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Exhibit 99.1
Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
[Japanese GAAP]
August 9, 2019
Company name: | PEPPER FOOD SERVICE Co., Ltd. | |
Stock Exchange Listing: | Tokyo Stock Exchange | |
Stock code: | 3053 | |
URL: | http://www.pepper-fs.co.jp | |
Representative: | Kunio Ichinose, Representative Director, President and Chief Executive Officer | |
Contact: | Ichiro Yasuda, Senior Executive Officer, General Manager of General Affairs Division | |
Tel: | +81-3-3829-3210 |
Date of filing of the quarterly Securities Report: | August 9, 2019 | |
Scheduled date of commencement of dividend payments: | September 6, 2019 | |
Supplementary materials for quarterly financial results: | None | |
Briefing on the quarterly financial results: | Yes |
(Millions, rounded down to the nearest million yen)
1. | Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending December 31, 2019 (from January 1, 2019 to June 30, 2019) |
(1) | Consolidated Operating Results |
(Percentages represent changes from the same period in the previous year) | ||||||||||||||||||||||||||||||||
Net Sales | Operating Income | Ordinary Income | Net Income Attributable to Shareholders of the Parent Company | |||||||||||||||||||||||||||||
Millions of yen | % | Millions of yen | % | Millions of yen | % | Millions of yen | % | |||||||||||||||||||||||||
Six-month period ended June 30, 2019 | 35,122 | 25.6 | 403 | -73.0 | 352 | -76.2 | 516 | -27.8 | ||||||||||||||||||||||||
Six-month period ended June 30, 2018 | 27,967 | 81.5 | 1,491 | 24.1 | 1,480 | 23.0 | 715 | 4.7 |
(Note) | Comprehensive Income |
Six-month period ended June 30, 2019 ¥604 million (down 13.7%)
Six-month period ended June 30, 2018 ¥701 million (down 0.5%)
Quarterly Earnings per Share | Diluted Earnings per Share | |||||||
Yen | Yen | |||||||
Six-month period ended June 30, 2019 | 24.71 | 24.13 | ||||||
Six-month period ended June 30, 2018 | 34.54 | 33.11 |
(2) | Consolidated Financial Position |
Total assets | Net assets | Equity ratio | ||||||||||
Millions of yen | Millions of yen | % | ||||||||||
As of June 30, 2019 | 25,510 | 4,133 | 15.6 | |||||||||
As of December 31, 2018 | 25,993 | 3,745 | 13.6 |
(Reference) Shareholders Equity
As of June 30, 2019 ¥3,977 million
As of December 31, 2018 ¥3,542 million
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2. | Dividends |
Annual Dividends | ||||||||||||||||||||
End��of first quarter | End of second quarter | End of third quarter | Year-end | Annual | ||||||||||||||||
Yen | Yen | Yen | Yen | Yen | ||||||||||||||||
Fiscal year ending December 31, 2018 | — | 15.00 | — | 15.00 | 30.00 | |||||||||||||||
Fiscal year ending December 31, 2019 | — | 15.00 | ||||||||||||||||||
Fiscal year ending December 31, 2019 (Forecast) | — | 15.00 | 30.00 |
(Note) | Revision of dividend forecast from the latest announcement: None |
3. | Consolidated Financial Forecasts for the Fiscal Year Ending December 31, 2019 (from January 1, 2019 to December 31, 2019) |
(Percentages indicate the net change in comparison with the previous year for full year figures) | ||||||||||||||||||||||||||||||||||||
Net Sales | Operating Income | Ordinary Income | Net Income Attributable to Shareholders of the Parent Company | Net Earnings per Share | ||||||||||||||||||||||||||||||||
Millions of yen | % | Millions of yen | % | Millions of yen | % | Millions of yen | % | Yen | ||||||||||||||||||||||||||||
Full Year | 76,423 | 20.3 | 2,061 | - 46.7 | 2,012 | - 48.1 | 1,529 | — | 72.73 |
(Note) | Changes from the latest consolidated forecasts: None |
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* | Notes |
(1) | Changes in important subsidiaries during this consolidated cumulative quarter (changes in the scope of consolidation) : None |
(2) | Application of specific accounting treatments for preparation of the quarterly consolidated financial statements : None |
(3) | Changes in accounting policies, changes in accounting estimates, and restatements |
1) Changes in accounting policies associated with the revision of accounting standards | : None | |||
2) Changes in accounting policies (other than those in 1) above | : Yes | |||
3) Changes in accounting estimates | : Yes | |||
4) Restatements | : None |
(4) | Number of shares issued and outstanding (common stock) |
1) Number of shares issued and outstanding (including treasury stocks) at end of period | Second quarter ended June 30, 2019 | 21,022,000 shares | Fiscal year ended December 31, 2018 | 20,818,200 shares | ||||||||
2) Number of shares issued and outstanding (including treasury stocks) at end of period | Second quarter ended June 30, 2019 | 220 shares | Fiscal year ended December 31, 2018 | 220 shares | ||||||||
3) Average number of shares issued and outstanding during the period | Second quarter ended June 30, 2019 | 20,904,906 shares | Second quarter ended June 30, 2018 | 20,709,810 shares |
* | These consolidated financial results for the quarter fall outside the scope of quarterly review by certified public accountants and auditing firms. |
* | Description of appropriate use of business forecasts; other special matters |
1. | The forecasts for results of operations in this report are based on information currently available to PEPPER FOOD SERVICE Co., Ltd. and assumptions determined to be reasonable. Actual results may differ significantly from the forecasts due to various factors. | |||
2. | Previously, the monetary values of all items recorded in the quarterly consolidated financial statements of PEPPER FOOD SERVICE Co., Ltd. were stated inthousands-of-yen. Beginning on the first quarter of the current consolidated accounting period and the first quarter of the current consolidated cumulative period, we modified the presentation of the values by stating them inmillions-of-yen. In addition, in order to facilitate comparison, the previous consolidated accounting period and the second quarter of the previous consolidated accounting period are also stated in units of one million yen. |
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
1. | Qualitative Information on Consolidated Final Results |
(1) | Explanation of Business Performance |
During the first six months of the current fiscal year, the Japanese economy showed a moderate recovery due to improvements in corporate earnings and the employment and income environment. Meanwhile, uncertainty remains in overseas economies such as movements in the trade dispute between China and the United States and the slowdown of the Chinese economy.
In the restaurant industry, the business environment remains harsh due not only to the increase in personnel expenses, distribution expenses and the cost of ingredients, but also to a rise in consumers’ preference to save.
Under such circumstances, according to the basic precept of our group, “to enjoy rapid growth and become a local, public institution that acts in all good faith, with a sense of humility,” we are working to expand our business with the goal of opening 25 new Pepper Lunch restaurants and 210 new Ikinari! Steak restaurants, but sales of existing stores decreased compared to our plan due to the impact of factors such as competition between Ikinari! Steak restaurants in some regions.
As a result, net sales for the first six months of the current fiscal year were ¥35,122 million (an increase of 25.6% over the same period of the previous year), operating income was ¥403 million (a decrease of 73.0% from the same period of the previous year), ordinary income was ¥352 million (a decrease of 76.2% from the same period of the previous year), and net income attributable to shareholders of the parent company was ¥516 million (a decrease of 27.8% over the same period of the previous year).
Performance by segment is as follows:
(i) | Pepper Lunch Business |
In the Pepper Lunch Business, we conducted a campaign offering five times the points using bothd-POINTs and Rakuten Points to commemorate the company’s 25th anniversary. Furthermore, we focused on home delivery services that are expected to have increased demand, and expanded the number of stores supported by Uber Eats to 15.
The Pepper Lunch Business overseas had sales of ¥204 million (an increase of 13.1% over the same period of the previous year) due to the sale of equipment, etc. associated with the launch of new stores and royalty revenue.
As a result, net sales for the first six months of the current fiscal year were ¥4,137 million (an increase of 13.7% over the same period of the previous year), and segment income was ¥586 million (a decrease of 8.9% from the same period of the previous year). In addition, the opening of 39 new stores (25 of which are located overseas) brought the total number of Pepper Lunch restaurants to 493.
(ii) | Restaurant Business |
In the Restaurant Business, we have been working to improve sales and profits in existing stores through initiatives such as brushing up main products and introducing seasonal products on the menu in individual stores to promote various business lines such asSumiyaki Steak Kuni in the steak line,Kodawari Tonkatu Katsukitei in the pork cutlet line, andGyutan Sendai Natori in the tender beef line.
As a result, net sales for the first six months of the current fiscal year were ¥675 million (a decrease of 12.1% over the same period of the previous year), and segment income was ¥23 million (a decrease of 60.3% from the same period of the previous year). In addition, the total number of restaurants in the Restaurant Business is now 15.
(iii) | Ikinari! Steak Business |
In the Ikinari! Steak business, we implemented movietie-ups with campaigns forAvengers: Endgame in April,Godzilla: King of the Monsters in May andSpider-Man: Far From Home in June.
In addition, to commemorate the beginning of the Reiwa era, we held a Sirloin Steak Festival for three days (April19-21), and offered a gift of a500-yen Meat Money Coupon to all customers using Ikinari! Steak during the airing of television commercials for Ikinari! Steak (April22-28).
In May, we introduced the Plus Menu for families in addition to the ordinary menu as a new initiative in the Ikinari! Steak Yashio Road Store, and also began the sale of oysters in three Ikinari! Steak stores (Ikinari! Steak Ginza6-chome, Ikinari! Steak Shimbashi Hibiya and Ikinari! Steak Toranomon).
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
As a result, net sales for the first six months of the current fiscal year were ¥30,201 million (an increase of 28.6% over the same period of the previous year) due to the launch of new stores, but segment income was ¥1,681 million (a decrease of 26.6% from the same period of the previous year) due to the impact of competition between Ikinari! Steak stores in some regions. In addition, the opening of 82 new stores (1 of which is located overseas) brought the total number of Ikinari! Steak restaurants to 472.
(iv) | Product Sales Business |
In the Product Sales Business, we sold our tonkatsu sauce, frozen pepper rice, frozen hamburger steak and Ikinari! Steak set that customers can enjoy at home through the majore-commerce sites.
Furthermore, we began sellingTHE OTSUMAMI BEEF overseen by Ikinari! Steak in supermarkets and convenience stores nationwide in June, for a limited period (June 10 to August).
As a result, net sales for the first six months of the current fiscal year including royalty revenue from Ikinari! Steak collaboration products were ¥107 million (an increase of 34.1% over the same period of the previous year), and segment income was ¥14 million (an increase of 56.0% from the same period of the previous year).
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(2) | Explanation of Financial Position |
At the end of the first six months of the current fiscal year, total assets were ¥25,510 million, down ¥482 million from the end of the previous fiscal year. This was primarily due to a decrease of ¥3,257 million in cash and cash equivalents, a decrease of ¥498 million in trade accounts receivable, an increase of ¥2,358 million in buildings and structures, net, and an increase of ¥209 million in lease deposits receivable.
Total liabilities were ¥21,377 million, down ¥869 million from the end of the previous year. This was mainly due to a decrease of ¥943 million in accrued corporate tax payable, a decrease of ¥934 million in allowances for business structure improvements, and an increase of ¥1,256 million in loans payable.
Net assets were ¥4,133 million, up ¥387 million from the end of the previous fiscal year. This was largely due to an increase of ¥516 million in net income attributable to shareholders of the parent company and ¥312 million in surplus distributed as dividends. Retained earnings increased by ¥204 million, and share capital and legal capital surplus increased by ¥71 million respectively due to the exercise of stock acquisition rights. Additionally, the capital equity ratio increased by 2.0 points from the end of the previous fiscal year to 15.6%.
(3) | Explanation for Future Projections such as Consolidated Earnings Forecast |
There is no change in the consolidated earnings forecast from the consolidated earnings forecast for the full year announced on June 28, 2019. For details, see the “Notice of Corrections to Earnings Forecasts” announced on June 28, 2019.
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
2. | Quarterly Consolidated Financial Statements and Important Notes |
(1) | Quarterly Consolidated Financial Position Statement |
(Unit: millions of yen) | ||||||||
Prior Fiscal Year (ended December 31, 2018) | Second-Quarter Consolidated Accounting Period (ended June 30, 2019) | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 6,732 | 3,475 | ||||||
Trade accounts receivable | 2,838 | 2,339 | ||||||
Merchandise | 456 | 437 | ||||||
Supplies | 186 | 196 | ||||||
Other | 2,288 | 2,294 | ||||||
Allowance for doubtful accounts | -0 | -4 | ||||||
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Total current assets | 12,502 | 8,739 | ||||||
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Non-current assets | ||||||||
Tangible fixed assets | ||||||||
Buildings and structures | 10,107 | 12,952 | ||||||
Accumulated depreciation | -1,806 | -2,293 | ||||||
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Buildings and structures, net | 8,300 | 10,658 | ||||||
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Others | 2,088 | 2,473 | ||||||
Accumulated depreciation | -984 | -1,089 | ||||||
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Others, net | 1,103 | 1,383 | ||||||
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Total tangible fixed assets | 9,403 | 12,042 | ||||||
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Intangible assets | 72 | 75 | ||||||
Investments and other assets | ||||||||
Lease deposits receivable | 2,750 | 2,960 | ||||||
Others | 1,274 | 1,704 | ||||||
Allowance for doubtful accounts | -11 | -11 | ||||||
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Total investments and other assets | 4,013 | 4,653 | ||||||
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Totalnon-current assets | 13,490 | 16,770 | ||||||
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Total assets | 25,993 | 25,510 | ||||||
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(Unit: millions of yen) | ||||||||
Prior Fiscal Year (ended December 31, 2018) | First six months (ended June 30, 2019) | |||||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable | 7,097 | 6,747 | ||||||
Short-term loans payable | — | 500 | ||||||
Current portion of long-term loans payable | 2,270 | 2,779 | ||||||
Accounts payable-other | 2,043 | 1,678 | ||||||
Income taxes payable | 1,513 | 570 | ||||||
Deposit liabilities | 1,445 | 1,672 | ||||||
Asset retirement obligations | 0 | — | ||||||
Allowance for business structure improvements | 331 | 235 | ||||||
Others | 1,401 | 1,172 | ||||||
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Total current liabilities | 16,104 | 15,356 | ||||||
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Non-current liabilities | ||||||||
Long-term loans payable | 2,931 | 3,178 | ||||||
Deposit liabilities | 1,363 | 1,527 | ||||||
Asset retirement obligations | 644 | 936 | ||||||
Allowance for business structure improvements | 1,187 | 348 | ||||||
Others | 15 | 29 | ||||||
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Totalnon-current liabilities | 6,142 | 6,020 | ||||||
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Total liabilities | 22,247 | 21,377 | ||||||
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Net Assets | ||||||||
Shareholders’ equity | ||||||||
Share capital | 1,532 | 1,603 | ||||||
Capital surplus | 813 | 884 | ||||||
Retained earnings | 1,210 | 1,414 | ||||||
Treasury shares | -0 | -0 | ||||||
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Total shareholders’ equity | 3,556 | 3,902 | ||||||
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Accumulated other comprehensive income | ||||||||
Valuation difference onavailable-for-sale securities | -1 | -2 | ||||||
Foreign exchange translation adjustments | -11 | 77 | ||||||
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Total accumulated other comprehensive income | -13 | 74 | ||||||
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Stock options | 203 | 155 | ||||||
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Total net assets | 3,745 | 4,133 | ||||||
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TOTAL NET ASSETS & LIABILITIES | 25,993 | 25,510 | ||||||
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(2) | Quarterly ConsolidatedProfit-and-Loss Statement and Quarterly Consolidated Statement of Comprehensive Income |
(Quarterly ConsolidatedProfit-and-Loss Statement)
(For theSix-month Period Ended June 30)
(Unit: millions of yen) | ||||||||
For the six-month period ended June 30, 2018 (January 1, 2018 to June 30, 2018) | For the six-month period ended June 30, 2019 (January 1, 2019 to June 30, 2019) | |||||||
Net sales | 27,967 | 35,122 | ||||||
Cost of sales | 15,902 | 20,620 | ||||||
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Gross profit | 12,064 | 14,502 | ||||||
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Selling, general and administrative expenses | 10,573 | 14,098 | ||||||
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Operating profit | 1,491 | 403 | ||||||
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Non-operating income | ||||||||
Interest income | 0 | 4 | ||||||
Dividend income | 0 | 0 | ||||||
Rental income | 1 | 1 | ||||||
Sponsorship income | 8 | 17 | ||||||
Prepaid card balances | 21 | 26 | ||||||
Others | 6 | 15 | ||||||
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Totalnon-operating income | 37 | 66 | ||||||
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Non-operating expenses | ||||||||
Interest expenses | 11 | 17 | ||||||
Foreign exchange losses | 15 | 89 | ||||||
Others | 21 | 11 | ||||||
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Totalnon-operating expenses | 48 | 117 | ||||||
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Ordinary income | 1,480 | 352 | ||||||
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Extraordinary income | ||||||||
Gain on sales ofnon-current assets | 22 | 0 | ||||||
Gain on reversal of subscription rights to shares | 0 | 51 | ||||||
Reversal of provision for business structure improvement allowances | — | 538 | ||||||
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Total extraordinary income | 22 | 589 | ||||||
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Extraordinary losses | ||||||||
Loss on sales ofnon-current assets | — | 1 | ||||||
Loss on disposals ofnon-current assets | 0 | 0 | ||||||
Impairment losses | 45 | 106 | ||||||
Others | — | 0 | ||||||
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Total extraordinary losses | 46 | 108 | ||||||
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Pre-tax quarterly net income | 1,457 | 833 | ||||||
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Income taxes – current | 891 | 474 | ||||||
Income taxes – deferred | -149 | -157 | ||||||
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Total income tax | 741 | 317 | ||||||
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Quarterly net income | 715 | 516 | ||||||
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Net Income Attributable to Shareholders of the Parent | 715 | 516 | ||||||
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(Quarterly Consolidated Statement of Comprehensive Income)
(For theSix-month Period Ended June 30)
(Unit: millions of yen) | ||||||||
For the six-month period ended June 30, 2018 (January 1, 2018 to June 30, 2018) | For the six-month period ended June 30, 2019 (January 1, 2019 to June 30, 2019) | |||||||
Quarterly net income | 715 | 516 | ||||||
Other comprehensive income | ||||||||
Unrealized gains or losses on other securities | -1 | -0 | ||||||
Foreign currency translation adjustments | -12 | 89 | ||||||
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Total other comprehensive income | -14 | 88 | ||||||
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Quarterly comprehensive income | 701 | 604 | ||||||
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(Breakdown) | ||||||||
Comprehensive income for the period attributable to owners of the parent | 701 | 604 | ||||||
Comprehensive income for the period attributable to minority interests | — | — |
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(3) | Quarterly Consolidated Statement of Cash Flows |
(Unit: millions of yen) | ||||||||
For the six-month period ended June 30, 2018 (January 1, 2018 to June 30, 2018) | For the six-month period ended June 30, 2019 (January 1, 2019 to June 30, 2019) | |||||||
Cash flows from operating activities | ||||||||
Pre-tax quarterly net income | 1,457 | 833 | ||||||
Depreciation | 550 | 645 | ||||||
Impairment loss | 45 | 106 | ||||||
Interest and dividend income | -0 | -4 | ||||||
Interest expenses | 11 | 17 | ||||||
Increase (decrease) in provision for business restructuring | — | -291 | ||||||
Reversal of provision for business structure improvement allowances | — | -538 | ||||||
Loss (gain) on sales of tangible assets | -22 | -0 | ||||||
Loss on retirement of tangible assets | 0 | 0 | ||||||
Decrease (increase) in trade receivables | -478 | 500 | ||||||
Decrease (increase) in inventories | -126 | 9 | ||||||
Increase (decrease) in trade payables | 1,286 | -349 | ||||||
Increase (decrease) in accounts payable – other | 993 | 188 | ||||||
Increase (decrease) in deposits received | 335 | 231 | ||||||
Others | 375 | -100 | ||||||
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Subtotal | 4,427 | 1,248 | ||||||
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Interest and dividends received | 0 | 4 | ||||||
Interest paid | -11 | -18 | ||||||
Income taxes paid | -747 | -1,482 | ||||||
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Net cash provided by (used in) operating activities | 3,669 | -247 | ||||||
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Cash flows from investing activities | ||||||||
Purchase of tangible assets | -3,314 | -3,582 | ||||||
Proceeds from sales of tangible assets | 44 | 0 | ||||||
Purchase of intangible assets | -34 | -5 | ||||||
Payments of leasehold and guarantee deposits | -417 | -311 | ||||||
Proceeds from refund of leasehold and guarantee deposits | 32 | 8 | ||||||
Refund of guarantee deposits received | -21 | -15 | ||||||
Guarantee deposits received | 278 | 177 | ||||||
Others | -274 | -331 | ||||||
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Net cash provided by (used in) investing activities | -3,707 | -4,060 | ||||||
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Cash flows from financing activities | ||||||||
Net increase (decrease) in short-term borrowings | — | 500 | ||||||
Proceeds from long-term borrowings | 2,500 | 2,000 | ||||||
Repayments of long-term borrowings | -666 | -1,243 | ||||||
Proceeds from issuance of shares | 80 | 125 | ||||||
Dividends paid | -309 | -312 | ||||||
Others | 67 | -2 | ||||||
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Net cash provided by (used in) financing activities | 1,672 | 1,068 | ||||||
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Effect of exchange rate change on cash and cash equivalents | -13 | -17 | ||||||
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Net increase (decrease) in cash and cash equivalents | 1,620 | -3,257 | ||||||
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Cash and cash equivalents at beginning of period | 4,364 | 6,732 | ||||||
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Cash and cash equivalents at end of period | 5,985 | 3,475 | ||||||
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(4) | Quarterly Consolidated Financial Statements and Important Notes |
(Notes on the Going Concern Assumption)
Not applicable.
(Notes When There Have Been Significant Changes in the Amount of Shareholders’ Equity)
II. This consolidated cumulative second quarter (from January 1, 2019 to June 30, 2019)
1. | Dividends Paid |
(Resolution) | Class of Stock | Total Amount of Dividends (millions of yen) | Dividend per Share (Yen) | Date of Record | Payment Date | Dividend Source | ||||||||||||||
March 28, 2019 General Shareholders’ Meeting | Common Stock | 312 | 15.00 | December 31, 2018 | March 29, 2019 | Retained earnings |
2. | Any dividends with a record date in the first six months of the fiscal year whose payment date falls after June 30 |
(Resolution) | Class of Stock | Total Amount of Dividends (millions of yen) | Dividend per Share (Yen) | Date of Record | Payment Date | Dividend Source | ||||||||||||||
August 9, 2019 General Shareholders’ Meeting | Common Stock | 315 | 15.00 | June 30, 2019 | September 6, 2019 | Retained earnings |
(Changes in Accounting Estimates and Changes in Accounting Policies that are Difficult to Distinguish from Changes in Accounting Estimates)
(Changes in depreciation methods; changes in the number of years of useful life; changes in estimates of asset retirement obligations)
In the past, we used the declining balance method to depreciate key tangible fixed assets but as of the consolidated cumulative first quarter we have changed to the straight-line method.
This change in accounting policy has been triggered by the creation of long-term stability in our business environment, as we have determined an increase in the demand for our business lines thanks to changing consumer preferences. This has allowed us to review our store strategy and open significantly more restaurants, while at the same time withdrawing from fewer. In light of these internal and external environmental changes, we examined the consumption pattern of economic benefits related to store facilities, which constitute our main assets. The result of these examinations led us to expect that our assets would be used in a stable manner over a long period of time, with equal consumption over the course of their useful lives; thus we decided to change to the straight-line method of depreciation, as we believe it better reflects our consumption patterns.
Furthermore, the useful life for conventional store facilities, etc. was primarily based on the number of years stipulated under the Corporate Tax Law, but with the change in depreciation method we are reviewing the number of years of an asset’s useful life with effect from the consolidated cumulative first quarter. As a result, we have changed the useful life of buildings and structures such as store facilities—which was 18 years in the majority of cases—to 12 years in light of the estimated period of economic viability given the number of years that the store is expected to survive in operation.
In conjunction with that, we have also changed our estimates regarding the period of time before our store-related asset retirement obligations need to be fulfilled in order to take account of the number of years that a store is expected to survive in operation; note that these obligations are recorded as the obligation to restore a property to its original condition in line with store real estate lease contracts.
With the changes above, operating income, ordinary income, andpre-tax income for the first six months of the current fiscal year have each increased by ¥136 million compared to calculations under the previous depreciation method.
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
(Changes in Estimates of Business Structure Improvement Allowances)
The Company recorded reasonable estimates in the previous consolidated fiscal year for anticipated losses to be incurred in business structure improvements for consolidated subsidiaries. These mainly contained any lease payments that could not be canceled and that we did not expect to be able to recover through sales orsub-leasing, etc., i.e., payments stipulated in building lease agreements connected with unprofitable stores and stores scheduled for closure. Subsequently, we revised our accounting estimates as we obtained new information thanks to progress made in business structure improvements, through negotiations with landlords who had signed building lease agreements, etc.; information that allowed us to calculate more accurate estimates. In conjunction with this, we have recorded the difference between the previous estimate and the current estimate under Extraordinary Income for the first six months of the current fiscal year.
As a result, quarterly net income before taxes increased by ¥477 million in the first six months of the current fiscal year.
(Application of “Partial Amendments to Accounting Standard for Tax Effect Accounting”)
“Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28; February 16, 2018) have been applied since the start of the first quarter of the current fiscal year. Deferred tax assets are shown under “Investments and Other Assets,” while deferred tax liabilities are shown under“Non-current Liabilities.”
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PEPPER FOOD SERVICE Co., Ltd. (3053) Consolidated Financial Results for theSix-Month Period Ended June 30, 2019
[Segment Information]
I. The previous consolidated cumulative second quarter (from January 1, 2018 to June 30, 2018)
1. | Information on Sales and Profit/Loss for Each Reporting Segment |
(Unit: millions of yen) | ||||||||||||||||||||||||||||
Reporting Segments | Total | Adjustments (Note 1) | Amount recorded in Quarterly Consolidated Profit-and-Loss Statements (Note 2) | |||||||||||||||||||||||||
Pepper Lunch | Restaurants | Ikinari! Steak | Products | |||||||||||||||||||||||||
Sales | ||||||||||||||||||||||||||||
Sales to External Customers | 3,640 | 768 | 23,479 | 80 | 27,967 | — | 27,967 | |||||||||||||||||||||
Total | 3,640 | 768 | 23,479 | 80 | 27,967 | — | 27,967 | |||||||||||||||||||||
Segment Profit | 643 | 58 | 2,290 | 9 | 3,001 | -1,510 | 1,491 |
(Notes) | 1. | A segment profit adjustment of minus ¥1,510 million was recorded as corporate expenses not allocated to each segment. Such expenses are mostly general administrative expenses not attributable to reporting segments. | ||
2. | Adjustment is made to operating income reported in the consolidated quarterly statement of income. |
2. | Information on Impairment Losses fromNon-current Assets and Goodwill for Each Reporting Segment |
(Unit: millions of yen) | ||||||||||||||||||||||||
Pepper Lunch | Restaurants | Ikinari! Steak | Products | Total | Amount recorded in Quarterly Consolidated Financial Statements | |||||||||||||||||||
Impairment loss | 3 | — | 42 | — | 45 | 45 |
II. This consolidated cumulative second quarter (from January 1, 2019 to June 30, 2019)
1. | Information on Sales and Profit/Loss for Each Reporting Segment |
(Unit: millions of yen) | ||||||||||||||||||||||||||||
Reporting Segments | Total | Adjustments (Note 1) | Amount recorded in Quarterly Consolidated Profit-and-Loss Statements (Note 2) | |||||||||||||||||||||||||
Pepper Lunch | Restaurants | Ikinari! Steak | Products | |||||||||||||||||||||||||
Sales | ||||||||||||||||||||||||||||
Sales to External Customers | 4,137 | 675 | 30,201 | 107 | 35,122 | — | 35,122 | |||||||||||||||||||||
Total | 4,137 | 675 | 30,201 | 107 | 35,122 | — | 35,122 | |||||||||||||||||||||
Segment Profit | 586 | 23 | 1,681 | 14 | 2,305 | D1,902 | 403 |
(Notes) | 1. | A segment profit adjustment of minus ¥1,902 million was recorded as corporate expenses not allocated to each segment. Such expenses are mostly general administrative expenses not attributable to reporting segments. | ||
2. | Adjustment is made to operating income reported in the consolidated quarterly statement of income. |
2. | Information on Impairment Losses fromNon-current Assets and Goodwill for Each Reporting Segment |
(Unit: millions of yen) | ||||||||||||||||||||||||
Pepper Lunch | Restaurants | Ikinari! Steak | Products | Total | Amount recorded in Quarterly Consolidated Financial Statements | |||||||||||||||||||
Impairment loss | — | 8 | 97 | — | 106 | 106 |
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