6-K 1 d67074d6k.htm FORM 6-K Form 6-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2020

Commission File Number: 001-37821

LINE Corporation

(Translation of registrant’s name into English)

JR Shinjuku Miraina Tower, 23rd Floor

4-1-6 Shinjuku

Shinjuku-ku, Tokyo, 160-0022, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      X                Form 40-F              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

LINE Corporation

  (Registrant)
August 6, 2020  

By: /s/ In Joon Hwang

  (Signature)
  Name: In Joon Hwang
  Title: Director and Chief Financial Officer


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Announcement of Additional Information of Summary of Consolidated Financial Results for the Six Months Ended June 30, 2020

LINE Corporation (Headquarters: Shinjuku-ku, Tokyo, Japan; Representative Director and President: Takeshi Idezawa) announces additional information for the “Summary of Consolidated Financial Results for the Six Months Ended June 30, 2020” announced on July 29, 2020, as follows.

The new information consists of the following:

 

1.  Interim Condensed Consolidated Financial Statements and Selected Notes

   6

(3)  Interim Condensed Consolidated Statement of Comprehensive Income - Unaudited

   8

(4)  Interim Condensed Consolidated Statement of Change in Equity - Unaudited

   9

(5)  Notes to Interim Condensed Consolidated Financial Statements - Unaudited

   11

Notes to Significant Accounting Policies

   11

Notes to Subsequent Events

   16

 

– 1 –


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This is an English translation of the original Japanese-language document. Should there be any inconsistency between the translation and the original Japanese text, the latter shall prevail. All references to the “Company,” “we,” “us” or “our” shall mean LINE Corporation and, unless the context otherwise requires, its consolidated subsidiaries.

July 29, 2020

LINE Corporation Announces Summary of

Consolidated Financial Results

for the Six Months Ended June 30, 2020

<Prepared in accordance with the International Financial Reporting Standards (“IFRS”)

as issued by the International Accounting Standards Board (“IASB”)>

TOKYO — LINE Corporation (NYSE: LN) (TOKYO: 3938) announces the summary of its consolidated financial results for the six months ended June 30, 2020.

 

Company name:

  LINE Corporation (Stock Code: 3938) (the “Company”)

Stock exchange on which the shares are listed:

  Tokyo Stock Exchange

URL:

  http://linecorp.com/

Representative:

  Takeshi Idezawa, Chief Executive Officer

Contact:

  Kokan Ki, Executive Officer

Telephone:

  +81-3-4316-2050

Filing date of quarterly securities report: August 7, 2020

Payment date of dividends: –

Supplemental materials prepared on quarterly financial results: Yes

Financial results conference scheduled: None

(Yen amounts are rounded to the nearest million, unless otherwise noted.)

 

1.    

Consolidated financial results for the first six months of 2020 (from January 1, 2020 to June 30, 2020)

(1)   Consolidated operating results (cumulative)

 

     (Percentages indicate year-on-year changes.)
    

 

Revenues

 

   

 

Loss from operating
activities

 

   

 

   Loss before income taxes

   

 

      Loss for the period

 

 
For the six months ended        Millions of yen     %            Millions of yen     %          Millions of yen     %          Millions of yen     %  

June 30, 2020

    117,346       5.9       (13,950           (23,608           (24,522      

June 30, 2019

 

   

 

110,760

 

 

 

   

 

11.5

 

 

 

   

 

(21,816

 

 

   

 

 

 

 

   

 

(28,490

 

 

   

 

 

 

 

   

 

(28,029

 

 

   

 

 

 

 

               
    

 

Loss attributable to the
shareholders of the Company

 

   

 

Comprehensive loss for the
period

 

   

 

    Basic earnings/(loss)

per share

 

   

 

      Diluted earnings/(loss)
  per share

 

 
For the six months ended        Millions of yen             %            Millions of yen             %     Yen     Yen  

June 30, 2020

    (20,163           (24,266             (83.99       (83.99

June 30, 2019

 

   

 

(26,619

 

 

   

 

 

 

 

   

 

(31,086

 

 

   

 

 

 

 

           

 

(111.44

 

 

           

 

(111.44

 

 

 

– 2 –


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(2)    

Consolidated financial position

 

     

 

Total assets    

 

  

 

Total equity    

 

  

 

    Equity attributable    
to the shareholders
of the Company

 

  

 

  Ratio of equity    
  attributable to the    
   shareholders of the    
  Company to total assets    

 

As of    Millions of yen      Millions of yen      Millions of yen      %  

June 30, 2020

   556,695      164,594      142,420      25.6  

December 31, 2019

   541,352      174,663      158,133      29.2  

 

2.    

Cash dividends

 

     Annual dividends per share
      First quarter-end      Second quarter-end        Third quarter-end          Fiscal year-end                    Total             
     Yen       Yen        Yen        Yen       Yen  

For the year ended December 31, 2019

  —       0.00        —        0.00       0.00  

For the year ending December 31, 2020

  —       0.00                 

For the year ending December 31, 2020 (Forecast)

          —        —       —    
Note:

Revisions to the cash dividends forecasts most recently announced: None

  

Cash dividend forecasts for the year ending December 31, 2020: While the Company has decided not to pay interim dividends, it has not yet made a decision regarding its year-end dividends.

3.     Consolidated earnings forecasts for 2020 (from January 1, 2020 to December 31, 2020)

Amid rapid international and domestic changes, there is a level of uncertainty within the mobile applications market for smartphones and other mobile devices, the main business of the Company and its subsidiaries (collectively, the “Group”). As the state of this market significantly impacts the Group’s financial results, it is difficult to formulate a precise earnings forecast. Furthermore, as the Company’s shares are listed on the New York Stock Exchange as well as the Tokyo Stock Exchange, we are also carefully considering risks relating to U.S. securities regulations. Accordingly, an announcement concerning earnings forecasts is not made at this time.

Notes

 

(1)

Changes in significant subsidiaries during the current period (changes in specified subsidiaries resulting in change in scope of consolidation): None

 

(2)

Changes in accounting policies and estimates

 

  a.

Changes in accounting policies due to revision in accounting standard under IFRS: None

 

  b.

Changes in accounting policies due to other reasons: None

 

  c.

Changes in accounting estimates: None

 

(3)

Number of shares issued and outstanding (common stock)

 

  a.

Total number of common shares issued and outstanding at the end of the period (including treasury shares)

 

As of June 30, 2020

     241,544,142 shares      

As of December 31, 2019

     241,133,142 shares      

 

  b.

Number of treasury shares at the end of the period

 

As of June 30, 2020

     934,361 shares      

As of December 31, 2019

     1,524,392 shares      

 

– 3 –


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  c.

Average number of common shares outstanding during the period (cumulative from the beginning of the fiscal year)

 

For the six months ended June 30, 2020

   240,072,283 shares

For the six months ended June 30, 2019

   238,856,268 shares

Quarterly financial results reports are exempt from review procedures conducted by certified accountants or an audit firm.

For the purpose of fair disclosure in connection with the release of the financial statements by NAVER Corporation, the Company’s parent company, and timely disclosure of the Company’s Summary of Consolidated Financial Results, the Company discloses the Interim Condensed Consolidated Statement of Financial Position, Interim Condensed Consolidated Statement of Profit or Loss and segment information in advance, and other information will be released as soon as it has been prepared. Supplementary information to this earnings release, including the Group’s profit and loss by segment, will be available today at the following IR website: https://linecorp.com/en/ir/top.

Due to the spread of the COVID-19, the Group has recorded impairment loss on property and equipment and right-of-use assets in the Consolidated Financial Results for the six months ended June 30, 2020. Please refer to the IR news, “Notice of Recognition of Loss Allowance on Loan Receivables and Impairment Loss of Property and Equipment and Right-of-Use Assets”, announced on July 29, 2020 for more details.

 

– 4 –


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1.

Interim Condensed Consolidated Financial Statements and Selected Notes

 

(1)

Interim Condensed Consolidated Statement of Financial Position - Unaudited

 

     (In millions of yen)  
     December 31,
2019
    June 30,
2020
 

Assets

                                                      

Current assets

    

Cash and cash equivalents

     217,345       178,916  

Trade and other receivables

     42,680       51,967  

Other financial assets, current

     20,117       27,898  

Contract assets

     241       233  

Inventories

     4,740       11,120  

Other current assets

     10,518       9,394  
  

 

 

   

 

 

 

Total current assets

     295,641       279,528  
  

 

 

   

 

 

 

Non-current assets

    

Property and equipment

     25,024       27,205  

Right-of-use assets

     54,337       56,328  

Goodwill

     17,651       17,602  

Other intangible assets

     7,801       8,447  

Investments in associates and joint ventures

     64,194       91,158  

Other financial assets, non-current

     51,737       50,576  

Deferred tax assets

     24,095       25,214  

Other non-current assets

     872       637  
  

 

 

   

 

 

 

Total non-current assets

     245,711       277,167  
  

 

 

   

 

 

 

Total assets

     541,352       556,695  
  

 

 

   

 

 

 

Liabilities

    

Current liabilities

    

Trade and other payables

     43,710       47,041  

Other financial liabilities, current

     44,826       53,020  

Accrued expenses

     23,462       19,455  

Income tax payables

     3,963       1,722  

Lease liabilities, current

     11,487       13,568  

Contract liabilities, current

     25,752       28,129  

Provisions, current

     3,221       3,782  

Other current liabilities

     5,238       10,045  
  

 

 

   

 

 

 

Total current liabilities

     161,659       176,762  
  

 

 

   

 

 

 

Non-current liabilities

    

Corporate bonds

     142,851       143,211  

Other financial liabilities, non-current

     362       325  

Lease liabilities, non-current

     45,150       49,988  

Contract liabilities, non-current

     —         5,438  

Deferred tax liabilities

     1,071       966  

Provisions, non-current

     4,528       4,816  

Post-employment benefits

     9,617       10,125  

Other non-current liabilities

     1,451       470  
  

 

 

   

 

 

 

Total non-current liabilities

     205,030       215,339  
  

 

 

   

 

 

 

Total liabilities

     366,689       392,101  
  

 

 

   

 

 

 

Shareholders’ equity

    

Share capital

     96,737       97,284  

Share premium

     121,299       122,554  

Treasury shares

     (6,308     (3,872

Accumulated deficit

     (53,524     (69,335

Accumulated other comprehensive income

     (71     (4,211
  

 

 

   

 

 

 

Equity attributable to the shareholders of the Company

     158,133       142,420  
  

 

 

   

 

 

 

Non-controlling interests

     16,530       22,174  
  

 

 

   

 

 

 

Total shareholders’ equity

     174,663       164,594  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

     541,352       556,695  
  

 

 

   

 

 

 

 

– 6 –


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(2)

Interim Condensed Consolidated Statement of Profit or Loss - Unaudited

 

     (In millions of yen)  
     For the six-month period ended June 30,  
             2019                     2020          

Revenues and other operating income:

                                                                      

Revenues

     110,760       117,346  

Other operating income

     1,404       1,777  
  

 

 

   

 

 

 

Total revenues and other operating income

     112,164       119,123  

Operating expenses:

    

Payment processing and licensing expenses

     (17,170     (20,451

Sales commission expenses

     (8,624     (4,808

Employee compensation expenses

     (33,775     (38,011

Marketing expenses

     (20,608     (11,131

Infrastructure and communication expenses

     (5,298     (5,601

Outsourcing and other service expenses

     (20,118     (22,973

Depreciation and amortization expenses

     (10,570     (13,109

Other operating expenses

     (17,817     (16,989
  

 

 

   

 

 

 

Total operating expenses

     (133,980     (133,073
  

 

 

   

 

 

 

Loss from operating activities

     (21,816     (13,950

Finance income

     272       173  

Finance costs

     (942     (1,024

Share of loss of associates and joint ventures

     (6,676     (6,397

Loss on foreign currency transactions, net

     (503     (410

Other non-operating income

     1,401       1,004  

Other non-operating expenses

     (226     (3,004
  

 

 

   

 

 

 

Loss before tax from continuing operations

     (28,490     (23,608

Income tax benefits/(expenses)

     461       (914
  

 

 

   

 

 

 

Loss for the period from continuing operations

     (28,029     (24,522

Profit from discontinued operations, net of tax

     0       —    
  

 

 

   

 

 

 

Loss for the period

     (28,029     (24,522
  

 

 

   

 

 

 

Attributable to:

    

The shareholders of the Company

     (26,619     (20,163

Non-controlling interests

     (1,410     (4,359
           (In yen)  

Earnings per share

    

Basic loss for the period attributable to the shareholders of the Company

     (111.44     (83.99

Diluted loss for the period attributable to the shareholders of the Company

     (111.44     (83.99

Earnings per share from continuing operations

    

Basic loss from continuing operations attributable to the shareholders of the Company

     (111.44     (83.99

Diluted loss from continuing operations attributable to the shareholders of the Company

     (111.44     (83.99

Earnings per share from discontinued operations

    

Basic profit from discontinued operations attributable to the shareholders of the Company

     0.00       —    

Diluted profit from discontinued operations attributable to the shareholders of the Company

     0.00       —    

 

– 7 –


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Interim Condensed Consolidated Statement of Comprehensive Income - Unaudited

 

     (In millions of yen)  
     For the six-month period ended June 30,  
             2019                     2020          

Loss for the period

     (28,029     (24,522

Other comprehensive income

                                                                      

Items that will not be reclassified to profit or loss:

    

Net changes in fair value of equity instruments at FVOCI

     (163     2,794  

Income tax relating to items that will not be reclassified to profit or loss

     52       (866

Items that may be reclassified to profit or loss:

    

Debt instruments at FVOCI:

    

Net changes in fair value of debt instruments at FVOCI

     30       (78

Reclassification to profit or loss of debt instruments at FVOCI

     2       (14

Exchange differences on translation of foreign operations:

    

Loss arising during the period

     (3,432     (2,074

Reclassification to profit or loss

     1       122  

Proportionate share of other comprehensive income of associates and joint ventures

     105       (36

Income tax relating to items that may be reclassified subsequently to profit or loss

     348       408  
  

 

 

   

 

 

 

Total other comprehensive (loss)/income for the period, net of tax

     (3,057     256  
  

 

 

   

 

 

 

Total comprehensive loss for the period, net of tax

     (31,086     (24,266
  

 

 

   

 

 

 

Attributable to:

    

The shareholders of the Company

     (29,451     (19,963

Non-controlling interests

     (1,635     (4,303

 

– 8 –


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Interim Condensed Consolidated Statement of Change in Equity - Unaudited

 

    (In millions of yen)  
    Equity attributable to the shareholders of the Company  
                            Accumulated other comprehensive
income
       
    Share
capital
    Share
premium
    Treasury
shares
    Accumulated
deficit
    Foreign
currency
translation
reserve
    Financial
assets at
FVOCI
    Defined
benefit plan
reserve
    Total  

Balance at January 1, 2019

    96,064       118,626       (8,205     (5,556     (659     (1,417     63       198,916  

Adjustment on adoption of new accounting standards

    —         —         —         (26     —         —         —         (26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2019 (adjusted)

    96,064       118,626       (8,205     (5,582     (659     (1,417     63       198,890  

Comprehensive loss

               

Loss for the period

    —         —         —         (26,619     —         —         —         (26,619

Other comprehensive loss

    —         —         —         —         (2,808     (24     —         (2,832
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

    —         —         —         (26,619     (2,808     (24     —         (29,451

Transactions with owners and other transactions

               

Recognition of share-based payments

    —         573       —         —         —         —         —         573  

Forfeiture of stock options

    —         (51     —         51       —         —         —         —    

Exercise of stock options

    384       (117     —         —         —         —         —         267  

Changes in interest in subsidiaries

    —         293       —         —         —         —         —         293  

Acquisition of subsidiaries

    —         —         —         —         —         —         —         —    

Disposal of treasury shares

    —         (440     1,600       —         —         —         —         1,160  

Purchase of treasury shares

    —         —         0       —         —         —         —         0  

Transfer of accumulated other comprehensive income to accumulated deficit

    —         —         —         46       —         (46     —         —    

Other

    —         —         —         (24     —         —         —         (24
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners and other transactions

    384       258       1,600       73       —         (46     —         2,269  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2019

    96,448       118,884       (6,605     (32,128     (3,467     (1,487     63       171,708  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Non-
controlling
interests
    Total
shareholders’
equity
                   

Balance at January 1, 2019

    9,598       208,514  

Adjustment on adoption of new accounting standards

    —         (26
 

 

 

   

 

 

 

Balance at January 1, 2019 (adjusted)

    9,598       208,488  

Comprehensive loss

   

Loss for the period

    (1,410     (28,029

Other comprehensive loss

    (225     (3,057
 

 

 

   

 

 

 

Total comprehensive loss for the period

    (1,635     (31,086

Transactions with owners and other transactions

   

Recognition of share-based payments

    —         573  

Forfeiture of stock options

    —         —    

Exercise of stock options

    —         267  

Changes in interest in subsidiaries

    12,782       13,075  

Acquisition of subsidiaries

    86       86  

Disposal of treasury shares

    —         1,160  

Purchase of treasury shares

    —         0  

Transfer of accumulated other comprehensive income to accumulated deficit

    —         —    

Other

    —         (24
 

 

 

   

 

 

 

Total transactions with owners and other transactions

    12,868       15,137  
 

 

 

   

 

 

 

Balance at June 30, 2019

    20,831       192,539  
 

 

 

   

 

 

 

 

– 9 –


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Interim Condensed Consolidated Statement of Change in Equity - Unaudited

 

    (In millions of yen)  
    Equity attributable to the shareholders of the Company  
                            Accumulated other comprehensive
income
       
    Share
capital
    Share
premium
    Treasury
shares
    Accumulated
deficit
    Foreign
currency
translation
reserve
    Financial
assets at
FVOCI
    Defined
benefit plan
reserve
    Total  

Balance at January 1, 2020

    96,737       121,299       (6,308     (53,524     (1,342     2,355       (1,084     158,133  

Comprehensive (loss)/income

               

Loss for the period

    —         —         —         (20,163     —         —         —         (20,163

Other comprehensive (loss)/income

    —         —         —         —         (1,630     1,834       (4     200  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive (loss)/income for the period

    —         —         —         (20,163     (1,630     1,834       (4     (19,963

Transactions with owners and other transactions

               

Recognition of share-based payments

    —         1,587       —         —         —         —         —         1,587  

Forfeiture of stock options

    —         (13     —         13       —         —         —         —    

Exercise of stock options

    547       (81     —         —         —         —         —         466  

Changes in interest in subsidiaries

    —         —         —         —         —         —         —         —    

Disposal of treasury shares

    —         (238     2,459       —         —         —         —         2,221  

Purchase of treasury shares

    —         —         (23     —         —         —         —         (23

Transfer of accumulated other comprehensive income to accumulated deficit

    —         —         —         4,340       —         (4,340     —         —    

Other

    —         —         —         (1     —         —         —         (1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners and other transactions

    547       1,255       2,436       4,352       —         (4,340     —         4,250  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2020

    97,284       122,554       (3,872     (69,335     (2,972     (151     (1,088     142,420  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Non-
controlling
interests
    Total
shareholders’
equity
                   

Balance at January 1, 2020

    16,530       174,663  

Comprehensive (loss)/income

   

Loss for the period

    (4,359     (24,522

Other comprehensive (loss)/income

    56       256  
 

 

 

   

 

 

 

Total comprehensive (loss)/income for the period

    (4,303     (24,266

Transactions with owners and other transactions

   

Recognition of share-based payments

    —         1,587  

Forfeiture of stock options

    —         —    

Exercise of stock options

    —         466  

Changes in interest in subsidiaries

    9,947       9,947  

Disposal of treasury shares

    —         2,221  

Purchase of treasury shares

    —         (23

Transfer of accumulated other comprehensive income to accumulated deficit

    —         —    

Other

    —         (1
 

 

 

   

 

 

 

Total transactions with owners and other transactions

    9,947       14,197  
 

 

 

   

 

 

 

Balance at June 30, 2020

    22,174       164,594              
 

 

 

   

 

 

             

 

– 10 –


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(5)

Notes to Interim Condensed Consolidated Financial Statements - Unaudited

Notes to Significant Accounting Policies

The significant accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2019.

The adoption of new and revised IFRS issued by the International Accounting Standards Board that are mandatorily effective for an accounting period that begins on or after January 1, 2020 had no significant impact on the Group’s unaudited interim condensed consolidated financial statements as of June 30, 2019 and 2020 and for the six-month periods then ended, as well as annual consolidated financial statements for the year ended December 31, 2019.

In addition, the new and revised standards and interpretations that have been issued but are not yet effective have not been adopted early by the Group.

 

– 11 –


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Notes to Segment Information

The Group identifies operating segments based on the internal report regularly reviewed by the Group’s Chief Operating Decision Maker to make decisions about resources to be allocated to segments and to assess performance. An operating segment of the Group is a component for which discrete financial information is available. The Chief Operating Decision Maker has been identified as the Company’s board of directors. No operating segments have been aggregated to form the reportable segments.

Under the corporate strategy to allocate the resources generated from the Core business to the Strategic business, the Company’s board of directors individually assesses the business performance of the Core business based on revenue and profitability growth and assesses the business performance of the Strategic business based on profitability as well as important non-financial KPIs such as expansion of the user base.

 

(1)

Description of Reportable Segments

The Group’s reportable segments are as follows:

 

Core business segment

   The Core business segment mainly consists of advertising service, communication and content. Advertising services mainly include display advertising, account advertising, and other advertising. Display advertising provides advertisements on services such as LINE NEWS. Account advertising mainly includes LINE Official Accounts and Sponsored Stickers. Other advertising mainly includes advertisements on services such as livedoor Blog, NAVER Matome and advertisements appearing on LINE Part-Time Job. Communication mainly includes LINE Stickers. Content mainly includes LINE GAME.

Strategic business segment

   The Strategic business segment consists of Fintech services such as LINE Pay service, and other services such as AI, LINE Friends, and E-commerce.

 

(2)

Profit or Loss for the Group’s reportable segments

The Group’s operating profit or loss for each segment is prepared in the same method as used in the consolidated financial statements, except that certain items such as other operating income and share-based compensation expenses are included in corporate adjustments. Also, IT development expenses and indirect expenses such as department management fees are allocated based on the information such as the hours of service provided, the number of server infrastructures used to provide the service, or the percentage of revenues. As the Company’s board of directors uses the information after eliminating intercompany transactions for their performance assessment, there is no adjustment between segments.

 

– 12 –


Table of Contents

For the six-month period ended June 30, 2019

 

                 (In millions of yen)  
     Reportable segments     Corporate
adjustments(1)
    Consolidated  
     Core business      Strategic
business
    Total  

Revenue from external customers

     96,355        14,405       110,760       —         110,760  

Segment profit/(loss)(2)

     16,861        (38,483     (21,622     (194     (21,816

Depreciation and amortization expenses

     6,793        3,777       10,570       —         10,570  
(1) 

Corporate adjustments include expenses such as other operating income and share-based compensation expenses.

(2) 

The amount of Segment profit/(loss) is equivalent to loss from operating activities on the Interim Condensed Consolidated Statement of Profit or Loss.

For the six-month period ended June 30, 2020

 

                 (In millions of yen)  
     Reportable segments     Corporate
adjustments(1)
    Consolidated  
     Core business      Strategic
business
    Total  

Revenue from external customers

     102,380        14,966       117,346       —         117,346  

Segment profit/(loss)(2)

     22,082        (34,716     (12,634     (1,316     (13,950

Depreciation and amortization expenses

     8,395        4,714       13,109       —         13,109  
(1) 

Corporate adjustments include expenses such as other operating income and share-based compensation expenses.

(2) 

The amount of Segment profit/(loss) is equivalent to loss from operating activities on the Interim Condensed Consolidated Statement of Profit or Loss.

The reconciliation of Segment loss to loss before tax from continuing operations is as follows:

For the six-month periods ended June 30,

 

           (In millions of yen)  
             2019                 2020  

Segment loss

     (21,816     (13,950

Finance income

     272       173  

Finance costs

     (942     (1,024

Share of loss of associates and joint ventures

     (6,676     (6,397

Loss on foreign currency transactions, net

     (503     (410

Other non-operating income

     1,401       1,004  

Other non-operating expenses

     (226     (3,004
  

 

 

   

 

 

 

Loss for the period before tax from continuing operations

     (28,490     (23,608
  

 

 

   

 

 

 

The above items are not allocated to individual segments as these are managed on an overall group basis.

 

– 13 –


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(3)

Revenues from Major Services

The Group’s revenues from continuing operations from its major services for the six-month periods ended June 30, 2019 and 2020 are as follows.

Revenues recognized at a point in time mainly consist of revenues from LINE Friends.

For the six-month periods ended June 30,

 

     (In millions of yen)  
         2019              2020      

Core business

     

Advertising

     

Display advertising(1)

     22,080        31,726  

Account advertising(2)

     31,210        29,274  

Other advertising(3)

     7,239        3,906  
  

 

 

    

 

 

 

Sub-total

     60,529        64,906  
  

 

 

    

 

 

 

Communication, content, and others

     

Communication(4)

     14,601        15,198  

Content(5)

     18,829        20,866  

Others

     2,396        1,410  
  

 

 

    

 

 

 

Subtotal

     35,826        37,474  
  

 

 

    

 

 

 

Core business total

     96,355        102,380  
  

 

 

    

 

 

 

Strategic business

     

Friends(6)

     9,137        5,398  

Others(7)

     5,268        9,568  
  

 

 

    

 

 

 

Strategic business total

     14,405        14,966  
  

 

 

    

 

 

 

Total

     110,760        117,346  
  

 

 

    

 

 

 

 

(1) 

Revenues from display advertising primarily consisted of fees from advertisement on services such as Timeline, Smart Channel and LINE NEWS.

(2) 

Revenues from account advertising primarily consisted of fees from LINE Official Accounts, Sponsored Stickers and LINE Points.

(3) 

Revenues from other advertising were mainly attributable to advertising revenue from livedoor, NAVER Matome and LINE Part-Time Job.

(4) 

Revenues from communication were mainly attributable to sales of LINE Stickers and Creator Stickers.

(5) 

Revenues from content primarily consisted of sales of LINE GAME’s virtual items.

(6) 

Friends primarily consisted of revenues from sales of character goods.

(7) 

Others primarily consisted of revenues from E-commerce.

 

– 14 –


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Notes to Going-Concern Assumption

Not applicable.

 

– 15 –


Table of Contents

Notes to Subsequent Events

Issuance of Stock Warrant (Stock Option)

Pursuant to the resolution of the board of directors’ meeting held on March 26, 2020 and July 29, 2020, the Company is planning to grant stock warrants in the form of stock options (the LINE Corporation 26th stock option and the LINE Corporation 27th stock option) to directors of the Company and its outside directors on November 5, 2020, as well as stock warrants in the form of stock options (The LINE Corporation 28th stock option) to the employees of the Company and its subsidiaries on April 28, 2021.

 

Name of stock options

   The LINE Corporation 26th Stock Option    The LINE Corporation 27th Stock Option

Title and number of grantees

   Four of the Company’s directors    Three of the Company’s outside directors

Total number of stock options

   30,240    240

Class and number of shares to be issued upon exercise of stock options

   3,024,000 of common shares    24,000 of common shares

Value of property to be contributed upon exercise of stock options

  

The average closing price of the Company’s common stock in the month preceding the month in which the stock option is granted multiplied by 1.05, or the closing price of the grant day, whichever is higher.

   Same as on the left

Fair value of stock options at the grant date

   To be determined at the grant date    Same as on the left

Exercise period for stock options

   From November 5, 2023 to November 5, 2030    Same as on the left

 

Name of stock options

   The LINE Corporation 28th Stock Option   

Title and number of grantees

  

The Company’s employees and the Company’s subsidiaries’ employees (Numbers of grantees have not been determined yet)

  

Total number of stock options

   50,328   

Class and number of shares to be issued upon exercise of stock options

   5,032,800 of common shares   

Value of property to be contributed upon exercise of stock options

  

The average closing price of the Company’s common stock in the month preceding the month in which the stock option is granted multiplied by 1.05, or the closing price of the grant day, whichever is higher.

  

Fair value of stock options at the grant date

   To be determined at the grant date   

Exercise period for stock options

   From November 5, 2023 to November 5, 2030   

Change of consolidated subsidiaries to associates

The Company resolved at the board of directors’ meeting held on May 27, 2020 to transfer its shares of LINE Digital Frontier Corporation, a consolidated subsidiary of the Company, to Webtoon Entertainment Inc. and executed the transfer on August 3, 2020 as a consideration for the acquisition of shares of Webtoon Entertainment Inc. As a result, the ownership ratio in Webtoon Entertainment Inc. and LINE Digital Frontier Corporation became 33.4%. Accordingly, LINE Digital Frontier Corporation including its subsidiary are accounted for as associates under the equity method rather than as consolidated subsidiaries. The Group expects to record gains on loss of control of subsidiary for the nine-month period ending September 30, 2020.

 

– 16 –


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Merger of consolidated subsidiaries and changes in consolidated subsidiaries to associates

LINE Man Corporation Pte. Ltd., a consolidated subsidiary of the Group, has resolved at its board of directors’ meeting held on July 30, 2020 to execute an absorption type merger with Wongnai Media Pte. Ltd. and a third-party allotment of new shares in the amount of 110 million dollars. In the event that the merger and the third-party allotment are executed, the Company’s ownership in LINE Man Corporation Pte. Ltd. shall decrease from 100.0% to 45.6%, resulting LINE Man Corporation Pte. Ltd. and its subsidiary to be accounted for as associates under the equity method rather than as consolidated subsidiaries. The Group expects to record gains on loss of control of subsidiary for the nine-month period ending September 30, 2020.

Capital injection of consolidated subsidiary

The Company resolved, at the board of directors’ meeting held on July 27, 2020, the capital injection of 85 billion Korean won from NAVER to LINE Friends Corporation, a subsidiary of the Group.

Tender offer

The Company resolved at the board of directors’ meeting held on August 3, 2020 to express, with respect to the tender offers to be made jointly by SoftBank Corp. (“SoftBank”) and NAVER, the controlling shareholder of the Company, or one of NAVER’s wholly-owned subsidiaries, consisting of a) a tender offer to be carried out in Japan to acquire all outstanding shares of common stock (the “Common Shares”), the share options and the convertible bonds (“Share Options” and “Convertible Bonds”) of the Company (the “Japan Offer”), and b) a tender offer to be carried out in the United States to acquire American depository shares (the “ADS”), which represents one Common Share (the “U.S. Offer”; and together with the Japan Offer the “Offers”), an opinion in support of the Offers, recommend that the Company’s shareholders and the holders of ADSs tender their Common Shares and ADSs into the Offers and defer to the judgment of the Share Options holders and Convertible Bond holders whether or not to tender their Share Options and Convertible Bond in the Offers.

It is noted that the Board of directors adopted the aforementioned resolution based on the assumptions i) that it is contemplated that SoftBank, NAVER and the NAVER J. Hub Corporation, a wholly-owned subsidiary of NAVER, will become the sole shareholders of the Company through the Offers and a series of subsequent procedures, as well as ii) that the delisting of the Common Shares is scheduled.

 

1.

Outline of the Purchasers

(1) Outline of SoftBank

 

     
(1)    Company Name    SoftBank Corp.
     
(2)    Address    1-9-1 Higashi-shimbashi, Minato-ku, Tokyo, Japan
     
(3)    Name and title of representative    Ken Miyauchi, Representative Director, President & CEO
     
(4)    Description of business   

Provision of mobile communications services, sale of mobile devices, provision of fixed-line telecommunications and an internet service provider

     
(5)      Capital    204,309 million yen (As of March 31, 2020)
     
(6)    Founded    December 9, 1986
       
(7)   

Major shareholders and shareholding ratio (As of March 31, 2020)

  

SoftBank Group Japan Corporation

 

   67.13% 

 

  

The Master Trust Bank of Japan, Ltd. (Trust Account)

 

     2.25% 

 

  

Japan Trustee Services Bank, Ltd. (Trust Account)

 

     1.54% 

 

  

Japan Trustee Services Bank, Ltd. (Trust Account 5)

 

     0.77% 

 

  

STATE STREET BANK WEST CLIENT-TREATY 505234

 

     0.57% 

 

  

STATE STREET BANK AND TRUST COMPANY 505103

 

     0.51% 

 

  

Japan Trustee Services Bank, Ltd. (Trust Account 1)

 

     0.39% 

 

  

Japan Trustee Services Bank, Ltd. (Trust Account 2)

 

     0.36% 

 

  

Japan Trustee Services Bank, Ltd. (Trust Account 6)

 

     0.31% 

 

   Japan Trustee Services Bank, Ltd. (Trust Account 9)      0.31% 
   
(8)    Relationship between the Company and the Purchaser (SoftBank)
   Capital relationship    Not applicable
   Personal relationship    Not applicable
   Business relationship   

The Company is engaged in transactions with SoftBank with respect to the use of communications services, etc.

   Status as Related Party    SoftBank and the Company are not related parties to each other.

 

– 17 –


Table of Contents

(2) Outline of NAVER J. Hub

 

     
(1)    Name    NAVER J. Hub Corporation
     
(2)    Address    2-10-44, Kamiosaki, Shinagawa-ku, Tokyo, Japan
     
(3)    Name and title of representative    Sang Jin Park, Representative Director
     
(4)    Description of business    Global AI investment and real estate leasing
     
(5)    Capital    50 million yen (As of August 3, 2020)
     
(6)      Founded    July 12, 2018
     
(7)   

Major shareholders and shareholding ratio (As of August 3, 2020)

   NAVER Corporation    100%  
   
(8)    Relationship between the Company and the Purchaser (NAVER J. Hub)
   Capital relationship   

Not applicable. NAVER, the wholly-owning parent company of NAVER J. Hub, holds 174,992,000 Common Shares (which represent 72.45% of the total number of issued shares of the Company (241,544,142 shares) as of June 30, 2020) and is the parent company of the Company. NAVER also holds a portion of the Convertible Bonds.

   Personal relationship   

There are two people seconded from the Company to NAVER J. Hub. Mr. Hae Jin Lee, an executive officer of NAVER, the wholly-owning parent company of NAVER J. Hub, also serves as chairman of the Company’s board of directors.

   Business relationship   

Not applicable other than the fact that the Company leases equipment such as personal computers to NAVER J. Hub. The Company is engaged in transactions with NAVER, the wholly-owning parent company of NAVER J. Hub, with respect to advertising services, etc.

   Status as Related Party   

As the Company and NAVER J. Hub have the same parent company, NAVER J. Hub is a related party of the Company.

 

2.

Purchase Price

(1) Common Share 5,380 yen per share

(2) Share Options

  (i)

The “4th Series Share Options” and the “5th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on December 11, 2013 (The exercise period shall be from December 17, 2015 to December 16, 2023) for 1 yen per share;

 

  (ii)

The “7th Series Share Options” and the “8th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on February 5, 2014 (The exercise period shall be from February 8, 2016 to February 5, 2024) for 1 yen per share;

 

  (iii)

The “10th Series Share Options” and the “11th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on August 1, 2014 (The exercise period shall be from August 9, 2016 to August 8, 2024) for 1 yen per share;

 

  (iv)

The “13th Series Share Options” and the “14th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on September 30, 2014 (The exercise period shall be from November 1, 2016 to October 31, 2024) for 1 yen per share;

 

– 18 –


Table of Contents
  (v)

The “16th Series Share Options”, the “17th Series Share Options”, the “18th Series Share Options” and the “19th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on January 30, 2015 (The exercise period shall be from February 4, 2017 to February 3, 2025) for 1 yen per share;

 

  (vi)

The “20th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on June 26, 2017 (The exercise period shall be from July 18, 2018 to July 18, 2027) for 1 yen per share;

 

  (vii)

The “22nd Series Share Options”, the “23rd Series Share Options” and the “24th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on July 9, 2019 (The exercise period shall be from July 29, 2022 to July 8, 2029) for 1 yen per share; and

 

  (viii)

The “25th Series Share Options”

    

Share options issued based on the resolution of the board of directors’ meeting of the Company held on July 9, 2019 and March 30, 2020 (The exercise period shall be from July 29, 2022 to July 8, 2029) for 1 yen per share;

(3) Convertible bonds

  (i)

Euroyen convertible bonds due 2023 issued pursuant to the resolution of the board of directors’ meeting of the Company held on September 4, 2018 for 7,203,820 yen per face value of 10,000,000 yen; and

 

  (ii)

Euroyen convertible bonds due 2025 issued pursuant to the resolution of the board of directors’ meeting of the Company held on September 4, 2018 for 7,155,400 yen per face value of 10,000,000 yen.

(4) Depositary receipts for share certificates

American depositary shares that are registered and issued by JP Morgan Chase Bank, N.A. in the United States and listed on the New York Stock Exchange, representing the title to one Common Share deposited with Mizuho Bank, Ltd., which is the custodian bank of the underlying shares for 5,380 yen per ADS.

 

3.

Date of Public Notice of Commencement of the Offers

August 4, 2020 (Tuesday)

 

4.

Period of the Offers

From August 4, 2020 (Tuesday) through September 15, 2020 (Tuesday) (30 Business Days)

 

– 19 –