Third Quarter Financial Report for the Fiscal Year Ending March 31, 2018 [Japan GAAP] (Consolidated)
February 7, 2018
Name of listed company: NICHIIGAKKAN CO., LTD.
Listed on:
Tokyo Stock Exchange 1st Section
Securities code:
9792
URL:
http://www.nichiigakkan.co.jp
Representative:(Title) President and COO (Name) Nobusuke Mori
Contact:(Title) Acting Division Director Accounting Division(Name) Kazuya Shiiya
Scheduled date for filing the quarterly financial report: February 9, 2018
Scheduled date to start dividends distribution: ―Supplementary quarterly materials prepared: Yes
Quarterly results information meeting held: Yes (for institutional investors and financial analysts)

TEL: 03-3291-2121(Figures shown are rounded down to the nearest million yen.)
1. Consolidated financial results for the third quarter ended December 31, 2017 (from April 1, 2017 to December 31, 2017)(1) Consolidated operating results (cumulative)(%s are the rate of increase/decrease from the previous corresponding period)
Profit attributable to owners
Net Sales
Operating Income
Ordinary Incomeof parent
Million yen%
Million yen%
Million yen%
Million yen%
Nine months ended December 31, 2017
212,914
2.7
5,963
184.4
3,014
―
1,704
―
Nine months ended December 31, 2016
207,294
1.0
2,097
―
108
―
(122)
―
(Note)Comprehensive income: Nine months ended December 31, 2017: 1,681 million yen (-%);Nine months ended December 31, 2016: minus 1,240 million yen (-%)

Net Income
per Share

Diluted Net Income
per Share
Yen
Yen
26.55
26.49
(1.92)－

Nine months ended December 31, 2017

Nine months ended December 31, 2016
(2) Consolidated financial position

As of December 31, 2017
As of March 31, 2017
Reference: Shareholders’ equity:

Total Assets
Net Assets
Equity Ratio
Million yen
Million yen%
189,082
38,081
19.4
191,708
37,92419.1
As of December 31, 2017: 36,758 million yen ; As of March 31, 2017: 36,592 million yen

2. Dividends

Year Ended March 31, 2017
Year Ending March 31, 2018

1Q-endYen——

Annual dividends
2Q-end3Q-endYear-end
Yen
Yen
Yen
11.00
—
11.00
11.00

Year Ending March 31, 2018 (forecast)(Note) Revisions to most recently announced dividend forecast: No

11.00

Annual
Yen
22.00
22.00

3. Forecast of consolidated financial results for the year ending March 31, 2018 (April 1, 2017 – March 31, 2018)(Percentage figures represent changes from the previous year for full year figures and from the same period in the previous year for second quarter figures.)
Profit attributable to
Net Income
Net Sales
Operating Income
Ordinary Income
owners of parent
per Share
Million yen%
Million yen%
Million yen%
Million yen%
Yen
Full year
300,000
8.4
9,300
121.1
6,000
319.9
3,000
113.8
46.73
(Note) Revisions to most recently announced financial results forecast: No

* Notes(1) Significant changes in subsidiaries during the term (Changes in specified subsidiaries resulting in changes in scope of consolidation): None
(1) New―(Company name) , Excluding―(Company name)(2) Application of specific accounting for preparing the quarterly consolidated financial statements: None
(3) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions of accounting standards, etc.: None
2) Changes in accounting policies due to reasons other than those stated in 1): None
3) Changes in accounting estimates: None
4) Restatement: None
(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding (including treasury stock)
As of December 31, 2017:
73,017,952
As of March 31, 2017:
73,017,952
2) Number of treasury stock
As of December 31, 2017:
8,825,313
As of March 31, 2017:
8,825,656
3) Average number of shares issued and outstanding in each period (quarterly consolidated cumulative period)
As of December 31, 2017:64,193,040
As of December 31, 2016: M h64,192,428*Quarterly financial results are outside the scope of the quarterly review.
*Explanation concerning the appropriate use of financial result forecasts and other special notes
The above forecasts are based on information Nichii Gakkan had when this report was prepared and on certain assumptions judged to be reasonable. Various
factors may cause actual results to differ significantly from forecasts. Regarding the assumptions upon which forecasts are based and precautions in using
results forecasts, please refer to "(3) Information on the future outlook, including consolidated financial results forecasts" in "1. Qualitative information onquarterly financial results" on page 6 of the quarterly consolidated financial results (attached document).

Table of Contents for the Attached Document
1. Qualitative information on quarterly financial results…………………………………………………………………………………………

2(1) Details of business results…………………………………………………………………………………………………………………

2(2) Details of financial position……………………………………………………………………………………………………………….

6(3) Information on the future outlook, including consolidated financial results forecasts……………………………………………………

6

2. Quarterly consolidated financial statements and key notes……………………………………………………………………………………

7(1) Quarterly consolidated balance sheets……………………………………………………………………………………………………..

7(2) Quarterly consolidated statements of income and comprehensive income………………………………………………………………..

9

Quarterly consolidated statements of income
Consolidated cumulative third quarter…………………………………………………………………………………………….

9

Quarterly consolidated statements of comprehensive income
Consolidated cumulative third quarter…………………………………………………………………………………………….

10(3) Notes to quarterly consolidated financial statements……………………………………………………………………………………...

11

Notes on the premise of a going concern………………………………………………………………………………………………..

11

Notes on significant fluctuation in the amount of shareholders' equity…………………………………………………………………

11

1

1. Qualitative information on quarterly financial results(1) Details of business results[Consolidated operating results]

Consolidated operating results

Net Sales

Previous consolidated cumulative
third quarter(from April 1, 2016
to December 31, 2016)(in million yen)

Current consolidated cumulative
third quarter(from April 1, 2017
to December 31, 2017)(in million yen)

Year-over-year
inc/dec rate (%)

207,294

212,914

2.7

Medical Support Segment

81,12880,536(0.7)

Long-term Care Segment

108,760

111,973

3.0Childcare Segment

4,064

6,332

55.8

Health Care Segment

2,254

2,363

4.8

Education Segment

9,415

9,621

2.2

Therapy Segment

147

166

13.4

1,397

1,755

25.6

Other Segments

127

163

28.3

Operating Income

2,097

5,963

184.4

Medical Support Segment

5,579

6,518

16.8

Long-term Care Segment

7,866

10,988

39.7

Childcare Segment

(643)

(783)

-

Health Care Segment

449

133

(70.2)

Education Segment(3,571)(2,980)-

Therapy Segment

(29)

(236)

-

(1,089)(1,053)

-

195

150

(23.1)(6,660)(6,772)

-

108

3,014

-

(122)

1,704

-

China Business Segment

China Business Segment
Other Segments
Elimination or Corporate Expenses
Ordinary Income
Profit (loss) attributable to owners of theparent company(General Summary)In the current consolidated cumulative third quarter, we pursued improvements to the business structure of the company as a whole and strove toestablish a solid business system for ensuring stable growth of long-term profits in anticipation of achieving our short-term target (period ending
March 31, 2018), mid-term target (ending March 31, 2021) and future targets and vision.
On December 1, 2017, Nobusuke Mori (formerly Executive Vice President) acceded to the role of President and COO. Under a new business
management system, efforts were put into the rapid and sound implementation of an area management strategy (Vision Progress Project/VIPRO
activities) led by the branch companies, branch offices and business sites we have built up to date, and into continued growth of organizational andhuman resource capabilities as well as further enhancement of corporate value.
Business results are as follows.
Sales were 212,914 million yen (207,294 million yen in the same period last year). Operating profit was 5,963 million yen (2,097 million yen in thesame period last year).
The increase in net sales was led by the Long-term Care Business, where user numbers of all services were stable thanks to the expansion of all
nursing services, from at-home type care services to residence type care services, and the Childcare Business, where there was an increase in the2number of newly opened facilities, especially corporate-run childcare centers that were promoted by the government with the aim of lowering thenumber of children on nursery school waiting lists.
The increase in operating profit was led by the Medical Support Business, where there was progress in contract review and suitable personnel
placement in contracted medical institutions, and the Long-Term Care Business, where innovative strategies brought continued improvement inbusiness site management efficiency.
(Overviews by business segment)
Results by business segment are as follows.
We changed the reporting segment classification from the consolidated first quarter and Therapy Business and Grooming Business, which werepreviously grouped in the Health Care Segment, are now separately segmented in the Therapy Segment.
To compare the results in the third quarter under review and the results in the third quarter of the previous fiscal year in the following results bybusiness segment, the business segments for the previous fiscal year have been reclassified, as described above.
<Medical Support Segment>
Sales were 80,536 million yen (81,128 million yen in the same period last year). Operating profit was 6,518 million yen (5,579 million yen in thesame period last year).
In order to contribute to productivity improvement and revenue expansion in medical institutions, we put effort into retaining human resources,enhancing service quality, and establishing a positive growth cycle through optimization of the work environment for our staff. In addition, we
proposed management support services, medical exchange services and other diversified services that can respond readily to changes in the healthservice management environment, and we strove to expand business under existing contracts.
Clinic Department sales bottomed out in the first quarter and trended upward on a quarter-by-quarter basis, but weak Hospital Department sales andstudent numbers for medical office work courses led to decreased sales for the Medical Support Segment as a whole. Profit rose thanks to suitableevaluation of our services from medical institutions and acquisition of suitable contracts.
<Long-term Care Segment>
Sales were 111,973 million yen (108,760 million yen in the same period last year). Operating profit was 10,988 million yen (7,866 million yen in thesame period last year).
To meet the diverse long-term care needs of regional communities, we ensured productivity improvement at each business site by encouraging eachand every care staff member at approximately 1,400 long-term care service facilities to upskill and progress their careers.
User numbers of at-home type care services were weak due to the transition of preventive care services to integrated business for promoting theestablishment of regional comprehensive care systems, but spending per customer maintained an upward trend due to the effects of the increased
subsidy for improvement of the benefits of care staff from April 2017 and the enhanced response to moderate-severe persons. We put effort into
reinforcing sales activities for residence type care services at facilities where utilization was sluggish.
Net sales increased as a result of stable utilization of both at-home type care services and residence type care services, and profits rose buoyed by
improved productivity achieved through greater business site management efficiency.
<Childcare Segment>
Sales were 6,332 million yen (4,064 million yen in the same period last year). Operating loss was 783 million yen (643 million yen of loss in thesame period last year).
We actively strove to expand facilities, focusing on corporate-run childcare centers as modeled by the Cabinet to help lower the number of children
on regional nursery school waiting lists and promote female participation in the workforce. Corporate-run childcare centers play a part in supporting
both employees' working lives and child rearing, and Nichii's childcare services grew in number to about 200 facilities nationwide, including thoseunder our basic agreement on childcare usage with Nippon Life Insurance Company, our 48 facilities as of December 31, 2017, and other childcarerelated facilities.
Net sales jumped by 55.8% through expansion of facilities to meet market needs, but profit decreased due to up-front expenditure for new
establishment. However, the loss amount decreased on a quarter-by-quarter basis due to the steady improvement in the utilization rate for both brandnew facilities and existing facilities.
<Health Care Segment>
Sales were 2,363 million yen (2,254 million yen in the same period last year). Operating profit was 133 million yen (449 million yen in the same
period last year).
To take on diverse livelihood support needs accompanying changes in lifestyle, we strove to expand the Nichii Life housekeeping service provided
by our Japanese staff, prepared to launch the Sunny Maid Service provided by our foreign staff, and promoted sales of various private brand products.

3

Net sales increased due to growth in the number of Nichii Life users boosted by the campaign that started in the fall and steady growth in sales
quantities of private brand products driven by sales activities utilizing the nationwide sales network. Profit decreased due to up-front expenditure forpreparations to launch the Sunny Maid Service foreign housekeeper program in the National Strategic Special Zone.
<Education Segment>
Sales were 9,621 million yen (9,415 million yen in the same period last year). Operating loss was 2,980 million yen (3,571 million yen of loss in thesame period last year).
With the aim of training global human resources who can play an active role in the world, we expanded our two language school brands,
COCOJUKU and Gaba, and leveraged our Group's capabilities in Japan and overseas to support exchanges to overseas language schools andcontinued learning following students' return to Japan.
Student numbers for our adult-oriented service were stable even as we put effort into preparing to transition * from COCOJUKU to one-to-one
English conversation lessons at Gaba. Student numbers for our child-oriented service COCOJUKU Jr. were stable due to expansion of schools to 500
locations nationwide and we advanced preparations for facility expansion centering on community-based satellites.
Sales and profit for both the COCOJUKU and Gaba brands increased (loss decreased) as a result of efforts to enhance the utilization rate of existing
schools and rapidly achieve a high utilization rate at newly established schools through aggressive communication-centered promotional activities
such as campaigns and events.
*The Education Business structural reforms (integration and parallel operation of Gaba and COCOJUKU) that will be implemented full-scale from
April this year will integrate our adult-oriented services into Gaba One-To-One English Conversation and our child-oriented services into
COCOJUKU Jr. for even greater efficiency and customer satisfaction with promotional activities and the management system for learning studios,teachers and students.
<Therapy Segment>
Sales were 166 million yen (147 million yen in the same period last year). Operating loss was 236 million yen (29 million yen of loss in the same
period last year).
We expanded our A-LOVE dog grooming salons, which are built on the concept of pet health, in Japan and Australia. At our Japan salons, we strove
to expand our facilities and enhance our ability to attract customers by promoting store openings using area marketing and reviewing event activities
such as private previews. We opened our first Australian salon in Adelaide and are preparing to open our second.
We expanded the number of Japan salons to 13 by December 31, 2017, including 12 salons we opened this fiscal year. Net sales increased due tostrategic expansion of facilities, but profit decreased due to up-front expenditure for new establishment.
<China Business Segment>
Sales were 1,755 million yen (1,397 million yen in the same period last year). Operating loss was 1,053 million yen (1,089 million yen of loss in thesame period last year).
With China's aging population, we focused on the long-term care field, providing Japanese-style services, training human resources and selling
sanitary products. Services are provided mainly through 21 regional operating companies and 8 educational corporations within China. In December
2017, we opened the Itsu-un-in Beijing Chaoyang dementia-specialized facility No. 1 in Beijing, and we strove to provide personalized care to eachand every patient by making the most of our know-how and experience gained through operating group homes in Japan.
Net sales increased due to the increased number of consolidated companies, and profit increased (loss decreased) due to greater management
efficiency by all companies and educational corporations.
<Other Segments>
Sales were 163 million yen (127 million yen in the same period last year). Operating profit was 150 million yen (195 million yen in the same period
last year)
We strove to maximize group synergy to strengthen cooperation between group companies.

4

[(reference) Individual operating results]
Previous cumulative third quarter(from April 1, 2016
to December 31, 2016)(in million yen)
Net Sales

Current cumulative third quarter(from April 1, 2017
to December 31, 2017)(in million yen)

Year-over-year
inc/dec rate (%)

180,063

182,926

1.6

Operating Income

1,632

4,480

174.5

Ordinary Income

1,265

3,640

187.7

Current Net Income

1,376

2,735

98.8

5

(2) Details of financial position
Total assets of the current third quarter were 189,082 million yen, a decrease of 2,626 million yen compared to the end of the previous fiscal
year. This is mainly because current assets increased by 1,394 million yen due to an increase of cash and deposits while fixed assets decreased
by 4,020 million yen due to a decrease in goodwill.
Total liabilities of the current third quarter were 151,000 million yen, a decrease of 2,783 million yen compared to the end of the previous
fiscal year. This is mainly because total current liabilities decreased by 8,314 million yen due to a decrease of provision for bonuses while total
non-current liabilities increased by 5,531 million yen due to an increase in long-term loans payable.
Net assets of the current third quarter were 38,081 million yen, an increase of 157 million yen compared to the end of the previous fiscal
year.
(3) Information on the future outlook, including consolidated financial results forecasts
As for the consolidated result estimations for the period ending March 2018, there are no changes from the official declaration of May 12,
2017.

6

2. Quarterly consolidated financial statements and key notes(1) Quarterly consolidated balance sheets(in thousand yen)
Fiscal 2017
(As of March 31, 2017)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Short-term investment securities
Merchandise and finished goods
Work in progress
Raw materials and supplies
Deferred tax assets
Other Segments
Less: allowance for doubtful accounts
Total current assets
Fixed assets
Property, plant and equipment
Buildings and structures—net
Lease assets—net
Other—net
Total property, plant and equipment
Intangible assets
Goodwill
Other Segments
Total intangible assets
Investment and other asset
Other Segments
Less: allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets

Current consolidated third quarter(As of December 31, 2017)16,357,197
32,855,836
200,416
1,076,922
8,570
232,5882,314,021
11,687,703(9,802)

17,151,535
33,096,594
1,048,992
37,214
252,969
2,348,342
12,210,401(28,341)

64,723,455

66,117,710

23,088,252
46,903,144
10,614,144

22,638,981
47,245,708
9,460,003

80,605,541

79,344,694

14,225,873
5,447,292

12,608,627
5,832,655

19,673,166

18,441,282

27,085,011(379,098)

25,448,601(270,277)

26,705,912

25,178,323

126,984,620

122,964,300

191,708,076

189,082,010

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Income taxes payable
Accrued expenses
Provision for bonuses
Provision for directors' bonuses
Provision for loss on store closing
Other Segments

840,286
20,269,380
1,990,593
15,914,778
4,990,083
38,00024,487,658

943,984
7,766,687
1,085,756
19,979,138
2,748,904
1,800
2,337
27,687,325

Total current liabilities

68,530,780

60,215,935

Non-current liabilities
Long-term loans payable
Lease obligations
Net defined benefit liability
Asset retirement obligations
Other Segments

17,563,057
52,192,808
7,311,817
2,378,419
5,806,811

20,793,133
53,356,404
7,598,260
2,435,813
6,600,629

Total non-current liabilities

85,252,913

90,784,241

153,783,694

151,000,176

Total liabilities7

(in thousand yen)
Fiscal 2017
(As of March 31, 2017)
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity

Current consolidated third quarter(As of December 31, 2017)

11,933,790
17,277,876
20,006,631(11,376,929)

11,933,790
17,057,007
20,297,750(11,376,345)

37,841,369

37,912,203

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency exchange adjustments
Remeasurements of defined benefit plans

20,543(457,572)(811,515)

24,588(519,781)(658,495)

Total accumulated other comprehensive income(1,248,544)(1,153,687)

531,839799,717551,119
772,199

Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

8

37,924,381

38,081,834

191,708,076

189,082,010

(2) Quarterly consolidated statements of income and comprehensive income(Quarterly consolidated statements of income)(Consolidated cumulative third quarter)
Previous consolidated cumulative
third quarter(from April 1, 2016
to December 31, 2016)(in thousand yen)
Current consolidated cumulative third
quarter(from April 1, 2017
to December 31, 2017)

Net Sales
Cost of sales

207,294,225
168,755,393

212,914,135
171,725,054

Gross profit

38,538,832

41,189,081

Selling, general and administrative expenses

36,441,499

35,225,195

Operating Income

2,097,332

5,963,885

Non-operating income
Interest income
Rent income
Subsidy income
Foreign exchange gains
Equity method investment gain
Other Segments

109,818
142,901
156,345
348,784
41,676
381,032

114,093
159,531
34,876
101,471
48,714
277,601

Total non-operating income

1,180,559

736,2883,021,545
27,559120,473

3,482,299
26,796
176,446

3,169,578

3,685,542

108,3133,014,631

8,158
783

5,310
85

8,942

5,396

2,661
24,4642,082

44,605
1,118

29,20845,723Non-operating expenses
Interest expenses
Rent expenses
Other Segments
Total non-operating expenses
Ordinary Income
Extraordinary income
Gain on reversal of subscription rights to shares
Other Segments
Total extraordinary income
Extraordinary losses
Loss on retirement of property, plant and equipment, net
Impairment losses
Other Segments
Total extraordinary losses
Net income (loss) before income taxes

88,0462,974,304

756,885(426,329)

1,440,915(38,456)

Total income taxes

330,555

1,402,458

Net income (loss)(242,508)

1,571,846

Profit (loss) attributable to non-controlling interests(119,510)(132,418)

Profit (loss) attributable to owners of the parent company(122,998)

1,704,265

Income taxes—current
Income taxes—deferred

9(Quarterly consolidated statements of comprehensive income)(Consolidated cumulative third quarter)
Previous consolidated cumulative
third quarter(from April 1, 2016
to December 31, 2016)
Net income (loss)
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency exchange adjustments
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of the parent
company
Comprehensive income attributable to non-controllinginterests

10(in thousand yen)
Current consolidated cumulative third
quarter(from April 1, 2017
to December 31, 2017)(242,508)

1,571,846

9,398(1,168,871)
161,484

4,054(47,486)
153,020(997,988)

109,588(1,240,496)

1,681,434(1,047,826)

1,810,841(192,670)(129,407)

(3) Notes to quarterly consolidated financial statements
Notes on the premise of a going concern
There are no applicable matters.
Notes on significant fluctuation in the amount of shareholders' equity
There are no applicable matters.

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