Summary of Financial Results for the Second Quarter Ended February 28, 2018
[Japan GAAP] (Consolidated)
April 12, 2018
Company
Stock Code
Representative
Contact

Watts Co., Ltd.

Listed on the TSE

2735
URL: http://www.watts-jp.com
Fumio Hiraoka, President and CEO
Hidehito Mori,T E L: +81-6-4792-3280
Executive Managing Director, Head of Corporate Planning Office
Expected date of filing of quarterly report: April 12, 2018
Expected starting date of dividend payment: Preparation of quarterly supplementary financial document: Yes
Quarterly results briefing: Yes (for institutional investors)（Rounded down to million yen）

１. Consolidated business results for the six months ended February 2018
(September 1, 2017 through February 28, 2018)(1) Consolidated results of operations(% change from the previous corresponding period)
Sales

Operating profit

Recurring profit

Million yen% Million yen% Million yen
Six months ended Feb. 2018
23,886
1.7
593
-7.9
602
Six months ended Feb. 201723,484
2.6
643
9.9
695
(Note) Comprehensive income
Six months ended February 2018: 373 million yen (-25.9 %)Six months ended February 2017: 503 million yen (93.6 %)Net income
Diluted net income perper share
share
Yen
Yen
Six months ended Feb. 2018
28.00
Six months ended Feb. 2017
36.13-

Net income attributable toowners of parent% Million yen
-13.4
379
18.9
489

%
-22.5
41.0

(2) Consolidated financial position
Total assets

Shareholders’ equity
ratio
%
51.6
49.7

Net assets

Million yen
As of Feb. 2018
19,717
As of Aug. 2017
20,084(Reference) Shareholders’ equity:
As of February 2018: 10,181 million yen
As of August 2017: 9,974 million yen

Million yen
10,0429,873

2. Dividends
End of 1Q

End of 2Q
Yen

Year ended Aug. 2017
Year ending Aug. 2018Year ending Aug. 2018 (forecast)

Yen
0.00
0.00

-

Annual dividend
End of 3Q
Yen-

Year-end

Total
Yen

-

Yen

15.00

15.00

15.00

15.00

(Note) Revisions to dividend forecast for the current quarter: None

3．Forecast of consolidated business results for the fiscal year ending August 2018
(September 1, 2017 through August 31, 2018)
Sales
Year ending Aug. 2018

Operating profit(% change from the previous corresponding period)
Net income
Net income attributable
Recurring Profit
per share
to owners of parent

Million yen%

Million yen%

Million yen%

Million yen%

49,600

4.4

1,450

19.9

1,520

19.5

925

10.2

(Note) Revisions to business forecast for the current quarter: None

Yen

68.28

*Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries accompanying changes
in the scope of consolidation): None
(2) Application of accounting procedures specific to preparation of the consolidated quarterly financial statements:
None(3) Changes in accounting policies, accounting estimates and restatement①Changes in accounting policies associated with revision of accounting standards:②Changes in accounting policies other than ①③Changes in accounting estimates④Restatement: None: None: None: None(4) Shares outstanding (common stock)① Number of shares outstanding at the end of period (treasury stock included)
As of February 2018
13,958,800 shares
As of August 2017
13,958,800 shares② Treasury stock at the end of period
As of February 2018
410,874 shares
As of August 2017
410,874 shares③ Average number of stock during period (quarterly cumulative period)
Six months ended February 2018
13,547,926 shares
Six months ended February 2017
13,547,926 shares(Note) The number of treasury stock at the end of period includes the Company’s shares held by the share issuance trust for
directors (FY8/18 2Q: 60,000 shares, FY8/17 2Q: 60,000 shares). In addition, the Company's shares owned by the shareissuance trust for directors are included in treasury stock deducted for calculation of the average number of shares during
period (FY8/18 2Q: 60,000 shares, FY8/17 2Q: 9,282 shares).

*Quarterly financial summary is not subject to auditing procedures by certified public accountants or auditing firms.
*Explanation regarding appropriate use of business forecasts and other special instructions(Caution concerning forward-looking statements)
The forward-looking statements regarding future performance in this material are based on information currently
available to the company and certain assumptions that the company deems to be reasonable at the time this report was
prepared. Therefore, the company does not make promises about the achievements. Actual results may differ
significantly from the forecasts due to various factors.
Please refer to “(3) Future forecast information including consolidated business forecasts” of “1. Results of operations”
on page 5 for the suppositions that form the assumptions for business forecasts and cautions concerning the use ofbusiness forecasts.

1. Results of Operations

・・・・

2

(1)Analysis of operating results

・・・・

2

(2)Analysis of financial position

・・・・

4

(3) Future forecast information including consolidated business forecasts

・・・・

5

2. Quarterly Consolidated Financial Statements

・・・・

6

(1) Quarterly Consolidated Balance Sheets

・・・・

6

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

・・・・

8

・・・・

8

・・・・

9

(3) Quarterly Consolidated Statements of Cash Flows

・・・・

10

(4) Notes to quarterly consolidated financial statements

・・・・

11

(Notes on going concern assumption)

・・・・

11

(Notes if there is a significant change in the amount of shareholder’s equity

・・・・

11

Quarterly Consolidated Statements of Income
Second quarter
Quarterly Consolidated Statements of Comprehensive Income
Second quarter- 1 -1. Results of Operations(1) Analysis of operating results
During the six months ended February 2018, the Japanese economy expanded over 63 months, and real GDP grew for
the eight consecutive quarters, mainly due to strong exports from the corporate sector and strong capital investment.
As for the household sector, the number of permanent employees continued to increase owing to the gradual economic
recovery. However, the growth in real income was limited, and consumer spending remained weak despite thecontinued improvement in consumer sentiment. This period was difficult especially for the retail industry, as there
were two large typhoons and long rains in October, and heavy snowfall caused by strong cold waves from January
onward.
Given this environment, in addition to the 100-Yen shop business in Japan, the Company, which operates the“Watts”, “Watts with”, “meets.”, “silk”, etc., has been working on diversifying its revenue sources by undertaking
other domestic businesses, centering on the sale of interior goods and life-style goods, as well as overseas business.
As for the domestic 100-Yen shop business, the Company has been striving to achieve both greater customer
satisfaction and higher earnings at shop by developing and selling ranges of private brand items under the “WATTS
SELECT” brand consisting of reasonably priced, best value-for-money products, mostly daily-use household items,
and carrying out low-cost opening and closing of shops and low-cost shop operations. At the same time, in order tocreate new brand value to meet diversifying customer needs, the Company is making further improvements throughthe business model restructuring which carries out a complete revision of the shop image and product mix, etc.
As specific measures, the Company is currently undertaking sales promotional campaign that each store displays andfeatures specific items along with a theme for each month to revitalize its sales floors and the development of“WATT'S new” sales proposal corners that make it easy for customers to imagine and visualize realistic lifestylescenes. The Company will strive to further strengthen its sales promotion led by the headquarters. In addition, theCompany is also proceeding with the optimization of product lineups on the basis of sales data acquired by POS
systems. The Company has also introduced a reordering support system, for the purpose of preventing theunnecessary opportunity losses in sales caused by stock out, to improve the accuracy of its targeting in this regard.
Furthermore, the Company has been steadily opening Watts branded shops, which were launched in February 2015,
and the efforts have made it possible to open in good locations, such “Namba Marui” and “Kobe Marui” shops opened
in March 2018.
As of the end of the second quarter, the number of “Watts" and "Watts with” 100-Yen shops increased by 95 to 352.
In the 100-Yen shop business in Japan, the Company has already opened 81 shops, against the full-year plan of 108
shops, although there were many relatively small size shops. There were 32 shop closings (including 8 franchisedshop), including certain unprofitable shops and unpredictable closing of shops where the Company’s shops werelocated in. As a result, the total number of 100-Yen shops at the end of the second quarter was 1,136, which includes
1,102 directly managed shops (net increase of 57), and 34 franchised/other shops (net decrease of 8).
As for the number of the other shops at the end of the second quarter, “Buona Vita,” a life-style goods shop offering
comfortable life, was 21 shops (net decrease of 4). Buona Vita did not open any new shops during 1H, but theCompany will focus on improving the profitability of existing shops. ‘Value-100,’ the fresh-foods supermarket
collaboration, continues with 1 shop. In addition, “Søstrene Grene”, a Denmark’s life-style variety shop, opened“PRIME TREE AKAIKE” shop as the first opening in Tokai region, totaling 4 shops. The Company will makeefforts to raise its brand recognition by dispatching products and shop information using SNS and increasing media- 2 -exposure.
Regarding the overseas operation, the Company operates “KOMONOYA”, a fixed-price shop mainly in Southeast
Asia. At the end of 1H, “KOMONOYA” operates 33 shops in Thailand (net increase of 2), 4 shops in Malaysia (netdecrease of 1), 12 shops in Vietnam (net decrease of 2), and 9 shops in Peru (net increase of 2). In China, a fixed priceshop “小物家园” (KOMONOKAEN) closed 5 shops (1 Chinese style franchised shop) and resulted in 4 shops (1Chinese style franchised shop). The total number of own-brand shops “KOMONOYA” and “ 小 物 家 园 ”(KOMONOKAEN) was 62 (net decrease of 4). The numbers of local shops with sales floors consisting of theCompany’s products are gradually increasing and expanding particularly in Myanmar, Mongolia, and Mexico. The
total number of shops, in addition to our group shops, exceeds 100 shops. The Company added new product supply
locations such as the Philippines, which are expected to achieve medium-to-long-term economic growth, the share ofoverseas sales in consolidated sales increased by 0.8 percentage points YoY to 5.4%.
As described above, the opening of 100-Yen shops was favorable, but same-store sales were weak mainly due toabnormal weather. As a result, for the second quarter of the fiscal year ending August 2018, sales were 23,886
million yen (up 1.7% YoY, 97.5% to the plan), operating profit was 593 million yen (down 7.9% YoY, 82.4% to theplan), recurring profit was 602 million yen (down 13.4% YoY, 80.3% to the plan). Net income attributable to ownersof parent was 379 million yen (down 22.5% YoY, 82.5% to the plan) due to the recording of income taxes-deferred
resulting from the impact of reorganization in the same period of the previous fiscal year. (*Year on year:
comparison with the results for the previous fiscal year. Ratio to plan: ratio to the business forecasts for the second
quarter of the fiscal year ending August 2018 which were announced in the Summary of Financial Results on
October 12, 2017.)
Since the Group operates under a single segment consisting of the operation of 100-Yen shops associated business,segment information is omitted.

- 3 -(2) Analysis of financial positiona. Assets, liabilities and net assets(Assets)
As of the end of the second quarter of the current fiscal year, current assets stood at 14,717 million yen, a decrease of
559 million yen compared with the end of the previous fiscal year. This is mainly because notes and accounts
receivable-trade decreased by 289 million yen, and cash and deposits increased by 253 million yen.
Fixed assets stood at 4,999 million yen, an increase of 191 million yen compared with the end of the previous fiscal
year. This is mainly because tools, furniture and fixtures increased by 61 million yen, and buildings and structures
increased by 58 million yen, and investment securities increased by 33 million yen, and guarantee deposits increasedby 27 million yen.
As a result, total assets stood at 19,717 million yen, a decrease of 367 million yen compared with the end of theprevious fiscal year.
(Liabilities)
As of the end of the second quarter of the current fiscal year, current liabilities stood at 8,269 million yen, a decreaseof 554 million yen compared with the end of the previous fiscal year. This is mainly because accrued consumption
taxes decreased by 165 million yen, and deposits included in other current liabilities decreased by 158 million yen,
and income taxes payable decreased by 108 million yen.
Fixed liabilities stood at 1,404 million yen, an increase of 18 million yen compared with the end of the previous fiscal
year. This is mainly because liabilities relating to retirement benefits increased by 11 million yen.
As a result, total liabilities stood at 9,674 million yen, a decrease of 536 million yen compared with the end of theprevious fiscal year.
(Net assets)
As of the end of the second quarter of the current fiscal year, net assets stood at 10,042 million yen, an increase of
168 million yen compared with the end of the previous fiscal year. This is mainly because retained earnings
increased by 175 million yen. As a result, the equity ratio was 51.6% (49.7% at the end of the previous fiscal year).

b. Cash flows
Cash and cash equivalents (hereinafter referred to as “cash”) at the end of the second quarter of the current fiscal year
amounted to 5,473 million yen, a decrease of 253 million yen compared with the previous fiscal year.
Details and breakdown of each cash flow in the second quarter are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was 344 million yen (588 million yen was provided in the same period of
the previous fiscal year). Cash was provided mainly by income before income taxes of 591 million yen, and decreasein accounts receivable-trade of 291 million yen. Cash was used mainly for income taxes paid of 329 million yen andincrease in inventory assets of 160 million yen.

- 4 -(Cash flows from investing activities)
Net cash used in investing activities was 391 million yen (259 million yen was used in the same period of theprevious fiscal year). As for the breakdown, cash was used mainly for property, plant and equipment of 320 million
yen for opening of new shops, and for payments for lease and guarantee deposits of 78 million yen.
(Cash flows from financing activities)
Net cash used in financing activities was 197 million yen (0 million yen was provided in the same period of theprevious fiscal year). As for the breakdown, there were proceeds from long-term loans payable of 400 million yen,
repayment of long-term loans payable of 394 million yen, and dividend paid of 203 million yen.
(3) Future forecast information including business forecasts
The Company made no revisions to its business forecasts announced in the summary of financial results on October
12, 2017.

- 5 -2. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Thousands of yen)Previous fiscal year
(August 31, 2017)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Raw materials and supplies
Deferred tax assets
Consumption taxes receivable
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation and impairment loss
Buildings and structures, net
VehiclesAccumulated depreciation and impairment loss
Vehicles, net
Tools, furniture and fixtures
Accumulated depreciation and impairment loss
Tools, furniture and fixtures, net
Land
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Guarantee deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets- 6 -Current second quarter(February 28, 2018)

5,727,607
2,201,021
6,506,142
28,606
303,936
127,273
404,956-22,621
15,276,922

5,473,644
1,911,752
6,684,344
21,902
270,346
56,839320,313-21,407
14,717,736

1,454,655-771,545
683,109
11,236-4,250
6,985
3,087,382-2,496,759
590,623
257,800
1,538,518

1,545,295-803,675
741,619
11,264-5,102
6,162
3,243,984-2,592,098
651,885
257,800
1,657,468

78,54378,54375,95375,953453,085
119,5612,488,108
131,260-1,4883,190,527
4,807,588
20,084,510

486,723
128,673
2,515,435
139,722-4,5633,265,992
4,999,414
19,717,150

(Thousands of yen)Previous fiscal year
(August 31, 2017)

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Accrued consumption taxes
Provision for bonuses
Provision for directors' bonuses
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Liabilities relating to retirement benefits
Provision for directors’ retirement benefits
Provision for directors' stock-based benefits
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets- 7 -Current second quarter(February 28, 2018)

6,325,286
100,000
648,434
349,322
252,300
168,421
11,475
969,451
8,824,690

6,288,626
100,000
653,160
241,199
86,783
161,493－
738,496
8,269,761

771,503
187,594
12,405
16,206
114,621283,836
1,386,168
10,210,858

772,695
199,045
13,751
20,693
117,516
281,078
1,404,780
9,674,541

440,297
1,637,636
8,029,585-137,991
9,969,528

440,297
1,637,636
8,204,812-137,991
10,144,755

26,277-21,377
4,900-100,776
9,873,652
20,084,510

32,793
3,466
36,259-138,406
10,042,608
19,717,150

(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income(Quarterly Consolidated Statements of Income)(Second quarter)(Thousands of yen)

Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating revenues
Rent income
Equity in earnings of affiliates
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Early-withdrawal penalty
Cost of lease revenue
Exchange loss
Other
Total non-operating expenses
Recurring profit
Extraordinary income
Gain on sales of fixed assets
Surrender value of insurance
Total extraordinary income
Extraordinary loss
Loss on retirement of fixed assets
Loss on sales of fixed assets
Impairment loss
Total extraordinary losses
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Net loss attributable to non-controlling interests
Net income attributable to owners of parent- 8 -Previous second quarter(from September 1, 2016
to February 28, 2017)

Current second quarter(from September 1, 2017
to February 28, 2018)

23,484,918
14,616,096
8,868,822
8,224,927
643,895

23,886,905
14,679,892
9,207,012
8,613,979
593,033

11,002
15,46526,032
13,831
66,332

10,742
10,863－22,90544,511

2,595
5,507
5,430
－
803
14,335695,891

2,757
20,540
5,400
1,087
5,438
35,224602,320

－
287
287

1,034
－
1,034

4,680
84
41,64946,414
649,765
281,944-73,704
208,240
441,525-47,923
489,449

843－
11,50812,352591,002230,057
19,228249,286
341,715-37,629
379,345(Quarterly Consolidated Statements of Comprehensive Income)(Second quarter)(Thousands of yen)

Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests- 9 -Previous second quarter(from September 1, 2016
to February 28, 2017)

Current second quarter(from September 1, 2017
to February 28, 2018)

441,525

341,715

7,592
30,164

6,515
8,962

23,88915,881

61,646503,172

31,359373,075

551,096

410,705-47,923-37,629

(3) Quarterly Consolidated Statements of Cash Flows(Thousands of yen)

Net cash provided by (used in) operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors' bonuses
Increase (decrease) in liabilities relating to retirement benefits
Increase (decrease) in provision for directors’ retirement benefits
Increase (decrease) in provision for directors' stock-based benefits
Interest and dividends income
Interest expenses
Loss on retirement of fixed assets
Decrease (increase) in accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accrued consumption taxes
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Payments for asset retirement obligations
Purchase of investment securities
Other
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Proceeds from long-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 10 -

Previous second quarter(from September 1, 2016
to February 28, 2017)

Current second quarter(from September 1,
2017 to February 28,
2018)649,765
170,035
41,6496
11,443－
7,617-78,685
3,908-1,293
2,595
4,680
233,803-230,102-14,455
106,732-141,119766,582
1,266-2,072-177,494－
588,282

591,002169,232
11,5081,860-6,927-11,475
11,4501,345
4,486-2,036
2,757
843
291,584-160,888
2,433-95,206-204,511
607,461
1,986-1,800-329,405
65,913
344,155-181,084
1,338-63,199
61,434－-48,745-29,135-259,390-320,812
1,034-78,283
45,519-865－-38,018-391,425

599,450-396,418-202,562
469
14,825344,187
5,030,891
5,375,078

400,000-394,082-203,144-197,226-9,466-253,963
5,727,607
5,473,644

(4) Notes to consolidated financial statements(Notes on going concern assumption)
None(Notes if there is a significant change in the amount of shareholders' equity)None- 11 -