Exhibit 99.2
Consolidated Financial Results for the Three-Month Period Ended March 31, 2019
[Japanese GAAP]
May 10, 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: |
May 10, 2019 | |
| Scheduled date of commencement of dividend payments: |
— | |
| Supplementary materials for quarterly financial results: |
None | |
| Briefing on the quarterly financial results: |
None |
(Millions, rounded down to the nearest million yen)
| 1. | Consolidated Financial Results for the First Quarter of the Fiscal Year Ending December 31, 2019 (from January 1, 2019 to March 31, 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 | % | |||||||||||||||||||||||||
| Three-month period ended March 31, 2019 |
17,588 | 33.1 | 178 | -76.8 | 195 | -72.5 | 585 | 61.8 | ||||||||||||||||||||||||
| Three-month period ended March 31, 2018 |
13,213 | 88.0 | 768 | 33.4 | 712 | 24.0 | 361 | 0.2 | ||||||||||||||||||||||||
| (Note) | Comprehensive Income |
Three-month period ended March 31, 2019 ¥588 million (67.0%)
Three-month period ended March 31, 2018 ¥352 million (-2.5%)
| Quarterly Earnings per Share |
Diluted Earnings per Share |
|||||||
| Yen | Yen | |||||||
| Three-month period ended March 31, 2019 |
28.08 | 27.31 | ||||||
| Three-month period ended March 31, 2018 |
17.52 | 16.77 | ||||||
| (2) | Consolidated Financial Position |
| Total Assets | Net Assets | Equity Ratio | ||||||||||
| Millions of yen | Millions of yen | % | ||||||||||
| As of March 31, 2019 |
25,244 | 4,022 | 15.2 | |||||||||
| As of December 31, 2018 |
25,993 | 3,745 | 13.6 | |||||||||
(Reference) Shareholders Equity
As of March 31, 2019 ¥3,847 million
As of December 31, 2018 ¥3,542 million
– 1 –
| 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 |
— | |||||||||||||||||||
| Fiscal year ending December 31, 2019 (Forecast) |
15.00 | — | 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, and the net change in comparison with the same quarter of the previous year for quarterly 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 | ||||||||||||||||||||||||||||
| 2nd Quarter (cumulative) |
42,187 | 50.8 | 1,867 | 25.2 | 1,888 | 27.5 | 1,069 | 49.5 | 51.21 | |||||||||||||||||||||||||||
| Full Year |
93,562 | 47.3 | 5,594 | 44.8 | 5,637 | 45.4 | 3,493 | — | 167.33 | |||||||||||||||||||||||||||
| (Note) | Changes from the latest consolidated forecasts: None |
– 2 –
| * | 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 |
First quarter ended March 31, 2019: |
20,875,200 shares | Fiscal year ended December 31, 2018: |
20,818,200 shares | ||||||||
| 2) Number of treasury stocks at end of period |
First quarter ended March 31, 2019: |
220 shares | Fiscal year ended December 31, 2018: |
220 shares | ||||||||
| 3) Average number of shares issued and outstanding during the period |
First quarter ended March 31, 2019: |
20,835,215 shares | Three-month period ended March 31, 2018: |
20,646,561 shares |
| * | These consolidated financial results for the quarter fall outside the scope of quarterly review by certified public accountants |
| * | 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, and 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 in thousands of yen, but we modified them by stating those in millions-of-yen units from the first quarter of the current consolidated accounting period and the first quarter of the current consolidated cumulative period. | |||
| Moreover, to facilitate comparison, the previous consolidated accounting period and the first quarter of the previous consolidated accounting period are also stated in units of one million yen. |
– 3 –
– 4 –
| 1. | Qualitative Information regarding the Financial Results for the Quarter |
| (1) | Explanation of Business Performance |
During the first three months of the current fiscal year, the Japanese economy seems, on the one hand, to have been at a standstill in terms of corporate earnings and capital investments, etc., but the income environment is gradually recovering with continued improvement in the employment situation and other conditions. However, personal consumption in Japan is sluggish as the future of the economy remains uncertain due to the slowdown in China’s economic growth resulting from trade friction between the US and China, as well as instability on the international political stage, such as the UK’s withdrawal from the EU.
As for the restaurant industry, despite a gradual improvement in personal consumption, the business environment remains harsh due not only to the increase in distribution expenses and the cost of food but also to intensified competition to attract customers from other types of businesses, such as convenience stores.
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. We have also been making ongoing efforts to strengthen our systems that enable us to provide safe and reliable products to our customers.
As a result of these business activities, net sales for the first three months of the current fiscal year were ¥17,588 million (an increase of 33.1% over the same period of the previous year), operating income was ¥178 million (a decrease of 76.8% from the same period of the previous year), ordinary income was ¥195 million (a decrease of 72.5% from the same period of the previous year), and net income attributable to shareholders of the parent company was ¥585 million (an increase of 61.8% over the same period of the previous year).
Performance by segment is as follows:
| (i) | Pepper Lunch Business |
In the Pepper Lunch business, in addition to our original points card, we also launched a “free-drink” service for Rakuten Points Card and d-Points Card holders (used by more than 100 million people) in order to increase usage. Furthermore, in February we started to phase out the use of plastic straws and replace them with paper straws, etc. as part of our support for environmental issues.
In the Pepper Lunch business overseas, we opened a store on Manhattan’s Broadway in March, “The Fast Food Steak House” [PEPPER LUNCH], our first directly-managed store in New York.
Additionally, equipment sales and other revenue generated from the opening of new restaurants, as well as royalty income, etc. in overseas FC totaled ¥94 million (an increase of 7.9% over the same period of the previous year).
As a result, net sales for the first three months of the current fiscal year were ¥2,037 million (an increase of 14.2% over the same period of the previous year), but segment profit fell to ¥ 295 million (a decrease of 8.5% from the same period of the previous year) due to the cost of refurbishing existing stores and an increase in recruitment costs for full and part-time employees associated with the growth in store numbers. In addition, the opening of 14 new stores (9 of which are located overseas) brought the total number of Pepper Lunch restaurants to 478.
| (ii) | Restaurant Business |
In the Restaurant Business we have been working to improve sales and profits in existing stores through initiatives such as the introduction of seasonal products on the menu, with individual stores promoting various business lines such as “Sumiyaki Steak Kuni” in the steak line, “Kodawari Tonkatu Katsukitei” in the pork cutlet line, and “Gyutan Sendai Natori” in the tender beef line.
However, net sales for the first three months of the current fiscal year fell to ¥333 million (a decrease of 16.7% from the same period of the previous year) while segment profit was ¥4 million (a decrease of 86.6% from the same period of the previous year), due in part to the change in business line-up for Ikinari! Steak. In addition, the total number of restaurants in the Restaurant Business is now 15.
| (iii) | Ikinari! Steak Business |
Beginning in February, our Ikinari! Steak Business has teamed up with Sinsiarge, Inc., the company that operates “Dokodemo Shashoku” (a food service that delivers to companies) and has also taken part in the “Marvel Studio 10th Anniversary Tie-Up Campaign” (March 20 – March 31). In addition, the restaurant at Narita Iinaka was the 400th Ikinari! Steak restaurant to be opened. To celebrate, we held various promotions including a three-day limited offer of a 300g Wild Steak for ¥1,000 (excl. tax) from February 13 to February 15; a ¥0.5 per gram discount on a “Fillet & Rib” steak platter in a time-limited Ikinari! Steak fair from February 22 to March 21; and a ¥1 per gram discount on three types of rib steaks from March 22 to March 24. In a new initiative, we launched two types of “curry products” in certain restaurants.
– 5 –
In addition, for the first time we broadcast national television CMs across the whole of Japan in February and March, for a week each time.
As a result of these business activities, net sales for the first three months of the fiscal year were ¥15,165 million (an increase of 37.9% for the same period of the previous year), but segment profit fell to ¥911 million (a decrease of 18.2% from the same period of the previous year) due declining sales in existing stores and an increase in recruitment costs for full and part-time employees associated with the growth in store numbers. In addition, there were 47 new store openings (none of them overseas), bringing the total number of Ikinari! Steak restaurants to 439.
| (iv) | Product Sales Business |
In the Product Sales Business, not only did we sell traditional favorites like our tonkatsu sauce, frozen pepper rice, frozen hamburger steak and Ikinari! Steak™ set that customers can enjoy at home, but we also sold popular Pepper Lunch and Ikinari! Steak products through the e-commerce site Rakuten Ichiba.
As a result of these business activities, including royalty income received from sales of products such as Ikinari! snacks in collaboration with other companies, net sales for the first three months of the fiscal year were ¥53 million (an increase of 78.0% over the same period the previous year), but segment profit fell to ¥5 million (a decrease of 4.7%% from the same period of the previous year) due to an increase in costs associated with the growth of on-line sales.
| (2) | Explanation of Financial Position |
At the end of the first three months of the current fiscal year, total assets were ¥25,244 million, down ¥748 million from the end of the previous fiscal year. This was primarily due to a decrease of ¥2,742 million in Cash and Cash Equivalents, an increase of ¥1,626 million in Property, Plant and Equipment (net), and an increase of ¥152 million in Lease Deposits Receivable.
Total liabilities were ¥21,222 million, down ¥1,024 million from the end of the previous year. This was mainly due to a decrease of ¥1,182 million in Accrued Corporate Tax Payable, a decrease of ¥686 million in Allowances for Business Structure Improvements, and an increase of ¥658 million in Loans Payable.
Net assets were ¥4,022 million, up ¥276 million from the end of the previous fiscal year. This was largely due to an increase of ¥585 million in Net Income Attributable to Owners of the Parent and ¥312 million in surplus distributed as dividends. Retained earnings increased by ¥272 million, and Share Capital and Share Premium increased by ¥14 million respectively due to the exercise of stock acquisition rights. Additionally, the capital equity ratio increased by 1.6 points from the end of the previous fiscal year to 15.2%.
| (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 first six months of the fiscal year and the full year announced in the “Consolidated Financial Results for the Fiscal Year ending December 2018 (Japanese GAAP)” on February 14, 2019.
– 6 –
| 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) |
Our First-Quarter Consolidated Accounting Period (Ended March 31, 2019) |
|||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
6,732 | 3,990 | ||||||
| Trade accounts receivable |
2,838 | 2,794 | ||||||
| Merchandise |
456 | 467 | ||||||
| Supplies |
186 | 221 | ||||||
| Others |
2,288 | 2,066 | ||||||
| Allowance for doubtful accounts |
-0 | -0 | ||||||
|
|
|
|
|
|||||
| Total current assets |
12,502 | 9,540 | ||||||
|
|
|
|
|
|||||
| Non-current assets |
||||||||
| Tangible fixed assets |
||||||||
| Property, plant and equipment |
10,107 | 11,990 | ||||||
| Accumulated depreciation |
-1,806 | -2,063 | ||||||
|
|
|
|
|
|||||
| Property, plant and equipment, net |
8,300 | 9,926 | ||||||
|
|
|
|
|
|||||
| Others |
2,088 | 2,325 | ||||||
| Accumulated depreciation |
-984 | -1,040 | ||||||
|
|
|
|
|
|||||
| Others, net |
1,103 | 1,285 | ||||||
|
|
|
|
|
|||||
| Total tangible fixed assets |
9,403 | 11,212 | ||||||
|
|
|
|
|
|||||
| Intangible assets |
72 | 73 | ||||||
| Investments and other assets |
||||||||
| Lease deposits receivable |
2,750 | 2,903 | ||||||
| Others |
1,274 | 1,525 | ||||||
| Allowance for doubtful accounts |
-11 | -11 | ||||||
|
|
|
|
|
|||||
| Total investments and other assets |
4,013 | 4,417 | ||||||
|
|
|
|
|
|||||
| Total non-current assets |
13,490 | 15,704 | ||||||
|
|
|
|
|
|||||
| Total Assets |
25,993 | 25,244 | ||||||
|
|
|
|
|
|||||
– 7 –
| (Unit: millions of yen) | ||||||||
| Previous Fiscal Year (ended December 31, 2018) |
First three months (Ended March 31, 2019) |
|||||||
| Liabilities |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
7,097 | 7,094 | ||||||
| Short term loans payable |
— | 1,250 | ||||||
| Current portion long-term loan payable |
2,270 | 2,205 | ||||||
| Accounts payable-other |
2,043 | 1,788 | ||||||
| Income tax payables |
1,513 | 331 | ||||||
| Deposit liabilities |
1,445 | 1,518 | ||||||
| Allowance for bonuses |
— | 149 | ||||||
| Assets retirement obligations |
0 | 0 | ||||||
| Allowance for business structure improvements |
331 | 310 | ||||||
| Others |
1,401 | 1,290 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
16,104 | 15,940 | ||||||
|
|
|
|
|
|||||
| Non-current liabilities |
||||||||
| Long-term loan payables |
2,931 | 2,403 | ||||||
| Deposit liabilities |
1,363 | 1,451 | ||||||
| Asset retirement obligations |
644 | 881 | ||||||
| Allowance for business structure improvements |
1,187 | 521 | ||||||
| Others |
15 | 23 | ||||||
|
|
|
|
|
|||||
| Total non-current liabilities |
6,142 | 5,282 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
22,247 | 21,222 | ||||||
|
|
|
|
|
|||||
| Net Assets |
||||||||
| Shareholders’ equity |
||||||||
| Share capital |
1,532 | 1,546 | ||||||
| Share premium |
813 | 827 | ||||||
| Retained earnings |
1,210 | 1,482 | ||||||
| Treasury shares |
-0 | -0 | ||||||
|
|
|
|
|
|||||
| Total shareholders’ equity |
3,556 | 3,857 | ||||||
|
|
|
|
|
|||||
| Accumulated other comprehensive income |
||||||||
| Valuation difference on available-for-sale securities |
-1 | -1 | ||||||
| Foreign exchange translation adjustments |
-11 | -8 | ||||||
|
|
|
|
|
|||||
| Total accumulated other comprehensive income |
-13 | -9 | ||||||
|
|
|
|
|
|||||
| Stock options |
203 | 175 | ||||||
|
|
|
|
|
|||||
| Total Net Assets |
3,745 | 4,022 | ||||||
|
|
|
|
|
|||||
| TOTAL NET ASSETS & LIABILITIES |
25,993 | 25,244 | ||||||
|
|
|
|
|
|||||
– 8 –
| (2) | Quarterly Consolidated Profit-and-Loss Statement and Quarterly Consolidated Statement of Comprehensive Income |
(Quarterly Consolidated Profit and Loss Statement)
(Consolidated Profit and Loss Statement for the three-month period ended March 31)
| (Unit: millions of yen) | ||||||||
| For the three-month period ended March 31, 2018 (January 1, 2018 to March 31, 2018) |
For the three-month period ended March 31, 2019 (January 1, 2019 to March 31, 2019) |
|||||||
| Net sales revenue |
13,213 | 17,588 | ||||||
| Cost of sales |
7,459 | 10,323 | ||||||
|
|
|
|
|
|||||
| Gross profit |
5,753 | 7,264 | ||||||
|
|
|
|
|
|||||
| Selling, general, and administrative expenses |
4,985 | 7,086 | ||||||
|
|
|
|
|
|||||
| Operating profit |
768 | 178 | ||||||
|
|
|
|
|
|||||
| Non-Operating Income |
||||||||
| Interest income |
0 | 1 | ||||||
| Foreign exchange gains |
— | 1 | ||||||
| Sponsorship income |
3 | 7 | ||||||
| Prepaid card balances |
6 | 11 | ||||||
| Others |
3 | 9 | ||||||
|
|
|
|
|
|||||
| Total Non-Operating Income |
14 | 30 | ||||||
|
|
|
|
|
|||||
| Non-Operating Expenses |
||||||||
| Interest expenses |
4 | 8 | ||||||
| Foreign exchange losses |
59 | — | ||||||
| Cash excess (deficiency) |
1 | 3 | ||||||
| Others |
3 | 2 | ||||||
|
|
|
|
|
|||||
| Total Non-Operating Expenses |
69 | 13 | ||||||
|
|
|
|
|
|||||
| Ordinary Income |
712 | 195 | ||||||
|
|
|
|
|
|||||
| Extraordinary Income |
||||||||
| Gains on sales of non-current assets |
22 | 0 | ||||||
| Gains on reversal of subscription rights to shares |
0 | 46 | ||||||
| Reversal of business structure improvement allowances |
— | 530 | ||||||
|
|
|
|
|
|||||
| Total Extraordinary Income |
22 | 577 | ||||||
|
|
|
|
|
|||||
| Extraordinary Losses |
||||||||
| Loss on disposals of non-current assets |
0 | 0 | ||||||
| Impairment losses |
— | 21 | ||||||
|
|
|
|
|
|||||
| Total Extraordinary Losses |
0 | 21 | ||||||
|
|
|
|
|
|||||
| Pre-Tax Quarterly Net Income |
734 | 751 | ||||||
|
|
|
|
|
|||||
| Income taxes |
470 | 278 | ||||||
| Adjustment to Income Tax |
-97 | -111 | ||||||
|
|
|
|
|
|||||
| Total Income Tax |
372 | 166 | ||||||
|
|
|
|
|
|||||
| Quarterly Net Income |
361 | 585 | ||||||
|
|
|
|
|
|||||
| Net Income Attributable to Owners of the Parent |
361 | 585 | ||||||
|
|
|
|
|
|||||
– 9 –
(Quarterly Consolidated Statement of Comprehensive Income)
(First-Quarter Consolidated Cumulative)
| (Unit: millions of yen) | ||||||||
| For the three-month period ended March 31, 2018 (January 1, 2018 to March 31, 2018) |
For the three-month period ended March 31, 2019 (January 1, 2019 to March 31, 2019) |
|||||||
| Quarterly Net Income |
361 | 585 | ||||||
| Other Comprehensive Income |
||||||||
| Unrealized gains or losses on other securities |
0 | 0 | ||||||
| Foreign currency translation adjustments |
-9 | 2 | ||||||
|
|
|
|
|
|||||
| Total Other Comprehensive Income |
-9 | 3 | ||||||
|
|
|
|
|
|||||
| Quarterly Comprehensive Income |
352 | 588 | ||||||
|
|
|
|
|
|||||
| (Breakdown) |
||||||||
| Comprehensive income for the period attributable to Owners of the Parent |
352 | 588 | ||||||
| Comprehensive income for the period attributable to minority interests |
— | — | ||||||
– 10 –
| (3) | Notes on the Quarterly Consolidated Financial Statements |
(Notes on the Going Concern Assumption)
Not applicable.
(Notes when there have been significant changes in the Amount of Shareholders’ Equity)
I. Previous consolidated cumulative first quarter (from January 1, 2018 to March 31, 2018)
| 1. | Dividends Paid |
| (Resolution) |
Class of Stock | Total Amount of Dividends (millions of yen) |
Dividend per Share (Yen) |
Record Date | Payment Date | Dividend Source | ||||||||||||||
| March 29, 2018 General Shareholders’ Meeting |
Common Stock |
309 | 15.00 | December 31, 2017 | March 30, 2018 | Retained Earnings | ||||||||||||||
| 2. | Any dividends with a record date in this consolidated cumulative first quarter whose payment date falls after March 31 |
Not applicable.
II. This consolidated cumulative first quarter (from January 1, 2019 to March 31, 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 three months of the fiscal year whose payment date falls after March 31 |
Not applicable.
(Changes in accounting estimates and changes in accounting policies and estimates that are difficult to classify)
(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, and pre-tax income for the first three months of the current fiscal year have each increased by ¥43 million compared to calculations under the previous depreciation method.
– 11 –
(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 or sub-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 three months of the current fiscal year.
As a result, quarterly net income before taxes increased by ¥530 million in the first three 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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[Segment Information]
I. The previous consolidated cumulative first quarter (from January 1, 2018 to March 31, 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 Financial Statements (Note 2) |
|||||||||||||||||||||||||
| Pepper Lunch | Restaurants | Ikinari! Steak | Products | |||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||
| Sales to External Customers |
1,784 | 400 | 10,999 | 29 | 13,213 | — | 13,213 | |||||||||||||||||||||
| Total |
1,784 | 400 | 10,999 | 29 | 13,213 | — | 13,213 | |||||||||||||||||||||
| Segment Profit |
322 | 33 | 1,115 | 6 | 1,477 | -709 | 768 | |||||||||||||||||||||
| (Notes) | 1. | A segment profit adjustment of minus ¥709 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. | Impairment losses from non-current assets and goodwill for each reporting segment Not applicable. |
II. This consolidated cumulative first quarter (from January 1, 2019 to March 31, 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 Consolidated Financial Statements for the quarter (Note 2) |
|||||||||||||||||||||||||
| Pepper Lunch | Restaurants | Ikinari! Steak | Products | |||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||
| Sales to External Customers |
2,037 | 333 | 15,165 | 53 | 17,588 | — | 17,588 | |||||||||||||||||||||
| Total |
2,037 | 333 | 15,165 | 53 | 17,588 | — | 17,588 | |||||||||||||||||||||
| Segment Profit |
295 | 4 | 911 | 5 | 1,217 | -1,038 | 178 | |||||||||||||||||||||
| (Notes) | 1. | A business segment profit adjustment of minus ¥1,038 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. | Impairment losses from non-current assets and goodwill for each reporting business segment |
| (Unit: millions of yen) | ||||||||||||||||||||||||
| Pepper Lunch | Restaurants | Ikinari! Steak | Products | Total | Amount recorded in Quarterly Consolidated Financial Statements |
|||||||||||||||||||
| Impairment losses |
— | — | 21 | — | 21 | 21 | ||||||||||||||||||
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