Notice of the business restructuring plan

LONDON--(BUSINESS WIRE)--

“Notice Concerning Amendments to the Earnings Forecast, Recording of Extraordinary Loss, and Amendments to the Dividend Forecast”

January 12, 2010

Best Denki Co., Ltd.

Code No. of TSE:	8175
Listed on:	First Section of Tokyo Stock Exchange and
	Fukuoka Stock Exchange
Head office:	Fukuoka
URL	http://www.bestdenki.ne.jp
Representative:	Masakazu Fukazawa, President and Representative Director
Contact:	Yoshiaki Mori,
	General Manager of General Affairs Department and
	Executive Officer
Tel:	092-643-6828

Notice of the Business Restructuring Plan

1. Background of the Business Restructuring Plan

While profitability of the competitors is improving, BEST DENKI Co., Ltd. (“the Company”) lags behind the competitors in recovering its operating profitability due to the delay in addressing the structural issues. However, as there is the favorable business opportunity in the electronics retail industry to effectively utilize the government support such as the eco-point system, the Company sees this as the great opportunity to improve its profitability and to strengthen its financial base and the Board of Directors of the Company resolved to formulate and implement the drastic business restructuring plan.

2. Earnings forecast for the Fiscal Year ending February 2010

Please see the “Notice Concerning Amendments to the Earnings Forecast, Recording of Extraordinary Loss, and Amendments to the Dividend Forecast” separately disclosed on January 12, 2010, for the detail of earnings forecast.

3. Reasons for the deterioration in earnings

The Company attributes its deteriorated earnings mainly to delay in addressing the structural issues such as introducing marketing and competitive strategies, improvement in the business result of Sakuraya, the Company’s consolidated subsidiary, introducing merit/result-based Human Resource Management System, and efforts to bolster its credibility including the compliance program and setup of an organization eyeing for promoting business plans.

4. Clarification of responsibility and changes in the management

To take responsibility for the deteriorated earnings of the Company, Kenichi Arizono, Chairman and Representative Director of the Company, resign the posts immediately, will remain to be a director (non-full-time) and adviser, and retire at the conclusion of the general shareholders’ meeting to be held May 2010. Takashi Hamada, President and Representative Director of the Company, resign the posts immediately, will remain to be a director (non-full-time) and retire at the conclusion of the general shareholders’ meeting to be held May 2010. Masakazu Fukazawa, Vice-chairman and Representative Director of the Company and a point man on the negotiation with the financial institutions, will take management responsibility by implementing the Business Restructuring Plan.

(Retirement)
Name:	Kenichi Arizono
Former title:	Chairman and Representative Director
Name:	Takashi Hamada
Former title:	President and Representative Director
(New Appointment)
Name:	Masakazu Fukazawa
New title:	President and Representative Director
Former title:	Vice Chairman and Representative Director

5. Outline of the Business Restructuring Plan

(1) Closure of the unprofitable stores

In terms of the stores to be closed, the Company will decide it by comprehensively examining each store’s possibility to improve profitability and cash flow and competitive situation. In particular, the Company plans to close 50 to 70 stores nationwide during the period between the Fiscal Year ending February 2010 and the Fiscal Year ending February 2012 and examine the reduction of excess workforce after the closure of the unprofitable stores. By closing the unprofitable stores, the Company aims for an increase of 1.8 to 2.3 billion yen in operating income and 1.3 to 1.8 billion yen in EBITDA for the Fiscal Year ending February 2012, compared to the Fiscal Year ending February 2010.

(2) Review of the Human Resource Management System

The Company aims to establish the effective cost structure and increase employees’ incentives by reviewing its HR system. In particular, the Company plans a drastic reduction in the number of the directors and in compensation for the directors, an introduction of the new merit/result-based HR system and effective organizational structure including downsizing of Head Office. By reviewing the HR system, the Company aims for an increase of 1.0 to 1.5 billion yen in operating income and 1.0 to 1.5 billion yen in EBITDA for the Fiscal Year ending February 2012, compared to the Fiscal Year ending February 2010.

(3) Disposal of the non-operating real estates

The Company aims to restore its financial base by disposing closed stores’ real estate and non-core assets and reduce interest-bearing debt. In particular, the Company plans to sell closed stores’ real estate and non-core assets of 5 to 6 billion yen on a book value basis during the period between the Fiscal Year ending February 2011 and the Fiscal Year ending February 2012. The Company is expecting revenue of 1.0 to 1.5 billion yen by disposing the non-operating real estates.

(4) Closure and liquidation of Sakuraya business

Despite the Company’s various efforts to improve the profitability of Sakuraya, there are still no prospects for its recovery at this moment, so the Company has decided to close Sakuraya’s business and liquidate it. The Company has completed necessary allowance required by accounting principles in the result for the third quarter of the Fiscal Year ending February 2010, based on the assumed closure of Sakuraya. With the closure and liquidation of Sakuraya business, the Company is expecting an increase of 2.0 to 2.5 billion yen in operating profit and 1.8 to 2.3 billion yen in EBITDA for the Fiscal Year ending February 2011, compared to the Fiscal Year ending February 2010.

6. Support from the Company’s stakeholders

The stakeholders of the Company expressed their continuous supports for the Company to execute the Business Restructuring Plan in each of financial and operational aspects.

(1) Strengthened financial supports from the financial institutions

In order to financially support the execution of the Business Restructuring Plan, an arrangement of the syndicated loan of a total of 30 billion yen has been agreed by nine financial institutions.

(2) Supports in operation from Bic Camera (business and capital alliance partner)

The Company wins the understanding of Bic Camera, another electronics retailer with which the Company formed business and capital alliance, for the Business Restructuring Plan and the two companies have agreed to further enhance their co-work framework.

7. Future announcement

The mid-term business plan will be announced in two stages before the announcement date of the full-year financial results for the Fiscal Year ending February 2010 scheduled in the middle of April 2010. In the first stage, business strategy of the mid-term business plan including strategies for store and marketing that are based on the Business Restructuring Plan will be announced by late February in 2010. When the business strategy is formulated, the Company intends to start working on the strengthening of business from the next fiscal year starting in March 2010. In the second stage, the financial projection in the mid-term business plan will be announced in the earnings announcement for the Fiscal Year ending February 2010 scheduled in the middle of April 2010.

-End-