Consolidated Financial Results for the Fiscal Year
Ended December 31, 2019 [Japanese GAAP]
February 12, 2020
Name of registrant:

Milbon Co., Ltd.

Tokyo Stock Exchange, First Section

Code No.:

4919

Representative:

Ryuji Sato, President and CEO

Inquiries:

Masahiro Murai, Executive Director

URL

http://www.milbon.co.jp
TEL: +81-3-3517-3915

Scheduled date of annual general meeting of shareholders: March 26, 2020
Scheduled filing date for Securities Report: March 27, 2020
Scheduled starting date of dividend payments: March 26, 2020
Preparation of supplementary materials on the Consolidated Financial Results: Yes
Holding of an explanatory meeting on the Consolidated Financial Results: Yes (For institutional investors and analysts)(Amounts of less than one million yen have been omitted.)

1. Consolidation Performance for December 2019 (January 1, 2019-December 31, 2019)(1) Consolidated operating results (Percentages show year-on-year changes.)
Net sales

Operating income

Million yen
36,266

Year ending December 31, 2019
As of December 31, 2018%
7.0

(NOTE) Comprehensive income

Basic earnings per shareYen―

137.31
Fiscal Year 2019(66) million yen

Million yen
6,231

-

4,601 million yen (24.7%)

Diluted earnings per shareYen―

137.99As of December 31, 2018
(Reference)Equity in earnings (losses) of affiliates

%
7.8

6,260

Year ending December 31, 2019Year ending December 31, 2019

Million yen
6,751

-

33,882

Profit attributable toOrdinary income

owners of parent
Million yen
4,517

%
7.2
-

5,811

4,495

Fiscal year ending December 31, 2018

%
0.5
-

3,689 million yen (-%)

Return on equity (ROE)%

Return on assets (ROA)%

Operating income ratio
%

13.1

15.3

18.6

15.0
(3) million yen

18.5

14.0
Year ended December 31, 2018

(NOTE)
1. From the beginning of the fiscal year under review, the Company has early adopted the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 30, 2018) andthe "Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No. 30, March 30, 2018). In accordance with the basic treatment, the previous fiscal year has been
applied retrospectively. 2. As of the fiscal year ended December 31, 2017, the Company changed its fiscal year end from December 20 to December 31. In addition, the Company changed
its fiscal year-end for overseas subsidiaries from September 30 to December 31. Accordingly, the rate of change from the previous period does not appear because the year 2018 (January
1, 2,018 to December 31, 2018) and the year 2017 (December 21, 2,016 to December 31, 2017) are different from the year 2018.

(2) Consolidated financial position
Total assets
Year ending December 31, 2019
As of December 31, 2018
(Reference)Equity

Net assets

Equity ratio

Net assets per share

Million yen

Million yen%

Yen

41,91235,88285.6

1,096.02

33,151
As of December 31, 2018: 33,151 million yen

83.6

1,012.58

39,634
Fiscal Year 12/2019 35,882 million yen(NOTE) Partial revision of the "Economic Criteria for Tax Effect Index" was applied from the beginning of the term of this concatenated fiscal year (No. 28 of the company's Economic
Criteria No. 28, February 16, 2018). The total wealth and self-capital ratios for the December 2018 period were calculated after retrospectively applying these accounting criteria, etc.

(3) Consolidated cash flows
Cash flows from operating
activities
Million yen

Cash flows from investing
activities
Million yen

Net cash provided by (used in)financing activities
Million yen

Cash and cash equivalents
at end of period
Million yen

Year ending December 31, 2019

4,486

(2,777)(1,869)9,376

As of December 31, 2018

6,487

(1,202)(1,639)9,541

2. Payment of dividends
Annual dividends
End of 1st

End of 2nd

End of 3rdquarterquarterYen
24.00

quarter
Yen
―

27.00

―

Yen
As of December 31, 2018―Year ending December 31, 2019―

Fiscal Year 12/2020(forecast)

―

28.00

―

End of fiscal
year

Total

Total dividends(Total)Dividend
payout ratio(Consolidated)

Dividends on equity(DOE)(Consolidated)

Yen
30.00

Yen
54.00

Million yen

%

%

1,767

39.3

5.5

29.00

56.00

1,833

40.6

5.3

30.00

58.00

40.1

3. Forecasts for the year ended December 2020 (January 1, 2020 to December 31, 2020)

Net salesYear ending December 31, 2020

Operating income

Ordinary income

Million yen%

Million yen%

Million yen%

39,000

7.5

7,300

8.1

6,670

7.0

*Notes(1)
Significant changes in subsidiaries during the period(changes in specified subsidiaries resulting in the change in the scope of consolidation)

New: 0 companies (Company name: )(Percentages show year-on-year changes.)
Profit attributable to
Basic earnings per shareowners of parent
Million yen
%
Yen
4,730

4.7

144.48: NoneExclude: 0 companies (Company name: )(2) Changes in accounting policies, changes in accounting estimates and retrospective restatements
1) Changes in accounting policies due to amendment to the accounting
standards, etc.
: None2) Changes in accounting policies other than those in 1) above: Yes3) Changes in accounting estimates: Yes4) Retrospective restatements: None(NOTE) For details, please refer to "4. Consolidated Financial Statements and Major Notes (5) Notes on Consolidated Financial Statements (Changes in Accounting Policies)" on theattached material page.
(3) Number of shares issued (common stock)1) Number of shares issued at the end of the period (including As oftreasury shares)
December 31, 20192) Number of treasury shares at the end of the period
As ofDecember 31, 20193) Average number of shares during the period
Year ended December
31, 2019

33,117,234 shares
378,250 shares
32,739,355 shares

As ofDecember 31, 2018
As ofDecember 31, 2018Year ended December
31, 2018

33,117,234 shares
377,460 shares
32,740,018 shares*These financial statements are not subject to audit by a certified public accountant or an audit corporation.
*Explanation on the appropriate use of operating forecasts and other special instructions
Operating forecasts and other statements regarding the future presented in these materials are based on information currently available and certain assumptions deemed to be reasonable, and actual
performance may differ substantially due to various factors. Please refer to "1. Overview of Operating Results, etc., (1) Progress of Business and Its Results" on page 2 of the attached materials for theassumptions underlying the forecasts and notes for using the forecasts.

○ Accompanying Materials – Contents
1. Overview of Operating Results, etc. .........................................................................................................................................
(1) Analysis of operating results ...............................................................................................................................................
(2) Analysis of financial position ..............................................................................................................................................
(3) Basic policy on the distribution of profit and dividends for the fiscal year under review and the following fiscal year ...
(4) Business and other risks ......................................................................................................................................................
2. Outline of the Milbon Group ....................................................................................................................................................
3. Basic Rationale for Selecting the Accounting Standards ..........................................................................................................
4. Consolidated Financial Statements and Main Notes ................................................................................................................
(1) Consolidated Balance Sheets ..............................................................................................................................................
(2) Consolidated Statements of Earnings and Consolidated Statements of Comprehensive Income Consolidated
Statements of Earnings .......................................................................................................................................................
Consolidated Statements of Comprehensive Income ..........................................................................................................
Consolidated Statements of Comprehensive Income ..........................................................................................................
(3) Consolidated Statements of Changes in Shareholders' Equity ...........................................................................................
(4) Consolidated Statements of Cash Flows .............................................................................................................................
(5) Notes regarding consolidated financial statements .............................................................................................................
(Notes regarding going concern assumption) ……………………………………………………………………………..
(Significant matters that serve as the basis for preparation of consolidated financial statements) …………..…………...
(Changes in accounting policies) ………………………………………………………………………………………….
(Change of presentation method) …………………………………...……………………………………………………..
(Changes in accounting estimates) …………………………………………………………………………………….…..

1

2
2
3
4
5
6
8
9
9
11
11
12
13
15
17
17
17
19
19
19

1. Overview of Operating Results, etc.
(1) Analysis of operating results① Operating results for the fiscal year under review
During the consolidated fiscal year under review, the Japanese economy continued to recover moderately on the back of an
improvement in the employment and income environment, but exports and production were weak. Overseas economies are
generally on a recovery trend, but there are concerns about the future of the impact of the prolonged U.S.-China trade friction,
the turmoil surrounding the United Kingdom's exit from the European Union, and the unstable situation in the Middle East. The
operating environment in the beauty industry remains severe, as it has become a challenge to recruit and retain human resources
due to the impact of population movements.
Amid this environment, the Milbon Group is working with salons premised on the goal of "Creating a Lifetime Beauty Salon
meaning that supporting the creation of a lifetime beauty salon that continues to provide beauty and emotional fulfillment throughlifetime beauticians with the aim of achieving a monthly productivity of 1 million yen per beautician."
Consolidated net sales for the fiscal year under review were 36,266 million yen (year-on-year increase of 7.0%). In the haircare product category, sales of Aujua grew thanks in part to the effects of new products. In addition, sales of milbon for the global
market were favorable, reflecting steady progress in establishing contact points for customers in Japan and overseas. There wasalso continued substantial growth in the fashion color Ordeve Addicthy, which was released in 2017, in the hair coloring productcategory. In overseas markets, the East Asian region, mainly South Korea and, performed steadily.
Operating income was 6,751 million yen (up 7.8% year-on-year), ordinary income was 6,231 million yen (up 7.2% year-onyear), and profit attributable to owners of parent was 4,517 million yen (up 0.5% year-on-year).
From the beginning of the fiscal year under review, the Company has applied the "Accounting Standard for Revenue
Recognition" (ASBJ Statement No. 29, March 30, 2018) and the "Guidance on Accounting Standard for Revenue Recognition"(ASBJ Guidance No. 30, March 30, 2018). The Company applied the Accounting Standard for Revenue Recognition
retrospectively to the previous fiscal year in accordance with the basic treatment stipulated in Paragraph 84 of the AccountingStandard for Revenue Recognition.
Breakdown of net sales by product category and breakdown of net sales into domestic and overseas sales are shown below:[Breakdown of consolidated net sales by product category](Unit: Million yen)Previous fiscal year

Current fiscal year

Product category
AmountRatio (%)

AmountRatio (%)

Increase(decrease)amountYear-on-yearchange (%)

Hair care products

20,222

59.7

21,328

58.8

1,105

5.5

Hair coloring products

11,85735.0

12,994

35.8

1,137

9.6

Permanent wave products

1,544

4.5

1,515

4.2

(29)

(1.9)

-

-

165

0.5

165

-

257

0.8

263

0.7

5

2.0

33,882100.0

36,266

100.0

2,383

7.0

Cosmetic products
Other
Total

[Breakdown of net sales into domestic and overseas sales](Unit: Million yen)Previous fiscal year
AmountCurrent fiscal year

Ratio (%)

AmountRatio (%)

Increase(decrease)amountYear-on-yearchange (%)

Domestic sales

28,56984.3

30,409

83.8

1,839

6.4

Overseas sales

5,312

15.7

5,857

16.2

544

10.2

Total

33,882100.0

36,266

100.0

2,383

7.0

2

② Outlook for fiscal 2020
The Environment economy has been slightly behind schedule since the consumption tax hike in October of last year. In
addition, there are concerns about the impact of the slowdown in the Chinese economy caused by a new coronaviral infectious
disease.
Against this backdrop, Milbon group is committed to supporting beauty salons to be the "Lifetime Beauty Salon", meaningthat beauty salons will become the communities for both beauty and spiritual wealth. In addition, we have established a Basic
Sustainability Policy and will contribute to the achievement of SDGs by working to develop sustainable beauty markets.
For the next fiscal year, we forecast net sales of 39 thousand million yen (up 7.5% year on year), operating income of 7.3
thousand million yen (up 8.1% year on year), ordinary income of 6,670 million yen (up 7.0% year on year), and profit attributableto owners of parent of 4,730 million yen (up 4.7% year on year).

(2) Analysis of financial position① Assets, liabilities and net assets
Total assets at the end of the fiscal year under review increased 2,277 million yen from the end of the previous fiscal year, to41,912 million yen.
Current assets increased 1,498 million yen from the end of the previous fiscal year to 20,330 million yen. The main factors
behind this increase were increases of 837 million yen in cash and deposits, 304 million yen in notes and accounts receivabletrade, and 268 million yen in merchandise and finished goods.
Non-current assets increased 778 million yen from the end of the previous fiscal year to 21,581 million yen. The main factors
behind this change were an increase of 372 million yen in buildings and structures and a decrease of 156 million yen in investment
securities due to a decrease in unrealized gains on the fair value of listed stocks.
Current liabilities decreased 938 million yen from the end of the previous fiscal year to 5,407 million yen. The main factor forthe change was a 694 million yen decrease in income taxes payable.
Non-current liabilities increased 484 million yen from the end of the previous fiscal year to 622 million yen. The main factor
for the change was the recording of 505 million yen in asset retirement obligations.
Net assets increased 2,730 million yen from the end of the previous fiscal year to 35,882 million yen. This was mainly due tothe 2,651 million yen increase in retained earnings.
As a result, the equity ratio changed from 83.6% at the end of the previous fiscal year to 85.6%. Net assets per share based on
the number of shares outstanding at the end of the period were 1,096.02 yen, compared with 1,012.58 yen at the end of theprevious fiscal year.
② Cash flows
Cash and cash equivalents (hereinafter “net cash”) at the end of the current consolidated fiscal year decreased by 165
million yen compared to the end of the previous consolidated fiscal year to 9,376 million yen.
The status of cash flows during the current fiscal year and the factors responsible are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities amounted to 4,486 million yen. This was mainly attributable to income before
income taxes and minority interests of 6,217 million yen, depreciation and amortization of 1,493 million yen, an increase innotes and accounts receivable-trade of 300 million yen, an increase in inventories of 278 million yen, and income taxes paid of
2,264 million yen.
(Cash flows from investing activities)
Net cash used in investing activities amounted to 2,777 million yen. This was mainly attributable to purchases of property,
plant and equipment of 1,098 million yen, purchases of intangible assets of 407 million yen, and payments into time depositsof 1,000 million yen.
(Cash flows from financing activities)
Net cash used in financing activities amounted to 1,869 million yen. This was mainly due to the cash dividends paid toshareholders of 1,865 million yen.

3

(Reference) Cash flow-related indicators
Year ended

Year ended

December 20,
2015

December 20,
2016

As of December

As of December

31, 2017

31, 2018

Year ending
December 31,
2019

Equity ratio (%)

85.1

85.4

82.6

83.6

85.6

Equity ratio based on market
value (%)

264.2

223.3

329.6

369.2

484.3

Interest-bearing debt to cash
flows ratio (%)

2.1

2.4

1.8

1.2

1.7

(Notes) Equity ratio: Equity/net assets
Equity ratio based on market value: Total market capitalization/total assets**

Interest-bearing debt to cash flows ratio: Interest-bearing debt/cash flows
All indicators were calculated using consolidated financial statements.
Total market capitalization was calculated by multiplying the closing stock price at the end of the period by the total number ofoutstanding shares at the end of the period (excluding treasury shares). For the fiscal year ended December 31, 2017, total market
capitalization was calculated by the following formula, due to the impact at the end of the period of ex-rights resulting from thestock split:
Closing stock price at the end of the period multiplied by (total number of outstanding shares at the end of the period plus thenumber of additional shares resulting from the stock split)

(3)

*
*

Cash flows were shown as an operating cash flow in the consolidated statements of cash flows.
Interest-bearing debt refers to all debt posted in the balance sheets upon which interest is paid. The amount of interest paid in*

the consolidated statements of cash flows was treated as an interest payment in the calculations above.
Interest-coverage ratio is not shown due to the fact that there were no interest payments.
Basic policy on the distribution of profit and dividends for the fiscal year under review and the following fiscal year
The Milbon Group considers the returning of profits to shareholders as an important management issue and makes it a basic
policy to pay dividends in accordance with its operating results, while enhancing its business structure by maintaining internal
reserves to the end of improving its earnings in the future. Moreover, we have set the target dividend payout ratio at 40%.
Interim dividends are determined at the Board of Directors meetings and year-end dividends at the general meeting ofshareholders, and it is the Group’s basic policy to pay dividends twice every fiscal year.
For the current fiscal year, upon comprehensively taking into account factors including our financial position and profit levels,
we have decided to pay a year-end dividend of 29 yen per share. As a result, the total annual dividend per share will amountto 56 yen per share, which includes the interim dividend of 27 yen per share that has already been paid.
For the following fiscal year, we plan to pay an annual dividend of 58 yen per share.

4(4) Business and other risks
Risks that could potentially affect the operating results, stock price and financial position of the Milbon Group include thefollowing.
The future risks identified in this section are based on assessments made by the Company as of the end of the fiscal year underreview. The Group recognizes the possibility of these risk events actually occurring and has prepared policies to prevent andavert such risks and take appropriate measures to minimize the impact of such risks when they do occur.
① Risks associated with global expansion
The Milbon Group is aggressively expanding its business into the overseas markets. Global expansion entails risks relating tointellectual property rights including counterfeit goods, unforeseeable changes in laws and regulations, and risks of social unrest
due to terrorism, war and other factors. Such risks could have a major impact on the Group's operating results and financial
position.
② Information security
The Milbon Group has taken various measures to protect information assets including customers' personal information andconfidential information.However, unforeseeable events, such as the leakage of information due to unauthorized access, could
have a major impact on the Group's operating results and financial position.
③ Risks associated with debt collection
The Milbon Group deliberates records necessary reserves upon regularly reviewing its business partners from both quantitative
qualitative perspectives in terms of collection status. However, deterioration in the business partner's credit standing or events
such as bankruptcy could have a major impact on the Group's operating results and financial position.
④ Risks associated with major accidents
The Milbon Group utilizes company cars in its sales activities. The Group implements safety measures that place maximum
priority on human life, including strict control over driving and the reinforcement of safety training.However, should a major
accident event occur, it could lead to the loss of the customers' and the public's trust in the Group and have a major impact on
the Group's operating results and financial position.
⑤ Risks associated with product-related health hazards
Many Milbon Group products come into direct contact with consumers' hair and scalp, And as such the Milbon Group places
top priority on its efforts to ensure product safety and quality.However, should an unforeseeable incident involving a major
health hazard occur, it could lead to the loss of the customers' and the public's trust in the Group and have a major impact on
the Group's operating results and financial position.

5

2. Outline of the Milbon Group
Name

Location

Capital stock or capital
contribution

Main line of business

Share of voting
rightsPercentage (%)

United States
New York StateUSD 2 million

Sale of hair products

100.0

Sells the Company's hairproducts in the U.S.

100.0

Sells the Company's hairproducts in China.
Three executives holdconcurrent posts at theCompany.

Relationship with the Company(Consolidated subsidiary)
MILBON USA, INC.
(NOTE) 1(Consolidated subsidiary)
Milbon Trading (Shanghai) Co.,Ltd.
(NOTE) 1

China
Shanghai CityJPY 430 million

Sale of hair products(Consolidated subsidiary)

Milbon Korea Co., Ltd.
(NOTE) 1

South Korea
Seoul City

KRW 3,000 million

Sale of hair products

100.0

Sells the Company's hairproducts in South Korea.
Three executives holdconcurrent posts at theCompany.

Kingdom ofThailandRayong

THB 450 million

Manufacture and saleof hair products

100.0

Manufactures and sells theCompany's hair products in
Thailand.

1.5 thousand thousand
Malaysia
RinggitSale of hair products

100.0

We sell our hair cosmetics in
Malaysia.

22,594 thousand
thousand
VND

Sale of hair products

100.0

We sell our hair cosmetics in
Vietnam.

250 thousand
Singapore dollars

Sale of hair products

100.0

Plans to sell the Company's hairproducts in Singapore.

(Consolidated subsidiary)
MILBON (THAILAND) CO.,LTD.
(NOTE) 1(Consolidated subsidiary)
MILBON MALAYSIA SDN.
BHD.

Malaysia
Kuala Lumpur(Consolidated subsidiary)
MILBON VIETNAM CO.,LTD.

VietnamHo Chi Minh City

(Consolidated subsidiary)
MILBON SINGAPORE PTE.
LTD.

Singapore(NOTE) 1. The company falls under the category of "specified subsidiary."
2. In addition to the companies noted above, the Group has one equity-method affiliate.

6The following diagram shows the positioning of Milbon Group companies and the Group's businesses.
(Diagram of business activities)(Notes) 1.For overseas transactions, sales channels differ depending on the country.
2 The main items for store sales are hair-care products.
3 MILBON SINGAPORE PTE. LTD. was newly established in the current consolidated fiscal year, but as it has notcommenced operations as of the end of Fiscal Year 2019, it has not been described in the above business chart.

7

3. Basic Rationale for Selecting the Accounting Standards
The Milbon Group currently prepares the consolidated financial statements according to the generally accepted accounting
standards in Japan (Japanese GAAP), as it makes it possible to compare the consolidated financial statements against previous fiscal
year and against other companies.
With regard to adoption of International Financial Reporting Standards (IFRS), it is the Group's policy to respond to this issue
appropriately based on consideration of various domestic and international circumstances.

84. Consolidated Financial Statements and Main Notes(1) Consolidated Balance Sheets(Thousand yen)Previous fiscal year
(As of December 31, 2018)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Merchandise and finished goods
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
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
LandConstruction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

9

Current fiscal year
(As of December 31, 2019)

9,778,129
3,875,865
3,643,382
39,6871,140,083
410,547(56,335)
18,831,359

10,615,390
4,180,186
3,912,361
34,781
1,120,202
470,610(3,185)
20,330,346

11,312,678(4,661,323)
6,651,355
6,541,039(4,433,316)
2,107,722
5,028,467
13,8302,542,100(2,002,027)
540,072
14,341,447
987,82112,015,077(4,991,438)
7,023,638
6,638,981(4,631,019)
2,007,962
5,001,021
84,801
2,718,267(2,137,166)
581,100
14,698,524
1,174,902

4,147,992
324,909
1,049,684(48,272)
5,474,314
20,803,583
39,634,942

3,991,136
149,125
155,832
204,502
1,266,204(58,381)5,708,420
21,581,847
41,912,194

(Thousand yen)Previous fiscal year
(As of December 31, 2018)
Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - other
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Net defined benefit liability
Deferred tax liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

10

Current fiscal year
(As of December 31, 2019)

865,878
2,376,675
1,585,720
419,922
1,097,287
6,345,484

797,033
2,479,907
891,258
397,297
841,726
5,407,223

57,24380,417
137,660
6,483,145

4,290
670
505,563
111,835
622,359
6,029,582

2,000,000
200,61330,614,693(558,811)
32,256,496

2,000,000
200,742
33,266,155(563,197)
34,903,700

859,702
264,024(228,425)
895,301
33,151,797
39,634,942

773,082
267,184(61,355)
978,91135,882,612
41,912,194

(2) Consolidated Statements of Earnings and Consolidated Statements of Comprehensive Income Consolidated Statements ofEarnings
Consolidated Statements of Comprehensive Income(Thousand yen)Previous fiscal year
(On January 1, 2018
From December 31, 2018
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Company house defrayment income
Gain on surrender of insurance
Subsidy income
Other
Total non-operating income
Non-operating expenses
Sales discounts
Share of loss of entities accounted for using equity
methodForeign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent

11

Current fiscal year
(On January 1, 2019
To December 31, 201933,882,496
11,693,433
22,189,063
15,928,538
6,260,524

36,266,444
12,554,646
23,711,797
16,959,857
6,751,939

6,980
60,87057,686
3,255
50,52857,251
236,571

16,38064,034
14,39244,01388,647
227,468

608,641

643,133

3,399

66,58569,657
4,025
685,723
5,811,372

29,105
9,045
747,869
6,231,538

229
310,341
310,571

799
799

8,158
8,158
6,113,785
1,583,193
35,174
1,618,367
4,495,417
4,495,417

3,403
11,371
14,7746,217,563
1,614,943
85,004
1,699,947
4,517,615
4,517,615

Consolidated Statements of Comprehensive Income(Thousand yen)Previous fiscal year
(On January 1, 2018
From December 31, 2018
ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to non-controllinginterests

12

Current fiscal year
(On January 1, 2019
To December 31, 2019

4,495,417

4,517,615(472,318)(117,367)(216,247)(805,933)
3,689,484(86,620)3,159
167,070
83,6104,601,226

3,689,484

4,601,226--

(3) Consolidated Statements of Changes in Shareholders' Equity
Previous fiscal year (January 1, 2018, to December 31, 2018)(Thousand yen)
Shareholders' equity
Capital stock
Balance at beginning of current
periodCapital surplus

2,000,000

200,066

Retained earnings
27,756,292

Treasury shares(554,227)

Total shareholders'equity29,402,131

Changes of items during period
Dividends of surplus(1,637,016)(1,637,016)

Profit attributable to ownersof parent

4,495,417

4,495,417

Purchase of treasury shares
Disposal of treasury shares

547(4,894)(4,894)309

857

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at end of current period-

547

2,858,401(4,584)2,854,364

2,000,000

200,61330,614,693(558,811)

32,256,496

Accumulated other comprehensive income

Balance at beginning of current
periodValuation difference on
available-for-salesecurities

Foreign currencytranslation adjustment

Remeasurements ofdefined benefit plans

Total accumulated othercomprehensive income

1,332,021

381,392(12,178)

1,701,234

Total net assets

31,103,366

Changes of items during period
Dividends of surplus(1,637,016)

Profit attributable to ownersof parent

4,495,417

Purchase of treasury shares(4,894)

Disposal of treasury shares

857

Net changes of items otherthan shareholders' equity(472,318)(117,367)(216,247)(805,933)(805,933)

Total changes of items during
period(472,318)(117,367)(216,247)(805,933)

2,048,431

Balance at end of current period

859,702

264,024(228,425)

895,301

33,151,797

13

Fiscal Year 2019 (January 1, 2,019 to December 31, 2019)(Thousand yen)
Shareholders’ equity
Capital stock
Balance at beginning of current
periodCapital surplus

2,000,000

200,613Retained earnings
30,614,693

Treasury shares(558,811)

32,256,496

Changes of items during period
Dividends of surplus(1,866,153)(1,866,153)

Profit attributable to ownersof parent

4,517,615

4,517,615

Purchase of treasury shares
Disposal of treasury shares

128(4,439)(4,439)53

182

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at end of current period-

128

2,651,461(4,385)2,647,204

2,000,000

200,742

33,266,155(563,197)

34,903,700

Accumulated other comprehensive income

Balance at beginning of current
periodValuation difference on
available-for-salesecurities

Foreign currencytranslation adjustment

Remeasurements ofdefined benefit plans

Total accumulated othercomprehensive income

859,702

264,024(228,425)

895,301

Total net assets

33,151,797

Changes of items during period
Dividends of surplus(1,866,153)

Profit attributable to ownersof parent

4,517,615

Purchase of treasury shares(4,439)

Disposal of treasury shares

182

Net changes of items otherthan shareholders' equity(86,620)3,159

167,070

83,61083,610Total changes of items during
period(86,620)3,159

167,070

83,6102,730,815

Balance at end of current period

773,082

267,184(61,355)

978,91135,882,612

14

(4) Consolidated Statements of Cash Flows(Thousand yen)Previous fiscal year
(On January 1, 2018
From December 31, 2018
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Interest and dividend income
Share of (profit) loss of entities accounted for using
equity method
Foreign exchange losses (gains)
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable trade
Other, net
SubtotalInterest and dividend income received
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments of loans receivableCollection of loans receivable
Payments into time deposits
Purchase of investment securities
Proceeds from sales of investment securities
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Proceeds from cancellation of insurance funds
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net decrease (increase) in treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities

15

Current fiscal year
(On January 1, 2019
To December 31, 2019

6,113,785
1,380,881(78,710)102,079(34,042)
10,092(67,850)

6,217,563
1,493,857(43,014)(22,381)
82,538(48,095)(80,414)

3,399

66,585(1,475)(310,341)
(229)
8,158

(25,286)
2,603
11,371

1,191,330(300,087)(813,250)(278,807)(272,641)(77,902)

1,287
7,232,471
67,849(812,988)
6,487,332(325,953)
6,672,577
78,297(2,264,011)
4,486,862(941,457)
266(396,429)(4,110)5,313(325)(244,100)
476,722(141,009)
46,617
6,589(10,226)(1,202,149)(1,098,797)
2,901(407,709)(150,840)
4,626(1,000,189)(193,986)
67,444(1,160)(2,777,709)(4,036)(1,635,166)(1,639,203)(4,257)(1,865,017)(1,869,274)

(Thousand yen)Previous fiscal year
(On January 1, 2018
From December 31, 2018
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

16

Current fiscal year
(On January 1, 2019
To December 31, 2019(32,513)(5,062)

3,613,466
5,928,017※ 9,541,483(165,183)
9,541,483※ 9,376,300

(5) Notes regarding consolidated financial statements(Notes regarding going concern assumption)
None(Significant matters that serve as the basis for preparation of consolidated financial statements)
1 The scope of consolidation
Matters regarding Number of consolidated subsidiaries: 7
Names of consolidated subsidiaries
MILBON USA,INC.
Milbon Trading (Shanghai)Co.,Ltd.
Milbon Korea Co.,Ltd.
MILBON (THAILAND)CO., LTD.
MILBON MALAYSIA SDN. BHD.
MILBON VIETNAM CO., LTD.
MILBON SINGAPORE PTE. LTD.
Of the above, MILBON SINGAPORE PTE. LTD. is included in the scope of consolidation because it was newly
established in the current consolidated fiscal year.
2 Matters regarding application of equity method
Number of equity-method affiliates: 1
Names of companies, etc.
KOSÉ Milbon Cosmetics Co., Ltd.
3 Matters regarding the fiscal year, etc. of consolidated subsidiaries
The account closing date of consolidated subsidiaries is the same as the consolidated account closing date.
4 Matters regarding accounting policies(1) Valuation standards and methods for important assets① Securities
1) Held-to-maturity bonds
Stated using the amortized cost method
2) Available-for-sale securities
With market value
Stated at market value based on the market price, etc. of the account closing date (unrealized gains and losses arereported as a separate component of net assets, and cost of sales is calculated by the moving-average method)
Market value not available
Stated at cost using the moving-average method② Inventories
MerchandiseStated primarily at cost using the first-in first-out method (the balance sheet value is calculated using the inventory
write- down method based on decreased profitability)
Finished goods and work in process
Stated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Raw materials
Stated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Supplies
Stated primarily at cost using the last-purchase-price method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)17

(2) Depreciation and amortization methods for important depreciable assets① Property, plant and equipment
They are amortized using the straight-line method.
Useful lives of principal assets are as follows.
Buildings and structures 31 to 50 years
Machinery, equipment and vehicles 6 to 8 years② Intangible assets
They are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated period of internal use (3 to 5
years).
(3) Accounting standards for major allowances① Allowance for doubtful accounts
To provide for possible losses on doubtful receivables, the Company and its overseas consolidated subsidiaries provide
an allowance for doubtful receivables based on the historical write-off ratio for general receivables and on an estimateduncollectible amount for specific receivables, such as doubtful receivables.
② Provision for bonuses
To provide for payment of bonuses to employees (including those for employees also serving as officers), the Company
and its overseas consolidated subsidiaries record the estimated amount of payment of bonuses.
(4) Accounting method for retirement benefits① Periodic allocation of projected retirement benefits
In calculating retirement benefit obligations, the benefit formula basis is applied for allocation of projected retirement
benefits to the periods up to the end of the fiscal year under review.
② Method of amortizing actuarial differences and past service costs
Actuarial differences are amortized using the straight-line method over a certain number of years (5 years) within the
average remaining period of service of the corresponding employees at the time of the occurrence, starting from the fiscal
year following the occurrence.
Past service costs are amortized using the straight-line method over a certain number of years (5 years) within the
average remaining period of service of the corresponding employees at the time of the occurrence.
③ Adoption of simplified method in small companies
Some of the overseas consolidated subsidiaries adopt a simplified method for calculating net defined benefit liability andretirement benefit expenses, in which the amount of retirement benefit payable at fiscal year-end due to voluntarytermination is recognized as retirement benefit obligations.
(5) The standards for recognition of significant revenues and expenses
We apply the Accounting Standard for Recognition of Revenue (Corporate Accounting Standard No. 29 March 30, 2018)
and the Guidelines for Applying the Accounting Standard for Recognition of Revenue (Corporate Accounting Standard No.
30, March 30, 2018) and recognize revenue as being in the amount that is expected to be received in exchange for such goods
or services when the promised product or service control transfers to the customer.
(6) Standard for translation of significant foreign currency dominated assets and liabilities into yen
Foreign currency denominated monetary claims and liabilities are translated into yen at the spot exchange rate on the
consolidated account closing date, and translation differences are accounted for as profit or loss. The assets and liabilities ofoverseas consolidated subsidiaries are translated into yen at the spot exchange rate on the local account closing dates ofoverseas consolidated subsidiaries, while revenue and expenses are translated into yen at the average exchange rate for theperiod, and translation differences are recorded in foreign currency translation adjustment under net assets.
(7) Scope of funds in the consolidated statements of cash flows
Funds (cash and cash equivalents) in the consolidated statements of cash flows comprise cash on hand, deposits available
for withdrawal as needed and short-term investments due for redemption within three months from the date of acquisition,
which are easily cashable and are subject to minimal risk of fluctuation in value.

18

(8)Other significant matters in the preparation of consolidated financial statements, etc.
Taxes are accounted for by the tax
Consumption tax and other similar taxes are accounted for by the tax-exclusion method.

(Changes in accounting policies)
The Financial Statements for Revenue Recognition (Corporate Accounting Standard No. 29, March 30, 2018) and the
Guidelines for Applying the Financial Statements for Revenue Recognition (Corporate Accounting Standard 30, March 30,2018) are now applicable from the beginning of the consolidated fiscal year beginning of April 1, 2018, and therefore the
Financial Statements for Revenue Recognition are being applied early on from the beginning of the current fiscal year.
When consideration arising from contracts with customers includes variable consideration, the Company includes suchvariable consideration within the transaction price to the extent that it is highly probable that a significant reversal ofpreviously recognized cumulative revenue will not occur when the uncertainty is subsequently resolved. Accordingly, sales
rebates previously presented as selling, general and administrative expenses are deducted from net sales and expenses related
to the goods transferred to business partners free of charge according to their sales results are added to cost of sales.
The Company applied the Accounting Standard for Revenue Recognition retrospectively to the previous fiscal year inaccordance with the basic treatment stipulated in Paragraph 84 of the Accounting Standard for Revenue Recognition.
As a result, net sales and gross profit for the previous fiscal year decreased by 1,302 million yen and 2,172 million yen,respectively, compared with the figures before retroactively applying these standards. However, there was no effect on
operating income, ordinary income, income before income taxes and minority interests, or net income.

(Change of Labeling Methods)(Changes due to the adoption of "Partial Revision of Accounting Standard for Tax Effect Accounting")"Partial Revision of Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018) has been
applied from the beginning of the fiscal year under review. Deferred tax assets are presented as investments and other assets,
and deferred tax liabilities are presented as non-current liabilities.
As a result, "Deferred tax assets" under "Current assets" decreased by 472 million yen and "Deferred tax assets" under"Investments and other assets" increased by 313 million yen in the consolidated balance sheets for the previous fiscal year. In
addition, "Deferred tax liabilities" under "Non-current liabilities" decreased by 159 million yen.
Deferred tax assets of the same entity and deferred tax liabilities are presented after offsetting each other. As a result, total
assets decreased by 159 million yen from the previous year.

(Changes in accounting estimates)
During the fiscal year under review, estimates of asset retirement obligations related to the obligation to restore properties
to their original state at the expense of tenants vacating were changed due to the relocation of the business offices of theCompany and its consolidated overseas subsidiaries.
Regarding the recognition of asset retirement obligations, in place of the recognition of liabilities, the Company hasreasonably estimated the amount that it would not be possible to ultimately collect lease deposits related to the real estate
rental agreement, and accounted for the amount that was borne in the current consolidated fiscal year as expenses. From thecurrent consolidated fiscal year, however, the Company has decided to record the expense of restoration as an asset retirement
obligation as an asset retirement obligation.
This was due to the fact that the total amount of restoration expenses exceeded the total amount of lease deposits in the
consolidated fiscal year under review, and it was no longer permitted to apply the conventional method.
As a result, asset retirement obligations of 505,563 thousand yen were recorded in the fiscal year under review. The impact
of changes in estimates is insignificant.

19