Summary of Financial Results for the Second Quarter Ended February 28, 2019
[Japan GAAP] (Consolidated)
April 11, 2019
Company
Stock Code
Representative
Contact

Watts Co., Ltd.

Listed on the TSE

2735
URL: https://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 11, 2019
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 2019
(September 1, 2018 through February 28, 2019)(1) Consolidated results of operations(% change from the previous corresponding period)
Sales

Operating profit

Recurring profit

Net income attributable toowners of parent

Million yen% Million yen% Million yen% Million yen%
Six months ended Feb. 2019
25,648
7.3
366
-38.7
337
-44.0
103
-72.7
Six months ended Feb. 2018
23,897
1.8
598
-7.1
602
-13.4
379
-22.5
(Note) Comprehensive income
Six months ended February 2019: -6 million yen (-%)
Six months ended February 2018: 373 million yen (-25.9%)
Net income
Diluted net income perper share
share
Yen
Yen
Six months ended Feb. 2019
7.70
Six months ended Feb. 2018
28.00
(Note) The Company has changed its reporting method from the first quarter of the current fiscal year, and the figures for the second
quarter of the fiscal year ended August 2018 reflect this change. For more details, please refer to the term of “*Notes (4) Change
in Reporting Method” on page 9.

(2) Consolidated financial position
Total assets

Shareholders’ equity
ratio
%
51.3
52.2

Net assets

Million yen
As of Feb. 201919,834As of Aug. 2018
19,945(Reference) Shareholders’ equity:
As of February 2019: 10,172 million yen
As of August 2018: 10,418 million yen

Million yen
9,888
10,234

2. Dividends
End of 1Q

End of 2Q
Yen

Year ended Aug. 2018Year ending Aug. 2019Year ending Aug. 2019 (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 2019
(September 1, 2018 through August 31, 2019)
Sales
Year ending Aug. 2019(% change from the previous corresponding period)
Net income
Net income attributable
Recurring Profit
per share
to owners of parent

Operating profit

Million yen%

Million yen%

Million yen%

Million yen%

52,000

5.1

920

-8.1

880

-15.2

270

-57.4

(Note) Revisions to business forecast for the current quarter: Yes

Yen

20.15

*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 201913,958,800 shares
As of August 2018
13,958,800 shares② Treasury stock at the end of period
As of February 2019
560,874 shares
As of August 2018
410,874 shares③ Average number of stock during period (quarterly cumulative period)
Six months ended February 201913,440,919 shares
Six months ended February 2018
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 (FY8/19 2Q: 60,000 shares, FY8/18: 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 (FY8/19 2Q: 60,000 shares, FY8/18 2Q: 60,000 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 3 for the suppositions that form the assumptions for business forecasts and cautions concerning the use ofbusiness forecasts.

・・・・

2

(1) Analysis of operating results

・・・・

2

(2) Analysis of financial position

・・・・

3

(3) Future forecast information including consolidated business forecasts

・・・・

3

2. Quarterly Consolidated Financial Statements

・・・・

4

(1) Quarterly Consolidated Balance Sheets

・・・・

4

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

・・・・

6

・・・・

6

・・・・

7

(3) Quarterly Consolidated Statements of Cash Flows

・・・・

8

(4) Notes to quarterly consolidated financial statements

・・・・

9

(Notes on going concern assumption)

・・・・

9

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

・・・・

9

(Additional information)

・・・・

9

1. Results of Operations

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 2019, the Japanese economy remained generally strong, supported by robust
corporate earnings and investments in labor-saving and IT industries. Consumer sentiment has been showing an
improving trend, partly due to a recovery in employee income. The Japanese government judged that the current
economy is in the longest recovery phase since the end of World War II, surpassing the "Izanami Economy."
However, the outlook remained uncertain due to overseas situations such as the U.S.-China trade talks and the U.K.'s
decision to leave the European Union.
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 life-style goods and discount goods as well as overseas business.
As for the domestic 100-Yen shop business, the Comapny is promoting further improvements mainly "Restructuring
the Business Model" with the goal of creating new brand value to meet diversifying customer needs.
Specifically, the Company is working to enhance its product lineup by introducing higher price products with sales
prices ranging from 200 yen to 1,000 yen. In addition, the Company is also working to create synergies among theGroup’s businesses, such as by offering products of the discount shop “Real”, which became a consolidated
subsidiary in the previous fiscal year, as a special feature at the newly-opened 100-Yen shop “Watts KadomaMinami Shop".
As for the new shop openings, the Company opened 58 shops (including 1 franchised shop) against the full-yearplan of 115 shops, although there were many relatively small sized shops. There were 40 shop closings (including 3
franchised shops), including certain unprofitable shops and unpredictable closing of shops where the Company’s
shops were located in. As a result, the total number of 100-Yen shops at the end of the second quarter was 1,179,
which includes 1,149 directly managed shops (net increase of 20), and 30 franchised/other shops (net decrease of 2).
Of these, the number of "Watts" and "Watts with", the Watts brand shops, increased to 479 (net increase of 60),
accounting for about 40% of the total.
As for the number of the domestic other shops at the end of the second quarter, “Buona Vita,” a life-style goods shop
offering comfortable life, was 21 shops (unchanged). Buona Vita has been working to develop the existing shops,
such as introducing new gift items. “Søstrene Grene”, a Denmark’s life-style variety shop, was 5 shops (increased by
1). Its same-store sales have not yet reach the target, the Company will continue to strengthen promotions using SNS
and product lineups to attract more customers. “Value-100,” the fresh-foods supermarket collaboration, continues
with 1 shop (unchanged). "Real", a discount shop, was 5 shops (increased by 1).
Regarding the overseas operation, the Company operates “KOMONOYA”, a fixed-price shop mainly in Southeast
Asia. At the end of the second quarter, “KOMONOYA” operates 41 shops in Thailand (increased by 4), 8 shops in
Malaysia (decreased by 1), 9 shops in Vietnam (decreased by 2), and 17 shops in Peru (increased by 4). In China, a
fixed price shop “小物家园”(KOMONOKAEN) was 2 shops (unchanged). The total number of own-brand shops“KOMONOYA” and “小物家园”(KOMONOKAEN) was 77 (increased by 5). The numbers of local shops withsales floors consisting of the Company’s products are gradually increasing and expanding particularly in Mexico andBrazil. The total number of shops, in addition to our group shops, exceeds 120 shops. Despite the transfer of a
subsidiary in Malaysia in the previous fiscal year and the switch from directly managed operations to franchise
operation, overseas sales increased YoY due to the steady opening of new shops in Thailand and Peru.
As a result, for the six months ended February 2019, sales were 25,648 million yen (up 7.3% YoY, 101.0% to theplan). Operating profit was 366 million yen (down 38.7% YoY, 85.3% to the plan), and recurring profit was 337
million yen (down 44.0% YoY, 78.4% to the plan) due to proactive opening of relatively large-scale shops in the
100-Yen shop business and delays in improving profits at “Søstrene Grene” and Chinese subsidiary. Net income
attributable to owners of parent was 103 million yen (down 72.7% YoY, 40.6% to the plan) mainly due to therecording of impairment losses on “Søstrene Grene” store facilities. (*Year on year: comparison with the results forthe same period of the previous fiscal year. Ratio to plan: ratio to the business forecasts for the six months ended
February 2019 which were announced in the Summary of Financial Results on October 11, 2018.)
Since the Group operates under a single segment consisting of the operation of 100-Yen shops associated business,segment information is omitted.
- 2 -(2) Analysis of financial positiona. Assets, liabilities and net assets(Assets)
As of the end of the current second quarter of the fiscal year, current assets stood at 14,331 million yen, decreased by
273 million yen from the end of the previous fiscal year. This was mainly due to an increase of 277 million yen inmerchandise and finished goods despite decreases of 311 million yen in cash and deposits and 223 million yen innotes and accounts receivable-trade.
Fixed assets stood at 5,503 million yen, increased by 162 million yen. This was mainly due to increases of 79
million yen in guarantee deposits, 59 million yen in tools, furniture and fixtures, and 22 million yen in buildings andstructures.
As a result, total assets stood at 19,834 million yen, decreased by 110 million yen from the end of the previous fiscal
year.
(Liabilities)
As of the end of the current second quarter of the fiscal year, current liabilities stood at 8,528 million yen, increasedby 113 million yen from the end of the previous fiscal year. This was mainly due to increases of 941 million yen inelectronically recorded obligations and 90 million yen in income taxes payable, despite a decrease of 863 million
yen in notes and accounts payable-trade.
Fixed liabilities stood at 1,417 million yen, increased by 121 million yen. This was mainly due to an increase of 147
million yen in long-term loans payable.
As a result, total liabilities stood at 9,945 million yen, increased by 234 million yen from the end of the previous
fiscal year.
(Net assets)
As of the end of the current second quarter of the fiscal year, net assets stood at 9,888 million yen, decreased by 345
million yen compared with the end of the previous fiscal year. This was mainly due to a decrease of 100 million yen
in retained earnings, and purchase of treasury stock of 135 million yen. As a result, shareholders’ equity ratio was
51.3% (52.2% at the end of the previous fiscal year).
b. Cash flows
Cash and cash equivalents (hereinafter referred to as “cash”) at end of the current second quarter of the fiscal year
amounted to 4,835 million yen, decreased by 311 million yen from the previous fiscal year. Details and breakdownof each cash flow in the second quarter are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was 376 million yen (344 million yen was provided in the same period of
the previous fiscal year). Cash was provided mainly by a decrease in notes and accounts receivable-trade of 223
million yen, depreciation and amortization of 209 million yen, and income before income taxes of 195 million yen.
Cash was used mainly for an increase of 283 million yen in inventories.
(Cash flows from investing activities)
Net cash used in investing activities was 503 million yen (391 million yen was used in the previous fiscal year). As
for the breakdown, there were payments for property, plant and equipment of 368 million yen for opening of new
shops, payments for lease and guarantee deposits of 150 million yen.
(Cash flows from financing activities)
Net cash used for financing activities was 186 million yen (197 million yen was used in the previous fiscal year).
This was mainly due to proceeds from long-term loans payable of 500 million yen, repayment of long-term loans
payable of 343 million yen, cash dividends paid of 203 million yen, and purchase of treasury stock of 135 million
yen.
(3) Future forecast information including business forecasts
In view of recent trends in business results, the Company revised its full-year business results, which wereannounced on October 11, 2018.

- 3 -2. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Thousands of yen)Previous fiscal year
(August 31, 2018)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Raw materials and supplies
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
Leased assets
Accumulated depreciation and impairment loss
Leased assets, net
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- 4 -Current second quarter(February 28, 2019)

5,147,120
2,262,537
6,811,518
8,087
42,588374,125-40,991
14,604,987

4,835,206
2,039,062
7,088,555
6,976
47,904
364,716-50,907
14,331,513

1,658,569-887,262
771,306
18,856-12,969
5,886
3,369,569-2,665,399
704,169
257,800
27,623-7,432
20,191
1,759,354

1,834,048-1,040,017
794,030
18,529-13,947
4,582
3,549,877-2,786,043
763,833
257,800
27,623-11,148
16,475
1,836,721

69,54769,54792,322
92,322472,690
420,341
2,481,628
140,832-3,8273,511,665
5,340,566
19,945,554

459,724410,157
2,560,651
145,134-1,664
3,574,004
5,503,049
19,834,562

(Thousands of yen)Previous fiscal year
(August 31, 2018)

Liabilities
Current liabilities
Notes and accounts payable-trade
Electronically recorded obligations - operating
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Accrued consumption taxes
Provision for 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- 5 -Current second quarter(February 28, 2019)

3,997,054
2,544,768
100,000
539,349
129,943
66,137
177,783
860,065
8,415,102

3,133,233
3,486,023
100,000
548,133
220,270
81,286
172,408
787,0038,528,360

532,182
264,848
38,78524,464
134,835
300,888
1,296,004
9,711,107

680,130
264,842
24,94628,592
153,274
265,765
1,417,550
9,945,910

440,297
1,637,636
8,459,425-137,991
10,399,368

440,297
1,637,636
8,358,744-273,120
10,163,557

20,482-883
19,598-184,519
10,234,447
19,945,554

10,129-1,5358,593-283,500
9,888,651
19,834,562

(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
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Early-withdrawal penalty
Exchange loss
Other
Total non-operating expenses
Recurring profit
Extraordinary income
Gain on sales of fixed assets
Total extraordinary income
Extraordinary loss
Loss on retirement 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- 6 -Previous second quarter(from September 1, 2017
to February 28, 2018)

Current second quarter(from September 1, 2018
to February 28, 2019)

23,897,647
14,685,292
9,212,354
8,613,979
598,375

25,648,425
16,053,143
9,595,281
9,228,680
366,601

10,86322,90533,7685,235
14,564
19,7992,757
20,5401,087
5,438
29,824602,320

2,492
37,6437,920
1,280
49,337
337,063

1,034
1,034

-

843
11,50812,352591,002230,057
19,228249,286
341,715-37,629
379,345

6,290
135,440
141,731
195,331208,945-18,070
190,874
4,457-98,980
103,437

(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- 7 -Previous second quarter(from September 1, 2017
to February 28, 2018)

Current second quarter(from September 1, 2018
to February 28, 2019)341,715

4,457

6,515
8,962

-10,353-8,876

15,881

8,224

31,359373,075-11,005-6,548

410,705

92,432-37,629-98,980

(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
Amortization of goodwill
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
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
Repayment of lease obligations
Purchase of treasury shares
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- 8 -Previous second quarter(from September 1, 2017
to February 28, 2018)

Current second quarter(from September 1,
2018 to February 28,
2019)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

195,331
209,192
135,440
1,907
8,376-5,375-6-13,8394,128-3,9362,492
6,290
223,300-283,103
95,993
8,911-91,263493,839
3,728-1,494-119,808
376,265-320,812
1,034-78,283
45,519-865-38,018-391,425-368,098-150,096
72,684-2,037-55,933- 503,481

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

500,000-343,268-3,989-135,128-203,892-186,279
1,580-311,914
5,147,120
4,835,206

(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)
The Company acquired 150,000 shares of its treasury stock pursuant to the resolution of the Board of Directors
meeting on October 11, 2018. With this, treasury stock was increased by 135,128 thousand yen during the six
months of the current fiscal year. As a result, treasury stock at the end of the second quarter of the current fiscal
year was 273,120 thousand yen.
(Additional information)(Application of "Partial Revision of Accounting Standard for Tax Effect Accounting")
From the beginning of the first quarter of the current fiscal year, the Company has applied the "Partial Revision of
Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018), and deferred tax
assets are presented under "Investments and other assets."(Changes in reporting method)(Quarterly consolidated statements of income)Previously, real estate leasing transactions were recorded in "Rental income" and "Cost of rental income" under
non-operating income and non-operating expenses. However, from the first quarter of the current fiscal year,"Rental income" is now presented as "Sales" and "Cost of rental income" is presented as "Cost of sales".
The Company regards leasing to tenants as one of its businesses, and recognizes that rental income is a stablesource of revenue. Based on this recognition, the Company has changed its reporting method in order to more
appropriately present the actual state of its business operations.
As a result, in the consolidated statements of income for the six months of the current fiscal year, the amount of
10,742 thousand yen, which was presented as "Rent Received" in non-operating income, was reclassified as"Sales", and the amount of 5,400 thousand yen, which was presented as "Cost of Rental Income" in non-operating
expenses, was reclassified as "Cost of sales."- 9 -