Financial Results for the First Quarter of the Year Ending March 31, 2019 (J-GAAP)
August 8, 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:
Nobusuke Mori, President and COO
Contact:
Kazuya Shiiya, Executive Officer, Acting Division Director Accounting Division
Scheduled date for filing the quarterly financial report: August 10, 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
June 26, 2018

(Figures shown are rounded down to the nearest million yen.)
1. Consolidated financial results for the first quarter of the year ending March 31, 2019(April 1, 2018 – June 30, 2018)(1) Consolidated operating results(Percentage figures represent changes from same period of previous year.)
Profit attributable to owners
Net Sales
Operating Income
Ordinary Incomeof parent
Million yen%
Million yen%
Million yen%
Million yen%
Three months ended June 30, 201870,8350.7
1,263(16.8)
139(75.1)―(158)
70,313
2.8
1,519
560
―
510
―
Three months ended June 30, 2017―
(Note) Comprehensive income: First three months of FY2019: (124) million yen(―%)
First three months of FY2018: 395 million yen (－%)
Net Income per Share
Diluted Net Income per ShareYen
Yen
Three months ended June 30, 2018
(2.47)―
Three months ended June 30, 2017
7.96
7.95
(2) Consolidated financial position
Total Assets
Million yen
As of June 30, 2018
188,641
As of June 30, 2017
190,239(Reference) Shareholders’ equity: As of June 30, 2018: 35,509 million yen

Net Assets
Equity Ratio
Million yen%
36,80318.8
37,656
19.1
As of March 31, 2018: 36,363 million yen

2. Dividends
1Q-endYen
Year ended March 31, 2018Year ending March 31, 2019

Annual dividends
3Q-end2Q-end——Year ending March 31, 2019(forecast)(Note) Revisions to most recently announced dividend forecast: No

Yen
11.00
15.00

Year-end
Yen

Annual

—

Yen
11.00

Yen
22.00

—

15.00

30.00

3. Forecast of consolidated financial results for the year ending March 31, 2019 (April 1, 2018 – March 31, 2019)(Percentage figures represent changes from previous year for full year figures and from same period of previous year for interim period figures.)
Profit attributable to owners Net Income per
Net Sales
Operating Income
Ordinary Incomeof parent
ShareMillion yen%
Million yen%
Million yen%
Million yen%
Yen
First six months
151,800
7.3
5,000
33.2
2,800
54.2
1,400
52.3
21.81
Full year
314,500
10.8
14,70092.7
10,500
189.4
6,300
637.3
98.14
(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
(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 June 30, 2018
73,017,952
2) Number of treasury stock
As of June 30, 2018
8,824,723
3) Average number of shares issued and outstanding in each period
Three months ended June 30, 2018
64,193,048

As of March 31, 2018:

73,017,952

As of March 31, 2018:

8,825,572

Three months ended June 30, 201764,193,132* Quarterly financial results are outside the scope of the quarterly review by certified public accountants or audit corporations.
* Explanation concerning the appropriate use of financial result forecasts and other special notes
The above forecasts are based on information Nichii Gakkan had as of the time this report was prepared and on certain assumptions judged to be reasonable.
Various factors may cause actual results to differ significantly from forecasts. Please refer to the disclaimers, provided under “(3) Information on the future
outlook, including consolidated financial results forecasts” of “1. Qualitative information on quarterly financial results” on page 4 of the attached document,
regarding the assumptions upon which forecasts are based and the use of forecasts.

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…………………………………………………………………………………………………………….

4(3) Information on the future outlook, including consolidated financial results forecasts…………………………………………………

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

5(1) Quarterly consolidated balance sheets………………………………………………………………………………………………….

5(2) Quarterly consolidated statements of income and comprehensive income……………………………………………………………..

7

Quarterly consolidated statements of income
Three months ended June 30…………………………………………………………………………………………………...

7

Quarterly consolidated statements of comprehensive income
Three months ended June 30…………………………………………………………………………………………………...

8(3) Notes to quarterly consolidated financial statements…………………………………………………………………………………..

9(Notes on the premise of a going concern)…………………………………………………………………………………….…….

9(Notes on significant fluctuation in the amount of shareholders’ equity)……………………………………………………………

9(Significant subsequent events)………………………………………………………………………………………………………

9

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1. Qualitative information on quarterly financial results
The forward-looking statements contained in the descriptions below are forecasts determined at the end of the current quarter.
In addition, ASBJ Statement No. 28 Partial Amendments to Accounting Standard for Tax Effect Accounting (February 16, 2018) and otherguidelines were applied from the beginning of the first quarter of the consolidated fiscal year under review. With respect to the financial position,
the figures at the end of the previous consolidated fiscal year after retrospective processing were used in comparison.
(1) Details of business results
In May of this year, the Nichii Group launched the medium-term management plan “VISION 2025” (from the fiscal year ending March 31, 2019
to the fiscal year ending March 31, 2025) to become an excellent company that achieves a contribution to social issues and the stable growth oflong-term profits and makes a global contribution. Initiatives for strengthening the business structure and organizational reforms, among others,
have commenced.
With respect to strengthening the business constitution, from April of this year, the hiring of regular workers and the indefinite-term hiring ofpart-time workers were encouraged in the core business (medical support/long-term care/childcare). Emphasis was also placed on securing andimproving the retention of human resources who provide services and the improvement of autonomy on the business frontlines by stabilizing
hiring. With respect to organizational reforms, the Nichii Sales and Marketing Headquarters, which is the organization under the direct controlof the President and COO, was established. Activities were implemented for the growth of the top line by chained sales of all business beyond
the scope of business and expansion and improvement of the placement of executive officers by business and area, among other aspects.
With respect to the business results, due to the lead of the Childcare Business, which expanded corporate-run childcare centers and other service
facilities, and the Health Care Business, in which the number of users of the housekeeping services increased, net sales hit a record high again
and increased.
Income decreased, mainly due to an increase in personnel expenses that was caused by improving the treatment of staff in the core business andthe recruitment of regular workers, among other causes, and the expenses for prior investments in the health care business.
Net sales for the first three months of the first quarter under review were 70,835 million yen (compared with 70,313 million yen in the same
period of the previous fiscal year). Operating income was 1,263 million yen (compared with 1,519 million yen in the same period of theprevious fiscal year). Ordinary income was 139 million yen (compared with 560 million yen in the same period of the previous fiscal year). Net
loss attributable to owners of parent was 158 million yen (compared with net income attributable to owners of parent of 510 million yen in thesame period of the previous fiscal year).
The business results by segment are as shown below.
From the fiscal year ending March 31, 2019, the categories of the reporting segments were changed. The China Business and services abroadwere transferred from each department to the global segment in presentation by segment. In addition, health care product sales were transferredfrom the Health Care Segment to the Long-Term Care Segment. In this regard, with respect to the comparison with the same quarter of theprevious fiscal year below, figures obtained by reclassifying the figures for the same quarter of the previous fiscal year under the changed
segment categories were used in comparison.
<Medical Support Segment>
Net sales were 26,791 million yen (compared with 26,885 million yen in the same period of the previous fiscal year). Operating income was
2,119 million yen (compared with 2,201 million yen in the same period of the previous fiscal year).
Focus was placed on contract optimization at medical institutions, as in the previous fiscal year, and the expansion of operations at medical
institutions such as support operations for medical administration work and various systems and services was advanced in anticipation of theworkstyle reforms of doctors and other health care providers. In addition, from April, support to make medical administration staff regular
workers and the promotion of indefinite-term hiring, among other initiatives, were implemented. Focus was placed on improving treatment andthe working environment.
In this quarter under review, given the sluggish growth in the number of contracts of the clinic department and the number of persons who took
medical administration courses, both net sales and income of the entire medical support business decreased.
<Long-Term Care Segment>
Net sales were 37,439 million yen (compared with 37,446 million yen in the same period of the previous fiscal year). Operating income was
3,649 million yen (compared with 3,659 million yen in the same period of the previous fiscal year).
Initiatives were taken for securing and retaining human resources for long-term care, including improving the treatment of staff and appointment
as regular workers. At the same time, productivity was improved and the efficient placement of personnel was implemented, among otheractions, for continued cost improvements. In addition, steps were taken by the overall Group in accordance with the revision to the nursing carecompensation in April of this year, including strengthening the acquisition of users in a moderate or severe condition. In residential care services,2the number of users at fee-charging elderly care facilities was steady, and high occupancy rates were maintained. In at-home care services, sales
per customer improved due to an increase in users in a moderate or severe condition, among other causes. However, both net sales and income
decreased, mainly due to a decrease in the number of users caused by changing preventive care services to the comprehensive business and theimpact of reduced compensation for extended day care services in the revision to nursing care compensation.
<Childcare Segment>
Net sales were 2,568 million yen (compared with 1,815 million yen in the same period of the previous fiscal year). Operating loss was 404
million yen (compared with operating loss of 571 million yen in the same period of the previous fiscal year).
Beginning with corporate-run childcare centers, which were institutionalized based on the government’s plan for accelerating the reduction in
the number of children on waiting lists, the establishment of nursery schools was actively promoted in this period under review as well. In thisquarter under review, 42 new childcare facilities were established or opened. As a result, together with licensed nursery schools, among othersimilar facilities, the childcare facilities of the Company were established in 242 locations nationwide.
Net sales increased 753 million yen due to the establishment of new bases. Income increased (reduction of the degree of loss) despite prior costs
due to active establishment as a result of efforts to acquire contracts for the use of the corporate-run child care centers with companies andimprove the recognition of nursery schools in each area.
<Health Care Segment>
Net sales were 381 million yen (compared with 332 million yen in the same period of the previous fiscal year). Operating loss was 115 million
yen (compared with operating income of 74 million yen in the same period of the previous fiscal year).
With an increase in single-person households and aged households and an increase in double-income households due to the promotion of
women’s participation and advancement in the workplace, recognition of housekeeping services increased, and demand continues to rise. In
response to these growing needs, the Company actively promoted the Nichii Life housekeeping service and the Sunny Maid Service
housekeeping support business provided by foreign staff in the National Strategic Special Zone. As a result, net sales grew significantly, rising
14.7% year on year. With respect to income, an operating loss was recorded due to prior costs in relation to the acceptance of foreign staff andpreparations for the establishment of the Sunny Maid Service in the Kansai region.
<Education Segment>
Net sales were 2,891 million yen (compared with 2,936 million yen in the same period of the previous fiscal year). Operating loss was 1,210
million yen (compared with operating loss of 1,030 million yen in the same period of the previous fiscal year).
Through structural reforms of the Education Business (integration and parallel operation of Gaba and COCO Juku), the transition from COCO
Juku to Gaba one-to-one English conversation lessons as services for adults and the transition to COCO Juku Junior as services for children
were completed.
In COCO Juku Junior, community-based satellite classrooms were established in 101 facilities nationwide. With respect to services for adults,
learning studios for GABA one-to-one English lessons were set up in 116 facilities nationwide. In regional areas, event-type promotions andother efforts were made to coincide with the establishment of the studios to bolster recognition. Through active promotional campaigns andadvertising, among other initiatives, emphasis was placed on improving recognition in the area where the classrooms were established andplanting seeds that will lead to people taking lessons. Despite these efforts, both net sales and income decreased year on year.
<Therapy Segment>
Net sales were 88 million yen (compared with 49 million yen in the same period of the previous fiscal year). Operating loss was 152 million yen(compared with operating loss of 68 million yen in the same period of the previous fiscal year).
The nationwide establishment of the A-LOVE dog grooming salons, which are built on the concept of pet health, continued. One new salon was
opened in this quarter under review. Twenty-one salons have now been established in total, including 20 salons in Japan and one in Australia.
The emphasis was placed on promotional campaign activities using social media, posting by taking advantage of the characteristics of areas,holding of and participation in various events and other initiatives to acquire new customers and retain repeat customers by improving services.
As a result, net sales increased 38 million yen. Due to prior investments including opening costs, however, the operating loss increased 83
million yen year on year.
<Global Segment>
Net sales were 484 million yen (compared with 783 million yen in the same period of the previous fiscal year). Operating loss was 326 million
yen (compared with operating loss of 480 million yen in the same period of the previous fiscal year).
In this quarter under review, the strengthening of sales of sanitary products in China, sales activities for contracts for the management of nursing
homes, the promotion of sales of long-term care training and seminars and other activities were emphasized. Efforts to spread Japanese-style3

long-term care locally continued to be made.
Local needs and management situations were reviewed, unprofitable joint ventures were wound up, and rents and other fixed costs were reduced.
As a result of these efforts, although net sales decreased, the degree of the deficits was reduced with respect to income.
<Other Segments>
Net sales were 190 million yen (compared with 63 million yen in the same period of the previous fiscal year). Operating income was 76 million
yen (compared with 47 million yen in the same period of the previous fiscal year).
The link between the business and services of the Group was strengthened and the further enhancement of the value of the core business was
pursued. As a result of the efforts to improve revenues, in the three months of the first quarter under review, net sales increased 126 million yen
and operating income increased 28 million yen.
(2) Details of financial position
At the end of the first quarter of the consolidated fiscal year under review, total assets decreased 1,598 million yen as compared to the end of theprevious consolidated fiscal year, to 188,641 million yen. The major causes were an increase of 47 million yen in current assets, mainly due toan increase in notes and accounts receivable – trade, and a decrease of 1,645 million yen in fixed assets, mainly due to a decrease in goodwill.
Liabilities decreased 745 million yen as compared to the end of the previous consolidated fiscal year, to 151,838 million yen. The major causes
were a decrease of 1,993 million yen in current liabilities, mainly due to a decrease in provision for directors’ bonuses, and an increase of 1,248
million yen in non-current liabilities, mainly due to an increase in lease obligations.
Net assets decreased 852 million yen from the end of the previous fiscal year, to 36,803 million yen.
(3) Information on the future outlook, including consolidated financial results forecasts
The forecast of consolidated financial results for the year ending March 31, 2019 that was announced on May 11, 2018 remains unchanged.

4

2. Quarterly consolidated financial statements and major notes(1) Quarterly consolidated balance sheets(Thousand yen)
Fiscal 2018
(As of March 31, 2018)
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
Other
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
Total intangible assets
Investment and other asset
Other
Less: allowance for doubtful accounts
Total investments and other assets

Q1 of Fiscal 2019
(As of June 30, 2018)

18,447,925
33,072,792
890,572
6,859
222,620
12,639,841(31,360)

17,822,687
33,405,416
208,880
869,656
19,299230,140
12,766,496(26,191)

65,249,251

65,296,384

22,260,337
47,283,743
10,230,927

22,114,619
47,806,381
9,384,516

79,775,008

79,305,517

11,424,497
5,592,039

10,954,510
5,317,333

17,016,537

16,271,844

28,464,166(265,077)

28,027,137(259,562)

28,199,088

27,767,574

124,990,634

123,344,936

190,239,886

188,641,320

1,170,987
5,336,220
2,563,388
17,836,819
5,611,659
38,00027,902,439

859,580
5,721,993
576,084
18,729,357
3,094,699
22,55029,461,430

Total current liabilities

60,459,515

58,465,695

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

22,007,024
53,596,996
7,524,273
2,446,418
6,549,487

22,188,234
54,373,878
7,598,438
2,457,168
6,754,688

Total fixed assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable—trade
Short-term loans payable
Income taxes payable
Accrued expenses
Provision for bonuses
Provision for directors’ bonuses
Other

Total non-current liabilities
Total liabilities

5

92,124,200

93,372,408

152,583,715

151,838,103

(Thousand yen)
Fiscal 2018
(As of March 31, 2018)
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders’ equity

Q1 of Fiscal 2019
(As of June 30, 2018)

11,933,790
17,026,495
19,636,670(11,376,709)

11,933,790
17,003,306
18,745,815(11,375,607)

37,220,245

36,307,305

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

19,091(366,488)(509,191)

16,960(354,195)(460,903)

Total accumulated other comprehensive income(856,588)(798,139)

560,694
731,819573,719
720,331

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

6

37,656,170

36,803,216

190,239,886

188,641,320

(2) Quarterly consolidated statements of income and comprehensive income
Quarterly consolidated statements of income
Three months ended June 30(Thousand yen)
Q1 of Fiscal 2018(from April 1, 2017
to June 30, 2017)

Q1 of Fiscal 2019(from April 1, 2018
to June 30, 2018)

Net sales
Cost of sales

70,313,364
56,795,338

70,835,690
57,358,847

Gross profit

13,518,025

13,476,842

Selling, general and administrative expenses

11,998,932

12,213,155

Operating income

1,519,093

1,263,686

Non-operating income
Interest income
Rent income
Subsidy income
Equity method investment gain
Other

41,291
61,10337,022
2,192
118,629

34,632
46,241
16,85485,290Total non-operating income

260,239

183,019

1,143,213
9,059
66,982

1,205,044
6,945
66,243
8,475
20,665

1,219,255

1,307,374

560,077

139,331

5,310

1,691

5,310

1,691

477
531

357
149,705-

Non-operating expenses
Interest expenses
Rent expenses
Foreign exchange losses
Share of loss of entities accounted for using equity method
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on reversal of subscription rights to shares
Total extraordinary income
Extraordinary losses
Loss on retirement of property, plant and equipment, net
Loss on sales of investment securities
Loss on cancellation of leases
Total extraordinary losses
Net income (loss) before income taxes
Income taxes—current
Income taxes—deferred

1,008

150,062564,379(9,039)221,620(103,525)

134,259
36,408

Total income taxes

118,095

170,667

Net income (loss)

446,284(179,707)

Profit (loss) attributable to non-controlling interests(64,626)(21,293)

Profit (loss) attributable to owners of parent

510,910(158,413)

7

Quarterly consolidated statements of comprehensive income
Three months ended June 30(Thousand yen)
Q1 of Fiscal 2018(from April 1, 2017
to June 30, 2017)
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 parent
Comprehensive income attributable to non-controllinginterests

8

Q1 of Fiscal 2019(from April 1, 2018
to June 30, 2018)446,284(179,707)

1,521(102,957)
51,006(2,131)
9,239
48,287(50,428)

55,395395,855(124,312)

472,781(96,489)(76,926)(27,822)

(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.

(Significant subsequent events)
Disposal of treasury stock as stock-based compensation with restrictions on transfer
The Company resolved at the meeting of the board of directors held on July 18, 2018 to dispose of treasury stocks as stockbased compensation with restrictions on transfer (hereinafter referred to as the “Disposal of Treasury Stocks” or the“Disposal”).
1. Purposes of and reasons for the Disposal
The Company resolved at a meeting of its Board of Directors held on May 11, 2018 to introduce the stock-based compensation plan withrestrictions on transfer (hereinafter referred to as the “Transfer”) for the purposes of providing appropriate incentives toward the achievementof the sustainable enhancement of corporate value and the medium-term management plan of the Company to directors of the Company otherthan outside directors (hereinafter referred to as the “Directors”), executive officers who are not directors of the Company and the directors of
the subsidiaries of the Company, and promote the further sharing of values with shareholders. In addition, the 46th annual general meeting ofshareholders held on June 26, 2018 (hereinafter referred to as the “General Meeting of Shareholders”), approved, among other matters, that
under the said plan, the right to claim monetary compensation would be provided to directors of the Company as monetary compensation forthe property contributed to acquire shares with restrictions on transfer up to the annual amount of 1,320,000 thousand yen only for seven (7)years from the date of the general meeting of shareholders.
2. Outline of the Disposal(1)(2)

Date of the Disposal
Class and number of shares to bedisposed ofAugust 17, 2018
Common stocks of the Company: 149,650 shares(3)

Price for the Disposal

1,234 yen per share(4)

Total amount of the Disposal

184,668,100 yen

(5)

(6)

Buyers and number of buyers andnumber of stocks to be disposed of

OthersDirectors (other than outside directors) of the Company: 8 persons, 127,500 shares
Executive officers of the Company: 46 persons, 16,750 shares
Directors of the subsidiaries of the Company: 9 persons, 5,400 sharesWith respect to the Disposal of Treasury Stocks, the condition that the securities report is tobecome effective under the Financial Instruments and Exchange Act is applied.

9