Consolidated Financial Report for The Fiscal Year Ending March 31, 2019
１. Financial Year Ending March 31, 2019 (April 1, 2018 – March 31, 2019) （Rounded down to the nearest million yen）
(1) Results of Consolidated Operations (% indicates variance from the previous fiscal year)
Income Attributable to Revenue Operating Income Ordinary Income the Company Million Million Million Million % ％ ％ ％ JPY JPY JPY JPY FY2018-19 27,466 12.3 957 5.8 922 5.8 615 -3.0 FY2017-18 24,451 9.0 905 48.7 872 61.6 634 133.8
Note: Comprehensive Income FY2018-19 216 million JPY (-73.6%) FY2017-18 821 million JPY (189.5%)
Earnings per share after Operating Earnings per share Return on Equity Return on Assets adjusting for dilution margin
Yen Yen ％ ％ ％ FY2018-19 26.26 25.45 14.4 5.8 3.5 FY2017-18 27.85 26.23 16.5 5.9 3.7
Note.: Equity Method Income FY2018-19 -1 million JPY FY2017-18 -6 million JPY Note: The Company has executed a share split of 1:2 on October 1, 2017. The calculation of net income per share and diluted net income per share is done as if the share-split was done at the beginning of the previous period.
(2) Consolidated Financial Position Total Assets Net Equity Equity Ratio Net Equity per share
million JPY million JPY ％ Yen FY2018-19 16,392 4,724 26.4 183.14 FY2017-18 15,300 4,720 27.8 182.31
Note: Net Worth FY2018-19 4,322 million JPY FY2017-18 4,249 million JPY Note: The Company has executed a share split of 1:2 on October 1, 2017. The calculation of net equity per share is done as if the share-split was done at the beginning of the previous period.
（3）Consolidated Cash Flow Cash and Equivalents Operating Cash Flow Investing Cash Flow Financial Cash Flow (ending balance) million JPY million JPY million JPY million JPY FY2018-19 2,207 -1,180 -260 4,323 FY2017-18 1,411 -1,583 98 3,555
2. Dividends Dividends per share (annual) Dividend Total Dividends Payout Ratio Q1 Q2 Q3 Q4 Total over Equity Yen Yen Yen Yen Yen Million JPY ％ ％ FY2017-18 － 5.00 － 4.00 － 150 23.3 3.9 FY2018-19 － 4.00 － 4.00 8.00 188 30.5 4.4 FY2019-20 (Forecast) － 4.00 － 4.00 8.00 26.9 Note: 1 Dividends Payment at the end of FY2018: Ordinary Dividend 3 Yen, Commemorative Dividend 1 Yen 2 The Company has executed a 1:2 share split on October 1, 2017. The dividends payment before the 2nd quarter of FY2018 has been indicated on the actual amount basis and the total dividends payment has been indicated “-“. Please refer to the “Cautionary Statement on the forecast of consolidated financial performance and other notes.” 3 The Company has introduced Employee Stock Ownership Program since this fiscal year. The total dividends include the dividends paid for the shares owned by the Trust (FY2018-19 total JPY358,000)
3. Forecast of Consolidated Operating Performance for the FY 2019-20 (April 1, 2019 to March 31, 2020)
(% indicates variance from the previous period or quarter)
Income Attributable Earnings per Revenue Operating Income Ordinary Income to the Company share Million Million Million Million % ％ ％ ％ Yen JPY JPY JPY JPY Half Year (up to Q2) 14,481 10.4 424 7.8 382 -6.8 297 -22.5 12.62 FY2019-20 30,010 9.3 1,150 20.1 1,072 16.2 700 13.9 29.69
Notes
(1) Changes in key subsidiaries during the period (Changes regarding specific companies accompanying changes in the scope of consolidation): Yes (Taiwan IPPUDO Co., Ltd.)
(2) Changes in accounting policies, accounting estimates, and restatement of error corrections:
1) Changes in accounting policies arising from revision of accounting standards: None
2) Changes in accounting policies due to reasons other than 1): None
3) Changes in accounting estimates: None
4) Restatement of prior period financial statements after error correction: None
(3) Total Number of Issued Shares (Ordinary Shares)
① Total number of issued shares at the As of 31 March, As of March 31, 23,693,500 Shares 23,307,300 Shares end of period (including treasury shares) 2019 2018
② Total number of treasury shares at the As of March 31, As of March 31, 89,600 Shares － Shares end of period 2019 2018
③ Average number of shares during the As of March 31, As of March 31, 23,438,447 Shares 22,789,067 shares period 2019 2018 Notes: 1 The Company has executed a 1:2 share split on October 1, 2017. The total number of issued shares at the end of period, the total number of treasury shares at the end of period, and the average number of shares during the period are calculated as if the share-split took place at the beginning of the previous period. 2 The Company has introduced Employee Stock Ownership Program since this fiscal year. The shares held by the Trust under this program are included in the Total number of treasury shares at the end of the period (as of march 31, 2019, 52,287 shares), which in turn is excluded from the calculation of Average number of shares during the period.
(Reference) Non-Consolidated Results
１. Financial Year Ending March 31, 2019 (April 1, 2018 – March 31, 2019) (1) Results of Non-Consolidated Operations (% indicates variance from the previous fiscal year)
Income Attributable to Revenue Operating Income Ordinary Income the Company
Million Million Million Million % ％ % ％ JPY JPY JPY JPY FY2018-19 2,503 15.2 456 113.8 472 107.5 -69 -118.0 FY2017-18 2,172 9.5 213 -26.3 227 -19.0 389 60.5
Earnings per share after Earnings per share adjusting for dilution
Yen Yen FY2018-19 -2.98 - FY2017-18 17.08 16.09
Note: 1) The Company has executed a share split of 1:2 on October 1, 2017. The calculation of net income per share and diluted net income per share is done as if the share-split was done at the beginning of the previous period. 2) Earnings per share after adjusting for dilution has been omitted as the net earnings for the period is negative.
(2) Non-Consolidated Financial Position Total Assets Net Equity Equity Ratio Net Equity per share
million JPY million JPY ％ Yen FY2018-19 8,035 3,611 44.9 153.00 FY2017-18 7,318 3,825 52.3 164.14
Note: Net Worth FY2018-19 3,611 million JPY FY2017-18 3,825 million JPY
NB: These consolidated financial reports (Tanshin) are exempt from audit procedures by certified public accountants or audit firms.
Cautionary Statement on the forecast of consolidated financial performance and other notes (Cautions concerning forward-looking statements) Performance forecasts presented herein are based on the information available to Chikaranomoto Holdings Co., Ltd. and its subsidiaries (the “Company”) as of the date of this document. Accordingly, there remains the possibility that the actual performance results may differ from projections. For the premises underlying the forecasts as well as cautionary statements regarding the usage of such forecasts, please refer to the “Forecasts” of the “Qualitative information concerning Consolidated Business Results” section in this document (page 4).
(Dividends Payment and Dividends Forecast for the Fiscal Year after Share-Split) The Company executed a 1:2 share split on October 1, 2017. The dividends payment before considering the share split for the fiscal years ended March 31, 2018 and March 31, 2019, as well as the forecast for the dividends payments for the fiscal year ending March 31, 2020 are as follows: 1. Dividends for Fiscal Year ended March 31, 2018 Dividends per share, 2nd Quarter: 5 Yen (Note 1), End of Fiscal Year: 8 Yen (Note 2) 2. Dividends for Fiscal Year ending March 31, 2019 Dividends per share, 2nd Quarter: 8 Yen (Note 2, 3), End of Fiscal Year: 8 Yen (Note 2) 3. Dividends forecast for Fiscal Year ending March 31, 2020 Dividends per share, 2nd quarter: 8 yen (Note 2), End of Fiscal Year: 8 yen (Note 2)
(Note 1) The dividends payment at the end of 2nd Quarter of FY2017-18 has been done on the basis of the number of issued shares before the share-split. (Note 2) The dividends payments are calculated on a before-split basis. (Note 3) The dividends were declared effective on December 4, 2018. (Note 4) The dividends payment for the fiscal year ending March 31, 2018 before-split is 13 Yen. (Note 5) The dividends payment for the fiscal year ending March 31, 2019 before-split is 16 Yen. (Note 6) The dividends forecast for the fiscal year ending March 31, 2020 before-split is 16 Yen.
(Supplementary Explanation Material) Supplementary Explanation Material for Financial Results can be obtained via TDnet on the same day as the publication of this document.
Contents of the Attached Material
1. Qualitative information concerning Consolidated Business Results for Fiscal Year Ending 1 March 31, 2019 …………………………………………………………………………………………………………………………… (1) Explanation on operating results …………………………………………………………………………………………… 1 (2) Explanation on financial position………………………………………………………………………………………………. 3 (3) Explanation on cash flow for the fiscal year ……………………………………………………………………………. 4 (4) Policy concerning appropriation of profits and dividends payout for the current and coming 4 fiscal year ………………………………………………………………………………………………………………………………… (5) Forecasts ………………………………………………………………………………………………………………………………… 4 2. Current State of the Company and its subsidiaries ………………………………………………………………….. 6 3. Management Philosophy ………………………………………………………………………………………………………….. 10 (1) Basic policies of the Company ……………………………………………………………………………………………….. 10 (2) Key Performance Indicators …………………………………………………………………………………………………… 10 (3) Mid- and long-term strategies of the company ……………………………………………………………………. 11 4. Basic approach in choosing accounting methods …………………………………………………………………… 12 5. Consolidated Financial Statements and Notes…………………………………………………………………………… 13 (1) Consolidated Balance Sheet …………………………………………………………………………………………………… 13 (2) Consolidated Statement on Profit and Loss and Comprehensive Income ………………………… 15 Consolidated Statement of Income …………………………………………………………………………………… 15 Consolidated Statement of Comprehensive Income ………………………………………………………… 16 (3) Consolidated Statement of Changes in Shareholders’ Equity ……………………………………………… 16 (4) Consolidated Statement of Cash Flow ………………………………………………………………………………… 19 (5) Notes on Consolidated Financial Statements ………………………………………………………………………. 21 Notes on premise of going concern ……………………………………………………………………………………… 21 Additional information …………………………………………………………………………………………………………… 21 Changes in methods of presentation …………………………………………………………………………………….. 21 Segment-by-segment information ………………………………………………………………………………………… 22 Per Share information …………………………………………………………………………………………………………….. 24 Significant subsequent events ……………………………………………………………………………………………….. 24 6. Others ………………………………………………………………………………………………………………………………………… 24
1. Qualitative information concerning Consolidated Business Results
(1) Explanation on operating results During this fiscal year, the Japanese economy continued to recover gradually, propelled by corporate performance, increase in their capital expenditure, and improvement in the employment and overall wages. Internationally, there remain risk factors in the outlook of the global economy stemming from American protectionist policies and trade disputes with the European Union and China and also from the potential “Brexit” of the United Kingdom from the EU. Within the restaurant industry where the company operates, domestically, it faces many challenges from hyper- competition across industries involving convenience store chains and food delivery services, rising wages from labor shortage, increase of raw materials and logistics costs. In addition, with the coming Tokyo Olympics in 2020, there are upward pressures on construction materials too. In the international markets, while there are many new entrants, the overall Japanese restaurant market is growing boosted by the increased awareness of Japanese food in general and ramen in particular. There are promising signs of further growth in this segment. Under such circumstances, the Company stays true to its corporate philosophy of “Keep Changing to Remain Unchanged” and to spread Japanese culinary culture to the rest of the world by opening more stores, aiming to realize 600 stores worldwide by the year 2025. At the end of the fiscal year, the total number of stores, including those in the licensed territories, amounted to 266 (151 domestically and 115 internationally). As such, the consolidated revenue during the fiscal year totaled 27,466 million yen, an increase of 12.3% from its previous fiscal year, its operating income amounted to 957 million yen (an increase of 5.8%), and its ordinary income 922 million yen (also an increase of 5.8%). The Company also recorded income from sales of investment shares held by its subsidiaries, while also booking impairment losses related to closures of certain stores in Japan. With additional tax expenses, the net income attributable to the Company resulted in 615 million yen (a decrease of 3.0%).
Explanation by segments (Domestic Store Operations) In this segment, the Company continued to open stores under the “IPPUDO” and “Ramen Express” brands. It also remodeled and renovated a certain number of high-performing stores to reinforce their profitability, as well as closing certain stores for strategic reasons. At the end of the period, there were 6 IPPUDO store openings, 6 Ramen Express store openings, as well as 5 stores under other brands, totaling 17 new stores. On the other hand, there were 2 IPPUDO closures, 4 closures in the bakery division, and 2 under other brands. The total number of stores at the end of the period was 143 (a net increase of 9 stores). At the 33rd Anniversary of IPPUDO on October 16, 2018, the Company also reinforced strong ties with loyal customers by issuing “IPPUDO Republic Premium Member’s Card” to the past “Premium Members.” While there were operation disruptions caused by natural disasters, the new stores opened on schedule and the existing stores showing signs of recovery, the overall revenue from this segment amounted to 15,795 million yen (an increase of 4.9% from the previous fiscal year). The Company also endeavored to increase profitability by improving productivity in production and manufacturing processes and revamping supply chain, as the positive effects from these efforts are spread over time, and there were stronger pressures on the profitability from industry-wide increase in logistics cost, wages and raw materials cost, the operating income resulted in 910 million yen (a decrease of 8.9%).
(International Store Operations) The Company opened its first Vietnamese store during this fiscal year, and continued to open more IPPUDO stores around the world. It has now presence in 13 countries and regions outside Japan, and its store count totaled 115 (a net increase of 33 stores). Individually, the new openings were: 2 in the USA, 1 in Singapore, 9 in China, 3 in Taiwan, 1 in
1
Australia, 2 in Malaysia, 8 in Thailand, 4 in the Philippines, 2 in Indonesia, and 1 in Vietnam. Additionally, the Company has consolidated the Taiwan operations, which had been a licensed area and reinforced its management and productivity improvements in this territory. Lastly, all of the stores participated in the 33rd Anniversary event throughout the world, which was the first-time ever globally coordinated event aimed at an increased brand recognition of IPPUDO. As such, the total revenue from the segment resulted in a strong growth of 37.4%, amounting to 8,578 million yen, propelled by solid performance from existing stores and additions from the new stores opening. While its operating income was dragged downward by the initial start-up costs in the USA west coast operations, the strong performance from existing stores and additional income from licensed store openings more than offset this, and the operating income saw a significant increase of 24.2%, resulting in 609 million yen.
(Domestic Production and Merchandise) The Company continued to reinforce its IPPUDO-related merchandising such as “Ouchi-de-IPPUDO,” a ready-to-eat products aimed at consumers, but its efforts were countered by the closure of instant-noodle manufacturing business during the previous year, as well as the self-initiated recall of “Hot Moyashi Sauce” (packaged condiment) during the period, which resulted in a decreased revenue. The revenue from the segment saw a decrease of 7.4% at 2,086 million yen, but its profitability increased by 35.0% to 50 million yen, thanks to an improved productivity and gross margin.
(Others) Within this segment, although the Consulting division has been refocusing on its existing business rather than acquiring new ones, its revenue continued to increase. The brands under this segment such as “Ichika-Bachika” and a 68-year old brand “Inaba Udon” received much media attention during the period, which saw their brand recognition improve. Ichika-Bachika had 1 new opening but also closed 1 store, resulting in 8 stores under this segment at the end of the period. The revenue from the segment totaled 1,005 million yen (an increase of 12.1%) and its loss amounted to 8 million yen (previous year saw 20 million yen loss).
The total number of stores, by segment, by market and by brands are indicated in the chart below:
Store count at Whereas Whereas licensed Increase/ Store count at the Segment Country/Region Brand the end of licensed stores Decrease end of FY2018-19 previous period stores IPPUDO 89 7 + 4 93 9 Domestic Store RAMEN EXPRESS 25 0 + 6 31 0 Operations Japan Others 20 0 - 1 19 0 Ichika Bachika ２ 1 － 2 0 Others Inaba Udon ６ 0 － 6 0 Domestic Total 142 8 ＋9 151 9 IPPUDO ５ 0 + 1 6 0 United States KURO－OBI ４ 0 + 1 5 0 IPPUDO ７ 0 － 7 0 International Store Singapore IPPUDO EXPRESS ２ 0 + 1 3 0 Operations Others １ 0 － 1 0 China (including IPPUDO 22 22 ＋9 31 31 Hong Kong) GOGYO １ 1 － 1 1
2
Taiwan IPPUDO ８ 8 + 3 11 0 IPPUDO ６ 1 + 1 7 2 Australia GOGYO １ 0 － 1 0 Malaysia IPPUDO ３ 3 + 2 5 5 Thailand IPPUDO ８ 8 + 8 16 16 The Philippines IPPUDO ５ 5 + 4 9 9 Indonesia IPPUDO ２ 0 ＋2 4 0 United Kingdom IPPUDO ３ 0 － 3 0 France IPPUDO ３ 0 － 3 0 Myanmar IPPUDO １ 1 － 1 1 Vietnam IPPUDO 0 0 + 1 1 1 International Total 82 49 ＋33 115 66 Group Total 224 57 ＋42 266 75 Notes: 1. Licensed stores are indicated in separate columns. 2. One IPPUDO store from the Domestic Store Operations was converted from company-owned to licensed. 3. 8 Taiwan stores have been converted from licensed to company-owned.
(2) Explanation on financial position The Company has applied “Partial Changes to Accounting Standards relating to Tax Effect Accounting, etc.” (Corporate Accounting Principles No. 28 (effective February 16, 2018)) since the first quarter of fiscal year ending March 31, 2019, and comparison to previous periods are calculated by applying the standard retroactively.
- Assets As of March 31, 2019, the total assets increased from the end of the previous fiscal year by 1,092 million yen, totaling 16,392 million yen. This is mainly due to an increase in cash and deposits of 550 million yen, an increase in inventories of 89 million yen due to revamp of supply chain to the stores, an increase in the tangible non-current assets of 351 million yen due to store openings, an increase of goodwill of 167 million yen, and an increase in deposits and guarantees of 114 million yen, while the investment securities decreased by 386 million yen due to its sales.
- Liabilities At the end of the period, the liabilities totaled 11,668 million yen, an increase of 1,087 million yen compared to the end of the previous fiscal year. This is mostly due to an increase in interest-bearing loan of 19 million yen, payables increase of 572 million yen for the capital expenditure of the new stores domestically and internationally, an increase of 117 million yen in asset retirement obligations, as well as an increase in corporate income tax payable of 184 million yen.
- Net Assets The net assets for the period increased by 4 million yen compared to the end of the previous fiscal year, totaling 4,724 million yen. Equity ratio is at 26.4%. There was an increase of retained earnings (615 million yen) from the period, while 99 million was spent on acquisition of treasury shares, 174 million yen decrease of valuations on investment securities due to the sales of certain securities, decrease of 187 million yen due to dividends payment from its retained earnings, and 136 million yen decrease in foreign-exchange adjustment accounts.
(3) Explanation on cash flow for the fiscal year 3
The cash and equivalents amounted to 4,323 million yen at the end of the fiscal year, an increase of 767 million yen compared to the end of the previous fiscal year. The cash flow situation and main reasons are as follows:
- Cash flow from operating activities The positive cash flow from operations amounted to 2,207 million yen mainly due to booking of 837 million yen net income before tax adjustments, an increase of 582 million yen in payables, 916 million yen of depreciation and 250 million yen of non-cash transactions such as impairment charges, while partially offset by 249 million yen booked from the sales of investment securities.
- Cash flow from investing activities The outflow from investing activities amounted to 1,180 million yen. There was an inflow of 507 million yen from the sales of investment securities, while 1,487 million yen was spent on acquisition of assets for new stores, and an outflow of 193 million yen for deposits and guarantees for the lease of new stores.
- Cash flow from financial activities 260 million yen was the total outflow from financial activities. Main reasons were an inflow of 1,703 million yen from long-term loans, a decrease of 1,417 million yen for the repayment of long-term loans, a net decrease of 283 million yen of short-term loans, an outflow of 99 million yen for the acquisition of treasury shares, and an outflow of 188 million yen from the payment of dividends for the fiscal year.
(4) Policy concerning appropriation of profits and dividends payout for the current and coming fiscal year The basic policy of the Company concerning appropriation of profits takes into consideration steady return of profit to the shareholders judged from the operating performance and payout ratio, while ensuring sufficient level of internal reserve for the future expansion of the business and strengthening of management resources. The Company plans to pay out dividends twice a year, at mid-term and at the end of the fiscal year. In addition, abiding by the Companies Act 459 Article 1, the articles of incorporation of the Company allows for the board to resolve on the matters of appropriation of profit. At the board meeting on May 10, 2019, the board of the Company has decided that the term-end ordinary dividend to be 4 yen per share. The board had additionally decided at its meeting on November 8, 2018 meeting on a mid-term dividend of 4 yen per ordinary share. The total payout per share for the fiscal year is therefore 8 yen. As for the next fiscal year (fiscal year ending March 31, 2020), the Company plans to balance the increase in income with the level of internal reserve necessary to realize the growth strategies into the future, plans an ordinary dividend of 8 yen per share (mid-term 4 yen, term-end 4 yen).
(5) Forecasts There are many uncertainties in the global economy arising from American protectionist policies leading to trade disputes, a potential “Brexit” of the United Kingdom from the European Union, a possible slowdown in the Chinese economy. Domestically in Japan, there are signs of improvement in the job market and consequent growth of disposable income and this leads to a gradual and solid recovery in the economic situations. The restaurant industry faces competition from outside its traditional business domain, notably from convenience store chains to delivery services, leading to a heightened competition. There are more promising signs outside Japan from increased awareness of, and interest in Japanese cuisine, in particular, ramen, resulting in an expanding market. The Company will focus on strengthening the existing stores in the domestic market around the core brand IPPUDO. In order to retain and improve the value of the brand to the customers, new stores will undergo rigorous site-selection processes both from profitability and branding perspectives. The existing stores will also receive, in turn, strategic renovations to improve seat efficiency and food hygiene standards. Additionally, incubating sub-brands such as 4
1/2PPUDO (“Nibun-no-IPPUDO”) and “IPPUDO Stand” will open more stores to meet the diversifying and changing needs of the customers. The Company will once again focus on its basics, Quality, Service and Cleanliness to win the love of the customers. Internationally, the Company will continue to strengthen its presence in various countries in Asia as well as aggressively expanding and improving profitability of its USA operations, solidifying a basis for further growth. There will be more “Kuro-Obi” and “IPPUDO Express” stores, which has better returns-on-investment compared to traditional IPPUDO stores, and the Company will also strengthen its presence by opening stores in high traffic trade zones such as airports and new territories. All of this will lead to the growth, improved profitability, and optimization of the business. Given the above ambitions, the Company’s forecast for the following fiscal year is as follow:
(Consolidated Operating Forecasts) (in million JPY) FY2018-19 FY2019-20 Variance Actual Forecast Revenue 27,466 30,010 +9.3% Operating Income 957 1,150 +20.1% Ordinary Income 922 1,072 +16.2% Income attributable to the Company 615 700 +13.9%
(Revenue Forecast by Segment) (in million JPY) FY2018-19 FY2019-20 Variance Actual Forecast Domestic Store Operations 15,795 16,764 +6.1% International Store Operations 8,578 10,033 +17.0% Domestic Production and Merchandise 2,086 2,143 +2.7% Others 1,005 1,070 +6.4%
(Income Forecast by Segment) (in million JPY) FY2018-19 FY2019-20 Variance Actual Forecast Domestic Store Operations 910 943 +3.6% International Store Operations 609 747 +22.6% Domestic Production and Merchandise 50 109 +115.1% Others -8 -9 - Corporate Overhead -605 -640 - Foreign exchange rates assumed: JPY 104.00 = USD1, JPY120 = EUR1, JPY135.00 = GBP1, JPY76.70 = SGD1, JPY75.0 = AUD1
5
2. Current State of the Company and its subsidiaries The Group operates under a holding structure, and the Company itself is a holding company holding the shares of 18 subsidiaries and 3 affiliated companies. Additionally, the Company operates with an integrated business model of producing raw materials, education, product development, manufacturing, supply chain, and sales within the domestic market and the international markets, respectively. The delineation of segments is as follows: Domestic Store Operations segment in which IPPUDO, a Hakata ramen specialist restaurant, Ramen Express, its food court model, as well as Gogyo, Najimatei, and Panda Express; International Store Operations which operates IPPUDO stores outside Japan; and Domestic Production and Merchandise segment which produces soba and ramen noodles and sells them within Japan. The Company stays true to its corporate philosophy of “Keep Changing to Remain Unchanged” and continues to aim to realize its mission of “Japanese Wonder to the World; Spread Smile and “Arigato” throughout the World” on a global scale. To achieve this, the Company continues to invest all its resources in heightening customer satisfaction and corporate value to the society. The following describes the details of the segment and subsidiaries engaged in respective segments:
(1) Domestic Store Operations At its core is the Hakata ramen specialist IPPUDO brand, and there are a few sub-brands in the segment. Recently, capitalizing on the expert know-how and brand recognition, the Company has launched a series of sub-brands including Ramen Express, Gogyo, IPPUDO Stand, which is a standing bar for a quick drink and ramen, and 1/2PPUDO (“Nibun-no-IPPUDO”) which offers half-portion and half-carb bowls of ramen. It aims to evolve the IPPUDO brand and to increase its value, while also expanding its Najimatei and Panda Express brands in Japan.
(A) The major brands and operating companies is as follows:
Brand Main areas of business Operating Companies
It is a ramen specialist brand with meticulous attention on every detail of taste, ambience and service: originally-blended flour, original and house- made soup, store design that strives for ultimate comfort, and a company-owned training facility to IPPUDO educate every staff. Its signature products include “Shiromaru Classic” “Akamaru Modern” and “IPPUDO Karaka” and its stores are located in central business districts, commercial centers, and road-side locations. It appeals to a wide segment of the Chikaranomoto market of all ages, gender and family constitutions. Company Ltd., Watanabe Seimen Launched in 2011, it is located at food-courts of main Ltd. shopping centers around the country and continues RAMEN EXPRESS to expand its presence. It is a speedier and easy-to- enjoy version of the IPPUDO brand.
“Drink, Nibble and Ramen” is the idea behind this new Ramen Dining concept. Literally flaming performance of its “Kogashi” chargrilled ramen Gogyo incorporating the French Flambé technique, brightens the relaxing ambience,
6
Brand Main areas of business Operating Companies
It is a classic ramen brand incorporating both Chikaranomoto Kurume tradition and Fukuoka Nagahama “Yatai” Company Ltd., Najimatei traditions. Its ultra-thin noodles and unique aroma Watanabe Seimen of its tonkotsu soup enlightens many. Ltd.
It is a 2,000-strong chain restaurant originating from I&P RUNWAY PANDA EXPRESS the USA, operating mainly in food courts in Japan JAPAN with its signature product “Orange Chicken.”
There are a few more brands such as “Gyoshu” a Chikaranomoto Others － Okinawa cuisine “izakaya-style” restaurant, from a Company Ltd. wide range of genre of cuisine.
Note : Watanabe Seimen Ltd. produces and sells the noodles and soup for IPPUDO, Ramen Express, Gogyo and Najimatei.
(B) Internal Franchising System The Company operates domestic stores either as company owned or internally franchised. Internal franchisees go through a rigorous selection process whose topics range anything from store operations skills, affinity with corporate philosophy and business plan. Those franchisees who pass the process, retire from the Company and creates their own company, and operates the designated stores at Company’s discretion. In terms of the effects this system has on the consolidated financial reports, as the main style of such internal franchising is a contract between the Company and the internal franchisees for the latter to carry out store operations on the former’s behalf, the sales from those stores are consolidated exactly like the Company-owned stores. The cost of sales and sales, general and administrative expenses at the store, which are mainly salaries expense including those for the franchisees, are booked as professionals fees for the Company (the equivalent amount is the revenue for the franchisees’ companies). The overall aim is to improve customer satisfaction through better Quality, Service and Cleanliness of the franchised stores and retaining the high performance individuals, by aligning the interests of the Company with those of the franchisees through performance-based compensation system, as well as offering a career path choice for the employees in a strongly independent-minded industry. At the point of March 31, 2019, there are 24 stores among 13 franchisees under the internal franchise scheme including the Ginza store, most of which are under the IPPUDO brand. Additionally, the Company also promotes a strict licensed business among the above franchisees who have achieved high levels of performance and results and pass a selection process, using the brand IPPUDO.
(2) International Store Operations Through its middle-holding and managing company, CHIKARANOMOTO GLOBAL HOLDINGS PTE. LTD., the Company aims to spread ramen, a signature Japanese food, and its surrounding cuisine, culture and the spirit of Omotenashi to the whole world. Currently within this segment, there are company-owned operations and licensed operations, to which the Company provides the brand and the operational support, in 13 different countries and regions excluding Japan: North America (USA), Europe (United Kingdom and France), Asia/Oceania (Australia, Singapore, China, Hong Kong, Taiwan, Malaysia, Thailand, the Philippines, Indonesia, Myanmar and Vietnam), and the Company plans to continue its aggressive expansion. It also operates with an integrated business model of manufacturing and selling the key ingredients such as 7
noodles and soup, production of raw materials, education, product development, manufacturing, supply chain and sales. More recently, there have been new brands such as IPPUDO Express, Kuro-Obi, and Gogyo, who are hoped to be the next core brand after IPPUDO.
The major brands and operating companies is as follows
Brand Main areas of business Operating Companies
IPPUDO NY, LLC. Similar to its original brand in Japan, its signature I＆P RUNWAY, LLC. dishes featured are “Shiromaru Classic” and IPPUDO SINGAPORE PTE. “Akamaru Modern.” It also adopts itself to the local LTD. markets’ diverse demands by offering more of a IPPUDO AUSTRALIA PTY.
dining concept interior design as well as dishes apart LTD. from ramen. IPPUDO LONDON CO. IPPUDO The “Japan Brand” extends beyond the taste and LIMITED
ambience, to service where service staff are trained IPPUDO PARIS in Omotenashi. The successful degree of localization PT IPPUDO CATERING leads to a strong following and higher spend per INDONESIA customer in many markets. Taiwan IPPUDO Co., Ltd. YOU＆ME FOOD FACTORY PTE. LTD. (Note)
Primarily in food courts of public facilities such as IPPUDO SINGAPORE PTE. IPPUDO airports and commercial centers, the sub-brand of LTD. EXPRESS IPPUDO offers more casual and quick service, yet YOU＆ME FOOD FACTORY uncompromisingly authentic tonkotsu ramen. PTE. LTD. (Note)
A relatively new brand initiated in the USA, it is aimed at locations in food halls, which originated in IPPUDO NY, LLC. KURO-OBI New York. It offers not just dine-in but also take- I&P Runway LLC. away of its blended Chicken and pork “paitan” soup- based ramen. Similar to its original Japanese brand, “Drink, Nibble and Ramen” concept offers a relaxing ambience for IPPUDO AUSTRALIA GOGYO ramen dining. It offers the same signature “Kogashi PTY. LTD. Shoyu” and “Kogashi Miso” in addition to various side dishes.
Note: You&Me Food Factory Pte. Ltd. produces and sells ramen ingredients such as noodle and soup for IPPUDO and IPPUDO Express in Singapore.
Company Name Main Business
CHIKARANOMOTO GLOBAL Management of its international subsidiaries, and operational support for its licensed HOLDINGS PTE. LTD. businesses. IPPUDO USA HOLDINGS, INC. Management of its American subsidiaries.
(3) Domestic Production and Merchandise Within this segment, the Company manufactures and sells mainly “Sinshu” Soba, buckwheat noodles, Chinese and other types of noodles through wholesale as well as retail, to a wide range of customers. In addition, it is
8
reinforcing its sales of IPPUDO-branded instant noodles and condiments under the “Ouchi de IPPUDO” series.
The main operating company is as follows
Company Name Main Business
Production and merchandising of various noodles (soba, ramen and udon), soup, sauce Watanabe Seimen Ltd. and condiments (including “Ouchi de IPPUDO” series) for consumers and wholesale
(4) Others Capitalizing on the well-established know-how of running successful store operations, this segment focuses on consulting business on brand development, product development and staff education for other restaurant companies, in addition to franchising business, international manufacturing and sales including ramen noodles, and experiential agriculture business.
The main brands and operating companies are as follows
Brand Main areas of business Operating Companies
This is a Hakata-style Izakaya concept with its Chikaranomoto Ichika Bachika signature soft-boiled udon noodles with flying fish- Company Ltd. broth and Hakata Yakitori, a local staple.
A 68-year old classic brand of Hakata Udon. There are currently 6 stores in Fukuoka and is usually cited as one of the mainstream Hakata Udon brands. Its Inaba Udon historical recognition is backed by careful selection Inaba udon Ltd. of ingredients, secret recipes of its traditional Dashi,
and ultra-soft Hakata style udon.
Company Name Main Business
Capitalizing on its know-how gained from successfully running IPPUDO stores, it provides various services to large corporations ranging from product development, production of restaurant concepts, human resources development programs focused Chikaranomoto Company Ltd. on restaurant industry and based on “Seven Habits,” international expansion consultation, wholesale of key ingredients, store opening support, and operating restaurants. It operates Ichika Bachika with an ultimate aim to expand it on a franchise basis. It provides experiential development sessions for the corporate employees at its Kushihuru no Daichi Ltd. farmland in Taketa city, Oita prefecture.
YOU ＆ ME FOOD FACTORY It provides manufacturing, sales and consulting services primarily on ramen to its PTE. LTD. clients in Singapore.
9
The following describes the system diagram of the Company’s businesses:
○ denotes subsidiaries and ● denotes affiliated companies using equity method
3. Management Philosophy (1) The basic philosophy underlying the Company The Company operates various businesses around the world under the philosophy of realizing an business model integrating the whole value chain of raw materials production, education, product development, manufacturing, supply chain and sales, with Hakata ramen brands IPPUDO and its peripheral brands at its core. Its corporate philosophy “Keep Changing to Remain Unchanged” propels its expansion of Japanese food and in particular ramen, and its corporate mission of “Japanese Wonder to the World, Spreading Smile and Arigatou” remains at its helm of striving for heightened customer satisfaction and creation of corporate value, while delivering value to our customers and all stakeholders including shareholders.
(2) Key Performance Indicators The indicators the management feels important are revenue, operating income, operating margin and Return on
10
Equity. The following describes the progression of these indicators: (In million yen)
FY2016-17 FY2017-18 FY2018-19
Revenue 22,430 24,451 27,466
Operating Income 609 905 957
Operating Margin 2.7% 3.7% 3.5%
ROE 9.0% 16.5% 14.4%
(3) Mid- and long-term strategies of the Company The Company and its Group, under the corporate philosophy of “Keep Changing to Remain Unchanged” and in order to spread Japanese food and in particular ramen, aims to realize 600 stores worldwide by the year 2025. There are many uncertainties on the way; domestically, the competition is heightened beyond traditional industry borders involving convenience store chains and food delivery services, wages and salaries are increasing due to labor shortage, the raw materials cost and logistics costs are rising, and, with the coming Olympics, the construction materials costs are also increasing, making the economic outlook opaque. Internationally as well, there are the American protectionist policies and its subsequent trade disputes with the EU and China, and a potential “Brexit” of the United Kingdom from the European Union. All these uncertainties may affect the Company’s forecasts. With the above in mind, the Company plans to tackle the below challenges and plans to continue its growth:
1) Strengthening its domestic operations The Company recognizes the importance of strengthening its existing store performance. In order to retain and improve its value to the customers for its core brand IPPUDO, all of the new stores will go through rigorous site selection process from both profitability and branding perspectives, and renovations of existing stores will aim to increase its seat efficiency and heighten hygiene standards. It will also strategize closure of stores if they are underperforming. In addition, in order to create new values for IPPUDO, it will also accelerate openings of 1/2PPUDO (“Nibun-no-IPPUDO”) and IPPUDO Stand sub- concepts to meet the diversifying and changing needs of the customers. Furthermore, it will continue to aim to win the love of the customers by reinforcing Quality, Service and Cleanliness principles. Lastly, in order to counter the rising costs of raw materials and logistics costs, it will optimize the production processes and revamp its supply chain, to contribute to sustainable development and solidifying its business base.
2) Aggressive international expansion In addition to its expansion in Asia, the Company will also aim to expand more quickly in the North American markets and to improve its profitability, building the basis for further expansion. The Company will open more Kuro-Obi stores and other new bands, which have better returns-on- investment, and to open stores in strategic areas such as high traffic trade zones and airports for brand recognition and improved profitability as well as management efficiency.
3) Reinforcing its human resources and development One of the critical differentiating factors for the Company, and that improves its store operations, is human resources. The Company will aim to widen its human resources pool irrespective of nationality, and to retain those personnel by improving their satisfaction levels. In terms of human resources development,
11
the Company places importance on understanding and embodying the corporate philosophy, knowledge of product and hygiene as well as service skills, store management skills and tools as well as compliance issues. It has introduced for its own employees “Seven Habits of Running Store Operations” program, and e-learning and performance appraisal system “Ichi-Tore” and it plans to reinforce their use. The Company also intends to expand its global recruitment even more.
4) Heightening its hygiene standards These days there is much more attention paid to food safety in the society overall, triggered by cases of food poisoning and false labeling of products. The Company has designated specialized team of professionals to ensure hygiene and food standard protection protocols are followed, based on hygiene management manuals, at each of the stores and production facilities.
4. Basic Approach in Choosing Accounting Methods The Company intends to continue using Japanese Generally Accepted Accounting Principles for the foreseeable future, for the ease of comparison of consolidated financial statements over different periods as well as comparison with other companies in the same industry. It will also monitor and appropriately respond to the changing dynamics surrounding the introduction of International Financial Reporting Standards.
12
5. Consolidated Financial Statements and Notes (1) Consolidated Balance Sheet (Unit: thousand yen) Previous Fiscal Year Current Fiscal Year
(ended March 31, 2018) (ended March 31, 2019) Assets Current assets Cash and deposits 3,064,604 3,615,246 Notes and accounts receivable - trade 500,495 516,708 Inventories 270,908 360,332 Other 1,146,730 1,301,182 Allowance for doubtful accounts -1,560 -895 Total current assets 4,981,179 5,792,574 Non-current assets Tangible non-current assets Buildings and structures 8,809,373 10,370,469 Accumulated depreciation -3,870,484 -4,565,380 Buildings and structures, net 4,938,889 5,805,089 Machinery, equipment and vehicles 906,693 1,030,013 Accumulated depreciation -652,496 -720,442 Machinery, equipment and vehicles, net 254,196 309,571 Land 642,235 633,495 Leased assets 149,425 154,280 Accumulated depreciation -76,863 -96,204 Leased assets, net 72,561 58,075 Construction in progress 792,576 82,040 Other 1,125,078 1,410,770 Accumulated depreciation -809,414 -931,592 Other, net 315,663 479,177 Total property, plant and equipment 7,016,123 7,367,450 Intangible assets Goodwill 86,278 253,526 Leased assets 19,589 6,917 Other 49,496 75,790 Total intangible assets 155,363 336,234 Investments and other assets Investment securities 816,179 429,235 Long-term loans receivable 4,914 4,449 Deferred tax assets 451,487 443,432 Lease and guarantee deposits 1,635,670 1,750,633 Other 241,506 271,460 Allowance for doubtful accounts -1,945 -2,718 Total investments and other assets 3,147,813 2,896,493 Total non-current assets 10,319,300 10,600,178 Total assets 15,300,479 16,392,753 13
(Unit: thousand yen) Previous Fiscal Year Current Fiscal Year
(ended March 31, 2018) (ended March 31, 2019) Liabilities Current liabilities Notes and accounts payable - trade 697,483 701,619 Short-term loans payable 330,000 50,000 Current portion of bonds 14,000 14,000 Current portion of long-term loans payable 1,336,777 1,743,088 Lease obligations 32,241 23,624 Accounts payable - other 857,931 1,429,995 Income taxes payable 64,460 248,894 Provision for bonuses 2,400 2,700 Asset retirement obligations 6,660 18,369 Other 878,508 903,317 Total current liabilities 4,220,463 5,135,610 Non-current liabilities Bonds payable 165,000 151,000 Long-term loans payable 5,297,078 5,232,806 Lease obligations 57,765 38,262 Provision for ESOP benefits for domestic － 14,624 residents Provision for ESOP benefits for non-residents － 1,822 Net defined benefit liability 200,453 230,522 Asset retirement obligations 567,801 673,867 Other 71,526 189,488 Total non-current liabilities 6,359,624 6,532,394 Total liabilities 10,580,088 11,668,004 Net assets Shareholders' equity Capital stock 1,239,003 1,266,774 Capital surplus 1,151,406 1,179,178 Retained earnings 1,252,051 1,680,407 Treasury shares － -99,278 Total shareholders' equity 3,642,461 4,027,081 Accumulated other comprehensive income Valuation difference on investment securities 333,331 158,774 Foreign-exchange adjustments 273,311 136,969 Total accumulated other comprehensive 606,642 295,743 income Non-controlling interests 471,286 401,923 Total net assets 4,720,391 4,724,748 Total liabilities and net assets 15,300,479 16,392,753
14
(2) Consolidated Statement on Profit and Loss and Comprehensive Income Consolidated Statement of Income (Unit: thousand yen) Previous Fiscal Year Current Fiscal Year (from April 1, 2017 (from April 1, 2018 To March 31, 2018) To March 31, 2019) Net sales 24,451,696 27,466,448 Cost of sales 7,089,180 7,801,932 Gross profit 17,362,516 19,664,515 Selling, general and administrative expenses 16,456,976 18,706,856 Operating profit 905,539 957,659 Non-operating income Interest income 8,739 1,941 Dividends income 13,636 21,592 Lease income 20,857 28,227 Subsidy income － 15,772 Experiential training income 14,410 － Other 23,546 20,891 Total non-operating income 81,190 88,425 Non-operating expenses Interest expense 83,415 86,854 Share of loss of entities accounted for using equity 6,363 1,497 method Foreign exchange losses 3,204 3,238 Cost of lease income 5,862 10,181 Financing expenses 12,975 12,213 Other 2,856 9,318 Total non-operating expenses 114,678 123,303 Ordinary Income 872,052 922,780 Extraordinary income Gain on sales of non-current assets 988 64,218 Gain on sales of shares of subsidiaries and 175,127 109 associates Gain on sales of investment securities － 249,291 Other 19,744 7,628 Total extraordinary income 195,860 321,246 Extraordinary losses Loss from sales of non-current assets 653 － Loss from retirement of non-current assets 9,108 4,061 Impairment loss 272,915 250,419 Settlement － 66,342 Other 29,979 85,891 Total extraordinary losses 312,656 406,713 Income before taxes 755,255 837,313 Income taxes – current 182,546 341,783
15
Income taxes – deferred -42,096 -39,804 Total income taxes 140,449 301,979 Net income 614,805 535,333 Loss attributable to non-controlling interest (-) -19,788 -80,156 Net income attributable to the Company 634,593 615,490
Consolidated Statement of Comprehensive Income (Unit: thousand yen) Previous Fiscal Year Current Fiscal Year (from April 1, 2017 (from April 1, 2018 To March 31, 2018) To March 31, 2019) Net income 614,805 535,333 Other comprehensive income Valuation difference on investment securities 214,808 -174,556 Foreign-exchange adjustments 60,181 -143,799 Share of other comprehensive income of entities -68,336 － accounted for using equity method Total other comprehensive income 206,654 -318,355 Comprehensive income 821,459 216,978 Comprehensive income attribution: Comprehensive income attributable to the 843,456 304,591 Company Comprehensive income attributable to non- -21,996 -87,613 controlling interests
(3) Consolidated Statement of Changes in Shareholder’s Equity Previous Fiscal Year (from April 1, 2017 to March 31, 2018)
(unit: thousand yen) Shareholder’s Equity
Capital Capital Surplus Retained Earnings Total Shareholder’s Equity
Beginning Balance 1,185,967 1,098,371 741,945 3,026,283
Changes during the year
Issuance of new shares 53,035 53,035 － 106,071
Dividends of retained earnings － － -124,487 -124,487
Net income attributable to the － － 634,593 634,593 Company
Other changes (net) － － － －
Total changes 53,035 53,035 510,106 616,178
Ending Balance 1,239,003 1,151,406 1,252,051 3,642,461
16
Accumulated Other Comprehensive Income
Variance of Non-controlling Foreign exchange Other comprehensive Total net assets valuations on other interest portion adjustment accounts income, accumulated investment securities
Beginning balance 118,522 279,257 397,779 152,634 3,576,697
Changes during the year
Issuance of new shares － － － － 106,071
Dividends of retained earnings － － － － -124,487
Net income attributable to the － － － － 634,593 Company
Other changes (net) 214,808 -5,946 208,862 318,652 527,515
Total changes 214,808 -5,946 208,862 318,652 1,143,693
Ending Balance 333,331 273,311 606,642 471,286 4,720,391
Current Fiscal Year (from April 1, 2018 to March 31, 2019) (unit: thousand yen) Shareholder’s Equity
Total Shareholder’s Capital Capital Surplus Retained Earnings Treasury shares Equity
Beginning Balance 1,239,003 1,151,406 1,252,051 － 3,642,461
Changes during the year
Issuance of new shares 27,771 27,771 － － 55,543
Dividends of retained earnings － － -187,134 － -187,134
Net income attributable to the － － 615,490 － 615,490 Company
Other changes (net) － － － -99,278 -99,278
Total changes － － － － －
Ending Balance 27,771 27,771 428,355 -99,278 384,619
Beginning Balance 1,266,774 1,179,178 1,680,407 -99,278 4,027,081
Accumulated Other Comprehensive Income
Variance of Non-controlling Foreign exchange Other comprehensive Total net assets valuations on other interest portion adjustment accounts income, accumulated investment securities
Beginning balance 333,331 273,311 606,642 471,286 4,720,391
Changes during the year
Issuance of new shares － － － － 55,543
Dividends of retained earnings － － － － -187,134
Net income attributable to the － － － － 615,490 Company
Other changes (net) － － － － -99,278
Total changes -174,556 -136,342 -310,899 -69,363 -380,262
17
Ending Balance -174,556 -136,342 -310,899 -69,363 4,357
Beginning balance 158,774 136,969 295,743 401,923 4,724,748
18
(4) Consolidated Statement of Cash Flow
(Unit: thousand yen) Previous Fiscal Year Current Fiscal Year (from April 1, 2017 (from April 1, 2018 To March 31, 2018) To March 31, 2019) Cash flow from operating activities Profit before income taxes 755,255 837,313 Depreciation 762,066 916,985 Impairment charges 272,915 250,419 Amortization of goodwill 10,987 19,615 Amortization of long-term prepaid expenses 16,767 19,783 Increase (decrease) in allowance for doubtful 928 107 accounts Increase (decrease) in provision for bonuses -58,656 300 Increase / decrease in provision for stock benefits － 14,624 Increase / decrease in provision for stock benefits － 1,822 (non-residents) Increase (decrease) in net defined benefit liability 23,604 30,144 Interest and dividend income -22,375 -23,533 Interest expenses 83,415 86,854 Foreign exchange losses (gains) -11,466 -59 Share of loss (profit) of entities accounted for 6,363 1,497 using equity method Loss (gain) on sales of shares of subsidiaries and -175,127 -109 affiliates Loss (gain) on sales of non-current assets -335 -64,218 Loss (gain) on sales of investment securities － -249,291 Loss on retirement of non-current assets 9,108 4,061 Decrease (increase) in notes and accounts -132,747 20,913 receivable - trade Decrease (increase) in inventories 15,194 -87,693 Increase (decrease) in notes and accounts payable 66,792 -53,026 - trade Decrease (increase) in prepaid expenses -3,401 -82,464 Increase (decrease) in accounts payable - other 32,923 582,385 Decrease/increase in consumption taxes 10,997 16,317 receivable/payable Other, net 69,675 161,220 Subtotal 1,732,888 2,403,973 Interest and dividend income received 54,183 23,536 Interest expenses paid -82,220 -86,763 Income taxes paid -292,876 -133,278 Net cash provided by (used in) operating activities 1,411,975 2,207,467 Cash flow from investing activities
19
Acquisition of non-current assets -1,932,277 -1,487,314 Sale of non-current assets 4,675 133,546 Purchase of intangible assets -20,123 -50,668 Purchase of investment securities -51,962 -61,120 Proceeds from sales of investment securities － 507,745 Purchase of shares of subsidiaries and associates -20,000 － Proceeds from sales of shares of subsidiaries and 500,172 109 associates Purchase of shares of subsidiaries resulting in -2,922 -52,513 change in scope of consolidation Payments of loans receivable -200 -1,018 Collection of loans receivable 91,254 2,973 Payments for lease and guarantee deposits -182,886 -193,390 Proceeds from collection of lease and guarantee 61,849 53,358 deposits Payments for asset retirement obligations -16,855 -4,560 Other, net -13,838 -28,125 Net cash provided by (used in) investing activities -1,583,115 -1,180,978
Cash flow from financial activities Net increase (decrease) in short-term loans -162,000 -283,306 payable Proceeds from long-term loans 1,314,804 1,703,896 Repayment of long-term loans -1,341,417 -1,417,130 Redemption of bonds -14,000 -14,000 Repayment of lease obligations -48,756 -34,530 Repayment of installment payables -1,391 － Proceeds of issuance of ordinary shares 97,766 54,187 Proceeds from share issuance to non-controlling 378,064 18,250 interest Purchase of treasury shares － -99,278 Cash dividends paid -124,245 -188,305 Net cash provided by (used in) financial activities 98,823 -260,218 Effect of exchange rate changes on cash and cash 22,365 1,501 equivalents Net increase (decrease) in cash and cash equivalents -49,950 767,773 Cash and cash equivalents at beginning of period 3,637,058 3,555,734 Decrease in cash and equivalents from non- -31,373 － consolidations Cash and cash equivalents at end of period 3,555,734 4,323,507
20
(5) Notes on Consolidated Financial Statements
Notes on premise of going concern There are no items to report
Additional information
ESOP The Company has decided, at its board meeting on July 13, 2018, to introduce an employee incentive plan “Stock Benefit Employee Stock Ownership Plan” (hereinafter the “Plan”), and this Plan has been in effect since August 13, 2018. The Company aims to motivate and align employee interest with that of the Company for the increase in the price of the stock, and the overall performance of the Company, by introducing stock ownership plan as a new form of benefits. (1) The Plan is an Employee Stock Ownership Plan Trust, (hereunder “ESOP Trust”), and it is modeled after the American ESOP system. It is an incentive scheme for employees whereby the treasury shares acquired by the ESOP Trust, are distributed, according to the Company’s benefit guideline, to the employees who meet certain criteria. The Company will assign certain “points” to the employees for their contribution to the Company, and when the employees meet certain criteria according to stock benefit guideline, they will be given a certain number of shares as benefits.
(2) The treasury shares held by the Trust are booked (net of expenses) in net assets as treasury shares. At the end of the 3rd quarter of the fiscal year ending 31 March 2019, the book value of the said treasury shares is 99,278 thousand yen and totals 89,600 shares.
Changes in methods of presentation
The Company has applied “Partial Changes to Accounting Standards relating to Tax Effect Accounting, etc.” (Corporate Accounting Principles No. 28 (effective February 16, 2018)) from the first quarter of fiscal year ending March 31, 2019, and comparison to previous periods are calculated by applying the standard retroactively, and the deferred tax assets are accounted under Investment and others assets class. As a result, the “Deferred Tax Assets” under “Current Assets” for the previous fiscal year’s Consolidated Balance Sheet is reduced by 136,690 thousand yen and “Deferred Tax Assets” under “Investment and other assets” is increased by the same amount (136,690 thousand yen). Additionally, “Deferred Tax Liabilities” under “Current Liabilities” is reduced by 5,524 thousand yen, and the “Deferred Tax Liabilities” under “Non-Current Assets” is increased by 5,524 thousand yen. The “Deferred Tax Assets” and “Deferred Tax Liabilities” are presented net of each other as a single tax-paying entity, and the total assets is reduced by 5,524 thousand yen.
21
Segment-by-Segment information 1 Details of the segments: methods in choosing the segments and details of their products and services. The segments hereunder defined are the business domains in which separated financial information is obtainable and they are the areas for which the board of directors meet time and time to discuss performance and resource allocation. The Company operates in the business of operating ramen restaurants domestically and internationally, and also in manufacturing and sales of ingredients and food for wholesale and retail. Therefore, the three segments defined by the Company are as follows and the details of their products and services follow.
Engages in operations of multiple brands such as IPPUDO, Ramen Express, Gogyo, Domestic Store Operations Najimatei, Panda Express and others International Store Engages in operating company-owned stores and provides operating support for Operations licensed businesses with IPPUDO at its core Domestic Production and Production and sales of various noodles (soba, ramen and udon), soup, sauce and Merchandise condiments (including “Ouchi de IPPUDO” series) for consumers and wholesale
2 Method to determine per segment amount of revenue, profit or loss, assets, liabilities and others: The segments hereunder reported are treated with the same accounting policies used in compiling the consolidated financial statements. The income hereunder reported are operating income.
3 Per-segment revenue, profit or loss, assets, liabilities and others. Previous financial year (from April 1, 2017 to March 31, 2018) (Thousands of Yen) Segment Results on Consolidated Domestic International Domestic Others Adjustment Total Financial Store Store Production & Total (Note 1) (Note 2) Statements Operations Operations Merchandise (Note 3) Revenue Sales to External 15,056,294 6,243,790 2,254,618 23,554,703 896,992 24,451,696 － 24,451,696 Customers Internal Sales or Transfer of － － － － － － － － accounts Total 15,056,294 6,243,790 2,254,618 23,554,703 896,992 24,451,696 － 24,451,696 Segment Income or 1,000,020 490,982 37,581 1,528,585 -20,867 1,507,717 -602,177 905,539 (Loss)
Segment Assets 6,778,305 4,796,889 906,271 12,481,466 537,739 13,019,205 2,286,799 15,306,004
Others
Depreciation 408,516 299,572 34,636 742,726 19,340 762,066 － 762,066 Increase in tangible and non-tangible non- 583,664 1,083,469 55,332 1,722,466 52,241 1,774,707 － 1,774,707 current assets Investment into affiliates using equity 11,695 － － 11,695 16,384 28,080 － 28,080 method
22
Notes (1) “Others” includes such business units as International Manufacturing and Sales, Consulting, and Agriculture units. (2) The followings are adjustments: 1. -602,177 thousand yen is the corporate overhead. The corporate overhead is sales, general and administrative expenses not allocated to any of the business segments. 2. The adjustment of segment assets of 2,286 thousand yen is the Group assets not allocated to any particular segment. (3) Segment profit or loss is adjusted in accordance with operating income of Consolidated Financial Statements.
Current financial year (from April 1, 2018 to March 31, 2019) (Thousands of Yen) Segment Results on Consolidated Domestic International Domestic Others Adjustment Total Financial Store Store Production & Total (Note 1) (Note 2) Statements Operations Operations Merchandise (Note 3) Revenue Sales to External 15,795,714 8,578,245 2,086,677 26,460,637 1,005,810 27,466,448 － 27,466,448 Customers Internal Sales or Transfer of － － － － － － － － accounts
Total 15,795,714 8,578,245 2,086,677 26,460,637 1,005,810 27,466,448 － 27,466,448 Segment Income or 910,799 609,892 50,751 1,571,443 -8,367 1,563,076 -605,417 957,659 (Loss)
Segment Assets 7,341,166 5,943,768 607,464 13,892,398 592,687 14,485,085 1,907,667 16,392,753
Others
Depreciation 414,504 452,835 30,993 898,334 19,056 917,390 － 917,390 Increase in tangible and non-tangible non- 894,716 548,041 32,277 1,475,036 12,864 1,487,900 － 1,487,900 current assets Investment into affiliates using equity － － － － － － － － method Notes (1) “Others” includes such business units as International Manufacturing and Sales, Consulting, and Agriculture units. (2) The followings are adjustments: 1. -605,417 thousand yen is the corporate overhead. The corporate overhead is sales, general and administrative expenses not allocated to any of the business segments. 2. The adjustment of segment assets of 1,907 thousand yen is the Group assets not allocated to any particular segment. (3) Segment profit or loss is adjusted in accordance with operating income of Consolidated Financial Statements.
23
Per Share information Previous Fiscal Year Current Fiscal Year (from April 1, 2017 (from April 1, 2018 To March 31, 2018) To March 31, 2019)
Net asset per share 182.31 yen 183.14 yen
Net profit per share 27.85 yen 26.26 yen
Net profit per share after dilution 26.23 yen 25.45 yen Note 1. The Company has executed a share split of 1:2 on October 1, 2017. The calculation of net asset per share, net income per share and diluted net income per share is done as if the share-split was done at the beginning of the period. 2. The basis for calculating net profit per share and net profit per share after dilution is as follows: Previous Fiscal Year Current Fiscal Year Items (from April 1, 2017 (from April 1, 2018 To March 31, 2018) To March 31, 2019)
Net profit per share
Income attributable to the Company (thousand yen) 634,593 615,490
Income not attributable to owners of ordinary － － shares (thousand yen) Income attributable to the owners of ordinary shares 634,593 615,490 (thousand yen) Average number of ordinary shares during the 22,789,067 23,438,447 period
Net profit per share after dilution
Adjustments to income attributable to the Company － －
Number of ordinary shares 1,403,291 746,158
Potential shares not included in the calculation of profit per share after dilution because they do not － － cause dilution:
Significant subsequent events: None Sales of investment securities With the intention of reviewing its holding of strategically held investment shares per the corporate governance code, solidifying its financial position, and improving the return on its assets, the Company has decided to sell a part of its investment shares (one type of publicly trades shares). Consequently, there will be a recognition of 94,423 thousand yen as "Proceeds from sales of investment securities" under "Extraordinary income" for the first quarter of the fiscal year ending March 31, 2020.
(6) Others
Change of Directors and Officers: A public announcement has been made on March 14, 2019 under “Notice concerning changes in directors” (only available in Japanese).
24