Sanyo Shokai : (Summary) Annual Securities Report for the Year Ended February 28, 2022

Note: This document is an excerpt translation of the original Japanese document and is only for reference purposes.

In the any discrepancy between this translated document and the original Japanese document, the later shall prevail.

(Summary)

Annual Securities Report

for the Year Ended February 28, 2022

SANYO SHOKAI LTD.

5. Financial Information

1. Basis of preparation of the consolidated and non-consolidated financial statements

1. The Company prepares its consolidated financial statements in accordance with the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ministry of Finance Order No. 28 of 1976).
2. The Company prepares its non-consolidated financial statements in accordance with the Regulation on Terminology, Forms, and Preparation Methods of Financial Statements (Ministry of Finance Order No. 59 of 1963; the "Regulation on Financial Statements").
   Additionally, as a special company submitting financial statements, the Company prepares its non-consolidated financial statements based on Article 127 of the Regulation on Financial Statements.

1. Audit certification

Pursuant to the provisions of Article 193-2, paragraph (1) of the Financial Instruments and Exchange Act, the Company's consolidated financial statements for the fiscal year (March 1, 2021 to February 28, 2022) and non-consolidated financial statements for the fiscal year (March 1, 2021 to February 28, 2022) have been audited by KPMG AZSA LLC.

3. Special measures to ensure the appropriateness of consolidated financial statements, etc.

The Company undertakes special measures to ensure the appropriateness of consolidated financial statements, etc. Specifically, in order to appropriately understand the details of accounting standards, the Company has joined the Financial Accounting Standards Foundation (FASF) and participates in seminars and other events hosted by the FASF.

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1. Consolidated Financial Statements and Other Information

1. Consolidated Financial Statements

1. Consolidated Balance Sheet

				(Millions of yen)
	As of February 28, 2021	As of February 28, 2022
Assets
Current assets
Cash and deposits	*4	19,652	*4	18,767
Notes and accounts receivable - trade		3,341		2,659
Merchandise and finished goods		9,406		7,819
Work in process		155		191
Raw materials and supplies		249		237
Other		1,154		955
Allowance for doubtful accounts		(12)		(6)
Total current assets		33,947		30,626
Non-current assets
Property, plant and equipment
Buildings and structures	*4	5,944	*4	5,730
Accumulated depreciation		(2,131)		(2,286)
Buildings and structures, net		3,813		3,443
Land	*1, *4	4,136	*1, *4	4,136
Leased assets		992		826
Accumulated depreciation		(472)		(555)
Leased assets, net		519		271
Construction in progress		2		2
Other	*4	1,460	*4	1,399
Accumulated depreciation		(568)		(591)
Other, net		891		807
Total property, plant and equipment		9,363		8,662
Intangible assets
Trademark right		109		3,323
Goodwill		1,248		-
Other		809		626
Total intangible assets		2,167		3,949
Investments and other assets
Investment securities	*2, *4	4,954	*2, *4	4,802
Leasehold and guarantee deposits		1,559		1,284
Deferred tax assets		5		-
Retirement benefit asset		872		2,284
Other		64		28
Allowance for doubtful accounts		(8)		(8)
Total investments and other assets		7,448		8,390
Total non-current assets		18,979		21,003
Total assets		52,926		51,629

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(Millions of yen)

As of February 28, 2021

As of February 28, 2022

Liabilities

Current liabilities

Notes and accounts payable - trade

Current portion of bonds payable

Short-term borrowings

Current portion of long-term borrowings

Lease obligations

Accrued expenses

Accrued consumption taxes

Income taxes payable

Provision for bonuses

Provision for sales returns

Other

Total current liabilities

Non-current liabilities

Convertible-bond-type bonds with share acquisition rights

Long-term borrowings

Lease obligations

Long-term accounts payable - other

Deferred tax liabilities

	3,876		4,176
	20		-
*4, *5	3,200	*4, *5	3,000
	-	*4	2,800
	266		195
	5,184		1,615
	957		462
	33		138
	193		212
	10		10
	828		1,632
	14,570		14,242
	-		553
*4	2,800		1,000
	422		208
*3	108	*3	74
	762		899

Deferred tax liabilities for land revaluation	*1	540	*1	540
Retirement benefit liability		235		164
Other		24		25
Total non-current liabilities		4,893		3,465
Total liabilities		19,464		17,708
Net assets
Shareholders' equity
Share capital		15,002		15,002
Capital surplus		9,688		9,658
Retained earnings		6,109		6,769
Treasury shares		(1,044)		(994)
Total shareholders' equity		29,755		30,435
Accumulated other comprehensive income
Valuation difference on available-for-sale securities		1,721		2,031
Deferred gains or losses on hedges		-		3
Revaluation reserve for land	*1	1,199	*1	1,199
Foreign currency translation adjustment		146		93
Remeasurements of defined benefit plans		639		-
Total accumulated other comprehensive income		3,707		3,328
Non-controlling interests		-		156
Total net assets		33,462		33,920
Total liabilities and net assets		52,926		51,629

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1. Consolidated Statement of Income and Consolidated Statement of Comprehensive Income Consolidated Statement of Income

				(Millions of yen)
	Fiscal year ended	Fiscal year ended
	February 28, 2021	February 28, 2022
Net sales		37,939		38,642
Cost of sales	*1	23,424	*1	20,095
Gross profit		14,515		18,547
Selling, general and administrative expenses	*2	23,429	*2	19,605
Operating loss		(8,913)		(1,058)
Non-operating income
Interest income		9		0
Dividend income		218		152
Foreign exchange gains		-		58
Subsidy income	*3	45	*3	246
Other		29		42
Total non-operating income		303		499
Non-operating expenses
Interest expenses		79		82
Loan related expenses		16		-
Share of loss of entities accounted for using equity		314		92
method
Foreign exchange losses		7		-
Other		9		1
Total non-operating expenses		426		176
Ordinary loss		(9,036)		(735)
Extraordinary income
Gain on sale of non-current assets	*4	7,128		-
Gain on sale of investment securities		517		501
Gain on sale of golf membership		-		6
Subsidy income	*3	759	*3	304
Reversal of accrued expenses for Cancellation penalty	*5	71		-
Gain on partial termination of retirement benefit plan		-	*6	1,248
Total extraordinary income		8,476		2,060
Extraordinary losses
Loss on sale of non-current assets	*7	35		-
Loss on retirement of non-current assets	*8	198	*8	8
Impairment losses	*9	937	*9	400
Loss on sale of investment securities		311		-
Loss on sale of golf club membership		3		5
Business restructuring expenses	*10	1,242		-
Cancellation penalty	*11	296		-
Extraordinary loss due to closing and other	*12	1,364	*12	209
Total extraordinary losses		4,390		624
Profit (loss) before income taxes		(4,951)		700
Income taxes - current		41		39
Income taxes - deferred		(1)		(0)
Total income taxes		39		38
Profit (loss)		(4,991)		661
Loss attributable to non-controlling interests		(3)		-
Profit (loss) attributable to owners of parent		(4,988)		661

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