SANIX INCORPORATED
Summary of Consolidated Financial Statements
For the First Quarter Ended June 30, 2016
[Japanese Standards]

The financial figures in this document are based on Japanese Accounting Standards and accompanying laws. Amounts arerounded off to 1 decimal place. This document is an English translation of the Japanese-language original.

Consolidated Financial Statements for the First Quarter ended June 30, 2016
SANIX INCORPORATED
Stock Listed:Tokyo Stock Exchange First Section, Fukuoka Stock Exchange

Code No;

4651

URL:

http://sanix.jp

President and CEO:Shin-ichi Munemasa

Contact:

Kozo Inoue, Director, Management Corporate Officer,
General Manager of Management & Planning Division

1. Business Results – Operating results for the First Quarter ended June 30, 2016
(April 1, 2016 to June 30, 2016)(1) Consolidated Operating Results(In Millions of Yen)First Quarter
From April 1 to June 30
FY2016%change

Net Sales······························································

11,358Operating Income ··················································FY2015%change(27.6%)

15,690(27.7%)(446)－(1,332)－

Ordinary Income ····················································

(368)

－

(1,368)－Net Income ···························································

(621)

－

(1,754)－Net Income per Share (¥) ········································(¥13.01)－(¥36.70)－

Net Income per Share, Diluted(¥)······························

－

－

－

－

(Note) Comprehensive Income ································

(758)

－

(1,695)－(2) Consolidated Financial Position(In Millions of Yen)
As of June 30

As of March 31

FY2016FY2015

Total Assets ···························································

30,161

31,248Net Assets ····························································

1,870

2,629

Shareholders’ Equity Ratio (%) ·······························

6.1%

8.3%

Net assets per share(¥) ···········································¥38.46¥54.34(Reference) Equity Capital ·······································

1,838

2,597

2. Dividends
Quarterly Period
1st

2nd

3rd

4th

Quarter

Quarter

Quarter

Quarter

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Annual(Dividends per Share)
FY2015 ended March 31, 2016······························

0.00

FY2016 ended June 30, 2016································

0.00

FY2016 ended March 31, 2017 (Forecast)···············

3. Forecasts for Consolidated Business Results (April 1, 2016 to March 31, 2017)(In Millions of Yen)
Fiscal Year 2016
From April 1 to March 31
First Half%change

Full Year%change

Net Sales······························································

22,870(25.3%)

46,670(24.6%)

Operating Income ··················································

(520)

－

600

－

Ordinary Income ····················································

(580)

－

480

－

Net Income ···························································(1,000)

－

(60)

－

Net Income per Share (¥) ········································(¥20.92)(¥1.26)* Notes(1) Changes in significant subsidiaries during the period(Change in scope of consolidations resulting from change in subsidiaries): None
Number of subsidiaries newly consolidated－
Name of subsidiaries newly consolidated－
Number of subsidiaries excluded from consolidation－
Name of subsidiaries excluded from consolidation－(2) Adoption of special quarterly accounting methods: None
(3) Changes in accounting policies and accounting estimates retrospective restatementⅰ) Changes in accounting policies based on revisions of accounting standard: Noneⅱ) Changes in accounting policies other than ones based on revisions of accounting standard: Noneⅲ) Changes in accounting estimates: Noneⅳ) Retrospective restatement: None
(4) Number of Issued and Outstanding Shares (Common Stock)(Shares)
End of term
June 30, 2016

March 31, 2016

Number of issued and outstanding shares ,end of period (including treasury stock)48,919,396

48,919,396

Number of treasury stock ,end of period······························································

1,113,518

1,113,443

Average number of shares during the fiscal term ··················································

47,805,897*

47,806,228* June 30, 2015

* Indication of Implementation status about the quarterly review:
This summary of financial statements is exempt from audit procedure required by Financial instruments and Exchange Act. It is
under the audit procedure process at the time of disclosure of this report.

* Note to ensure appropriate use of forecasts:
Forecasts in this document are based on assumptions, prospects and plans as of the date of this document. Actual results may
differ significantly from these forecasts, due to various factors affecting the Company’s business performance, such as change ineconomical conditions. For details of these assumptions, prospects and plans, and for notes appropriate use of forecasts for thebusiness results, please see page 2 of the Attachment.

Index of the attachment
1. Qualitative Information for the first quarter ended June 30, 2016 ..........................

2(1) Information of Consolidated Business Results .............................................................................

2(2) Information of Consolidated Financial Position ............................................................................
(3) Information on the Future Outlook,
Including the Forecasts of Consolidated Business Results ........................................................

4

2. Matters relating to Summary Information (Notes) ..............................................................

4(1) Changes in Significant Subsidiaries during the Period................................................................
(2) Application of Particular Accounts Proceduresto the Preparation of Quarterly Consolidated Financial Statements..........................................
(3) Changes in Accounting Policies and Changes or Restatement of Accounting Estimates. ....

4

4

3. Important Information regarding Assumption of Going Concern................................

5

4. Quarterly Consolidated Financial Statements for the first quarter ended June30, 2016 ..................................................................................................................................................

7(1) Quarterly Consolidated Balance Sheets........................................................................................

7(2) Quarterly Consolidated Statements of Income and Comprehensive Income ..........................

9

4

4

Quarterly Consolidated Statements of Income
for the first quarter of the fiscal year ending March 31,2017 ..................................................

9

Quarterly Consolidated Statements of Comprehensive Income
for the first quarter of the fiscal year ending March 31,2017 ..................................................

10(3) Notes to the Quarterly Consolidated Financial Statements ........................................................

11

Note to the Assumption of a Going Concern...........................................................................

11

Note to Remarkable changes in the amount of shareholders’ equity ..................................

12

Segment Information, etc. ........................................................................................................

12

5. Supplement Information ................................................................................................................

14

Consolidated Net Sales by Division ...............................................................................................

14

2

1. Qualitative Information for the first quarter ended June 30, 2016(1) Information of Consolidated Business Results
In the first quarter of the fiscal year ending March 31,2017 (April 1, 2016 to June 30, 2016),
the Japanese economy stayed on a modest recovery path. However, the outlook remained
uncertain, with sluggish consumer spending and the risk of downturn in corporate earnings
amid deceleration in certain emerging economies.
Under such a business environment, in the previous consolidated fiscal year, our Group
implemented measures, such as reducing the workforce through a voluntary retirement
program and eliminating and consolidating stores, in anticipation of the solar electric powerbusiness environment and as an appropriate and timely response to dramatic changes. Then,
recognizing the need to further strengthen the business foundation to achieve sustainablegrowth, the Group started to execute its new medium-term business plan (FY2016-FY2018)
and, in the first quarter under review, carried out concrete management reform measures,
including implementing a voluntary retirement program, consolidating and eliminating stores,
and downsizing logistics and production operations with the aim of business rationalization.
As for sales in the first quarter under view, the Solar Engineering (SE) Division posted
sharp decline in sales, reflecting changes in the market environment for the solar electric
power business. As a consequence, the net sales of the entire Group were ¥11,358 million(falling 27.6% year on year).
In terms of profitability, although sales declined sharply, lower costs as a result ofmanagement rationalization initiatives and lower materials costs, among other factors, led to
improvement in profitability and the operating loss narrowed year on year. As a consequence,for the whole Group, the operating loss was ¥446 million compared to the operating loss of¥1,332 million in the same period of the previous year, and the ordinary loss was ¥368 million
compared to the ordinary loss of ¥1,368 million in the same period of the previous year. The
Group posted expenses related to voluntary retirement including special retirement
allowances of ¥177 million as extraordinary losses. Reflecting the extraordinary losses, theGroup posted a net loss belonging to the shareholders of the parent company of ¥621 million,
compared to a net loss belonging to the shareholders of the parent company of ¥1,754 million
in the same period of the previous year.
Consolidated results of individual divisions for the first quarter were as follows:a. Solar Engineering (SE) Division
Sales of PV systems decreased. This decrease mainly reflected decline in the number of
installations of commercial PV systems and decline in wholesale sales of PV modules andother products. As a consequence, the sales were ¥5,757 million (decreased 42.7% year on3year).
Despite the sharp decline in sales, operating income increased, reflecting improvement in
profitability compared to a year ago, thanks to lower expenses mainly as a result ofmanagement rationalization and lower materials costs. Accordingly, an operating loss of ¥68
million yen was posted, compared to an operating loss of ¥1,150 million in the same period of
the previous year.
b. Home Sanitation (HS) Division
The HS Division focused on home maintenance-related services with high profit margins
such as termite control services, floor/ceiling ventilation systems, and basic repair and housereinforcement construction services. However, sales declined. As a result, the sales were
¥1,655 million (decreased 14.8% year on year).
The operating income were ¥253 million (decreased 34.2% year on year) due to decreases
in segment sales.
c. Establishment Sanitation (ES) Division
The ES Division concentrated on maintenance-related services for buildings andcondominiums and sanitation management-related services such as pest control for offices.
As a result, net sales were ¥232 million (decreased 2.1% year on year).
Cost reduction measured results in an operating profit of ¥14 million in spite of decreases insegment sales (increased 25.3% year on year).
d. Environmental Resources Development (ERD) Division
Plastic fuel sales fell slightly, down 1.1% from a year earlier, reflecting efforts to raise unit
prices for regular properties despite lower collection volume of waste plastic. Electricity salesrose 41.6% year on year due to expansion of the electric power retail area to high-voltage
consumers and an increase in new supply destinations. As a consequence, the sales were
¥3,713 million (increased 7.1% year on year).
Despite increased sales, operating income declined 42.5% year on year to ¥128 million,
mainly due to higher repair costs as a result of the regular repairs carried out at TomakomaiPower Plant in the first quarter under review.

4(2) Information of Consolidated Financial Position
The status of Assets, Liabilities and Net Assets
Total assets as of the end of the first quarter under review were ¥30,161 million, adecrease of ¥1,086 million, compared with the end of the previous consolidated fiscal year,
mainly due to the increase in cash and deposits by ¥764 million, the decrease in notes andaccounts receivable-trade by ¥1,550 million, and the decrease in inventories by ¥396 million.
Total liabilities were ¥28,290 million, a decrease of ¥328 million, compared with the end of
the previous consolidated fiscal year, mainly due to the decrease in notes and accounts
payable-trade by ¥1,737 million, the decrease in accounts payable-other by ¥701 million, thedecrease in long-term loans payable by ¥289 million, the decrease n income taxes payableby ¥116 million, while the short-term loans payable increased of ¥2,616 million.
Net assets were ¥1,870 million, a decrease of ¥758 million, compared with the end of theprevious consolidated fiscal year, mainly due to the net loss belonging to the shareholders of
the parent company was ¥621 million.
As a consequence, the capital-to-asset ratio was 6.1%, compared with 8.3% at the end of
the previous consolidated fiscal year.

(3) Information on the Future Outlook, Including the Forecasts of Consolidated BusinessResults
There is no change in the forecast of consolidated business results for the current fiscal
year ending March 31, 2017, from the forecasts announced on May 12, 2016.

2. Matters relating to Summary Information (Notes)(1) Changes in Significant Subsidiaries during the Period: None(2) Application of Particular Accounts Procedures to the Preparation of Quarterly
Consolidated Financial Statements: None(3)Changes in Accounting Policies and Changes or Restatement of Accounting Estimates: None5

3. Important Information regarding Assumption of Going Concern
The Group recorded a significant operating loss, ordinary loss, and net loss belonging to
the shareholders of the parent company both in the fiscal year ended March 31, 2015 and thefiscal year ended March 31, 2016. Also in the first quarter under review, the Group posted an
operating loss of ¥446 million, an ordinary loss of ¥368 million, a net loss belonging to theshareholders of the parent company of ¥621 million. The Group’s interest-bearing debt is¥15,157 million, which is high compared with its liquidity on hand and the Company
recognizes that it is susceptible to events and conditions that cast significant doubt on going
concern assumptions.
To overcome the situation, the Company believes that, in light of the business environment
surrounding the solar electric power business, it is essential to further strengthen thebusiness foundation to achieve sustainable growth. The Company is thus focusing on thefollowing measures as part of the medium-term business plan (FY2016 - FY2018) announced
on April 15, 2016.
ⅰ) A well-balanced allocation of management resources to business divisions
The Company is scaling down the SE Division to an appropriate size based on areasonable analysis of the external environment, rebuilding the HS Division and ES Division,and further improving efficiency of the Environmental Resources Development Division.
ⅱ) Strengthening the business base through thorough streamlining
The Company is disposing of assets in accordance with the downsizing of the SE
Division (the elimination and consolidation of stores, the scaling down of the production of
power conditioners, the downsizing of logistics and production operations, and the closingof a logistics center).
The Company called for voluntary retirement (approximately 500 employees) inaccordance with sales and, as a result, 391 employees took voluntary retirement, which
was less than the number called for but is more or less in line with the initial plan if the
reduction in employees retiring for personal reasons, etc. is taken into account. The
Company is also lowering the level of wages across the board.
ⅲ) Enhancement of the governance system
At the 38th Annual general Meeting of Shareholders held on June 29, 2016, the Company
increased the number of outside directors by one to a total of three. The Company is also
strengthening the management oversight functions of the Board of Directors and changing
the business execution system to clarify the responsibilities of each business division.

6

The Company expects that its profitability will improve through these initiatives and willremain in the black. The medium-term business plan (FY2016 - FY2018) has been formulatedon the assumption of the continued support of the main financing bank. The Company
expects to continue to receive support and cooperation in financing and will work to stabilize
cash management.
However, we have not completed these initiatives, and the support and cooperation of themain financing bank is not ensured, although we have obtained their understanding. We
therefore recognize significant uncertainty about the going concern assumption.

7

4. Quarterly Consolidated Financial Statements for the first quarter ended
June 30, 2016
(1) Quarterly Consolidated Balance Sheets(In Millions of Yen)

As of March 31

As of June 30

FY2015FY2016

Assets :Current Assets :Cash and deposits

3,038

3,802

Notes and accounts receivable-trade

6,693

5,142

962

953

Merchandise and finished goods
Work in process-construction

514

472

Raw materials and supplies

5,688

5,343

Other

727

878

Allowance for doubtful accounts

(693)

(660)

16,93015,931

Buildings and structures (net of depreciation)

1,909

1,863

Machinery, Equipment and Vehicles(net of depreciation)

1,323

1,267

Land

8,001

7,941

Other, net

1,183

1,274

Total Property, Plant and Equipment

12,417

12,347

Goodwill

289

261

Other

151

144

Intangible Fixed Assets, net

440

406

Investments and Other Assets :

1,458

1,476

Total Fixed Assets

14,317

14,22931,24830,161

Total Current Assets
Fixed Assets:
Property, Plant and Equipment :Intangible Fixed Assets :Total Assets

8(In Millions of Yen)

As of March 31

As of June 30

FY2015FY2016

Liabilities :Current Liabilities :Notes and accounts payable-trade

7,227

5,490

Short-term loans payable

10,11812,734

896

862

3,298

2,597

Accrued income taxes

244

128

Allowance for resource-recycling expenses

37

30

Current portion of long-term loans payable
Accounts payable

Other

2,820

2,813

Total Current Liabilities

24,642

24,657

1,077

821

170

163

Non-Current Liabilities :Long-term loans payable
Provision for directors’ retirement benefits
Provision for disposal site closing expenses
Liability Related to Retirement Benefits

499

511

1,371

1,366

856

769

3,976

3,633

28,61828,29014,041

14,0411

1Retained earnings(10,193)(10,815)

Treasury stock(1,481)(1,481)

Total Shareholders’ Equity

2,368

1,746

Other
Total Non-Current Liabilities
Total Liabilities
Net Assets :Shareholders’ Equity :Capital stock
Capital surplus

Valuation and translation adjustments :Valuation difference on available-for-sale securities

34

28

Foreign currency translation adjustment

46

(48)

Adjustment for Retirement Benefits (Cumulative)

148

111

Total Valuation and translation adjustments

229

91

31

31

Total Net Assets

2,629

1,870

Total Liabilities and Assets

31,24830,161

Non-controlling Interests

9(2) Quarterly Consolidated Statements of Income and Comprehensive Income(Quarterly Consolidated Statements of Income)(For the first quarter of the fiscal year ending March 31, 2017)(In Millions of Yen)First Quarter
From April 1 to June 30
FY2016FY2015Net sales

15,69011,358

Cost of sales

12,7138,284

Gross profit

2,977

3,074

Selling, general and administrative expenses

4,309

3,520

Operating income (loss)(1,332)

(446)

16

7

Non-operating income :Interest income
Dividends income

71Land and house rent revenue

17

16

-

96

Subsidy income

45

-

Other

25

26

Total non-operating expenses

110

148

Interest expenses

50

53

Rent expenses

40Foreign exchange losses

85

-

Other

6

16

Foreign exchange gains

Non-operating expenses :

146

70

(1,368)(368)

Cost of earlier voluntary retirement

284

177

Total extra ordinary loss

284

177

(1,653)

(546)

100

72

Total non-operating expenses
Ordinary income (loss)
Extra ordinary loss :Income (loss) before income taxes and minority interests
Income taxes-current
Income taxes-deferred(0)2

Total income taxes

100

75

(1,753)

(621)

0

0

(1,754)(621)

Net Income
Net Income (loss) belonging to the non-controlling shareholders
Net income (loss) belonging to the shareholders of the parent
company10(Quarterly Consolidated Statements of Comprehensive Income)(For the first quarter of the fiscal year ending March 31, 2017)(In Millions of Yen)First Quarter
From April 1 to June 30
FY2016FY2015(1,753)(621)

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

31

(5)

Foreign currency translation adjustment

18

(94)

Retirement benefit adjustment

7

(37)

Total other comprehensive income

57

(137)

(1,695)(758)(1,696)

(759)

0

0

Income before minority interests
Other comprehensive income :Comprehensive net income
Comprehensive income attributable toComprehensive income (loss) belonging to non-controllingshareholders
Comprehensive income (loss) belonging to the shareholdersof the parent company

11(3) Notes to the Quarterly Consolidated Financial Statements(Notes to Assumption of Going Concern)
The Group recorded a significant operating loss, ordinary loss, and net loss
belonging to the shareholders of the parent company both in the fiscal year ended
March 31, 2015 and the fiscal year ended March 31, 2016. Also in the first quarter
under review, the Group posted an operating loss of ¥446 million, an ordinary loss of¥368 million, a net loss belonging to the shareholders of the parent company of ¥621
million. The Group’s interest-bearing debt is ¥15,157 million, which is high comparedwith its liquidity on hand and the Company recognizes that it is susceptible to eventsand conditions that cast significant doubt on going concern assumptions.
To overcome the situation, the Company believes that, in light of the businessenvironment surrounding the solar electric power business, it is essential to further
strengthen the business foundation to achieve sustainable growth. The Company isthus focusing on the following measures as part of the medium-term business plan
(FY2016 - FY2018) announced on April 15, 2016.
ⅰ) A well-balanced allocation of management resources to business divisions
The Company is scaling down the SE Division to an appropriate size based on areasonable analysis of the external environment, rebuilding the HS Division and ESDivision, and further improving efficiency of the Environmental Resources
Development Division.
ⅱ) Strengthening the business base through thorough streamlining
The Company is disposing of assets in accordance with the downsizing of the SE
Division (the elimination and consolidation of stores, the scaling down of the
production of power conditioners, the downsizing of logistics and production
operations, and the closing of a logistics center).
The Company called for voluntary retirement (approximately 500 employees) inaccordance with sales and, as a result, 391 employees took voluntary retirement,
which was less than the number called for but is more or less in line with the initialplan if the reduction in employees retiring for personal reasons, etc. is taken into
account. The Company is also lowering the level of wages across the board.
ⅲ) Enhancement of the governance system
At the 38th Annual general Meeting of Shareholders held on June 29, 2016, theCompany increased the number of outside directors by one to a total of three. The
Company is also strengthening the management oversight functions of the Board of
Directors and changing the business execution system to clarify the responsibilities of

12each business division.

The Company expects that its profitability will improve through these initiatives andwill remain in the black. The medium-term business plan (FY2016 - FY2018) has beenformulated on the assumption of the continued support of the main financing bank. The
Company expects to continue to receive support and cooperation in financing and will
work to stabilize cash management.
However, we have not completed these initiatives, and the support and cooperationof the main financing bank is not ensured, although we have obtained theirunderstanding. We therefore recognize significant uncertainty about the going concern
assumption.
Quarterly consolidated financial statements were prepared based on the assumptionof a going concern, and did not reflect the impact of these serious doubts regarding ourability to continue as a going concern.

(Notes to Remarkable Changes in the amount of Shareholders’ Equity): None(Segment Information, etc.)
Ⅰ The previous first quarter (From April 1, 2015 to June 30, 2015)
Information concerning the Amount of Net Sales and Operating Income (loss)
by Segment(In Millions of Yen)

Elimination
or Group(note 1)

Segments

Consolidated(note 2)

SE

HS

ES

ERD

Total

10,043

1,942

237

3,465

15,690-15,690

-

-

-

-

-

-

-

Total

10,043

1,942

237

3,465

15,690-15,690Operating income (loss)(1,150)

384

11

223

(530)

(801)

(1,332)

Sales:
Sales to customers
Internal sales among
segments
And transfer accounts(note 1)
Negative ¥801 million for adjustments of Operating income (loss) represents corporate expenses notallocated to reportable segments. Corporate expenses are mainly general and administrative expenses
note attributable to reportable segments.
(note 2)
Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income.

13

Ⅱ The first quarter (From April 1, 2016 to June 30, 2016)ⅰ) Information concerning the Amount of Net Sales and Operating Income(loss) by Segment(In Millions of Yen)

SE

HS

ES

ERD

Total

Elimination
or Group(note 1)

5,757

1,655

232

3,713

11,358-

11,358

-

-

-

-

-

-

-

5,757

1,655

232

3,713

11,358-

11,358

(68)

253

14

128

327

(773)

(446)

Segments

Sales:
Sales to customers
Internal sales among
segments
And transfer accounts
Total
Operating income (loss)

Consolidated(note 2)

(note 1)
Negative ¥773 million for adjustments of Operating income (loss) represents corporate expenses notallocated to reportable segments. Corporate expenses are mainly general and administrative expenses
note attributable to reportable segments.
(note 2)
Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income.

ⅱ) Information concerning Assets by Segment
During the first quarter under review, the assets of the SE Division decreased¥2,416 million from the end of the previous consolidated fiscal year.
This was mainly due to a decline in notes and accounts receivable-trade as aresult of a decrease in sales from the fourth quarter of the previous consolidated
fiscal year.

14

5. Supplemental Information
Consolidated Net Sales by Division(In Millions of Yen)

From April 1 to June 30
FY2016FY2015

ChangesCommercial PV system

8,078

5,238

(2,840)Wholesale of PV components

1,935

488

(1,447)2930

1

10,043

5,757(4,286)

Termite Eradication Service

810

634

(176)

Under-Roof/Roof Ventilation System

253

186

(67)

Foundation Repairing/Home Reinforcement
System

125

144

19

OthersSolar Engineering Total

OthersHome Sanitation Division Total

753

689

(63)

1,942

1,655

(287)

Anti-rust equipment installation

10

16

5

Repair of building water-woks

120

78

(41)

Water proofing of building

13

30

17

Others

94

107

13

Establishment Sanitation Division Total

237

232

(5)

1,717

1,698

(19)

864

1,224

360

419

410

(9)

Final disposal

182

172

(10)

OthersEnvironmental
Division Total :

280

207

(73)

Plastic fuelIndustrial waste
Recycle)(Organic

Waste

Water

Generation of electricity

Total Net Sales

Resources

Development
3,465

3,713

247

15,69011,358(4,331)