Consolidated Financial Results for the Fiscal Year Ended December 31, 2018
[Japanese GAAP]
February 13, 2019
Name of registrant:
Milbon Co., Ltd.
Tokyo Stock Exchange, First Section
Code No.:4919
URL http://www.milbon.co.jp
Representative:
Ryuji Sato, President and CEO
Inquiries:
Masahiro Murai, Executive Director
TEL: +81-3-3517-3915
Scheduled date of annual general meeting of shareholders: March 28, 2019
Scheduled filing date for Securities Report: March 28, 2019
Scheduled starting date of dividend payments: March 29, 2019
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. Consolidated financial results for the fiscal year ended December 31, 2018 (January 1, 2018 - December 31, 2018)(1) Consolidated operating results
Net salesYear ended December 31, 2018

Million yen
35,185%-

Million yen
6,260

33,456-

5,345

Year ended December 31, 2017
(Note) Comprehensive income

Year ended December 31, 2018

Operating income

Year ended December 31, 2018: 3,689 million yen [-%]

(Percentages show year-on-year changes.)
Profit attributable to ownersof parent%
Million yen
%
4,495
-

Ordinary income%-

Million yen
5,811

-

4,997

-

3,817

Basic earnings per share Diluted earnings per share Return on equity (ROE) Return on assets (ROA)
Yen
Yen
%
%
137.3114.0
15.0

Year ended December 31, 2017116.58(Reference)Year ended December 31, 2018: (3) million yen

Equity in earnings (losses) of affiliates-

Year ended December 31, 2017: 4,715 million yen [-%]

-

13.0

Operating income ratio
%
17.8

14.3

16.0

Year ended December 31, 2017: 0 million yen(Notes)1. The fiscal year ended December 31, 2017 is an irregular accounting period. Results are for the 12 months plus 11 days from December 21, 2016 to December 31, 2017. For
the consolidated accounting, financial results for overseas consolidated subsidiaries are their respective individual results for the 15-month period from October 1, 2016 to
December 31, 2017. Therefore, year-on-year changes are not stated.
2. On January 1, 2018, the Company conducted a stock split at a ratio of two shares for every one share of common stock. Accordingly, basic earnings per share was calculatedon the assumption that the stock split was conducted at the beginning of the previous fiscal year.
(2) Consolidated financial position
Total assets
Million yen
39,794As of December 31, 2018
As of December 31, 2017
(Reference)

EquityNet assets
Million yen
33,15137,642Equity ratio

31,103As of December 31, 2018: 33,151 million yen

Net assets per share
%
83.3

Yen
1,012.58

82.6

949.99As of December 31, 2017: 31,103 million yen(Note) On January 1, 2018, the Company conducted a stock split at a ratio of two shares for every one share of common stock. Accordingly, net assets per share was calculatedon the assumption that the stock split was conducted at the beginning of the previous fiscal year.
(3) Consolidated cash flows

Year ended December 31, 2018

Cash flows from operating
activities
Million yen
6,487

Cash flows from investing
activities
Million yen(1,202)

Cash flows from financing
activities
Million yen(1,639)Cash and cash equivalents
at end of period
Million yen
9,541

Year ended December 31, 2017
4,346
(1,919)(1,317)
5,928(Note) The fiscal year ended December 31, 2017 is an irregular accounting period. Results are for the 12 months plus 11 days from December 21, 2016 to December 31, 2017.
For the consolidated accounting, financial results for overseas consolidated subsidiaries are their respective individual results for the 15-month period from October 1, 2016 to
December 31, 2017.

2. Payment of dividends
Annual dividends
End of 1st quarter
Yen

End of 2ndquarterYen

End of 3rd
End of fiscal year
quarterYen
Yen

Total dividends(Annual)

Total

Dividend
Dividends on
payout ratio
equity (DOE)(Consolidated) (Consolidated)

Yen

Million yen%%

Year ended December 31, 2017

-

40.00

-

52.00

92.00

1,506

39.5

5.1

Year ended December 31, 2018

-

24.00

-

30.00

54.00

1,767

39.3

5.5

Year ending December 31, 2019
27.00
27.00
54.00
(forecast)(Note) On January 1, 2018, the Company conducted a stock split at a ratio of two shares for every one share of common stock. Regarding the dividend for the fiscal year
ended December 31, 2017, the amount stated is the actual dividend paid before the stock split.

3. Consolidated operating forecasts for the fiscal year ending December 31, 2019 (January 1, 2019 - December 31, 2019)(Percentages show year-on-year changes.)
Net salesYear ending December 31, 2019

Million yen
36,600Operating income% Million yen
8.0
6,840

Ordinary income% Million yen
9.3
6,190

Profit attributable to
Basic earnings per shareowners of parent% Million yen
%
Yen
6.5
4,350
(3.2)
132.86(Note[A1]) The Company adopts the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29 issued on March 30,2018) and the “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 issued on March 30, 2018). In addition, year-on-yearchanges are calculated on the basis of consolidated financial results for the fiscal year ended December 31, 2018, after reclassification.

*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: ): 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 theaccounting standards, etc.
: None2) Changes in accounting policies other than those in 1) above: None3) Changes in accounting estimates: None4) Retrospective restatements: None(3) Number of shares issued (common stock)1) Number of shares issued at the end of the period(including treasury shares)
2) Number of treasury shares at the end of the period
3) Average number of shares during the period

As ofDecember 31, 2018
As ofDecember 31, 2018Year ended
December 31, 201833,117,234 shares
377,460 shares
32,740,018 shares

As ofDecember 31, 2017
As ofDecember 31, 2017
Year ended
December 31, 201733,117,234 shares
376,572 shares
32,742,188 shares(Note) On January 1, 2018, the Company conducted a stock split at a ratio of two shares for every one share of common stock. Accordingly, the number of shares issued at theend of the period, the number of treasury shares at the end of the period, and the average number of shares during the period were calculated on the assumption that the stock
split was conducted at the beginning of the fiscal year ended December 31, 2017.

*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. For notes on the use of preconditions ofoperating forecasts and the use of operating forecasts, refer to “1. Analysis of Operating Results and Financial Position (1) Analysis of operating
results” on page 2 of the supplementary materials.

Contents of supplementary materials
1. Overview of Operating Results, etc. .……………………………………...…………....………………………………………. 2(1)

Analysis of operating results ……………………………………………………...…….………………………………... 2(2)

Analysis of financial position ……………………………………………………...……………………………...……… 3(3)

Basic policy on the distribution of profit and dividends for the fiscal year under review and the following fiscal year ... 4(4)

Business and other risks ……………………………………………………...……………………………...……..…….. 5

2. Outline of the Milbon Group ………………………………………………...…………………………………...……..……… 6
3. Basic Rationale for Selecting the Accounting Standards …………………...…………………………………...……..………. 8
4. Consolidated Financial Statements and Main Notes ………………………………………………..………………..……….

9(1)

Consolidated Balance Sheets ……………………………………………………………………….…………..………

9(2)

Consolidated Statements of Earnings and Consolidated Statements of Comprehensive Income …..…………..……… 11(3)

Consolidated Statements of Changes in Shareholders’ Equity …………………………………………………………

(4)

Consolidated Statements of Cash Flows …………………………………………………….………………………….. 15(5)

Notes regarding consolidated financial statements ………………………………………………………………….….... 16

13

Notes regarding going concern assumption ………………………………………...……....………………………….... 16
Significant matters that serve as the basis for preparation of consolidated financial statements ……………………….. 16
Notes to Consolidated Balance Sheets ……………………………………………………….………………………….. 18
Notes to Consolidated Statements of Earnings …………………………………………………….…………………… 18
Notes to Consolidated Statements of Comprehensive Income ……………………………………….………………… 20
Notes to Consolidated Statements of Changes in Shareholders’ Equity ……………………………………….……….. 21
Notes to Consolidated Statements of Cash Flows ……………………………………….……………………………… 22
Lease transactions …………………………………………………...…………………………………...……..……….. 23
Financial instruments ………………………………………………………...…………………………………...…….. 23
Securities …………………………………………………...…………………………………...……..………..……..… 27
Derivative transactions …………………………………………………...…………………………………...……..…… 30
Retirement benefits …………………………………………………...…………………………………...……..………. 31
Stock options, etc. …………………………………………………...…………………………………...……..……….. 35
Tax effect accounting …………………………………………………...…………………………………...…………… 36
Business combinations …………………………………………………...…………………………………...……..…… 37
Asset retirement obligations …………………………………………………...…………………………………...…….. 37
Real estate for leasing, etc. …………………………………………………...…………………………………...……… 37
Segment information, etc. …………………………………………………...…………………………………...………. 38
Related party transactions …………………………………………………...…………………………………...………. 39
Per share information …………………………………………………...…………………………………...……..…….. 40
Significant subsequent events …………………………………………………...…………………………………...…... 40

-1-

1.

Overview of Operating Results, etc.

(1)

Analysis of operating results
1)

Operating results for the fiscal year under review
Starting in the previous fiscal year, the Company changed its fiscal year end from December 20 to December 31. Additionally,
the Company’s consolidated subsidiaries changed their fiscal year end from September 30 to December 31. These changes
give the Company and all of its consolidated subsidiaries the same fiscal year end. While the fiscal year under review covers
the 12 months from January 1, 2018 to December 31, 2018, the previous fiscal year covered the 12 months and 11 days from
December 21, 2016 to December 31, 2017 (for consolidated subsidiaries, the 15 months from October 1, 2016 to December
31, 2017). Therefore, year-on-year comparisons are not stated.
During the fiscal year under review, the Japanese economy continued on a moderate recovery trend as personal consumption
picked up amid improvement in the employment environment. The global economy is also generally on a recovery trend.
However, concerns surround the overall economic outlook regarding the impact on the global economy, as a result of aslowdown in the Chinese economy from prolonged trade friction between the U.S. and China, as well as the protectionist
trade policy of the U.S.
Amid this environment, the Milbon Group worked with salons premised on the goal of “aiming to improve labor productivity
by supporting lifetime hair designers who fulfill ‘lifetime beauty’ and enhance its dual time values.”
In the hair care product category, the upgraded version of Aujua released in November 2017 continued to be very wellreceived by the market. Additionally, the “milbon” brand, targeting the global market, also progressed steadily in salons,
and the premium brand remained strong. In the hair coloring product category, the fashion color Ordeve Addicthy, which
was launched in February 2017, saw substantial growth. In overseas markets, the East Asian region, mainly China,
performed steadily.
As a result of the above efforts, consolidated net sales for the fiscal year under review amounted to 35,185 million yen,operating income was 6,260 million yen, ordinary income was 5,811 million yen, and profit attributable to owners of parent
was 4,495 million yen. Reversal of provision for sales returns of 209 million yen recorded during the first quarter for theprevious version of Aujua is included in each type of income. In addition, 310 million yen in gain on sales of investment
securities due to sales of cross-held shares, etc., was recorded during the fiscal year under review.

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

19,511

58.3

21,12460.0––

Hair coloring products

12,09536.2

12,202

34.7––

Permanent wave products

1,569

4.7

1,590

4.5

–

–

Others

279

0.8

267

0.8

–

–

Total

33,456100.0

35,185

100.0

–

–

[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

27,974

83.6

29,872

84.9––

Overseas sales

5,481

16.4

5,312

15.1

–

–

Total

33,456100.0

35,185

100.0

–

–

-2-

2)

Outlook for fiscal 2019
In the economic outlook for Japan, an increase in the consumption tax scheduled for October 2019 has triggered concerns
about budget-mindedness among consumers. Other issues include the slowdown in the Chinese economy and the impact on
the global economy resulting from the prolonged trade friction between the U.S. and China.
Amid this environment, the Milbon Group will work with salons premised on the goal of “promoting the NEXT 100 by
supporting ‘the creation of salons where human resources development is well established,’ where personnel are nurtured
and retained, and creating ‘lifetime beauty salons’ by training beauty partners who fulfill lifetime beauty for women.”
The Company anticipates net sales of 36,600 million yen (up 8.0% year on year), operating income of 6,840 million yen (up9.3% year on year), ordinary income of 6,190 million yen (up 6.5% year on year), and profit attributable to owners of parentof 4,350 million yen (down 3.2% year on year) on a consolidated basis for the next fiscal year. The “Accounting Standard
for Revenue Recognition” (ASBJ Statement No. 29 issued on March 30, 2018) and the “Implementation Guidance on
Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 issued on March 30, 2018) have been applied tothese amounts. The year-on-year comparisons are calculated on the basis of consolidated financial results for the fiscal year
ended December 31, 2018, after reclassification.

(2)

Analysis of financial position
1)

Assets, liabilities and net assets
Total assets at the end of the fiscal year ended December 31, 2018 increased by 2,151 million yen compared to the end of
the previous fiscal year to 39,794 million yen.
Current assets increased by 3,197 million yen compared to the end of the previous fiscal year to 19,303 million yen. Thiswas mainly due to the 3,613 million yen increase in cash and deposits, the 651 million yen increase in merchandise andfinished goods and the 1,200 million yen decrease in notes and accounts receivable - trade.
Non-current assets decreased by 1,045 million yen compared to the end of the previous fiscal year to 20,490 million yen.
This was mainly due to the 285 million yen decrease in property, plant and equipment due to the recording of depreciation,etc., and the 600 million yen decrease in investment securities associated with the sales and drop in prices of listed stocks.
Current liabilities increased by 350 million yen compared to the end of the previous fiscal year to 6,345 million yen. Thiswas mainly due to the 799 million yen increase in income taxes payable and the 280 million yen decrease in accounts payable– trade, the 265 million yen decrease in provision for sales returns and the 158 million yen decrease in accounts payable –other.
Non-current liabilities decreased by 247 million yen compared to the end of the previous fiscal year to 296 million yen.
Net assets increased by 2,048 million yen compared to the end of the previous fiscal year to 33,151 million yen. This was
mainly due to the 2,858 million yen increase in retained earnings and the 472 million yen decrease in valuation difference
on available-for-sale securities associated with the sales and drop in prices of listed stocks.
As a result, the equity ratio changed from 82.6% at the end of the previous fiscal year to 83.3%. Net assets per share basedon the total outstanding shares as of the end of the period under review increased from 949.99 yen per share at the end of
the previous fiscal year to 1,012.58 yen per share.

2)

Cash flows
Cash and cash equivalents (hereinafter “net cash”) at the end of the current fiscal year increased by 3,613 million yen
compared to the end of the previous fiscal year to 9,541 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 6,487 million yen. This was mainly the result of posting 6,113 million
yen in profit before income taxes, depreciation of 1,380 million yen, 812 million yen in income taxes paid and the 1,191
million yen decrease in notes and accounts receivable - trade.
(Cash flows from investing activities)
Net cash used in investing activities amounted to 1,202 million yen. This was mainly due to the purchase of property, plantand equipment of 941 million yen, the purchase of intangible assets of 396 million yen.
(Cash flows from financing activities)
Net cash used in financing activities amounted to 1,639 million yen. This was mainly due to the cash dividends paid toshareholders of 1,635 million yen.
-3-

(Reference) Cash flow-related indicators
Year ended
December 20,
2014

Year ended
December 20,
2015

Year ended
December 20,
2016

Year ended
December 31,
2017

Year ended
December 31,
2018

Equity ratio (%)

85.7

85.1

85.4

82.6

83.3

Equity ratio based on market
value (%)

183.0

264.2

223.3

329.6

367.8

Interest-bearing debt to cash
flows ratio (%)

3.0

2.1

2.4

1.8

1.2

(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)*

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*Interest-coverage ratio is not shown due to the fact that there were no interest payments.

(3)

Basic policy on the distribution of profit and dividends for the fiscal year under review and the following fiscal year

the consolidated statements of cash flows was treated as an interest payment in the calculations above.

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 30 yen per share. As a result, the total annual dividend per share will amountto 54 yen per share, which includes the interim dividend of 24 yen per share that has already been paid.
For the following fiscal year, we plan to pay an annual dividend of 54 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
to intellectual 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 andfinancial 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 and records necessary reserves upon regularly reviewing its business partners from bothquantitative and qualitative perspectives and 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 amajor 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(Consolidated subsidiary)
MILBON USA, INC.
(Note) 1.
(Consolidated subsidiary)
Milbon Trading(Shanghai) Co., Ltd.
(Note) 1.

Location

New York, USA

Shanghai, China

Capital stockor capital
contribution
USD 2 million

JPY 430 million

Main line ofbusiness

Percentage ofvoting rights held(%)

Relationship with theCompany

100.0

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

Sale of hairproducts

Sale of hairproducts(Consolidated subsidiary)
Milbon Korea Co., Ltd.
(Note) 1.

Seoul,South Korea

KRW 3,000 Sale of hairmillion products(Consolidated subsidiary)
Manufacture and
MILBON (THAILAND)
Rayong, Thailand THB 450 million sale of hairCO., LTD.
products(Note) 1.
(Consolidated subsidiary)
Kuala Lumpur,
Sale of hair
MYR 1.5 million
MILBON MALAYSIA
Malaysia
products
SDN. BHD.
(Consolidated subsidiary)
Ho Chi MinhVND 22,594 Sale of hair
MILBON VIETNAM
city, Vietnam
million products
CO., LTD(Notes) 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-

Sells the Company’s hairproducts in China.
100.0 Three executives holdconcurrent posts at theCompany.
Sells the Company’s hairproducts in South Korea.
100.0 Three executives holdconcurrent posts at theCompany.
Manufactures and sells the
100.0 Company’s hair productsin Thailand.
Plans to sell the
100.0 Company’s hair products
in Malaysia.
Plans to sell the
100.0 Company’s hair products
in Vietnam.

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 MALAYSIA SDN. BHD. and MILBON VIETNAM CO., LTD were newly established during the current
fiscal year but had not begun operations as of the end of the fiscal year ended December 31, 2018. Therefore, they are
not included in the above diagram of business activities.

-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 andagainst 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.
(1)

Consolidated Financial Statements and Main Notes
Consolidated Balance Sheets(Thousand yen)Previous Fiscal Year

Current Fiscal Year(As of December 31, 2017)(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
Deferred tax assets
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
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

6,164,763*2 5,076,624
2,991,885
57,709
1,025,671
458,893
450,693(119,553)
16,106,686

11,148,669(4,286,940)
6,861,729
6,172,774(4,002,956)
2,169,817
5,029,802
12,9812,476,243(1,923,830)
552,412
14,626,742
943,654*1 4,748,113
275,1889,750
996,332(63,862)
5,965,522
21,535,919
37,642,605-9-

9,778,129*2 3,875,865

3,643,382
39,6871,140,083
472,397
410,547(56,335)
19,303,757

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
987,821*1 4,147,992–
11,6401,049,684(48,272)
5,161,044
20,490,313
39,794,071

(Thousand yen)Previous Fiscal Year

Current Fiscal Year(As of December 31, 2017)(As of December 31, 2018)

Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - other
Income taxes payable
Provision for sales returns
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Net defined benefit liability
Deferred tax liabilities
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-salesecurities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets- 10 -

1,145,987
2,535,084
786,252
292,501
318,617
916,809
5,995,253

865,878
2,376,675
1,585,720
27,271
419,9221,070,015
6,345,484

47,859411,51184,614543,986
6,539,239

57,243
159,128
80,417296,788
6,642,273

2,000,000
200,066
27,756,292(554,227)
29,402,131

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

1,332,021

859,702381,392(12,178)
1,701,234
31,103,366
37,642,605

264,024(228,425)
895,301
33,151,797
39,794,071

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

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity
methodCompany 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
Depreciation
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 retirement of non-current assets
Loss on renewal of brandTotal extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)33,456,268
10,659,047
22,797,220*1,*2 17,452,054
5,345,165
6,981
67,316

6,980
60,870979–

74,07814,439–40,884
204,680

57,686
3,255
50,52857,251
236,571

512,060

608,641–

3,399

10,032
11,96218,006552,062
4,997,783

69,657–
4,025
685,723
5,811,372*3 70

788,540
788,611*4 48,144*5 520,594

568,739
5,217,656
1,438,644(38,174)
1,400,469
3,817,186
3,817,186- 11 -(Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)35,185,374
10,824,145
24,361,229*1,*2 18,100,704
6,260,524*3 229310,341
310,571*4 8,158–
8,158
6,113,785
1,583,193
35,174
1,618,367
4,495,417
4,495,417

Consolidated Statements of Comprehensive Income

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 tonon-controlling interests

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
3,817,186- 12 -(Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)
4,495,417

579,325
338,055(18,771)
898,609
4,715,795(472,318)(117,367)(216,247)(805,933)
3,689,484

4,715,795

3,689,484

–

–

(3)

Consolidated Statements of Changes in Shareholders’ Equity
Fiscal Year Ended December 31, 2017 (December 21, 2016 - December 31, 2017)(Thousand yen)
Shareholders’ equity
Capital stock

Balance at beginning ofcurrent period
Changes of items during
period2,000,000

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity199,946

25,248,823(544,946)

26,903,823

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items
during period
Balance at end of current
period

(1,309,716)(1,309,716)

3,817,186

3,817,186

119(9,508)(9,508)

227

347

–

119

2,507,469(9,280)2,498,308

2,000,000

200,066

27,756,292(554,227)

29,402,131

Total accumulated
other comprehensive
incomeTotal net assets

Accumulated other comprehensive income
Valuation difference
on available-for-salesecurities
Balance at beginning ofcurrent period
Changes of items during
period752,695

Foreign currencytranslation
adjustment
43,336

Remeasurements ofdefined benefit plans
6,592

802,624

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items
during period
Balance at end of current
period27,706,448(1,309,716)
3,817,186(9,508)347
579,325

338,055(18,771)

898,609898,609579,325

338,055(18,771)

898,6093,396,917

1,332,021

381,392(12,178)

1,701,234

31,103,366- 13 -

Fiscal Year Ended December 31, 2018 (January 1, 2018 - December 31, 2018)(Thousand yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
period2,000,000

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity200,066

27,756,292(554,227)

29,402,131

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items
during period
Balance at end of current
period(1,637,016)(1,637,016)

4,495,417

4,495,417

547(4,894)(4,894)

309

857

–

547

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

2,000,000

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

32,256,496

Total accumulated
other comprehensive
incomeTotal net assets

Accumulated other comprehensive income
Valuation difference
on available-for-salesecurities
Balance at beginning ofcurrent period
Changes of items during
period

1,332,021

Foreign currencytranslation
adjustment

Remeasurements ofdefined benefit plans

381,392(12,178)

1,701,234

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items
during period
Balance at end of current
period31,103,366(1,637,016)
4,495,417(4,894)857(472,318)(117,367)(216,247)(805,933)(805,933)(472,318)(117,367)(216,247)(805,933)

2,048,431

859,702

264,024(228,425)

895,301

33,151,797- 14 -

(4)Consolidated Statements of Cash Flows
Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)

Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for sales returns
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
Proceeds from withdrawal of 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
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- 15 -(Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

5,217,656
1,278,755

6,113,785
1,380,881(44,328)(78,710)

176,422
277,302(52,382)
10,214(74,297)

102,079(265,229)(34,042)
10,092(67,850)

(979)

3,399

(35,648)(788,540)(70)
48,144(1,475)(310,341)
(229)
8,158

(1,232,633)

1,191,330(25,676)(813,250)

399,781(272,641)

487,6035,641,322
75,003(1,369,467)
4,346,858

266,516
7,232,471
67,849(812,988)
6,487,332(1,151,251)
300,091(386,997)(6,400)7,020(619)
61,605(1,439,880)
938,007(315,192)
48,84754,873(29,961)(1,919,858)(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)(9,161)(1,308,689)(1,317,850)(4,036)(1,635,166)(1,639,203)

81,441(32,513)

1,190,590
4,737,426
5,928,017

3,613,466
5,928,017
9,541,483

(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. Matters regarding the scope of consolidation
Number of consolidated subsidiaries: 6
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 MALAYSIA SDN. BHD. and MILBON VIETNAM CO., LTD have been included in the scope of
consolidation as they were newly established in the fiscal year under review.
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 assets
1) Securities
i) Held-to-maturity bonds
Stated using the amortized cost methodii) Available-for-sale securities
Market value available
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 method
2) Inventories
MerchandiseStated primarily at cost using the first-in first-out method (the balance sheet value is calculated using the inventory writedown 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)(2) Depreciation and amortization methods for important depreciable assets
1) Property, plant and equipment
They are depreciated using the straight-line method.
- 16 -

Useful lives of principal assets are as follows.
Buildings and structures: 31 to 50 years
Machinery, equipment and vehicles: 6 to 8 years
2) 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 allowances
1) Allowance for doubtful accounts
In order to prepare for potential credit losses on receivables, the Company and its overseas consolidated subsidiaries record
the estimated uncollectible amount at the amount calculated based on the historical rate of credit loss in the case of ordinary
receivables, and at the amount determined in consideration of collectability of individual receivables in the case of doubtful
accounts and other certain receivables.
2) Provision for bonuses
To provide for payment of bonuses to employees (including those for employees also serving as officers), the Company andits overseas consolidated subsidiaries record the estimated amount of payment of bonuses.
3) Provision for sales returns
To provide for loss due to returns of merchandise and products, the Company records the estimated amount of loss resulting
from future returns, taking into account factors including the historical sales return ratio.
(4) Accounting method for retirement benefits
1) 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 averageremaining 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 averageremaining 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 voluntary terminationis recognized as retirement benefit obligations.
(5) 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 of overseas
consolidated subsidiaries, while revenue and expenses are translated into yen at the average exchange rate for the period, andtranslation differences are recorded in foreign currency translation adjustment under net assets.
(6) 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 forwithdrawal 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.
(7) Other significant matters in the preparation of consolidated financial statements
Accounting treatment of consumption tax, etc.
Consumption tax and other similar taxes are accounted for by the tax-exclusion method.

- 17 -

(Notes to Consolidated Balance Sheets)*1 Information concerning affiliates are as follows.
(Unit: Thousand yen)Previous Fiscal Year(As of December 31, 2017)
Investment securities (shares)

Current Fiscal Year(As of December 31, 2018)
5,879

52,713*2 Accounting treatment for notes maturing at period end
Notes maturing at the end of the fiscal year are accounted for as if they had been settled on their maturity dates.
As the last day of the fiscal year under review fell on a bank holiday, the following notes maturing at the end of the fiscal year are
accounted for as if they had been settled on their maturity dates.
(Unit: Thousand yen)Previous Fiscal Year(As of December 31, 2017)
Notes receivable - trade

Current Fiscal Year(As of December 31, 2018)

101,266

104,512(Notes to Consolidated Statements of Earnings)*1 Main items and amounts of selling, general and administrative expenses(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Sales promotion expenses
Compensation, salaries and allowances
Provision for bonuses[A2]3,063,409
4,314,985

3,097,793
4,351,512

240,335
203,082

299,318
223,101(44,328)(60,767)

Retirement benefit expenses
Provision of allowance for doubtful
accounts[A3]*2 Total amount of research and development expenses included in selling, general and administrative expenses(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Research and development expenses

1,422,422

1,479,094*3 Breakdown of gain on sales of non-current assets(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Machinery, equipment and vehicles

70- 18 -

229

*4 Breakdown of loss on retirement of non-current assets(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Buildings and structures

14,978

1,689

565

93

SoftwareOther

17,557
15,043

–
6,375

Total

48,144

8,158

Machinery, equipment and vehicles*5 Loss on renewal of brandFiscal year ended December 31, 2017 (December 21, 2016 - December 31, 2017)
With respect to its main stay brand Aujua, the Company recorded the amount of disposed Aujua products before upgrading alongwith estimated future sales returns under extraordinary losses. The breakdown of loss on renewal of brand is 245,594 thousand yenof loss on abandonment of inventories[A4] and 275,000 thousand yen of provision for sales returns.
Fiscal year ended December 31, 2018 (January 1, 2018 - December 31, 2018)
None- 19 -

(Notes to Consolidated Statements of Comprehensive Income)* Reclassification adjustment and tax effect relating to other comprehensive income(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Valuation difference on available-for-salesecurities
Amount incurred during the current period
Reclassification adjustment
Before tax effect adjustment
Tax effect
Valuation difference on available-for-salesecurities

1,623,303(788,540)(370,233)(310,341)

834,762(255,437)(680,574)
208,255

579,325(472,318)

338,055(117,367)

Foreign currency translation adjustment
Amount incurred during the current period
Remeasurements of defined benefit plans
Amount incurred during the current period

14,328(286,629)

Reclassification adjustment(41,376)(24,965)

Before tax effect adjustment(27,048)(311,595)

8,276

95,348(18,771)(216,247)

898,609(805,933)

Tax effectRemeasurements of defined benefit plans
Total other comprehensive income- 20 -

(Notes to Consolidated Statements of Changes in Shareholders’ Equity)
Fiscal year ended December 31, 2017 (December 21, 2016 - December 31, 2017)
1. Matters regarding issued sharesClass of shares

Beginning of current
fiscal year

Common stock (shares)

16,558,617

Increase

End of current fiscal
year

Decrease––

16,558,617

2. Matters regarding treasury sharesClass of shares

Beginning of current
fiscal year

Common stock (shares)

186,816

Increase

End of current fiscal
year

Decrease
1,548

78

188,286(Outline of reasons for changes)
1. The increase comprises the purchase of shares in response to the request for the Company’s purchase of shares of less than one unit.
2. The decrease comprises the sale of shares in response to the request to purchase additional shares of less than one unit.
3. Matters regarding dividends(1) Payment of dividends
Resolution

Class of shares

Total amount ofdividends(Thousand yen)

Dividend per share(Yen)

Record date

Effective dateOrdinary General
Meeting of
Shareholders[A5]Common stock

654,872

40

December 20, 2016

March 17, 2017

Common stock

654,844

40

June 20, 2017

August 10, 2017

held on March 16,
2017
The Board of
Directors meeting
held on June 28,
2017(2) Dividends for which the record date falls in the fiscal year under review but the effective date falls in the following fiscal year
Total amount of Dividend per
Dividend
Resolution
Class of shares
dividends
share
Record date
Effective dateresource(Thousand yen)
(Yen)
Ordinary General
Meeting of
Shareholders heldon March 29, 2018

Common stock

Retainedearnings

851,257

52

December 31, 2017

March 30, 2018

(Note) The Company conducted a two-for-one stock split of its common stock on January 1, 2018. The above dividend per share is theactual amount of dividend paid before the stock split.

- 21 -

Fiscal year ended December 31, 2018 (January 1, 2018 - December 31, 2018)
1. Matters regarding issued shares
Beginning of current
Class of shares
Increase
fiscal year
Common stock (shares)

16,558,617

End of current fiscal
year

Decrease–

16,558,617

33,117,234(Outline of reasons for changes)
The increase of 16,558,617 shares is an increase resulting from the two-for-one stock split of common stock conducted on January 1,
2018.
2. Matters regarding treasury sharesClass of shares

Beginning of current
fiscal year

Common stock (shares)

188,286

Increase

End of current fiscal
year

Decrease

189,384

210

377,460(Outline of reasons for changes)
1. The increase comprises the purchase of 1,098 shares in response to the request for the Company’s purchase of shares of less than
one unit and the increase of 188,286 shares due to the stock split.
2. The decrease comprises the sale of shares in response to the request to purchase additional shares of less than one unit.
3. Matters regarding dividends(1) Payment of dividends
Resolution
Ordinary General
Meeting of
Shareholders heldon March 29, 2018

Total amount ofdividends(Thousand yen)Class of shares

Dividend per share(Yen)

Record date

Effective dateCommon stock

851,257

52

December 31, 2017

March 30, 2018

Common stock

785,758

24

June 30, 2018

August 22, 2018

The Board of
Directors meeting
held on August 10,
2018(2) Dividends for which the record date falls in the fiscal year under review but the effective date falls in the following fiscal year
Total amount of Dividend per
Dividend
Resolution
Class of shares
dividends
share
Record date
Effective dateresource(Thousand yen)
(Yen)
Ordinary General
Meeting of
Shareholders heldon March 28, 2019

Common stock

Retainedearnings

982,19330

December 31, 2018

March 29, 2019

(Notes to Consolidated Statements of Cash Flows)* Relationship between cash and cash equivalents at end of period and the amounts of items stated in the Consolidated Balance Sheets(Unit: Thousand yen)
Fiscal Year Ended
Fiscal Year Ended
December 31, 2017
December 31, 2018
(December 21, 2016 (January 1, 2018 December 31, 2017)
December 31, 2018)
Cash and deposits

6,164,763

9,778,129

Term deposits with deposit terms of more than
three month(236,745)(236,645)

Cash and cash equivalents

5,928,017

9,541,483- 22 -

(Lease transactions)
1. Operating lease transactions(Lessee)
Future lease payments for the operating lease transactions that are non-cancellable(Unit: Thousand yen)Previous Fiscal Year(As of December 31, 2017)

Current Fiscal Year(As of December 31, 2018)

Due within one year or less

54,596

208,560

Due within more than one year

58,433415,328

113,029

623,889

Total(Financial instruments)
1. Matters regarding the current status of financial instruments(1) Policies for handling financial instruments
The Group invests its funds exclusively in the asset classes with higher degree of safety for the purpose of preserving its assets inprinciple.
It is also the Group’s policy not to perform any speculative transactions. In the fiscal year under review, the Group conducted noderivative transactions.
(2) Description of financial instruments, related risks and risk management system
Notes and accounts receivable - trade, which are trade receivables, are exposed to the credit risks of customers. For these risks,term administration and balance management are performed for each customer.
Securities and investment securities mainly comprise shares in the companies with whom the company maintains business
relationship and held-to-maturity bonds, and are exposed to the risks of market price fluctuations. These risks are managed throughregular identification of their market values as well as the financial conditions of their issuers, while such market values are reported
to the Board of Directors on a regular basis.
Accounts payable - trade, which are trade payables, are mostly due within one month or less.
(3) Supplementary explanation on the matters regarding the market value, etc. of financial instruments
The market value of financial instruments is based on the market price, and when there is no market price available, a rationallycalculated amount is used. Since such calculation involves factors that fluctuate, applying different assumptions and factors canchange such market value.
2. Matters regarding the market value, etc. of financial instruments
Consolidated balance sheet amount, market value and their difference are as follows. Instruments whose market value is extremely
difficult to determine are not included in the following table. (Please refer to (Note 2))- 23 -

Previous fiscal year (As of December 31, 2017)
Consolidated balance sheet
amount(Thousand yen)

Market value(Thousand yen)

Difference(Thousand yen)

(1) Cash and deposits

6,164,763

6,164,763–(2) Notes and accounts receivable - trade

5,076,624

5,076,624–(3) Investment securities

4,725,984

4,725,560(424)

Total assets

15,967,371

15,966,947(424)(1) Accounts payable - trade1,145,987

1,145,987–(2) Accounts payable - other

2,535,084

2,535,084–(3) Income taxes payable

786,252

786,252–

4,467,325

4,467,325–

Total liabilities

Current fiscal year (As of December 31, 2018)
Consolidated balance sheet
amount(Thousand yen)

Market value(Thousand yen)

Difference(Thousand yen)

(1) Cash and deposits

9,778,129

9,778,129–(2) Notes and accounts receivable - trade

3,875,865

3,875,865–(3) Investment securities

4,079,028

4,065,905(13,123)

Total assets

17,733,023

17,719,900(13,123)(1) Accounts payable - trade865,878865,878–(2) Accounts payable - other

2,376,675

2,376,675–(3) Income taxes payable

1,585,720

1,585,720–

4,828,274

4,828,274–

Total liabilities- 24 -

(Note 1) Matters regarding the method for calculating the market value of financial instruments as well as securities
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
As these are settled in the short term, their market value approximate the book value, and therefore the book value is used as themarket value.
(3) Investment securities
The prices on the exchanges are used for the market value of shares, while the prices provided by correspondent financial
institutions, etc. are used for the market value of bonds. For the notes regarding securities by purpose of holding, please refer tonotes related to “Securities”.
Liabilities(1) Accounts payable - trade, (2) Accounts payable - other and (3) Income taxes payable
As these are settled in the short term, their market value approximate the book value, and therefore the book value is used as themarket value.
(Note 2) Consolidated balance sheet amount of the financial instruments whose market value is extremely difficult to determine(Unit: Thousand yen)
Category

Previous Fiscal Year(As of December 31, 2017)

Unlisted shares

22,129Current Fiscal Year(As of December 31, 2018)
68,963Since unlisted shares have no market price available and the market value is extremely difficult to determine, they are not included in“(3) Securities.”- 25 -

(Note 3) Scheduled redemption amounts of monetary claims and securities with maturity after consolidated account closing datePrevious fiscal year (As of December 31, 2017)
Within one year
(Thousand yen)More than one year

More than five years

but within five years(Thousand yen)

but within ten years(Thousand yen)More than ten years(Thousand yen)

Cash and deposits

6,164,763–––

Notes and accounts receivable trade

5,076,624–––

1) Corporate bonds––

200,000–

2) Other

–

–

–

–

11,241,387–

200,000–

More than one year

More than five years

but within five years(Thousand yen)

but within ten years(Thousand yen)

Securities and investment
securities
Held-to-maturity bonds

Total

Current fiscal year (As of December 31, 2018)
Within one year
(Thousand yen)More than ten years(Thousand yen)

Cash and deposits

9,778,129–––

Notes and accounts receivable trade

3,875,865––－

1) Corporate bonds––

200,000–

2) Other–

200,000––

13,653,994

200,000

200,000–

Securities and investment
securities
Held-to-maturity bonds

Total- 26 -

(Securities)
1. Held-to-maturity bonds
Previous fiscal year (As of December 31, 2017)
Consolidated balance
sheet amount(Thousand yen)

Category

Market value(Thousand yen)

Difference(Thousand yen)

(1) Japanese government
bonds and local
government bonds,

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

200,000

199,576

(424)

–

–

–

200,000

199,576(424)

200,000

199,576(424)

Securities with market value

etc.
exceeding consolidated balance sheet(2) Corporate bonds
amount(3) Other
Sub-total(1) Japanese government
bonds and local
government bonds,
Securities with market value notetc.
exceeding consolidated balance sheet(2) Corporate bonds
amount(3) Other
Sub-total
Total

Current fiscal year (As of December 31, 2018)
Consolidated balance
sheet amount(Thousand yen)

Category(1) Japanese government
bonds and local
government bonds,
etc.

Securities with market value

exceeding consolidated balance sheet(2) Corporate bonds
amount(3) Other
Sub-total(1) Japanese government
bonds and local
Securities with market value notgovernment bonds,
etc.

exceeding consolidated balance sheet(2) Corporate bonds
amount(3) Other
Sub-total
Total- 27 -

Market value(Thousand yen)

Difference(Thousand yen)

–

–

–

200,000

200,129

129

–

–

–

200,000

200,129

129

–

–

–

–

–

–

200,000

186,748(13,252)

200,000

186,748(13,252)

400,000

386,877(13,123)

2. Available-for-sale securities
Previous fiscal year (As of December 31, 2017)
Consolidated balance
sheet amount(Thousand yen)

Acquisition cost(Thousand yen)

(1) Shares

4,525,984

2,606,645

1,919,338

Securities with consolidated balance
sheet amount exceeding acquisition(2) Bonds

–

–

–

cost

(3) Other–––

4,525,984

2,606,645

1,919,338(1) Shares

–

–

–

Securities with consolidated balance
sheet amount not exceeding(2) Bonds–––

acquisition cost(3) Other

–

–

–

–

–

–

4,525,984

2,606,645

1,919,338

Category

Sub-total

Sub-total
Total

Difference(Thousand yen)

(Note) Since unlisted shares (consolidated balance sheet amount of 16,250 thousand yen) have no market price available and themarket value is extremely difficult to determine, they are not included in “available-for-sale securities” in the table above.
Current fiscal year (As of December 31, 2018)
Consolidated balance
sheet amount(Thousand yen)

Acquisition cost(Thousand yen)

(1) Shares

3,264,349

1,999,562

1,264,786

Securities with consolidated balance(2) Bonds–––

sheet amount exceeding acquisition
cost(3) Other–––

3,264,349

1,999,562

1,264,786(1) Shares

414,679

440,701(26,022)

Securities with consolidated balance(2) Bonds–––

sheet amount not exceedingacquisition cost(3) Other–––414,679

440,701(26,022)

3,679,028

2,440,264

1,238,764

Category

Sub-total

Sub-total
Total

Difference(Thousand yen)

(Note) Since unlisted shares (consolidated balance sheet amount of 16,250 thousand yen) have no market price available and themarket value is extremely difficult to determine, they are not included in “available-for-sale securities” in the table above.

- 28 -

3. Available-for-sale securities sold during the fiscal year
Fiscal year ended December 31, 2017 (December 21, 2016 - December 31, 2017)
Category

Amount of sales

Total gain on sales

Total loss on sales(Thousand yen)(Thousand yen)(Thousand yen)

(1) Shares(2) Bonds

938,007–788,540–––(3) Other–––

938,007788,540–

Total

Fiscal year ended December 31, 2018 (January 1, 2018 - December 31, 2018)
Category

Amount of sales

Total gain on sales

Total loss on sales(Thousand yen)(Thousand yen)(Thousand yen)

(1) Shares

476,722

310,341–(2) Bonds(3) Other

–
–

–
–

–
–

476,722

310,341–

Total

4. Securities subject to impairment
None
Criteria for impairment recognition are as follows. Shares whose market value fell 50% or more from acquisition cost are all subject
to impairment recognition, while those whose market value fell 30% or more but less than 50% from acquisition cost are individuallyreviewed for their recoverability to decide whether impairment recognition is necessary.

- 29 -

(Derivative transactions)
As the Group does not use derivative transactions at all, there is no applicable information.
(Retirement benefits)
1. Outline of the retirement benefits plan adopted
The Company has adopted a defined benefit corporate pension plan and a defined contribution corporate pension plan as defined
benefit plans.
The Company was participating in a joint-type welfare pension plan, which, however, was transferred to the corporate pension planon March 1, 2017 under the permission by the Minister of Health, Labor and Welfare allowing the Company to return the substitution
part.
Meanwhile, some of the consolidated subsidiaries have adopted retirement lump-sum plans and defined contribution pension plans
as defined benefit plans.
2. Defined benefit plans (excluding the plans adopting simplified method)(1) Reconciliation of the balances of retirement benefit obligations at beginning and end of period
Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Balance of retirement benefit obligation at beginning(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

1,941,296

2,213,143

Service cost

146,563

166,199

Interest cost

17,471

11,065

Amount of actuarial differences incurred

134,070

29,450Retirement benefits paid

(26,258)(46,547)

Balance of retirement benefit obligations at end of
period2,213,143

2,373,312of period(2) Reconciliation of the balances of plan assets at beginning and end of period
Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Balance of plan assets at beginning of period(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

2,191,150

2,488,331

Expected return on plan assets

56,42962,208Amount of actuarial differences incurred

148,398(257,178)

Employer contributions

118,611

124,134

Retirement benefits paid

(26,258)(46,547)

Balance of plan assets at end of period

2,488,331

2,370,948- 30 -

(3) Reconciliation of the balances of retirement benefit obligations and pension assets at end of period, and net defined benefit liability
and net defined benefit asset recorded in Consolidated Balance Sheets
Previous Fiscal Year(As of December 31, 2017)Retirement benefit obligations of the funded pension
plan
Plan assets(Unit: Thousand yen)
Current Fiscal Year(As of December 31, 2018)

2,213,143

2,373,312(2,488,331)(2,370,948)

Net amount of liability and asset recorded in
Consolidated Balance Sheets(275,188)

2,364

Net defined benefit asset(275,188)

2,364(275,188)

2,364

Net amount of liability and asset recorded in
Consolidated Balance Sheet- 31 -

(4) Amount of retirement benefit expenses and its breakdown
Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Service cost

146,563

166,199

Interest cost

17,471

11,065

Expected return on plan assets(56,429)(62,208)

Amount of actuarial differences expensed(41,376)(24,965)

Retirement benefit expenses related to defined
benefit plan

66,22890,091(5) Remeasurements of defined benefit plans
Breakdown of the items recorded in remeasurements of defined benefit plans (before tax effect adjustment) is as follows.
(Unit: Thousand yen)
Fiscal Year Ended
Fiscal Year Ended
December 31, 2017
December 31, 2018
(December 21, 2016 (January 1, 2018 December 31, 2017)
December 31, 2018)
Actuarial differences

27,048311,595

Total

27,048311,595(6) Accumulated remeasurements of defined benefit plans
Breakdown of the items recorded in accumulated remeasurements of defined benefit plans (before tax effect adjustment) is as follows.
Previous Fiscal Year

(Unit: Thousand yen)
Current Fiscal Year(As of December 31, 2017)(As of December 31, 2018)

Unrecognized actuarial differences(17,548)(329,143)

Total(17,548)(329,143)(7) Matters regarding the plan assets
1) Main components of the plan assets
The ratio of each main category to the plan assets is as follows.
Previous Fiscal Year

Current Fiscal Year(As of December 31, 2017)(As of December 31, 2018)

Domestic bonds

19%

21%

Domestic shares

26%

23%

Foreign bonds

13%

13%

Foreign shares

24%

22%

Other

18%

21%

Total

100%

100%

2) Method for determining expected long-term rate of return
In determining the expected long-term rate of return of the plan assets, the Company takes into consideration the current andexpected allocation of plan assets, as well as the current and expected long-term rate of return from various assets constituting theplan assets.

- 32 -

(8) Matters regarding the basis of actuarial calculation
Main basis of actuarial calculation
Previous Fiscal Year(As of December 31, 2017)

Current Fiscal Year(As of December 31, 2018)

Discount rate

0.5%

0.5%

Expected long-term rate of return

2.5%

2.5%

Estimated salary increase rate

5.1%

5.1%

- 33 -

3. Defined benefit plan adopting the simplified method(1) Reconciliation of the balances of net defined benefit liability at beginning and end of period in the plan adopting the simplified
methodFiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Balance of net defined benefit liability at beginning(Unit: Thousand yen)
Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)32,27047,859Retirement benefit expenses

15,94420,801

Paid retirement benefits(5,730)(10,709)

Currency translation differences

5,375(3,073)

Balance of net defined benefit liability at end of
period47,85954,878of period(2) Reconciliation of the balances of retirement benefit obligations and pension assets at end of period, and net defined benefit liability
and asset recorded in the Consolidated Balance Sheets
None(3) Retirement benefit expenses
Retirement benefit expenses calculated by the simplified method
Previous fiscal year: 15,944 thousand yen
Fiscal year under review: 20,801 thousand yen
4. Defined contribution plans
The amount the Company was required to contribute to its defined contribution plans was 50,680 thousand yen for the previous
fiscal year, while 54,849 thousand yen for the fiscal year under review.
5. Multiemployer pension plan
The amount the Company was required to contribute to the multiemployer welfare pension plan and the corporate pension plan, bothof which are accounted for in the similar way as the defined contribution plan, was 147,708 thousand yen for the previous fiscal year,
while 145,103 thousand yen for the fiscal year under review.
(1)
Previous Fiscal Year(As of December 31, 2017)(Unit: Thousand yen)
Current Fiscal Year(As of December 31, 2018)

Plan assets

10,658,672

12,422,596

The sum of actuarial obligations in the calculation ofpension finance and the minimum liability reserves

18,632,634

18,604,938

Balance(7,973,962)(6,182,342)(2) The Group’s share in the contribution to the multiemployer pension planPrevious fiscal year: 9.6% (as of December 31, 2017)
Fiscal year under review: 10.1% (as of December 31, 2018)(3) Supplementary explanation
Main components of the balance in (1) above are the balance of past service liability in the calculation of pension finance(10,012,238 thousand yen for the previous fiscal year and 9,768,404 thousand yen for the fiscal year under review), and generalreserve (2,038,276 thousand yen for the previous fiscal year and 3,586,062 thousand yen for the fiscal year under review). Past
service liability under the plan is subject to amortization of principal and interest by using the straight-line method over the periodof 11 years, whereby the Company expensed special contribution (91,423 thousand yen for the previous fiscal year and 98,070
thousand yen for the fiscal year under review) in its Consolidated Financial Statements.
Shares in (2) above do not precisely match the actual shares.
- 34 -

(Stock options, etc.)
Not applicable- 35 -(Tax effect accounting)
1. Breakdown of deferred tax assets and liabilities by main causes(Unit: Thousand yen)Previous Fiscal Year(As of December 31, 2017)
Deferred tax assets (current)
Allowance for doubtful accounts

Current Fiscal Year(As of December 31, 2018)36,267

16,498Provision for sales returns
Provision for bonuses

90,09096,093

8,345
124,957

Valuation loss on inventories
Accrued enterprise tax and business office tax

18,11045,787

16,467
98,145

Accrued social insurance premiums
Unrealized gain on inventories

45,975
100,717

66,346
117,109

Other

35,69827,153Sub-total of deferred tax assets (current)
Valuation allowance

468,739(9,846)

475,023(2,625)

Total of deferred tax assets (current)

458,893472,397

Deferred tax assets (non-current)
Depreciation

274,859

268,541

Asset retirement cost associated with asset retirement
obligations

16,583

18,870Allowance for doubtful accounts
Net defined benefit liability

19,542
9,987

15,476
12,026

Valuation loss on investment securities
Executive retirement benefits

1,889
3,905

1,879
3,905

105,129

89,392Sub-total of deferred tax assets (non-current)
Valuation allowance

431,896(127,210)

410,091(110,986)

Total of deferred tax assets (non-current)

304,686

299,104

Other

Deferred tax liabilities (non-current)
Net defined benefit asset
Valuation difference on available-for-sale securities
Retained earnings at overseas subsidiaries
Total of deferred tax liabilities (non-current)
Net amount of deferred tax assets and liabilities (noncurrent)- 36 -(84,207)723(587,317)(34,922)(379,061)(68,254)(706,446)(446,592)(401,761)(147,487)

2. Breakdown by major item of differences between the statutory tax rate and the income tax rate after the adoption of tax effectaccounting
Previous Fiscal Year(As of December 31, 2017)
Statutory tax rate
(Adjustments)
Entertainment and other permanently non-deductible
expensesDividends income and other income permanently excluded
from gross revenue
Inhabitant tax on a per capita basis

Current Fiscal Year(As of December 31, 2018)

30.8%

30.8%

1.4%

1.3%

(0.1)%(0.1)%

0.5%

0.4%

Tax credit for research and development expenses
Tax credit for employee salaries, etc.

(2.9)%(1.8)%(3.4)%(2.2)%

Other(1.1)%(0.3)%

Income tax rate after the adoption of tax effect accounting

26.8%

26.5%

(Business combinations)
None(Asset retirement obligations)
While the Company recognizes asset retirement obligations for its obligations under the property lease agreement for its businessoffice premises, etc., to restore the property to the original state when returning it to the landlord, such obligations are notspecifically stated due to the insignificance of the amount of such obligations.
Rather than recording such asset retirement obligations, the Company reasonably estimates the amount of lease deposit under
the property lease agreement that is recognized to be ultimately unrecoverable, and records the amount attributable to each fiscal
year.
(Real estate for leasing, etc.)
None- 37 -

(Segment information, etc.)
a. Segment information
The Company omits segment information, as it operates just one business segment engaged in the manufacturing and sales of haircosmetics.
b. Related information
Fiscal year ended December 31, 2017 (December 21, 2016 - December 31, 2017)
1. Information by product and service(Unit: Thousand yen)
Hair care products
Net sales to external customers

19,511,148

Hair coloringproducts

Permanent wave
products

12,095,507

1,569,700

OthersTotal

279,91133,456,268

2. Information by geographical area
(1) Net sales(Unit: Thousand yen)Japan

Others27,974,631

Total

5,481,636

33,456,268(Note) Net sales are classified into countries or regions based on the customer locations.
(2) Property, plant and equipment
The Company omits this information, as the amount of property, plant and equipment located in Japan exceeds 90% of theamount of property, plant and equipment in the Consolidated Balance Sheet.
3. Major customer information
The Company omits this information, as there is no major external customer that represents 10% or more of the net sales in
the Consolidated Statements of Earnings.
Fiscal year ended December 31, 2018 (January 1, 2018 - December 31, 2018)
1. Information by product and service(Unit: Thousand yen)
Hair care products
Net sales to external customers

21,124,883

Hair coloringproducts

Permanent wave
products

12,202,862

1,590,324

Others267,303

Total
35,185,374

2. Information by geographical area
(1) Net sales(Unit: Thousand yen)Japan
29,872,668

OthersTotal

5,312,706

35,185,374(Note) Net sales are classified into countries or regions based on the customer locations.
(2) Property, plant and equipment
The Company omits this information, as the amount of property, plant and equipment located in Japan exceeds 90% of theamount of property, plant and equipment in the Consolidated Balance Sheet.

- 38 -

3. Major customer information(Unit: Thousand yen)
Trade name or name of customers

Net sales

Topy Co., Ltd.[A6]3,643,478

BIC HOLDINGS Inc.[A7]3,267,720

GAMO Co., Ltd.[A8]3,176,537(Note) The Group omits to provide the name of concerned segments, as it operates just one business segment engaged in the
manufacturing and sales of hair cosmetics.
c. Information regarding impairment loss on property, plant and equipment by reportable segment
The Group omits this information, as it operates just one business segment engaged in the manufacturing and sales of hair cosmetics.
d. Information regarding amortization and unamortized balance of goodwill by reportable segment
None
e. Information regarding gain on negative goodwill by reportable segment
None[Related party transactions]Fiscal year ended December 31, 2017 (December 21, 2016 - December 31, 2017)
None
Fiscal year ended December 31, 2018 (January 1, 2018 - December 31, 2018)
None- 39 -

(Per share information)
Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)

Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

Net assets per share (Yen)

949.991,012.58

Basic earnings per share (Yen)

116.58137.31(Notes) 1. Diluted earnings per share is not stated as there are no residual shares.
2. The Company conducted a two-for-one stock split of its common stock on January 1, 2018. Accordingly, net assets per
share and basic earnings per share are calculated based on the assumption that such stock split took place at the beginningof the previous fiscal year.
3. The basis for calculating basic earnings per share is as follows.
Fiscal Year Ended
December 31, 2017
(December 21, 2016 December 31, 2017)
Profit attributable to owners of parent (Thousand yen)Amount not attributable to common shareholders(Thousand yen)
Profit attributable to owners of parent relating tocommon stock (Thousand yen)
Average number of outstanding shares of common stockduring the period (shares)(Significant subsequent events)
None- 40 -

Fiscal Year Ended
December 31, 2018
(January 1, 2018 December 31, 2018)

3,817,186

4,495,417––

3,817,186

4,495,417

32,742,188

32,740,018