TEAR Corporation

Against a backdrop of declining birthrates reducing the number of relatives and rising age at death, funerals are becoming simpler and smaller in scale, and the average unit price of funerals has been trending downward across the industry as a whole. While the number of funerals is projected to expand to approximately 1.1 times current levels in the future, actual demand may fall short of these estimates, and seasonal fluctuations also affect business performance. As countermeasures, the Company is expanding membership in the "Tear no Kai" (Tear Membership Club), conducting sales activities targeting affiliated organizations and companies, and regularly introducing new products and new altar set plans.

Competition within the trading areas where the Group operates is intensifying due to entry from other industries into the funeral business, the rise of portal sites, and aggressive expansion of halls by competitors in the same industry. The competitive environment may intensify further going forward, raising concerns about the impact on business performance and financial condition. As countermeasures, the Company regularly utilizes TV commercials and flyer advertisements and conducts periodic membership campaigns for the "Tear no Kai."

The Company handles large volumes of personal information, including "Tear no Kai" member information and information on bereaved families related to funeral and memorial service contracts, and there is a possibility of information leakage due to theft of documents or unauthorized network intrusion. Should a leak occur, it could have a material impact on business performance and financial condition. As countermeasures, in addition to employee training and the development of information leakage prevention systems, the Company has obtained the "Privacy Mark" certification from an external organization.

Deterioration in the earnings status and future outlook of owned halls, or a significant decline in the market value of land and other assets, may result in the recognition of impairment losses on fixed assets, which could affect business performance and financial condition. As a countermeasure, the Company holds quarterly meetings between division heads and the officer in charge of the Corporate Planning Office to discuss earnings status, market conditions, and recoverability, with a reporting structure in place to the Board of Directors.

Recruiting and developing human resources, including ensuring diversity, has become increasingly important for realizing the medium- to long-term vision through proactive business expansion, and if this does not proceed as planned, business expansion could be constrained, affecting performance. As countermeasures, the Company conducts recruitment activities based on personnel plans and works to improve employee skills through its in-house training institution, "Tear Academy."

The outbreak or spread of infectious diseases may lead to a reduction in the scale of funerals and a decline in sales of memorial service meals, potentially affecting revenue and financial condition through lower average funeral unit prices. As countermeasures, the Company implements necessary public health measures and has organized an "Infectious Disease Response Team" specializing in handling cases of individuals who have died from infectious diseases.

Against a backdrop of increasingly active business consolidation within the funeral industry, the Company positions M&A as a key growth strategy. Goodwill and customer-related assets are recognized upon execution of M&A transactions, and if business development does not proceed as planned due to changes in the business environment or other factors, recognition of impairment losses could affect operating results and financial condition. As countermeasures, the Company carefully gathers information on and analyzes the business operations and financial condition of target companies, and works to create synergies in store openings, products, human resources, and IT even after execution.

As funds for hall construction, security deposits, and M&A are procured through borrowings from financial institutions, fluctuations in procurement interest rates due to rising market interest rates or changes in financial institutions' lending stance could affect performance and financial condition. In addition, certain borrowings are subject to financial covenants, and a breach of these covenants also raises concerns about impact on business performance and financial condition. As countermeasures, the Company works to strengthen its financial base through optimal fundraising based on interest rate trends, regular monitoring, and building up retained earnings.

As the land and buildings of the halls are basically leased, there exist risks such as non-refundability of security deposits, inability to continue leasing after the expiration of fixed-term land leases of 20 to 38 years, and delays in store opening and renovation plans, all of which could affect business performance and financial condition. There are also related-party transactions, including a debt guarantee from major shareholder Mugen Co., Ltd. and Mr. Hiroichi Yokoyama (transaction amount ¥60 million) and rent payments to related party PineBee Co., Ltd. (transaction amount ¥15 million). As countermeasures, the Company strives to formulate plans based on its medium- to long-term store opening policy and to build a contract renewal management structure.

Hearse transportation is subject to regulation under the Motor Truck Transportation Business Act, and new cost burdens arising from legal amendments or tightening of regulations could affect performance. In addition, funeral businesses that provide food are subject to regulation under the Food Sanitation Act, and in the event of a food poisoning incident, there is a risk of business license revocation or suspension. As countermeasures, the Company has established a safe operation system through the appointment of operation managers and maintenance managers, and implements appropriate hygiene management through the appointment of food sanitation supervisors.