TOA : Announcement of FY2020 Q2 results

Consolidated Financial Results

for the Six Months Ended September 30, 2020

[Japanese GAAP]

November 4, 2020

Company name: TOA Corporation

Stock exchange listing: Tokyo Stock Exchange

Code number: 6809

URL: https://www.toa.jp/

Representative: Kazuhiro Takeuchi, President, CEO

Contact: Keigo Yoshida, General Manager of Accounting & Financial Department

Scheduled date of filing quarterly securities report: November 13, 2020

Scheduled date of commencing dividend payments: December 2, 2020

Availability of supplementary briefing material on quarterly financial results: Yes

Schedule of quarterly financial results briefing session: Yes (Only through video streaming)

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Six Months Ended September 30, 2020 (April 1, 2020 to September 30, 2020)

(1) Consolidated Operating Results				(% indicates changes from the previous corresponding period.)
				Net sales			Operating profit		Ordinary profit		Profit attributable to
									owners of parent
	Six months ended		Million yen	%		Million yen	%		Million yen	%			Million yen	%
	September 30, 2020		17,666	(14.9)		(32)	-		53	(95.8)			(155)	-
	September 30, 2019		20,766	3.2		1,167	(1.2)		1,278	(6.2)			670	(5.6)
	(Note) Comprehensive	income: Six months ended September 30, 2020: ¥570 million [(30.6) %]
				Six months ended September 30, 2019: ¥822 million [87.3%]
			Basic earnings	Diluted earnings
			per share	per share
	Six months ended			Yen					Yen
	September 30, 2020		(4.74)			-
	September 30, 2019		19.79			-
(2) Consolidated Financial Position
				Total assets			Net assets	Equity ratio
				Million yen					Million yen			%
	As of September 30, 2020		56,332					43,686			74.0
	As of March 31, 2020			58,653					44,780			72.9
	(Reference) Equity: As of	September 30, 2020: ¥	41,682 million
	As of March 31, 2020: ¥42,756 million
2. Dividends
											Annual dividends
					1st				2nd		3rd		Year-end		Total
					quarter-end	quarter-end	quarter-end
							yen		yen		yen		yen	yen
	Fiscal year ended March 31, 2020			-			10.00			-		16.00	26.00
	Fiscal year ending March 31, 2021			-			10.00
	Fiscal year ending March 31, 2021										-		10.00	20.00
	(Forecast)
	(Note) Revision to the forecast for	dividends announced most recently: No
							1

Breakdown of the dividends for the fiscal year ended March 31, 2020: Stable dividend ¥20, Performance-based dividend ¥2, Commemorative dividend ¥4

Dividends for the fiscal year ending March 31, 2021 (Forecast) will be determined by taking into account the performances on stable dividend of ¥20, aiming at a consolidated dividend payout ratio of 35%, as announced in "Consolidated Financial Results for the Fiscal Year Ended March 31, 2020" on May 13, 2020.

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2021 (April 1, 2020 to March 31, 2021)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings
		owners of parent	per share
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	40,500 (10.1)	700	(79.8)	750	(79.0)	600	(71.0)	18.45

(Note) Revision to the financial results forecast announced most recently: No

* Notes:

1. Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in changes in scope of consolidation): No
2. Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: Yes
3. Changes in accounting policies, changes in accounting estimates and retrospective restatement
4. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
5. Total number of issued shares (common shares)
6. 1. Total number of issued shares at the end of the period (including treasury shares):

September 30, 2020: 34,536,635 shares

March 31, 2020: 34,536,635 shares

1. Total number of treasury shares at the end of the period: September 30, 2020: 2,017,172 shares
   March 31, 2020: 657,114 shares
2. Average number of shares during the period:

Six months ended September 30, 2020: 32,826,435shares

Six months ended September 30, 2019: 33,868,428 shares

• These quarterly financial results are outside the scope of quarterly review by a certified public accountant or an audit corporation.
• Explanation of the proper use of financial results forecast and other notes

Forecasts presented herein are the current prospects based on information currently available and contain elements of uncertainty. Actual results may therefore differ from the above forecasts due to subsequent changes in the circumstances.

In order to prevent the spread of coronavirus disease (COVID-19), the Company plans to post a financial results briefing video and supplementary briefing materials on financial results on its website instead of holding a financial results briefing session for institutional investors as in the past.

2

Table of Contents
1. Qualitative Information on Quarterly Financial Results for the Period under Review. .......................................	4
(1)	Explanation of Operating Results....................................................................................................................	4
(2)	Explanation of Financial Position ...................................................................................................................	5
(3)	Explanation of Consolidated Financial Results Forecast and Other Forward-Looking Information ..............	5
2. Quarterly Consolidated Financial Statements and Primary Notes.......................................................................	6
(1)	Quarterly Consolidated Balance Sheets ..........................................................................................................	6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income ..................................................	8
	Quarterly Consolidated Statements of Income................................................................................................	8
	Quarterly Consolidated Statements of Comprehensive Income......................................................................	9
(3)	Quarterly Consolidated Statements of Cash Flows .......................................................................................	10
(4)	Notes to the Quarterly Consolidated Financial Statements ...........................................................................	11
	(Notes on going concern assumption)...........................................................................................................	11
	(Notes in the case of significant changes in shareholders' equity)................................................................	11
	(Accounting policies adopted specially for the preparation of quarterly consolidated financial
	statements) ....................................................................................................................................................	11
	(Segment information) ..................................................................................................................................	12

3

1. Qualitative Information on Quarterly Financial Results for the Period under Review

(1) Explanation of Operating Results

During the six months ended September 30, 2020, the economy has escaped its worst period with the gradual easing of public health measures introduced as a way to combat the global spread of the novel coronavirus (COVID-19). However, it maintains a moderate recovery trend due to concerns over the resurgence of infections, and there is still a risk of economic downturn.

In such an environment, we engage in activities to further strengthen our "connection with our customers" through interactions with both people and goods in order to realize our corporate value "Smiles for the Public." In the domestic market, we have provided value in line with the social circumstances, including preparation for natural disasters, against which continued precautions must be taken, and work style reform that accommodates new forms of society and lifestyles. Specifically, we renewed our broadcast amplifiers for business use to make them networkable, allowing users to remotely confirm operation status and adjust settings. In addition, we are proceeding with efforts to provide sounds that contribute to security and safety. These efforts include the release of IP horn speakers that realized alert broadcast automation to help avoid congestion with the use of monitoring cameras and linked sensors. We also introduced and launched a new system platform to improve the efficiency of our marketing activities in five regions around the world, and to further strengthen our connection with our customers, while pursuing initiatives to achieve user satisfaction at a higher level, according to each market environment.

However, as the entire Group was affected by the spread of COVID-19, net sales during the six months ended September 30, 2020 were ¥17,666 million (down ¥3,100 million, or 14.9%, year on year). In terms of profits, although selling, general and administrative expenses decreased, operating profit was negative ¥32 million (down ¥1,200 million year on year), ordinary profit was ¥53 million (down ¥1,225 million, or 95.8%, year on year), and profit attributable to owners of parent was negative ¥155 million (down ¥825 million year on year).

Performance by segment is as follows.

(Japan)

Net sales amounted to ¥11,538 million (down ¥1,216 million, or 9.5%, year on year), and segment profit (operating profit) to ¥1,898 million (down ¥659 million, or 25.8%, year on year).

Net sales and segment profit decreased due mainly to sluggish sales of audio equipment attributable primarily to stagnant economic activities, despite robust sales for disaster reduction and prevention markets and an increase in the delivery of products for railway cars.

(Asia & Pacific)

Net sales amounted to ¥2,794 million (down ¥1,018 million, or 26.7%, year on year), and segment profit (operating profit) to ¥428 million (down ¥283 million, or 39.9%, year on year).

Net sales and segment profit decreased due to sluggish sales in Indonesia and Thailand, despite robust sales in Vietnam including the progress in delivering large-scale projects for public offices.

(Europe, Middle East & Africa)

Net sales amounted to ¥1,852 million (down ¥476 million, or 20.5%, year on year), and segment profit (operating profit) to ¥133 million (down ¥163 million, or 55.2%, year on year).

Net sales and segment profit decreased due to the impact of stagnant economic activities in the entire Europe.

(The Americas)

Net sales amounted to ¥787 million (down ¥264 million, or 25.2%, year on year), and segment profit (operating profit) to ¥4 million (down ¥57 million, or 92.3%, year on year).

4

Net sales and segment profit decreased due mainly to sluggish sales of audio equipment for retailers, despite progress in delivering projects for public offices in the Americas.

(China & East Asia)

Net sales amounted to ¥692 million (down ¥123 million, or 15.2%, year on year), and segment profit (operating profit) to ¥54 million (down ¥61 million, or 53.1%, year on year).

Net sales and segment profit decreased due to sluggish sales in China, despite robust sales in Hong Kong and Taiwan due to progress in delivering multiple large-scale projects.

1. Explanation of Financial Position
2. 1. Assets, Liabilities and Net Assets

Total assets at the end of the six months ended September 30, 2020 decreased ¥2,321 million from the end of the previous fiscal year to ¥56,332 million. Assets decreased due mainly to decreases in notes and accounts receivable - trade as well as securities. The decrease in liabilities and net assets is mainly attributable to a decrease in trade payables and the purchase of treasury shares.

(ii) Cash Flows

Cash and cash equivalents at the end of the six months ended September 30, 2020 (hereinafter "cash") decreased by ¥975 million from the end of the previous fiscal year to ¥15,132 million. The status of cash flows and their contributing factors during the six months ended September 30, 2020 are as follows.

(Cash flows from operating activities)

Net cash provided by operating activities amounted to ¥1,464 million. This was mainly attributable to a decrease of ¥3,137 million in trade receivables, and a decrease of ¥1,265 million in trade payables.

(Cash flows from investing activities)

Net cash used in investing activities amounted to ¥575 million. This was mainly attributable to the purchase of production and development equipment that amounted to ¥459 million.

(Cash flows from financing activities)

Net cash used in financing activities amounted to ¥1,719 million. This was mainly attributable to ¥1,004 million of purchase of treasury shares, and ¥682 million of dividends paid.

(3) Explanation of Consolidated Financial Results Forecast and Other Forward-Looking Information

The financial results forecast for the fiscal year ending March 31, 2021 have not been revised from the initial forecast announced in "Consolidated Financial Results for the Fiscal Year Ended March 31, 2020."

5

2. Quarterly Consolidated Financial Statements and Primary Notes

(1) Quarterly Consolidated Balance Sheets

				(Million yen)
			As of March 31, 2020	As of September 30, 2020
Assets
Current assets
Cash and deposits	15,610	15,793
Notes and accounts receivable - trade	10,312	7,120
Securities	1,200	―
Merchandise and finished goods	6,845	6,724
Work in process	1,045	707
Raw materials and supplies	3,065	3,654
Other	880	828
Allowance for doubtful accounts		(75)	(40)
Total current assets	38,885	34,788
Non-current assets
Property, plant and equipment
Buildings and structures, net	6,237	6,114
Other	4,342	4,863
Total property, plant and equipment			10,579	10,978
Intangible assets	1,599	1,465
Investments and other assets
Investment securities	6,163	7,680
Other	1,426	1,420
Allowance for doubtful accounts	(0)	(0)
Total investments and other assets			7,589	9,100
Total non-current assets	19,768	21,543
Total assets			58,653	56,332

6

(Million yen)

As of March 31, 2020

As of September 30, 2020

Liabilities

Current liabilities

Notes and accounts payable - trade

Short-term borrowings

Income taxes payable

Provisions

Other

Total current liabilities

Non-current liabilities

Retirement benefit liability

Other

Total non-current liabilities

Total liabilities

Net assets

Shareholders' equity

Share capital

Capital surplus

Retained earnings

Treasury shares

Total shareholders' equity

Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasurements of defined benefit plans

3,409	2,068
1,915	2,060
332	146
176	161
3,348	3,070
9,183	7,507
2,841	2,788
1,848	2,349
4,689	5,138
13,872	12,645
5,279	5,279
	5,058	5,061
	30,236	29,397
	(385)	(1,370)
40,189	38,368
3,682	4,739
	(1,009)	(1,322)
	(104)	(102)

Total accumulated other comprehensive income		2,567	3,314
Non-controlling interests	2,024	2,004
Total net assets		44,780	43,686
Total liabilities and net assets		58,653	56,332

7

1. Quarterly Consolidated Statements of Income and Comprehensive Income Quarterly Consolidated Statements of Income
   Six Months Ended September 30

	(Million yen)
For the six months ended	For the six months ended
September 30, 2019	September 30, 2020

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses Operating profit (loss)

Non-operating income Interest income Dividend income Subsidy income Other

Total non-operating income Non-operating expenses

Interest expenses Foreign exchange losses

Share of loss of entities accounted for using equity method

Other

Total non-operating expenses Ordinary profit Extraordinary losses

Dismantlement expenses

Total extraordinary losses

Profit before income taxes

Income taxes

Profit (loss)

Profit attributable to non-controlling interests Profit (loss) attributable to owners of parent

	20,766			17,666
11,525		10,288
	9,240			7,377
8,072		7,409
	1,167			(32)
	24			14
45		50
		―		78
84		75
	154			218
	32			35
6		89
		―	3
5		5
	43			133
1,278		53
		―	11
		―		11
1,278		42
	380			163
898		(121)
	227			34
670		(155)

8

Quarterly Consolidated Statements of Comprehensive Income

Six Months Ended September 30

		(Million yen)
	For the six months ended	For the six months ended
	September 30, 2019	September 30, 2020
Profit (loss)	898	(121)
Other comprehensive income

Valuation difference on available-for-sale securities

Foreign currency translation adjustment

Share of other comprehensive income of entities accounted for using equity method Remeasurements of defined benefit plans, net of tax

Total other comprehensive income

Comprehensive income

Comprehensive income attributable to

Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests

		272			1,057
		(357)		(369)
		―	0
		8		4
		(75)			691
		822		570
		637		590
		185		(20)

9

(3) Quarterly Consolidated Statements of Cash Flows

			(Million yen)
		For the six months ended	For the six months ended
		September 30, 2019	September 30, 2020
Cash flows from operating activities
Profit before income taxes	1,278	42
Depreciation	668	704
Increase (decrease) in retirement benefit liability	21	(40)
Share of loss (profit) of entities accounted for using equity	―	3
method
Interest and dividend income	(70)	(64)
Foreign exchange losses (gains)	20	(16)
Interest expenses	32	35
Subsidy income	―	(78)
Increase (decrease) in accounts payable - other	(249)	(206)
Decrease (increase) in trade receivables	2,240	3,137
Decrease (increase) in inventories	(1,158)	(266)
Increase (decrease) in trade payables	(1,111)	(1,265)
Other, net	(514)	(303)
Subtotal	1,158	1,680
Interest and dividends received	71	73
Interest paid	(33)	(33)
Proceeds from subsidy income	―	72
Income taxes (paid) refund	(537)	(327)
Net cash provided by (used in) operating activities	659	1,464
Cash flows from investing activities
Payments into time deposits	(384)	(411)
Proceeds from withdrawal of time deposits	612	447
Purchase of property, plant and equipment	(1,619)	(459)
Proceeds from sales of property, plant and equipment	5	8
Purchase of intangible assets	(86)	(153)
Other, net	(23)	(7)
Net cash provided by (used in) investing activities	(1,496)	(575)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings	413	162
Purchase of treasury shares	(0)	(1,004)
Repayments of finance lease obligations	(153)	(164)
Dividends paid	(541)	(682)
Dividends paid to non-controlling interests	(78)	(30)
Net cash provided by (used in) financing activities	(360)	(1,719)
Effect of exchange rate change on cash and cash equivalents	(193)	(145)
Net increase (decrease) in cash and cash equivalents	(1,391)	(975)
Cash and cash equivalents at beginning of period	19,660	16,108
Cash and cash equivalents at end of period		18,268	15,132

10

(4) Notes to the Quarterly Consolidated Financial Statements

(Notes on going concern assumption) There is no relevant information.

(Notes in the case of significant changes in shareholders' equity)

The Company acquired 1,390,000 treasury shares based on a resolution at the meeting of the Board of Directors held on May 13, 2020. As a result, due to an increase of ¥984 million in treasury shares in the six months ended September 30, 2020, treasury shares amounted to ¥1,370 million as of September 30, 2020.

(Accounting policies adopted specially for the preparation of quarterly consolidated financial statements) - Calculation of tax expense

The Company calculates tax expense by multiplying profit before income taxes by an effective tax rate that was reasonably estimated by applying tax effect accounting to profit before income taxes for the fiscal year under review.

11

(Segment information)

[Segment information]

I. For the six months ended September 30, 2019

Information on net sales and profit (loss) by reportable segment

								(Million yen)
			Reportable segment				Amount
								recorded in
			Europe,				Adjustment	Quarterly
						Consolidated
	Japan	Asia &	Middle	The	China &	Total	(Note) 1
	Statements of
	Pacific	East &	Americas	East Asia
				Income
			Africa
							(Note) 2
Net sales
Net sales to
outside customers	12,754	3,812	2,329	1,052	816	20,766	-	20,766
Inter-segment net	2,149	57	5	2	15	2,231	(2,231)	-
sales or transfers
Total	14,904	3,870	2,335	1,055	832	22,998	(2,231)	20,766
Segment profit	2,557	711	296	62	115	3,744	(2,576)	1,167

(Notes) 1. The adjustment for segment profit of negative ¥2,576 million includes elimination of inter-segment transactions of ¥40 million and corporate expenses in the amount of negative ¥2,616 million not previously allocated to the reportable segments. The relevant corporate expenses are mainly costs relating to the headquarters divisions which are not attributable to a reportable segment.

2. Segment profit has been adjusted with operating profit in quarterly consolidated statements of income.

12

II. For the six months ended September 30, 2020

Information on net sales and profit (loss) by reportable segment

								(Million yen)
			Reportable segment				Amount
								recorded in
			Europe,				Adjustment	Quarterly
						Consolidated
	Japan	Asia &	Middle	The	China &	Total	(Note) 1
	Statements of
	Pacific	East &	Americas	East Asia
				Income
			Africa
							(Note) 2
Net sales
Net sales to
outside customers	11,538	2,794	1,852	787	692	17,666	-	17,666
Inter-segment net	1,410	33	9	2	12	1,468	(1,468)	-
sales or transfers
Total	12,948	2,828	1,862	790	705	19,134	(1,468)	17,666
Segment profit	1,898	428	133	4	54	2,518	(2,550)	(32)

(Notes) 1. The adjustment for segment profit of negative ¥2,550 million includes elimination of inter-segment transactions of ¥0 million and corporate expenses in the amount of negative ¥2,551 million not previously allocated to the reportable segments. The relevant corporate expenses are mainly costs relating to the headquarters divisions which are not attributable to a reportable segment.

2. Segment profit has been adjusted with operating loss in quarterly consolidated statements of income.

13