QUARTERLY BUSINESS REPORT for the 3rd quarter of the year ending March 2007
(Consolidated)
February 16, 2007
Listed company name: Nichii Gakkan Company

Code number: 9792
Listed on: Tokyo Stock Exchange 1st Section(URL: http://www.nichiigakkan.co.jp/)
Representative
Contact

Title: President and Representative Director Name: Takashi Mori
Title: Director, Vice President of Accounting Division and General Manager of Accounting Department
Name: Koichi Terada
Tel: 03-3291-2121

1. Notes on quarterly financial statements(1) Concise methods for accounting procedures: Adopted
Physical inventory is omitted for some of the inventory assets.
(2) Change in accounting method since the latest consolidated fiscal year: None
(3) Changes in scope of consolidation and application of equity method: None
2. Operating performance highlights for the 3rd quarter of the year ending March 2007 (April 1, 2006 through December 31, 2006)(1) Progress of consolidated operating results(Amounts are rounded to the nearest million yen)
Net sales
Operating income
Ordinary income
Quarterly net income
Millions of yen％ Millions of yen％
Millions of yen％
Millions of yen％
3rd quarter FY2007
153,165
△1.2
2,091
△48.5
2,159 △49.0
901－
rd
3 quarter FY2006
154,967
2.9
4,058
5.5
4,235
5.8
8
△99.2
(Reference) FY2006
206,222
4,990
5,185
1,974
[Notes] 1. The percentages shown for net sales, operating income, etc., represent the rates of change on a year-on-year basis.
2. The figures shown above have not been audited by an auditing company.

[Qualitative information on the progress of consolidated operating results]
Japan’s economy continues to show a gradual upturn in the current third quarter with an increase in capital investment accompanied by a growth incorporate earnings and improvement of the unemployment rate. However, uncertainty remains in consumer spending.
In the medical and long-term care business, the market environment is expected to change significantly in the future through revisions of the medical
service fee system and the long-term care insurance system, aimed at establishing sustainable systems.
Against such a backdrop, our group executed organizational reforms by enhancing existing businesses, developing new services, and establishing an“Information Strategy Department” to promote realization of the medium range business strategy, in order to respond to system revisions and businesstrends. In addition, we have launched active advertising campaigns incorporating a media mix centered on TV commercials.
As a result, during the 3rd quarter under review, net sales were ¥153,165 million (down 1.2% year-on-year), operating income ¥2,159 million (down
49.0% year-on-year), and net income ¥901 million (¥8 million in the same quarter last fiscal year).
Shown below is the segment information on net sales and operating income by business category.
Medical Support BusinessIn the Medical Support Business, competition is becoming stiffer as the management environment of medical institutions becomes more severe due todecreases in medical service fee compensation, etc. In order to achieve both enhancement of sales and improvement of profit ratio, we have enforced
reviewing of contract negotiations and contractual coverage, and promoted strategies to increase sales for each medical institution, which enables
efficient labor time shift operation. Although investment cost for personnel has increased due to measures such as the introduction and execution of the“career improvement system,” which enables us to secure employees with rich field experience and good skills, we have improved our profit ratio byincreasing business efficiency.
As a result, net sales were ¥83,258 million (up 3.1% year-on-year) and operating income ¥7,827 million (down 6.3% year-on-year).
Health Care BusinessIn the Health Care Business, we have actively promoted establishment of complex “multi-functional care centers,” care facilities with preventive careservices, throughout Japan, and development of our service infrastructure, in order to accommodate the long-term care insurance system revisions
executed in April 2006. The ratios for the revisions of the long-term care insurance system are said to be minus 0.5% as a whole and minus 1.0% forhome care. However, the numbers in the market are declining. For the third quarter, net sales and operating income fell below those of the previous
fiscal year and are in a severe state. They were affected by discontinuation of health insurance coverage, beginning October 2006, for welfare
equipment leasing for those who are under support and care level 1.
As a result, net sales were ¥59,280 million (down 0.4% year-on-year) and operating income ¥1,597 million (down 9.4% year-on-year).
Education BusinessIn the Education Business, the number of students saw sluggish growth. One reason for this is because uncertainty continues to remain regarding
home-helper certification for the second-grade home-helper training course, which is our flagship program. Another reason is, for other courses, as the
economy improves, the demand for obtaining certifications has temporarily decreased. In such an environment, we have continued to launch active
advertising campaigns including TV commercials, which were started in the first half of the fiscal year, in order to obtain students and also to obtainhuman resources that can provide our services. However, the effect of the advertising campaigns remains small at present.
As a result, net sales were ¥9,733 million (down 4.3% year-on-year) and operating loss ¥1,245 million (¥1,642 million in the same quarter last fiscal
year).
Other Businesses
In Other Businesses, we promoted organizational reform by reorganization of group businesses, and dedicated our efforts to centralize our business byliquidation of subsidiaries and affiliates.
As a result, net sales were ¥893 million (down 80.2% year-on-year), operating income ¥215 million (up 19.0% year-on-year).

1(2) Changes in consolidated financial status
Total assets
Millions of yen
3rd quarter FY2007
92,789
3rd quarter FY2006
91,770(Reference) FY2006
97,898

Net assets
Millions of yen
52,37550,56952,159Equity ratio
％
56.3
55.1
53.3

Net assets per shareYen
1,482.89
1,435.60
1,479.74[Note] The figures shown above have not been audited by an auditing company.

[Qualitative information on changes in consolidated financial status]
The total assets for the current third quarter were ¥92,789 million (down 5,109 million from the end of the last fiscal year). This is mainly due to theincrease in buildings and structures and decrease in the cash and deposits and others.
Total liabilities was ¥40,413 million (down 5,193 million from the end of the last fiscal year) due to the increase in current redemption of bonds andbonds, and the decrease in the short-term loans payable, income taxes payable, and allowance for employee bonuses. Net assets were ¥52,375 million(up ¥216 million from the end of the last fiscal year).

[Reference] Non-consolidated data
(1) Progress of non-consolidated operating results
Net sales
Millions of yen％
3rd quarter FY2007
149,766
1.3
rd
3 quarter FY2006
147,890
3.4(Reference) FY2006
197,635

Operating income
Millions of yen
％
1,928
△50.4
3,889
△24.7
4,956

(Amounts are rounded to the nearest million yen)
Ordinary income
Quarterly net income
Millions of yen％
Millions of yen％
2,038 △50.1
876－
4,082 △23.4△873 △131.6
5,257
△978

[Notes] 1. The percentages shown for net sales, operating income, etc., represent the rates of change on a year-on-year basis.
2. The figures shown above have not been audited by an auditing company.

(2) Changes in non-consolidated financial status
Total assets
Millions of yen
3rd quarter FY2007
88,579
3rd quarter FY2006
88,010(Reference) FY2006
92,666

Net assets
Millions of yen
48,39848,83348,350[Notes] The figures shown above have not been audited by an auditing company.

3. Forecast of consolidated operating performance for the year ending March 2007 (April 1, 2006 through March 31, 2007)
No change was made to the adjusted projection for the First Half of the fiscal year ending March 31, 2007 (released on November 22, 2006).
The above projections are based on information available as of time of this announcement. Actual results may differ due to various factors.

2

Quarterly Consolidated Financial Statements (Summary)
1. Quarterly Consolidated Balance Sheet (Summary)(Thousands of yen)
Current Quarter(3rd quarter FY2007)

Corresponding Quarterof Previous Year
(3rd quarter FY2006)

AmountAmount(Reference)
FY2006

ChangeAmountRC

Amount%ASSETSI Current assets
1. Cash and deposits
2. Notes and accounts receivable
3. Inventories
4. Short-term loans receivable
5. Deferred tax assets
6. Other current assets
7. Allowance for doubtful accounts
Total current assets
II Fixed assets(1) Tangible fixed assets
1. Buildings and structures
2. Land
3. Other tangible fixed assets
Total tangible fixed assets(2) Intangible fixed assets
1. Consolidated adjustment account
2. Goodwill
3. Other intangible fixed assets
Total intangible fixed assets(3) Investments and other assets
1. Investment securities
2. Guarantee money deposited
3. Long-term loans receivable
4. Deferred tax assets
5. Other investments and other assets
6. Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

8,661,719
24,736,187
1,857,721－
2,152,684
3,647,467△ 104,595
40,951,184

10,094,126
25,524,784
3,359,628
33,1701,407,442
3,396,644△ 236,588
43,579,207△ 1,432,407△ 788,597△ 1,501,906△ 33,170
745,241
250,822
131,992△ 2,628,023△ 14.2△ 3.1△ 44.7－53.0
7.4△ 55.8△ 6.0

12,557,413
25,343,630
1,943,892－
2,882,923
2,650,723△ 135,756
45,242,826

26,467,280
7,733,496
744,755
34,945,532

22,592,307
7,958,054
1,829,292
32,379,654

3,874,973△ 224,557△ 1,084,537
2,565,878

17.2
△ 2.8
△ 59.3
7.9

24,699,677
7,844,328
2,571,600
35,115,605－
2,723,046
1,193,247
3,916,294

2,951,558－
893,553
3,845,111△ 2,951,558
2,723,046
299,694
71,182

－
－
33.5
1.9

2,881,157－
1,114,903
3,996,060

912,6034,756,563
2,449,850
3,401,867
4,049,660△ 2,594,547
12,975,998
51,837,825
92,789,009

1,995,563
4,988,140
4,978,187
1,063,051
1,422,318△ 2,480,451
11,966,809
48,191,574
91,770,782△ 1,082,960△ 231,576△ 2,528,337
2,338,816
2,627,342△ 114,095
1,009,189
3,646,250
1,018,226△ 54.3△ 4.6△ 50.8
220.0
184.7
4.6
8.4
7.6
1.1

1,219,031
4,977,231
2,557,397
3,307,304
4,020,965△ 2,538,361
13,543,570
52,655,236
97,898,062

3

(Thousands of yen)
Current Quarter(3rd quarter FY2007)

Corresponding Quarterof Previous Year
(3rd quarter FY2006)

AmountAmount(Reference)
FY2006

ChangeAmountRC

Amount%LIABILITIESI Current liabilities
1. Notes and accounts payable
2. Short-term loans payable
3. Current installments of long-term debt
4. Current redemption of bonds
5. Income taxes payable
6. Consumption tax payable
7. Accrued expenses
8. Allowance for employee bonuses
9. Other current liabilities
Total current liabilities
II Long-term liabilities
1. Bonds
2. Long-term loans payable
3. Allowance for employee retirement
benefits
4. Allowance for directors' and auditors'
retirement benefits
5. Other long-term liabilities
Total long-term liabilities
Total Liabilities
MINORITY INTEREST
Minority interest
SHAREHOLDERS' EQUITYI Common stock
II Capital surplus
III Retained earnings
IV Gain or loss from revaluation of marketablesecurities
V Treasury stock
Total shareholders' equity
Total liabilities, minority interests andshareholders' equity
NET ASSETS
I Shareholders' equity
1. Common stock
2. Capital surplus
3. Retained earnings
4. Treasury stock
Total shareholders' equity
II Unrealized gains and adjustments
Unrealized gains on other securities
Total unrealized gains and adjustments
III Minority interest
Total net assets
Total liabilities and net assets

1,530,574
600,000
38,352
3,808,000
142,755
1,464,838
16,442,918
1,572,873
4,995,377
30,595,691

1,935,995
11,405,000
63,283－
252,713
1,716,011
16,209,078
1,667,676
4,822,873
38,072,633△ 405,420△ 10,805,000△ 24,930
3,808,000△ 109,958△ 251,173
233,839△ 94,802
172,504△ 7,476,941△ 20.9△ 94.7△ 39.4－△ 43.5△ 14.6
1.4
△ 5.7
3.6
△ 19.6

1,736,727
13,063,000
55,171－2,074,565
1,742,666
15,402,527
3,475,893
5,017,256
42,567,807

6,590,000
22,037－42,4316,590,000△ 20,394－△ 48.1－
39,3452,950,328

2,703,468

246,860

9.1

2,767,862

130,147
125,083
9,817,597
40,413,289

127,308
95,583
2,968,792
41,041,425

2,838
29,5006,848,804△ 628,136

2.2
30.9
230.7
△ 1.5

129,209102,333
3,038,751
45,606,559－

159,917－－

132,488－－－

11,933,790
17,354,214
26,757,810

－
－
－

－
－
－

11,933,790
17,354,214
28,723,606－－－

451,426△ 5,927,802
50,569,439

－
－
－

－
－
－

77,628△ 5,930,226
52,159,014－

91,770,782－－

97,898,062

11,933,790
17,354,214
28,813,219△ 5,933,206
52,168,018

－
－
－
－
－

－
－
－
－
－

－
－
－
－
－

－
－
－
－
－

63,22863,228144,473
52,375,720
92,789,009

－
－
－
－
－

－
－
－
－
－

－
－
－
－
－

－
－
－
－
－

4

2. Quarterly Consolidated Statements of Income (Summary)(Thousands of yen)
Current Quarter(3rd quarter FY2007)

Corresponding Quarterof Previous Year
(3rd quarter FY2006)

AmountAmountI Net sales

153,165,394

II Cost of sales
Gross profit(Reference)
FY2006

ChangeAmountRC

Amount154,967,301△ 1,801,907△ 1.2

206,222,324

123,298,712

123,844,697△ 545,985△ 0.4

165,174,725

29,866,681

31,122,603△ 1,255,921△ 4.0

41,047,599

27,775,548

27,063,972

711,575

2.6

36,057,561

2,091,133

4,058,631△ 1,967,497△ 48.5

4,990,037

1. Interest income

19,512

61,261△ 41,749△ 68.1

36,152

2. Dividend income

12,83827,911△ 15,072△ 54.027,911

3. Commission on consignment for officework
4. Income from lease of fixed assets

67,857

68,380

△ 523

△ 0.8

91,952

23,424

20,036

3,388

16.9

27,065

5. Others

74,49959,14815,35026.0

98,693

198,132

236,739△ 38,606△ 16.3281,775

1. Interest expenses

33,64439,399△ 5,755△ 14.657,430

2. Bond interest

37,178－37,178－－

3. Compensation for damages

10,966

5,052

5,913

117.0

11,931

4. Bond issue cost

32,940－32,940

－

－

△ 3.3

17,101%

III Selling, general and administrative expenses
Operating income
IV Non-operating income

Total non-operating income
V Non-operating expenses

5. Others
Total non-operating expenses
Ordinary income

14,787

15,285△ 498

129,516

59,73869,778116.886,463

2,159,749

4,235,631△ 2,075,882△ 49.05,185,349

VI Extraordinary income
1. Gain on sale of fixed assets

29,3204

29,315－

4

2. Gain on sale of shares of related company－

1,489,112△ 1,489,112－

1,489,112

3. Gain on sale of investment in securities

2,850

－

2,850

－

552,837

634

－

634

－

－

32,804

1,489,116△ 1,456,312△ 97.82,041,954

－

－

－

－

55,32535,63365,402△ 29,769△ 45.574,997

3. Loss on revaluation of shares of relatedcompany
4. Loss on revaluation of inventories－

97,493△ 97,493－

118,492－

1,174,757△ 1,174,757－

2,422,614

5. Transfer to allowance for doubtful
accounts
6. Loss on closedown of offices－

2,528,000△ 2,528,000－

2,455,000

－

7,552

△ 7,552－

7,552

7. Loss on impairment

52,560131,098△ 78,537△ 59.9131,098

8. Loss on disengagement of lease

103,395－

103,395－－

9. Loss on disposal of merchandise－

31,382△ 31,382－－

10. Others

4. Others
Total extraordinary income
VII Extraordinary losses
1. Loss on sale of fixed assets
2. Loss on retirement of fixed assets

－

－

－

－

3,503

Total extraordinary losses

191,589

4,035,686△ 3,844,097△ 95.3

5,268,583

Income before income taxes

2,000,964

1,689,062

311,902

18.5

1,958,719△ 71.1

3,243,944△ 3,295,144

Income, inhabitants and business taxes

429,322

1,487,245△ 1,057,922

Adjustments for income and other taxes

645,314

168,030

477,283

284.0

Minority interest

24,99024,93752

0.2

34,984

Net income

901,337

8,848

892,488

－

1,974,9345