ZERO : Financial Results for the Nine Months of FY2019

Summary of Consolidated Financial Results for the Third Quarter Ending of the Fiscal Year June 30, 2020 [Based on IFRS]

						May 14, 2020
Company name:	ZERO CO., LTD.					Stock Exchange Listing: Tokyo
Stock code:	9028	URL: http://www.zero-group.co.jp/
Representative:	President & CEO				Takeo Kitamura
Inquiries:	Director and Manager of Group Strategies Headquarters	Toshihiro Takahashi	TEL [phone]
Scheduled Date of Submission of Quarterly Report:	May 15, 2020
Scheduled date to commence dividend payments:	-
Preparation of supplementary material on quarterly financial results:	No
Holding of quarterly financial results meeting:		No

(Amounts less than one million yen are rounded down)

1. Consolidated financial results for the third quarter ending of the fiscal year June 30, 2020 (From July 1, 2019 to March 31, 2020)

(1) Consolidated operating results (cumulative)

																								(Percentages indicate year-on-year changes)
																								Profit attributable to	Total comprehensive
		Sales revenue			Operating income		Profit before tax			Quarterly income	equity shareholders
							income of the quarter
																								of the company
		Millions of yen		%		Millions of yen		%		Millions of yen	%		Millions of yen		%	Millions of yen	%	Millions of yen		%
3Q FY2019	71,809		7.3			3,439			58.1		3,453	59.4					2,285		156.6	2,274	156.0	2,075		186.4
3Q FY2018	66,944		12.3			2,175			∆31.9		2,167	∆31.9					890		∆45.1	888	∆45.6	724		∆58.9
		Basic quarterly earnings per share		Diluted quarterly earnings per share
							Yen									Yen
3Q FY2019						136.32								135.94
3Q FY2018						53.43								53.31
(2) Consolidated financial position
		Total assets							Total capital					Equity attributable to equity	Equity ratio attributable to equity
											shareholders of the company	shareholders of the company
						Millions of yen						Millions of yen								Millions of yen					%
3Q FY2019						47,386								24,595								24,567						51.8
FY2018						39,554								23,072								23,056						58.3
2. Cash dividends
														Annual dividends per share
		1st quarter-end		2nd quarter-end		3rd quarter-end					Fiscal year-end			Total
						Yen							Yen								Yen				Yen				Yen
FY2018	---										4.00				---								20.90				24.90
FY2019	---										15.00				---
FY2019 (forecast)																									19.60				34.60
(Note) Amendment from the most recently announced dividend forecast: No
3. Forecast of consolidated financial results for the year ending June 30, 2020 (From July 1, 2019 to June 30, 2020)	(Percentages indicate year-on-year changes)
																								Profit attributable to
		Sales revenue		Operating income		Profit before tax		equity shareholders	Basic earnings per share
																								of the company
		Millions of yen			%	Millions of yen	%		Millions of yen		%		Millions of yen		%			Yen
Full year		95,000			5.3				4,000	21.0				3,980		20.8		2,300		38.7			138.33

(Note) Revisions from the most recently released business forecast: No

ø(Note)

1. Changes in significant subsidiary companies during the current quarter (Changes in the specific subsidiary companies following changes in the scope of
   consolidation): No

New ⎯ Co. (Company name),			Exclusions ⎯ Co. (Company name)
(2) Changes in accounting policies, changes in accounting estimates
Changes in the accounting policies required by IFRS	:	Yes
' Changes in the accounting policies due to other reasons	:	No
ƒ Changes in the accounting estimates		:	Yes
(Note) For details, please refer to the attached page. See "2. Summary of the Quarterly Consolidated Financial Statements and Major Notes, (6) Notes regarding
Summary Quarterly Consolidated Financial Statements (Changes in Accounting Policy), (Changes in Accounting Estimates)" on page 12-13.
(3) Number of issued shares (common shares)
Total number of issued shares at the end of the	3Q FY2019			17,560,242 shares	FY2018		17,560,242 shares
period (including treasury shares)
' Number of treasury shares at the end of the period	3Q FY2019			1,018,869 shares	FY2018		1,030,369 shares
ƒ Average number of shares during the period	3Q FY2019			16,685,873 shares	3Q FY2018		16,626,874 shares
(total up to this quarter)

øEarnings summary is not within the scope of the quarterly review by a certified public accountant or auditor

øExplanation of the proper use of financial results forecast and other notes

The earnings forecast, and other forward-looking statements herein are based on the information currently available to the Company and certain assumptions that the Company considers reasonable. The actual results may differ significantly from these forecasts due to a wide range of factors such as economic status of the major domestic and international markets or exchange rates fluctuation.

o Attached Documents - Table of Contents

1. Qualitative information on the quarterly financial results	2
(1)	Explanation regarding the operating results	2
(2)	Explanation regarding the financial position	3
(3)	Explanation on future forecast information, such as consolidated earnings forecast	4
2. Summary of the consolidated financial statements and major notes	5
(1)	Summary of the quarterly consolidated financial position	5
(2)	Summary of the quarterly consolidated profit and loss statement	7
(3)	Summary of the quarterly consolidated comprehensive income statement	8
(4)	Summary of the quarterly consolidated statement of changes in equity	9
(5)	Summary of the quarterly consolidated statement of cash flows	10
(6)	Notes regarding summary quarterly consolidated financial statements	12
	(Notes on going concern assumption)	12
	(Changes in accounting policy)	12
	(Changes in accounting estimate)	13
	(Segment information)	14

－ 1 －

1. Qualitative information on the quarterly financial results

1. Explanation regarding the operating results

Japan's economy during the consolidated cumulative period of the third quarter continued to recover gradually up to the second half-yearly consolidated cumulative period; personal consumption also improved with a steady employment and income environment, but it is getting affected by the massive spread of the n - COVID infection during the consolidated cumulative period of the third quarter and it is facing downward pressure of the background. The economic environment remains unclear as a weak movement is seen in the individual consumption.

Even in the domestic automotive market, a part of automobile manufacturers are adjusting production and even the total number of new vehicles sales decreased 93.7% (statistical data of the Japan Automobile Manufacturers Association) as compared to the consolidated cumulative period of the same quarter from the previous year (hereinafter referred to as the same quarter from the previous year). The first quarterly consolidated cumulative period ratio to the same period of the previous year stood at 108.1 % as rush demand prior to the rise in consumption tax is observed and as against this, there was a massive reduction in the second quarterly consolidated cumulative period ratio to the same period of the previous year standing at 83.7 % due to effect of reaction to rush demand and natural disaster. The third quarterly consolidated cumulative period ratio to the same period of the previous year stood at 89.8 % due to effect of spread of n - COVID infection in addition to continuation of decline in motivation of consumption due to the rise in tax therefore 2-digit reduction continues at two consecutive quarters.

The number of registered used cars has continued with the same trend. However, this has stopped at slight reduction of quarterly ratio of 99.5 % as compared to the previous year.

On the other hand, the business environment of the logistics industry is in serious circumstances with insufficient drivers due to the background of a strained supply and demand in the labor market as well as cost increase factors such as increased wages, increased hiring costs, and compliance response.

Under these circumstances, in the 3-yearmid-term plan from July of 2018 until June of 2021 devised by our group, and are proceeding with the following 5 topics: (1)development of new businesses in anticipation of a reduction of the domestic automobile market and next generation mobility society, (2) Expansion of human resources business corresponding to the strained supply and demand in the labor market and decreasing working age population, (3) Expansion of overseas business in anticipation of economic growth such as in ASEAN countries, (4) Maximization of effect to establish regional block companies through promotion of transportation reform in the vehicle transportation business, and (5) Creation of group synergy, including subsidiaries and cooperating companies and promotion of optimization.

As a result, the business results of our group are as follows: sales revenue of 718,09 million yen (107.3% compared to the same quarter from the previous year) and operating profit of 3,439 million yen (158.1% compared to the same quarter from the previous year). In addition, the profit before taxes was 3,453 million yen (159.4 % compared to the same quarter from the previous year), and the profit of the quarter attributable to the equity shareholders of the company was 2,274 million yen (ratio of same quarter from the previous year of 256.0 %).

Number of units related to domestic distribution of automobiles				Units: vehicles
	Domestic			July of 2018 to March of 2019		July of 2019 to March of 2020	Compared to the
				previous year
Number of new vehicles
sold
Domestic manufacturer	*1	3,833,430			3,593,651	93.7 %
(out of this, Nissan		*1	(466,331)		(408,032 )	(87.5 %)
Motor)
Foreign manufacturer	*2	234,374			219,871	93.8 %
Total of new vehicle sales		4,067,804			3,813,522	93.7 %
Number of used vehicle
registrations
Registered vehicles		*3	2,904,829			2,881,172	99.2 %
Light vehicles		*4	2,377,288			2,375,139	99.9 %
Total number of used			5,282,117			5,256,311	99.5 %
vehicles registered
Number of vehicles		*3	189,805			194,049	102.2 %
permanently deleted
	Export			July of 2018 to March of 2019		July of 2019 to March 2020	Compared to the
				previous year
New vehicles of domestic	*1	3,648,385			3,521,008	96.5%
manufacturers
Used vehicles(registered	*5	1,089,592			1,123,567	103.1 %
vehicles)
*1 Calculated from Japan Automobile Industry Association statistics	*2 Calculated from Japan Automobile Importers' Association
statistics	*3 Calculated from Japan Automobile Dealers Association statistics	*4 Calculated from Japan Mini Vehicles
Association statistics	*5 Trial calculated from the number of export deleted registered vehicles in the Japan Automobile Dealers
Association statistics

－ 2 －

The segment business results are as follows.

• Automobile related businesses

For vehicle transportation, which is the core business, sale for Nissan Motor Co., Ltd. reduced with slump in sales of the vehicles. However, yield increased due to proactive sales activity against the major used-cars dealers in addition to start of Mitsubishi Motors' vehicle transportation business in the middle of August of 2019. There was an overall increase in revenue for automotive-related businesses due to the favorable transition of the used vehicle export business for Malaysia as well as vehicle transportation business.

The restructuring of the transportation system including cooperating companies has been accelerated with the impetus of establishment of regional block companies in the vehicle transportation business, and thorough implementation of cost management is being conducted while aiming to achieve a systematic allocation and optimum distribution network throughout Japan. Profits increased in the automotive business due to the revision of transportation charges from January of 2019,review of the depreciation period of car carriers to match the actual life expectancy, and drop in unit price of fuel expenses compared to the same period of the previous year, in the midst of business challenges such as promoting initiatives for work style reforms to create forwarding company and decrease the total work hours, increased labor costs and recruitment costs to deal with driver shortages, and increased vehicle costs due to the increased number of vehicles and the measures against aging of car carriers.

As a result, the overall sales revenue in the automobile related businesses was 52,432 million yen (107.4 % compared to the same period from the previous year), and the segment profit was 4,525 million yen (147.5 % compared to the same quarter from the previous year).

• Human resource business

With tightening of the labor demand accompanying the economic recovery and increasing personnel expenses, the difficulty in employment in major cities has become a serious matter; therefore, the Group has promoted a regional shift from the major cities to smaller cities and reinforcement of the sales system, and has reviewed its product portfolio strategically and continuously. In addition to the fact that the existing pick up service and driver dispatch business have transitioned steadily, participation in the newly entered airport related business, and the fact that transient job listing advertising costs are no longer necessary has increased revenue; and profit has increased with the restructuring of non-profitable business and cost reduction.

As a result, the sales revenue of the overall human resource business was 14,491 million yen (105.0% compared to the same quarter from the previous year), and the segment profit was 684 million yen (285.6 % compared to the same quarter from the previous year).

• General cargo business

Revenue in the transport / warehousing business increased due to the increased cargo volume from the last minute surge in demand of the consumption tax rate, from clients that were mainly handling household equipment. However, the revenue in the port cargo handling business reduced due to reduction in coal and automobile-related cargo. Furthermore, the CKD business was launched and contributed to the sales revenue increase, increasing the revenue in the overall general cargo business as well.

Profit increased with the increased revenue in the transport / warehousing business, but revenue decreased in the port cargo business due to reduced revenue. Furthermore, expenses related to the launch of the CKD business have continued, and there was a significant decrease overall in profit in the general cargo business.

As a result of the above, the sales revenue of the overall general cargo business was 4,885 million yen (112.5% compared to the same quarter of the previous year), and the segment loss was 277 million yen (segment profit of 413 million yen in the same quarter of the previous year).

Furthermore, the company expenses not included in the abovementioned report segment (expenses affiliated with our company's management division), etc. are allocated as an item in the "adjustment amount" as indicated in "2. (Segment information) in the summary of consolidated statements for the quarter," and totaled 1,491 million yen.

1. Explanation regarding financial position
   ① Status of assets, liabilities, and equity (Assets)
   Current assets increased 2,860 million yen (15.7 %) compared to the end of the previous consolidated fiscal year and were 21,038 million yen.
   This was mainly because, other current assets decreased 261 million yen, but the operating receivables and other receivables increased by 2,854 million yen.
   Non-current assets increased by 4,971 million yen (23.3 %) compared to the end of the previous consolidated fiscal year to 26,348 million yen.
   This was mainly due to an increase of tangible fixed assets of 5,334 million yen resulting from an increase of assets of right to use, etc.
   As a result, total assets increased by 7,831 million yen (19.8 %) compared to the previous consolidated fiscal year to 47,386 million yen.
   (Liabilities)
   Current liabilities increased 4,341 million yen (34.6 %) compared to the end of the previous consolidated fiscal year to 16,903 million yen.
2. • 3 －

This was mainly due to accrued income tax decreasing by 256 million yen, while short-term borrowings increased by 2,067 million yen, and other financial liabilities increased by 2,171 million yen due to an increase of lease liabilities.

Non-current liabilities increased by 1,967 million yen (50.2 %) compared to the end of the previous consolidated fiscal year to 5,888 million yen.

This was mainly due to an increase of 2,219 million yen in other financial liabilities due to lease liabilities,

etc.

As a result, total liabilities increased by 6,309 million yen (38.3 %) compared to the end of the previous consolidated fiscal year to 22,791 million yen.

(Equity)

Total equity increased by 1,522 million yen (6.6 %) compared to the end of the previous consolidated fiscal year to 24,595 million yen.

This is mainly because retained earnings increased by 1,637 million yen due to the recording of quarterly profits attributable to equity shareholders of the company.

②Cash flow status

Cash and cash equivalents (hereinafter referred to as "funds") at the end of the consolidated accounting period of the third quarter increased by 213 million yen compared to the end of the previous consolidated accounting fiscal year to 3,679 million yen.

Each cash flow status category during the consolidated cumulative period of the third quarter and their causes are as follows.

(Cash flow through operating activities)

Funds obtained from operating activities were 2,731 million yen (there were expenditures of 1,410 million yen during the same period of the previous year).

The main cause of the increase in funds were 2,285 million for profit from quarterly profits and 3,119 million yen for depreciation and amortization expenses which are non-fund expenses; the main cause of the decrease in funds was increased amount of trade receivables of 2,418 million yen and 1,327 million yen for payment of corporate income. To compare this with consolidated cumulative period of the previous third quarter, depreciation and amortization have increased due to the adoption of IFRS16 "lease", etc.

(Cash flow through investment activities)

Net cash used in investment activities was 1,510 million yen (expenditures of 1,665 million yen during the same period of the previous year).

The main itemization breakdown for expenditures was 1,371 million yen for acquisition of tangible fixed assets and investment property.

(Cash flow through financial activities)

Funds used due to financing activities were 1,006 million yen (income of 1,632 million yen in the previous year).

The main itemization breakdown for income was 2,100 million yen for short-term borrowings, and the main itemization breakdown for expenditures were 2,406 million yen lease liabilities payments and 593 million for dividends. To compare this with consolidated cumulative period of the previous third quarter, expenditures due to lease liability payments (payment of finance / lease liabilities for the consolidated cumulative period of the previous third quarter) have increased due to the adoption of IFRS16 "lease", etc.

1. Explanation regarding the future forecast information such as consolidated business forecast
   We have not made any amendments to the consolidated forecast announced on August 8, 2019. However sense of uncertainty about the future heightens, since as for the effect of spread of n-COVID infection April 2020 onwards when the situation such as declaration of emergency situation deepened, no. of vehicles sold in Japan will drop and no. of vehicle transportation contracts will also drop along with increased production adjustment by domestic automobile manufacturers and confinement (lockdown). Our full-year forecast based on our best estimate as of this reporting remains unchanged, but if any significant changes of the circumstance happen we will make announcements in a proper manner.

－ 4 －

2. Summary of the consolidated financial statements and major notes

1. Summary of quarterly consolidated statement of financial position

		(Unit: million yen)
	End of the previous consolidated	End of the consolidated accounting
	accounting year (June 30, 2019)	period of the third quarter (March
	31, 2020)
Assets
Current assets
Cash and cash equivalents	3,465	3,679
Trade and other receivables	13,281	16,136
Inventories	922	968
Other financial assets	4	11
Other current assets	503	242
Total current assets	18,177	21,038
Non-current assets
Tangible fixed assets	11,931	17,265
Goodwill and intangible assets	2,803	2,702
Investment properties	3,393	3,304
Investment accounting processed with	986	1,023
equity method
Other financial assets	1,629	1,414
Other non-current assets	291	326
Deferred tax assets	341	310
Total non-current assets	21,377	26,348
Total assets	39,554	47,386

－ 5 －

		(Unit: million yen)
	End of the previous consolidated	End of the consolidated accounting
	accounting year (June 30, 2019)	period of the third quarter (March
	31, 2020)
Liabilities and Equity
Liabilities
Current liabilities
Trade and other payable	6,976	7,210
Loans	1,283	3,350
Other financial liabilities	720	2,892
Income taxes payable, etc.	901	644
Other current liabilities	2,679	2,804
Total current liabilities	12,561	16,903
Non-current liabilities
Loans	154	80
Other financial liabilities	1,519	3,739
Retirement benefits liabilities	1,725	1,562
Other non-current liabilities	306	290
Deferred tax liabilities	214	215
Total non-current liabilities	3,920	5,888
Total liabilities	16,481	22,791
Equity
Capital	3,390	3,390
Capital surplus	3,362	3,395
Treasury stock	△687	△681
Other component of funds	236	69
Retained earnings	16,754	18,392
Total equity attributable to the equity
23,056	24,567
shareholders of the company
Non-controlling interest	16	27
Total Equity	23,072	24,595
Total liabilities and equity	39,554	47,386

－ 6 －

1. Summary of quarterly consolidated profit and loss statement

		(Unit: million yen)
	Consolidated cumulative period	Consolidated cumulative period
	for the previous third quarter	of this third quarter
	(from July 1, 2018	(from July 1, 2019
	to March 31, 2019)	to March 31, 2020)
Sales revenue	66,944	71,809
Cost of sales	△ 58,307	△61,805
Gross Profit	8,636	10,004
Selling, general and administrative expenses	△ 6,968	△ 6,790
Other income	555	274
Other expenses	△47	△49
Operating profit	2,175	3,439
Financial profit	9	11
Financial expenses	△36	△45
Investment gain / loss through equity method	17	48
Profit before tax	2,167	3,453
Corporate income tax expenses	△1,276	△1,168
Profits of the quarter	890	2,285
Attribution of the profits of the quarter ():
Equity shareholders of the company	888	2,274
Non-controlling interest	2	11
Profits of the quarter	890	2,285
Quarterly earnings per share-
Basic quarterly earnings per share (yen)	53.43	136.32
Diluted quarterly earnings per share (yen)	53.31	135.94

－ 7 －

1. Summary of quarterly consolidated statement of comprehensive income

(Unit: million yen)

Profits for the quarter

Other comprehensive income

Items not transferring over to profit or loss:

Remeasurement of defined benefit system

Financial assets measured by fair value through other comprehensive income

Total of the items not transferring over to profit or loss

Items which may be transferred over to profit or loss

Other comprehensive income equity of affiliated company accounted for by the equity method

Total of the items which may be transferred over to profit or loss

Other comprehensive income after tax deduction

Comprehensive income for the quarter

Attribution of the comprehensive income for the quarter:

Equity shareholders of the company

Non-controlling interest

Comprehensive income for the quarter

Consolidated cumulative period	Consolidated cumulative period
for the previous third quarter	of this third quarter
(from July 1, 2018	(from July 1, 2019
to March 31, 2019)	to December March, 2020)
890	2,285

△18	△43
△125	△ 155
△143	△198

△22	△11
△22	△11

△166△210

724

2,075

722	2,064
2	11
724	2,075

－ 8 －

1. Summary of quarterly consolidated statement of changes in equity

Consolidated accounting period of the second quarter (from July 1, 2018 to March 31, 2019)

(Unit: million yen)

Capital Capital Treasury

surplus stock

Balance on July 1, 2018	3,390	3,305	△687
Cumulative effect amount
due to change of
accounting method
Carrying amount with the			△687
change in accounting	3,390	3,305
method reflected
Profit of the quarter
Other comprehensive
income
Comprehensive
income of the	-	-	-
quarter
Dividends of surplus
Share-based payment
transactions, etc.		44
Acquisition of own
shares
Other
Acquisition of treasury			△0
stock

Transfer from other capital component to Retained earnings

Total transactions,			△0
etc. with the	-	44
owners
Balance on March 31,	3,390	3,350	△687
2019

Equity attributable to equity shareholders of the company
	Other components of funds
		Financial					Total equity
		assets					Non-	Total
Conversion	Fluctuation	measured	Remeas-				attributing to	controlling
of fair value	by fair	urement		Retained	the equity	equity
difference	Total other	interest
of business	of financial	value	of	components	earnings	shareholders
assets	through	defined			of the
activities	of funds
which can	other	benefit			company
overseas
be sold	compre-	system
		hensive
		profits
△47	464	-	-	416	15,682		22,108	11	22,119
	△464	464		-	△18	△18		△18
△47
-	464	-	416	15,664		22,089	11	22,101
				-	888		888	2	890
△22		△125	△18	△166			△166		△166
△22	-	△125	△18	△166	888		722	2	724
				-	△348	△348		△348
							44		44
				-
				-			△0		△0
			18	18	△18	-		-
-	-	-	18	18	△367	△303	-	△303
△70	-	339	-	269	16,185		22,508	13	22,522

Consolidated accounting period of the previous third quarter (from July 1, 2019 to March 31, 2020)

(Unit: million yen)

Equity attributable to equity shareholders of the company

Other components of funds

Total equity

Fluctuation

Non-controlling

Remeas-

attributing to

Total equity

Capital

Treasury

Conversion

of fair

Retained

Capital

urement

Total other

the equity

interests

surplus

stock

difference

value of

of

earnings

shareholders

of business

financial

components

defined

of the

activities

assets

of funds

benefit

company

overseas

which can

system

be sold

Balance on July 1, 2019

3,390

3,362

△687

△50

286

-

236

16,754

23,056

16

23,072

Profit of the quarter

-

2,274

2,274

11

2,285

Other comprehensive income

△11

△155

△43

△210

△210

△210

Comprehensive income of

-

-

-

△11

△155

△43

△210

2,274

2,064

11

2,075

the quarter

Dividends of the surplus

-

△593

△593

△593

Share-based payment

-

transactions

33

6

40

40

-

Transfer from other capital

△43

component to retained

43

43

-

-

earnings

Total of transactions, etc.,

-

33

6

-

-

43

43

△636

△552

-

△552

with the owners

Balance on March 31, 2020

3,390

3,395

△681

△61

131

-

69

18,392

24,567

27

24,595

－ 9 －

(5) Summary of quarterly consolidated cash flow statements

(Unit: million yen)

Cash flow from operating activities

Profits of the quarter

Depreciation and amortization costs

Interest income and dividend

Interest expense

Investment gain / loss through equity method

Corporate income tax expenses

Increase / decrease of trade receivables (△ is an increase)

Increase / decrease of inventories (△ is an increase)

Increase / decrease of trade payables (△ is a decrease)

Increase / decrease in retirement benefits liabilities (△ is a decrease)

Other

Subtotal

Interest and dividend received

Interest paid

Corporate income tax paid

Net cash provided by (used in) operating activities

Cash flow from investment activities

Payment for acquisition of tangible fixed assets and investment properties

Proceed from sales of tangible fixed assets and investment properties

Payment for intangible assets

Payment for loans receivable

Proceed from loans receivable

Other

Net cash provided by (used in) investment activities

Consolidated cumulative period Consolidated cumulative period
for the previous third quarter	of this third quarter
(from July 1, 2018	(from July 1, 2019
to March 31, 2019)	to March 31, 2020)
890	2,285
1,262	3,119
△8	△10
34	38
△17	△48
1,276	1,168
△2,875	△2,418
△645	△46
957	571
△371	△213
100	△359
601	4,086
8	10
△34	△38
△1,986	△1,327
△1,410	2,731

△1,486	△1,371
6	9
△223	△106
△14	△35
11	13
41	△21
△1,665	△1,510

－ 10 －

Cash flow from financing activities

Net increase or decrease of short-term loans (△ is a decrease)

Repayment of long-term loans

Repayment of finance lease debts

Repayment of lease debts

Dividend paid

Payment for acquisitioning of treasury stock

Cash flow through financing activities

Increase / decrease in of cash and cash equivalents (△ is a decrease)

Cash and cash equivalents at the beginning of the quarter

Balance of cash and cash equivalents at the end of the quarter

Consolidated cumulative period		Consolidated cumulative period
for the previous third quarter	of this third quarter
(from July 1, 2018	(from July 1, 2019
to March 31, 2019)	to March 31, 2020)
2,600		2,100
△189	△106
△429	-
-		△2,406
△348	△593
△0	-
1,632		△1,006
△1,443	213
5,273		3,465
3,829		3,679

－ 11 －

1. Notes regarding summary of quarterly consolidated financial statements (Notes on going concern assumption)
   There are no applicable matters.
   (Changes in accounting policies)
   The important company policies that our group applies to this quarterly consolidated financial statement summary will be the same company policies applicable to the consolidated financial statements of the previous consolidated accounting year excluding the below.

1. Application of IFRS No. 16 (lease)
   Our group has applied the following standards starting from the first quarter of the consolidated accounting

period.
Standard	Name of the standard	Summary
IFRSNo. 16	Lease	Definition of lease and revision of accounting
process

In the application of IFRS No. 16 "Lease (announced in January of 2016, hereinafter referred to as IFRS No. 16), a method which is approved as a transitional measure that recognizes the cumulative amount of financial impact due to the application of this standard to be recognized on the day the application is started(retroactive revision approach), is being adopted. Therefore, revised comparison information is not shown again, and the cumulative effect of the application of IFRS No. 16 is recognized on the initial application date, which is July 1, 2019.

In the previous consolidated accounting year, our group has classified all substantial risks and lease contracts with economic benefit as finance lease. Lease assets are initially recognized at the fair value or the current value of the total amount of minimum payment lease fee. Lease contracts other than finance leases are classified as operating leases and are not appropriated in the consolidated statement of affairs of our group. The payment lease fee of operating leases is recognized as an expense throughout the lease period based on the straight-line method.

During this consolidated accounting year, our group did not categorize borrower leases as finance leases or operating leases, in accordance with IFRS No. 16, Our group introduced a single accounting model, and has recognized lease debts which show the obligation to pay the right-of-use asset and lease fee, which show the right to use the underlying assets as a general rule for all leases; excluding cases of short term leases with a lease period shorter than 12 months or small amount assets leases.

Accompanying the application of IFRS No. 16, for borrower lease transactions, our group has measured the right to use asset at acquisition cost and the lease debt at the current value of the total amount of unpaid lease fees at the lease commencement date. The acquisition cost of the right to use asset is initially measured by adjusting the prepaid lease payment, etc. to the initial measured amount of the lease debt. In the summary of consolidated financial status statement for the quarter, the right-of-use asset is shown as included in the "tangible fixed assets," and the lease debt is included in the "other financial debts. "The depreciation of the right-of-use assets and interest costs related to the lease debt are appropriated after recognizing the right-of-use assets and the lease debts.

Our group estimates the lease period of the right-of-use asset by adding a reasonably certain time period in which executing an option to extend the lease or executing an option to cancel the lease will not be exercised during the irrevocability period of the lease. In addition, the discount rate applied to the lease debts related to the applicable right-of-use assets utilize the borrowing interest rate of the borrower. The right-of-use assets are depreciated using the straight-line method over the useful life period of the underlying asset if the ownership of the underlying asset is to be transferred to the borrower, over the shorter of either the useful life period or the lease period for other cases.

In addition, our group utilizes the following practical expedients in applying the IFRS No. 16.

• Regarding leases in which the lease period is to be concluded within 12 months of the application start date, the same accounting process method of short-term leases
• Exclude the initial direct cost from the measurement of right-of use as of the date of initial application
• Carry over the past decision of whether the transaction is a lease or not for the contracts signed before the previous consolidated accounting year
• Utilize ex post facto decisions in the case of calculating the lease period for contracts which include extension or cancellation options

(2) Effect on the summary of the consolidated financial statements of the quarter

For the company group, 8,871million yen for right-of-use assets and 8,720 million yen for lease debts are appropriated in the summary of consolidated financial status statements for this quarter on July 1, 2019. This is mainly an influence of the lease fee classified as an operating lease in IAS No. 17being appropriated as an asset and debt upon application of IFRS No. 16. Furthermore, there is no effect on the accumulated earnings at the beginning of the term because right-of-use assets that is the same amount as the lease debts (however, advance lease fee is revised) is recognized when the lease debt is recognized.

The average of the added borrowing interest applied to the lease debts at the time of the application start date was 0.2%.

－ 12 －

In addition, the cash flow due to sales activities increased, and the cash flow due to financial activities decreased in conjunction with the change, etc. of display in the operating lease cost.

The difference between the total of the minimum lease fee of the irrevocable operating leases at the last date of the fiscal year immediately before the application start date, and the lease debt recognized in the summary of the consolidated financial status statement for the quarter as of the application start date, is as follows.

	(Million yen)
	Amount
Total amount of future minimum lease fees for irrevocable operating lease (June 30, 2019)	1,965
Total amount of future minimum lease fees for irrevocable operating lease after discount (July 1,	1,946
2019)
Lease debts classified in the finance leases (June 30, 2019)	2,149
Effects, etc., from the review of lease period due to the application of IFRS No. 16	4,624
Lease debts recognized in the summary of the consolidated financial status statement as of the	8,720
application start date (July1, 2019)

(Change of accounting estimates)

In creating the summary of the consolidated financial statements for the quarter conforming to IFRS, managers are required to apply the accounting policy as well as to determine, estimate, presume the effect thereof on the assets, debts, profits, and cost amount. The actual business results may differ compared to these estimates.

The estimate and the assumptions, which become the base of the estimates, will be continuously reviewed. The effect from the accounting estimate review is recognized in the accounting period in which the estimate is reviewed and in the future accounting period thereafter.

Excluding the changes in accounting estimate indicated below, the estimate and decisions significantly affecting the amount in the summary of the consolidated financial statements in the quarter are the same as the consolidated financial statements in the previous consolidated accounting year.

(Change in life expectancy)

Regarding the group's sales vehicles in the automobile related business by our company, (some excluded); it became clear that long-term usage could be expected through regular maintenance, etc. Due to this, the life expectancy has been revised from the conventional 7 years to 10 years starting the first quarter of the consolidated accounting period going forward.

Due to this, 235 million yen has been added to the sales profit and pre-tax profits for this third quarter of the consolidated cumulative period compared to the case of using the conventional useful life period. In addition, the effect on the segment information is indicated in the applicable portions.

－ 13 －

(Segment information)

The segment information of our group is as follows.

Consolidated cumulative period of the previous third quarter (from July 1, 2018 to March 31, 2019) (Unit: million yen)

						Total amount
	Automobile	Human	General		Adjustment	on the
		quarterly
	related	resource	cargo	Total	amount
	consolidated
	businesses	businesses	businesses		(note)
		financial
						statements
Sales revenue
Sales revenue from external	48,807	13,796	4,341	66,944	-	66,944
customers
Sales revenue between segments	27	885	306	1,219	△1,219	-
Total	48,834	14,681	4,647	68,163	△1,219	66,944
Segment profit (operating profit)	3,068	239	413	3,721	△1,545	2,175

(Note) The △1,545 million yen adjustment amount in the segment profits includes the total company cost△1,545 million yen and 0 million yen of transaction elimination between segments. The total company cost is an expense related to the management divisions of our company not belonging to the reporting segment.

Consolidated cumulative period of this third quarter (from July 1, 2019 to March 31, 2020)

							(Unit: million yen)
								Total amount
			Automobile	Human	General		Adjustment	on the
				quarterly
			related	resource	cargo	Total	amount
			consolidated
			businesses	businesses	businesses		(note)
				financial
								statements
Sales revenue
Sales revenue from external	52,432	14,491	4,885	71,809	-	71,809
customers
Sales revenue between segments	32	850	341	1,225	△1,225	-
	Total		52,465	15,342	5,226	73,034	△1,225	71,809
Segment profit (operating profit)(△is	4,525	684	△277	4,931	△1,491	3,439
loss)
(Note) 1. The △	million yen	adjustment amount in the segment profits includes the total company cost △1,491
million	yen and 0 million yen of transaction elimination between segments. The total company cost is an
1,491

expense related to the management divisions of our company not belonging to the reporting segment.

2. as indicated in "2. Summary of consolidated financial statements for the quarter and important notes (change in accounting estimates)", the life expectancy has been changed starting from the consolidated cumulative period of this second quarter for the vehicles for sales in our company's automobile related businesses (excludes some). Due to this change, the segment profit during the consolidated cumulative period of this third quarter has increased 235 million yen in the automotive related businesses compared to that of the conventional method.

－ 14 －