired company
Name of acquired company: Earth Homecare Products (Philippines), Inc.
Business: Sale of insecticides and repellents, household products, pet care products, etc.
② Main reasons for business combination
In the medium-term management plan, “Act For SMILE – COMPASS 2023 –,” the Earth Group positioned the
expansion of earnings base in Asia as one of its top priorities and to this end, has worked to expand its business in Southeast
Asia. Of the Southeast Asian countries, the Group believes the Philippines in particular has potential for growth, as
population increase and significant market growth are anticipated and demand for insecticides and repellents is increasing
every year. Earth Homecare Products (Philippines), Inc. has secured a market share and sales channels in the sale ofinsecticides and repellents, household products, and pet care products among others in the Philippines, and by utilizing
synergies generated through the introduction of the Group’s products, Earth Homecare Products (Philippines) is expected
to contribute to sales growth and business expansion in Southeast Asia.
③ Date of business combination
April 1, 2022 (share acquisition date)June 30, 2022 (deemed acquisition date)④ Legal framework of business combination
Share acquisition through cash payment⑤ Name of company after business combination
No change⑥ Percentage of voting rights acquired
66.7%⑦ Grounds for determining acquiring company
The Company acquired 66.7% of voting rights through acquiring shares of Earth Home Products (Philippines) for cash(2) Acquisition cost for the acquired company and breakdown of the costNot disclosed due to an agreement with the acquired party.
(3) Main items and amounts of acquisition-related expenses
Not confirmed as of the date of the release of this document.
(4) Amount of goodwill, reason for occurrence, amortization method, and amortization period
Not confirmed as of the date of the release of this document.
(5) Amounts of assets received and liabilities undertaken on the date of the business combination, and their breakdown
Not confirmed as of the date of the release of this document.

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