Consolidated Balance Sheets (As of March 31, 2011)

Transcription

1 ASSETS Current Assets: Cash and Time Deposits Notes and Trade Accounts Receivable Short-Term Investments in Securities Inventories Deferred Tax Assets Other Current Assets Less: Allowance for Doubtful Accounts Fixed Assets: Property, Plant and Equipment: Buildings and Structures Machinery, Equipment and Vehicles Furniture and Fixtures Land Lease Assets Construction in Progress Intangible Assets: Goodwill Lease Assets Trademarks Other Intangible Assets Investments and Other Assets: Investments in Securities Prepaid Pension Expenses Long-Term Loans Receivable Long-Term Prepaid Expenses Deferred Tax Assets Other Investments Less: Allowance for Doubtful Accounts Consolidated Balance Sheets (As of March 31, 2011) March 31, ,279 90, ,002 15,051 67,574 26,657 12, , ,221 61,439 11,082 17,852 33,490 4,532 2, ,054 94, ,628 48, ,628 27,515 24,560-9,743 19,577 27, March 31, 2010 (Reference) 318,241 70, ,796 24,723 67,342 28,389 16,939-1, , ,784 62,089 10,826 14,373 35,274 5,898 4,322 35,837 11, , , ,142 28,740 17,476 10,326 14,163 25, TOTAL ASSETS 740, ,445 LIABILITIES Current Liabilities: Notes and Trade Accounts Payable Short-Term Debt Current Portion of Long-Term Debt Lease Obligations Other Payables Accrued Income Taxes Reserve for Sales Returns Accrued Bonuses for Employees Accrued Bonuses for Directors Provision for Liabilities and Charges Reserve for Loss on Disaster Deferred Tax Liabilities Other Current Liabilities Long-Term Liabilities: Bonds Long-Term Debt Lease Obligations Accrued Retirement Benefits Allowance for Loss on Guarantees Allowance for Environmental Measures Deferred Tax Liabilities Other Long-Term Liabilities (Millions of yen) March 31, March 31, (Reference) 159,676 43,771 5,595 8,509 2,256 37,980 12,214 11,447 11, , ,316 90,000 88,337 2,818 41, ,165 6, ,512 44, ,966 4,273 2,453 46,988 10,277 11,821 11, , , ,725 50,000 47,779 3,974 40, ,381 2,611 Total Liabilities 418, ,237 NET ASSETS Shareholders Equity: Common Stock Capital Surplus Retained Earnings Less: Treasury Stock, at Cost Accumulated Other Comprehensive Income (Loss) Unrealized Gains (Losses) on Available-for-Sale Securities, Net of Taxes Foreign Currency Translation Adjustments Stock Acquisition Rights Minority Interests in Consolidated Subsidiaries 363,290 64,506 70, ,400-3,874-54, , ,717 64,506 70, ,063-23,111-22,393 1,054-23, ,267 16,453 Total Net Assets 321, ,207 TOTAL LIABILITIES AND NET ASSETS 740, ,

2 Consolidated Statements of Income (Fiscal Year from April 1, 2010 to March 31, 2011) Fiscal Year (Millions of yen) Previous Fiscal Year (Reference) Net Sales 670, ,201 Cost of Sales 168, ,166 Gross Profit 502, ,035 Selling, General and Administrative Expenses 457, ,684 Operating Income 44,458 50,350 Other Income 4,133 4,350 Interest Income Dividend Income Equity in Earnings of Affiliates Rental Income Subsidy Income Other 1,306 1,575 Other Expenses 4,110 3,215 Interest Expense 2,165 1,569 Foreign Exchange Loss Other 1,354 1,643 Ordinary Income 44,480 51,485 Extraordinary Income 1, Gain on Sales of Property, Plant and Equipment 1, Gain on Sales of Securities Extraordinary Loss 16,966 5,199 Impairment Loss 457 3,469 Loss on Disposal of Property, Plant and Equipment 1, Loss on Sales of Securities Loss on Revaluation of Investments in Securities 4, Loss on Cancellation of Lease Contracts 112 Environmental Expenses 507 Loss on Adjustment for Changes of Accounting Standard for Asset Retirement Obligations 844 Purchasing-Related Expense 1,232 Loss on Adjustment for Change in Estimate for Samples and Promotional Items 6,751 Loss on Disaster 1,668 Income before Income Taxes 28,695 46,739 Income Taxes Current 18,614 14,659 Income Taxes Deferred -5,286-5,166 Income before Minority Interests 15,367 Minority Interests in Net Income of Consolidated Subsidiaries 2,576 3,575 Net Income 12,790 33,

3 Reference: Consolidated Statements of Comprehensive Income (Fiscal Year from April 1, 2010 to March 31, 2011) (Millions of yen) Fiscal Year Previous Fiscal Year Income before Minority Interests 15,367 Other Comprehensive Income Unrealized Gains (Losses) on Available-for-Sale Securities, Net of Tax -1,003 Foreign Currency Translation Adjustments -32,564 Share of Other Comprehensive Income of Associates Accounted for Using Equity Method -59 Total Other Comprehensive Income -33,627 Comprehensive Income -18,260 (Breakdown) Comprehensive income attributable to shareholders equity -19,833 Comprehensive income attributable to minority interests 1,

4 Consolidated Statements of Changes in Net Assets (Fiscal Year from April 1, 2010 to March 31, 2011) Common Stock Capital Surplus Shareholders Equity Retained Earnings Treasury Stock, at Cost (Millions of Yen) Total Shareholders Equity Balance as of March 31, ,506 70, ,063-23, ,717 Changes During Fiscal Period Cash Dividends from Retained Earnings -19,890-19,890 Net Income 12,790 12,790 Acquisition of Treasury Stock Retirement of Treasury Stock -18,879 18,879 Disposal of Treasury Stock Noncontrolling Interests, Capital Transactions, Others Net Change in Items Other than Shareholders Equity Total Change During the Fiscal Period -26,663 19,236-7,426 Balance as of March 31, ,506 70, ,400-3, ,290 Accumulated Other Comprehensive Income (Loss) Unrealized Gains (Losses) on Availablefor-Sale Securities, Net of Tax Foreign Currency Translation Adjustments Total Accumulated Other Comprehensi ve Income (Loss) Stock Acquisiti on Rights (Millions of Yen) Minority Interests in Consolidated Subsidiaries Total Net Assets Balance as of March 31, ,054-23,447-22, , ,207 Changes During Fiscal Period Cash Dividends from Retained Earnings -19,890 Net Income 12,790 Acquisition of Treasury Stock -13 Retirement of Treasury Stock Disposal of Treasury Stock 221 Noncontrolling Interests, Capital Transactions, Others -534 Net Change in Items Other than Shareholders Equity ,593-32, ,186-36,589 Total Change During the Fiscal Period ,593-32, ,186-44,016 Balance as of March 31, ,040-54, , ,

5 Notes to Consolidated Financial Statements Basis of Presenting Consolidated Financial Statements 1. Scope of Consolidation (1) Number of consolidated subsidiaries: 95 Principal subsidiaries are listed in 1.2 Outline of the Shiseido Group (3) Major Subsidiaries and Affiliated Companies of Shiseido Group. [Additions: 1 company] One company Shiseido S.A. is included in the scope of consolidation in the current fiscal year as a result of acquisition of shares. [Exclusions: 3 companies] Three companies MD Beauty Sales, ID Direct, and Carita UK were excluded from the scope of consolidation in the current fiscal year because they were liquidated during the period. (2) Non-consolidated subsidiaries Major company name: Beauté Prestige International Ltd. (UK) (Reasons for excluding non-consolidated subsidiaries from scope of consolidation) Since these companies are small in scale or do not engage in full-scale operations, total assets, net sales, net income (the Company s interest share) and retained earnings (the Company s interest share) have a minimal effect on the Company s consolidated financial statements, and they are immaterial, thus they are not included in the scope of consolidation. 2. Application of the Equity Method (1) Affiliated companies where equity method is applicable: 3 Major Company Name: Pierre Fabre Japon Co., Ltd. (2) Since the non-equity method non-consolidated subsidiaries (Beauté Prestige International Ltd. (UK), etc.) and affiliated companies are small in scale or do not engage in full-scale operations, their net income (the Company s interest share) and retained earnings (the Company s interest share) have a minimal effect on the Company s consolidated financial statements, and they are immaterial, thus they are not included in the scope of equity method application. (3) The latest financial figures are used for equity-method affiliates with fiscal year-ends that differ from that of the parent company. 3. Fiscal Year of Consolidated Subsidiaries Of the Company s consolidated subsidiaries, 70 companies overseas consolidated subsidiaries, Tai Shi Trading Co., Ltd., Bare Escentuals Inc. and Selan Anonymous Association have fiscal years ending December 31. All other consolidated subsidiaries have fiscal years ending March 31. The most recent financial statements have been used for 70 consolidated subsidiaries overseas subsidiaries, Tai Shi Trading Co., Ltd., Bare Escentuals Inc. and Selan Anonymous Association with fiscal years ending in months other than March. When significant transactions occur at those subsidiaries between their fiscal year ends and the Company s fiscal year end, these transactions are included in consolidation. 4. Notes on Accounting Standards (1) Valuation of Major Assets 1) Securities Available-for-sale securities: Fair value available: At market, based on market prices at fiscal year-end. (Net unrealized gains and losses are reported separately in net -53-

6 Fair value not available: assets. The cost of securities sold is mainly calculated using the moving average method.) Primarily valued at cost, based mainly on the moving average method. Investments in limited partnerships are recorded as investments in securities, at the amount of interest in such partnerships calculated based on ownership percentage. Investment gain or loss is included in net income or loss in proportion to the ownership interests in the net asset value of the partnership. 2) Inventories Inventories held by the Company are valued at cost, determined by the average method. (Carrying amount in the balance sheet is calculated with consideration of write-downs due to decreased profitability.) (Additional Information) Accounting Treatment for Samples and Promotional Items Several consolidated subsidiaries in Europe and certain other countries formerly have recognized samples and promotional items associated with marketing activities at stores as assets if they are saleable. As part of its efforts to promote enhanced efficiency, the Shiseido Group introduced its core business processing system overseas and successively expanded it, which has enhanced management clarity and standardized operations globally. Consequently, the consolidated subsidiaries in Europe and certain other countries improved the accuracy of their estimates for the saleability of samples and promotional items. This change in the method for estimating saleability reduced income before income taxes and net income by 6,751 million and 4,805 million, respectively, compared with the previous method applied in the fiscal year ended March 31, (2) Depreciation of Major Fixed Assets 1) Property, Plant and Equipment (Excluding Lease Assets) Buildings (excluding leasehold improvements) are depreciated using the straight-line method. Other tangible fixed assets are, in principle, depreciated using the declining-balance method at the Company and consolidated subsidiaries in Japan and the straight-line method at consolidated subsidiaries overseas. Major fixed assets in Japan are designated specific useful lives based on durability, level of deterioration, and special characteristics (20-30% reduction from legal useful lives for tax purposes). 2) Intangible Assets (Excluding Lease Assets) Intangible assets are mainly amortized using the straight-line method over the following estimated useful lives: Goodwill: 20 years, mainly Software: 5 years, mainly Customer relationship: 10 years, mainly 3) Lease Assets Lease assets associated with finance lease transactions that do not transfer ownership are amortized using the straight-line method over the period of the lease, with zero residual value. 4) Long-Term Prepaid Expenses Long-term prepaid expenses are primarily amortized using the straight-line method. -54-

7 (3) Significant Reserves 1) Allowance for Doubtful Accounts The Company and its domestic consolidated subsidiaries provide the allowance for doubtful accounts based on the historic percentage of actual bad debt losses against the balance of total receivables and the amount of uncollectible receivables estimated on an individual basis. Overseas consolidated subsidiaries record the allowance based primarily on the amount of uncollectible receivables estimated on an individual basis. 2) Reserve for Sales Returns The Companies provide reserve for sales returns for future losses considering the past return ratios and the market distribution status. 3) Accrued Bonuses for Employees The Companies provide accrued bonuses for employees based on the estimated amounts to be paid in respect of the fiscal year. This reserve includes bonuses for corporate officers who are non-board members, for whom the calculations are the same as those for Accrued Bonuses for Directors. 4) Accrued Bonuses for Directors The Companies provide accrued bonuses for the Board of Directors (except for external directors) based on the estimated amounts to be paid in respect of the fiscal year. 5) Provision for Liabilities and Charges To provide for losses due to legal risks, product guarantee risks, currency risks, tax risks, and other factors, certain overseas consolidated subsidiaries make provision, the amount of which is based on estimated losses to be incurred considering the likelihood of such losses in the future. 6) Reserve for Loss on Disaster The Company provides for expenses associated with products damaged by the Great East Japan Earthquake using estimates of future expenditures. 7) Accrued Retirement Benefits The Companies have obligations to pay retirement benefits to their employees and, therefore, the Company, its domestic consolidated subsidiaries and certain overseas consolidated subsidiaries provide accrued retirement benefits based on the estimated amount of projected benefit obligation and the fair value of plan assets. Unrecognized prior service cost is primarily amortized by the straight-line method over a 10-year period, which is shorter than the average remaining years of service of the eligible employees. Unrecognized net actuarial gain or loss is primarily amortized from the following year on a straight-line basis over a 10-year period, which is shorter than the average remaining years of service of the eligible employees. 8) Allowance for Losses on Guarantees The Company provides an allowance for estimated probable losses on guarantees based on the financial status of the guaranteed parties. 9) Allowance for Environmental Measures The Companies provide a reserve for the estimated cost to treat polychlorinated biphenyl (PCB) waste as required by the Act on Special Measures Concerning Promotion of Proper Treatment of PCB Wastes. (4) Translation of Significant Foreign-Currency Assets and Liabilities into Yen Receivables and payables denominated in foreign currencies are translated into yen at the exchange rate prevailing at the end of the consolidated fiscal period and resulting exchange gains and losses are included in net income or loss for the fiscal year. The financial statements of overseas consolidated subsidiaries and affiliates are translated into yen at the exchange rate prevailing on the respective balance sheet dates of those subsidiaries for assets and liabilities. All income and expenses are translated at the average rate of exchange during the fiscal year and resulting translation adjustments are included in net assets as foreign currency translation adjustments and minority interests. -55-

8 (5) Accounting for Major Hedges Hedge accounting method Deferral hedge accounting has been applied. The Company applies special accounting treatment to interest rate swaps that meet the requirement of special accounting. The Company also applies combined accounting treatment (special accounting treatment, assignment accounting treatment) to interest rate and currency swaps that meet the requirement of combined accounting. (6) Other Significant Accounting Policies for Preparation of Consolidated Financial Statements Consumption Tax: In relation to consumption tax and regional consumption tax, the Companies adopt the tax-exclusive method. (Additional information) Application of Consolidated Taxation System The Company and certain domestic consolidated subsidiaries have received permission from the Commissioner of the National Tax Agency to apply a consolidated taxation system effective from the fiscal year ending March 31, In addition, as of the current fiscal year the Company has implemented accounting treatment and disclosure based on the Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 1) (ASBJ, Practical Issues Task Force No. 5, March 18, 2011) and Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 2) (ASBJ, Practical Issues Task Force No. 7, June 30, 2010) under the assumption that it will apply a consolidated taxation system. 5. Changes to the Basis of Presenting Consolidated Financial Statements (Application of Accounting Standard for Asset Retirement Obligations) Effective from the current fiscal year, the Company applied Accounting Standard for Asset Retirement Obligations (ASBJ Statement No. 18, March 31, 2008) and Guidance on Accounting Standard for Asset Retirement Obligations (ASBJ Guidance No. 21, March 31, 2008). This change reduced operating income and ordinary income by 130 million, and reduced income before income taxes by 976 million. (Application of Accounting Standard for Business Combinations) Effective from the current fiscal year, the Company applied Accounting Standard for Business Combinations (ASBJ Statement No. 21, December 26, 2008), Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, December 26, 2008), Partial Amendments to Accounting Standard for Research and Development Costs (ASBJ Statement No. 23, December 26, 2008), Revised Accounting Standard for Business Divestitures (ASBJ Statement No. 7 (Revised 2008), December 26, 2008), Revised Accounting Standard for Equity Method of Accounting for Investments (ASBJ Statement No. 16, December 26, 2008) and Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, December 26, 2008). 6. Changes to the Basis of Presentation of Consolidated Financial Statements (Consolidated Balance Sheets) As of March 31, 2010, the Company included trademarks totaling 7,912 million in Other Intangible Assets. As of March 31, 2011, the Company presented Trademarks as a discrete line item because it represents more than 5 percent of total assets. As of March 31, 2010, the Company presented Long-Term Loans Receivable as a discrete line item. As of March 31, 2011, Long-Term Loans Receivable totaled 40 million and were included in Other Investments under Investments and Other Assets because this amount represented less than 1 percent of total assets. -56-

9 Notes to Consolidated Balance Sheets (1) Inventories Merchandise and products Work in process Raw materials and supplies (2) Collateralized assets and loan liabilities Assets pledged as collateral are as follows: Buildings and structures Other investments (Guarantee deposit paid) Investments in securities Cash and time deposits Machinery, equipment and vehicles, and furniture and fixtures Total 45,666 million 3,066 million 18,842 million 16,606 million 15,200 million 1,512 million 1,217 million 2 million 34,538 million The above assets are pledged as collateral for derivative transactions (interest rate swaps) in addition to the below liabilities. Current portion of long-term debt Long-term debt 800 million 24,050 million (3) Accumulated depreciation of property, plant and equipment 211,800 million -57-

10 Notes to Consolidated Statements of Changes in Net Assets (1) Shares issued and outstanding Category and number of shares issued and outstanding as of March 31, 2010 Common stock: 400,000 thousand shares (2) Dividends 1) Cash dividends paid Resolution Share Class Cash Dividends Paid (Millions of yen) Cash Dividends per Share (Yen) Ordinary General Meeting of Common Shareholders on June 25, 2010 stock 9, Board of Directors Meeting on Common October 28, 2010 stock 9, Total 19,980 Term End Effective Date March 31, June 28, September 30, December 3, ) Resolution at the Ordinary General Meeting of Shareholders to be held on June 24, 2011 concerning dividends on shares of common stock made for the current fiscal year but for which the effective date is after the end of the fiscal year. Cash dividends paid: 9,948 million Cash dividends per share: 25 Term end: March 31, 2011 Effective date: June 27, 2011 Funding source: Retained earnings (3) Category and number of stock acquisition rights outstanding at fiscal year-end, excluding those for which the exercisable period has not commenced Common stock 1,314 thousand shares -58-

11 Financial Instruments 1. Financial Instruments (1) Policy for financial instruments The Companies limit fund management to short-term deposits, investments in securities and other methods. As a matter of policy, the Companies procure funds using bank loans, commercial paper, bonds and other methods. The Companies use derivatives to mitigate the risk of exchange rate fluctuations associated with receivables and payables denominated in foreign currencies and the risk of interest rate fluctuations associated with loans. The Companies limit the use of derivatives to the volume of receivables and payables and actual requirements, and do not engage in speculative transactions. (2) Financial instruments content, risks and risk management system Notes and accounts receivable are exposed to customer credit risk. The Companies mitigate this risk by managing settlement date and amount due for each counterparty. Investments in securities, primarily the equity securities of corporations with which the Companies do business, are exposed to the risk of fluctuations in market price. The Companies manage this risk by periodically examining market prices and the financial condition of the issuing entities. Notes and accounts payable are due within one year. Interest-bearing debt includes short-term borrowings and commercial paper, which the Companies use to procure funds for operating transactions, as well as long-term borrowings, bonds and lease obligations, which the Companies use to fund investments and loans, capital expenditures and operating transactions. Floating-rate debt is exposed to the risk of fluctuations in interest rates. The Companies hedge this risk for specific long-term borrowings by using derivatives (interest rate swaps and interest rate and currency swaps) to mitigate the risk of interest rate fluctuations and fix interest payments. The Companies use forward foreign exchange contracts and currency options to hedge the risk of foreign exchange fluctuations associated with receivables and payables denominated in foreign currencies, and use interest rate swaps to hedge the risk of fluctuations in interest rates associated with debt. The Companies also use interest rate and currency swaps to hedge the risk of fluctuations in foreign exchange and interest payments associated with debt denominated in foreign currencies. The Companies execute and manage derivative transactions within the limits of established internal rules and regulations, and reduce credit risk by limiting counterparties to highly creditworthy financial institutions. Payables and interest-bearing debt are exposed to liquidity risk that the Companies manage in ways such as preparing monthly capital deployment reports. -59-

12 2. Fair Value of Financial Instruments Fair value and variance with carrying value presented on the balance sheets as of March 31, 2011 are as follows. Unlisted equity securities, investments in limited partnerships and other instruments with fair values that are difficult to determine are not included in the following table. (Millions of yen) Carrying Value* Fair Value* Variance (1) Cash and time deposits 90,006 90,006 (2) Notes and trade accounts receivable (less allowance for doubtful accounts) 102, ,063 (3) Short-term investments in securities and investments in securities Available-for-sale securities 31,981 31,981 (4) Notes and trade accounts payable (81,752) (81,752) (5) Short-term bank borrowings (5,595) (5,595) (6) Bonds (90,000) (90,112) -112 (7) Long-term borrowings from banks and other financial institutions (96,847) (95,025) -1,822 (8) Lease obligations (5,074) (5,159) -84 (9) Derivative instruments 1) Hedge accounting not applicable (38) (38) 2) Hedge accounting applicable (2,555) -2,555 * Liabilities are in parentheses. Derivative transactions are presented as net amounts receivable or payable, with net amounts payable in parentheses. Note 1: Method for calculating the fair value of financial instruments, short-term investments in securities and derivative transactions (1) Cash and time deposits; (2) Notes and trade accounts receivable Carrying value is used for fair value for these short-term items because these amounts are approximately the same. (3) Short-term investments in securities and investments in securities Short-term investments in securities are held as available-for-sale securities. Market prices on exchanges are used to determine the fair value of equity securities. Prices quoted by financial institutions are used to determine the fair value of bonds. Carrying value is used for fair value for instruments with short-term maturities included in available-for-sale securities because these amounts are approximately the same. (4) Notes and trade accounts payable; (5) Short-term bank borrowings Carrying value approximates fair value for these short-term items. (6) Bonds Fair value of bonds issued by the Company is calculated based on market prices. (7) Long-term borrowing from banks and other financial institutions Floating-rate long-term borrowing reflects market interest rates. In addition, fair value approximates carrying value because the Company s creditworthiness does not vary significantly after assuming long-term borrowing. Therefore, carrying value is used for fair value of floating-rate long-term borrowing. Fair value of fixed-rate long-term borrowing is the discounted value of total principal and interest using an assumed interest rate on equivalent new borrowings. -60-

13 (8) Lease obligations The fair value of lease obligations is the discounted present value of total principal and interest using an assumed interest rate on equivalent new lease transactions. (9) Derivative instruments Prices quoted by financial institutions are the fair value of derivative instruments. Per Share Information Net assets per share: Net income per share:

14 Business Combinations (Application of the purchase method) The Company accounted for the components of the purchase price of Bare Escentuals on a provisional basis at March 31, The accounting was finalized at March 31, Purchase price of the acquired company Cash paid to acquire tendered shares Cash paid to purchase the stock options of Bare Escentuals employees Contingent consideration Total acquisition price US$1,633,296 thousand US$66,970 thousand US$30,411 thousand US$1,730,677 thousand 2. Accounting for contractually obligated contingent consideration (1) Contingent Consideration Contingent consideration consists of contractually stipulated payments after a specified period from the fiscal year ending March 31, 2012 (2) Accounting policy The Shiseido Group recognized the contingent consideration discussed above in accordance with accounting standards generally accepted in the United States. 3. Goodwill recognized, reason for recognition, and amortization method and period (1) Goodwill recognized 91,503 million (2) Reason for recognition The goodwill resulted from reasonable estimates of future excess earnings, including expected synergies, of the acquired company as a result of anticipated business development (3) Amortization method and period 20 years using the straight-line method 4. Period for which the acquired company s financial results are included in the consolidated financial statements From March 8, 2010 to December 31, Summary of assets and liabilities assumed at date of business combination Current assets 34,690 million Non-current assets 179,800 million Total assets 214,490 million Current liabilities 5,701 million Long-term liabilities 52,305 million Total liabilities 58,006 million Significant intangible assets other than goodwill acquired in the business combination included in the acquisition price were as follows. Customer relationship (amortized over 40,300 million 10 years) Trademarks (mostly not subject to 39,985 million amortization) Note: The yen amounts in the table above are calculated using the rate of to US$1, the rate in effect as of the date of business combination. Accordingly, goodwill recorded as a result of this business combination and included in the consolidated balance sheets does not correspond with the goodwill reported in Note 3 (1) above. -62-

15 Subsequent Events None applicable 6. Estimated impact on the consolidated statements of income for the fiscal year ended March 31, 2011 if the business combination had been completed as of April 1, 2010 Net sales 8,099 million Operating loss million (Estimate methodology and main assumptions) 1. Estimated impact on sales and income is the difference between the sale and income of the acquired company and the Company s consolidated income statements assuming the business combination had been completed as of April 1, This impact includes intangible assets related to customers and the amortization of goodwill from April 1, 2010 until the date of business combination. Advisory fees that Bare Escentuals paid to its financial advisors and the cost of purchasing the stock options of Bare Escentuals employees paid by Bare Escentuals during the period from April 1, 2010 to the date of business combination are not included. 2. The above yen amounts are calculated using the rate of to US$1, the average exchange rate for the period from January 1, 2010 to March 31, These notes have not been audited. Other Amounts have been rounded down to the nearest million yen. -63-