QUARTERLY BUSINESS REPORT for the 1st quarter of the year ending March 2006 (Consolidated)
August 12, 2005
Listed company name

Nichii Gakkan Company

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

Title: President & CEO

Name: Takashi Mori

Contact

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 stocktaking is omitted for some of the inventory assets.
(2) Change in accounting method since the latest consolidated fiscal year: None
(3) Scope of consolidation and application of equity method
Number of
Number of non-consolidated
consolidated
8
subsidiaries covered by equity
methodsubsidiaries

Number of relatedcompanies covered byequity method

–

–

st

2. Operating performance highlights for the 1 quarter of the year ending March 2006

(April 1, 2005 through June 30, 2005)(1) Progress of consolidated operating results (Amounts are rounded to the nearest million yen.)

Net sales
Millions of Yen%

Operating income

Ordinary income

Millions of Yen

Millions of Yen%%

Quarterly net
incomeMillions of Yen %30.9

1st quarter FY 2006
51,390
3.2
1,353
1.8
1,418
0.3
703
st
1 quarter FY 2005
49,781
5.9
1,329
△63.2
1,414
△62.0
537
(Reference) FY 2005
201,590
5,284
5,472
2,029
[Note] 1. The percentages shown in 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 the auditing firm.

△72.9[Qualitative information on the progress of consolidated operating results]
Japan's economy showed a gradual upturn in this quarter; the business investment increased moderately with the improved
corporate profit, and the employment market saw the unemployment rate remaining high but on a declining trend.

The

consumer spending had visible signs of a recovery with the income becoming firmer.
In the medical and welfare industry we are engaged, fundamental structural reforms are now taking place along with therapid progress of aging, in order to build a sustainable social security system for pension and medical/nursing care services.
The health insurance reform aims to realize new insurance system in 2008, and discussions are now fully in progress,
featuring the establishment of new “Public Medical Insurance for the Elderly” as well as “Insurance Restructuring” which
will shift the management of insurance to prefectures.

As for the long-term care insurance system, the revised long-termcare insurance law to be enforced in April 2006 passed in the Upper House plenary session on June 23, after which details of
the revision are announced in stages, including outline of the new preventive benefit and the revision of nursing-care benefits
at long-term care insurance facilities (increase in the self-pay burden of the housing expense and abolition of meals provision
expense) to be implemented in coming October, ahead of the law enforcement.
To rebuild a solid corporate entity capable of quick and flexible response to this changing market environment andrealizing ever-lasting growth, Nichii Gakkan group has carried forward its operational improvement and structural reforms
since 2003.

Under the new management setup with Mr. Takashi Mori who succeeded presidency on June 24, 2005, ourefforts for even higher corporate value are continuing, promoting the management system and business strategy reflecting
the local input.
As a result, first quarter net sales increased to 51,390 million yen (up 3.2% year on year), ordinary income to 1,418
million yen (up 0.3% year on year), and net income to 703 million yen (up 30.9% year on year).
Shown below is the segment information of net sales and operating income by business category.
‐1‐

In Medical Support Business, we have strived to gain more intensive sales force by thorough increase of sales personnel
and holding sales strategic meetings on a regular basis since early this period, aiming to acquire new clients from hospitals
and clinics and to negotiate expansion of contracted operations and improvement of contracts with the existing clients.

As

operation assistance services to medical institutions, we are actively engaged in hospital PFI business and consulting andproposals for health service management as well, trying to provide comprehensive services to clients.

As we have juststarted our attempt to intensify the sales structure, we still see only small effects in the first quarter of the year, staying at
2.8% sales increase over the same period last year.
On the operating cost, we see marked effects of the operational improvement project we have worked on since 2 years ago,and have succeeded in achieving greater efficiencies of the field service and higher cost-consciousness.

As the new

employment system implemented last year resulted in a greater cost than expected, we are running an improved employment
system starting this period.
As a result, net sales increased to 26,680 million yen (up 2.8% year on year) and operating income to 2,747 million yen(up 51.9% year on year).
In the rest of the business year, we will commit ourselves to improve the sales structure and promote acquisition of newusers, aiming to conduct aggressive business operations.
In the Heal Care Business, we are advancing the establishment of multi-functional care centers with preventive carefunction, preparing for the introduction of new preventive benefit for the amendment of long-term care insurance system in
April 2006.

We have established 20 multi-functional care centers (18 newly established centers and 2 existing centersrenovated) by the end of first quarter, and developed the project as planned while watching the trends of local governments.
Last year, we expanded and increased facilities and professional staff for home-visit nursing care service, and worked
aggressively to increase new users.

We have seen users increasing, but not enough effects yet. However, the welfare

equipment rental service and the nursing-care worker dispatching service are selling steadily, which boosted the net sales by
7.5 % compared to the same period last year.
As for the operating cost, establishment of the multi-functional care centers temporarily caused overhead costs and recruiting
cost of nursing-care workers.
As a result, net sales increased to 19,303 million yen (up 7.5% year on year) and operating income to 535 million yen (up20.2% year on year).
As a measure to increase new users of home-visit nursing care service, we will enhance the sales promotion activities with acoalition of the branch office sales force and the facilities to further raise the service level for greater sales, asking medial
institutions and home-care support centers as well as home-care support organizations to actively introduce our services.
In the Education Business, we made a quick start of the “preventive exercise instructor course” in late May 2005 while thepreventive care service is attracting attention, which is catching on as an upskilling program for field staff. The homehelper training course as our flagship program, however, is still suffering a severe market situation because of the unclear
outlook working as a brake against the program demand, for the positioning of the home helper qualification is not yet madeclear by the government.
In respect of the operating cost, we expect to take the cost reduction measures in or after the second quarter, as we are
currently examining the integration and closing of unprofitable classes to improve efficiency of class management.
As a result, net sales fell to 3,606 million yen (down 20.7% year on year) and operating income to minus 308 million yen(was 476 million yen in the same period last year).
For the rest of the business year, we intend to improve and expand the favorable “preventive care project instructor training
course” and promote group participation for companies with large sales size.

Besides, we plan to create an environment

where potential students can have easy access to us by diversifying the sales channels making positive use of the web site,
and to develop an advertising strategy to gain recognition.
In Other Businesses, the net sales increased to 1,800 million yen (up 34.8% year on year) and operating income fell to 59
million yen (down 34.6% year on year).
As one of our efforts for cost reduction, we cut down the facilities of the manpower service company “Power Bank Co.,
Ltd.” by reviewing the employment system early in the period. (The Power Bank Co., Ltd. changed its name from Nichii
Power Bank Co., Ltd. as of July 20, 2005, and became a consolidated subsidiary of our group from the semiannual
settlement of accounts for the year ended March 2005.)‐2‐

(2) Changes in the consolidated financial state

Total assets

Shareholders’equityEquity ratio

Millions of Yen

Millions of Yen%

Shareholders'equity per share
Yen
1,448.18

1st quarter FY 2006
88,84451,01957.4
1st quarter FY 2005
83,70051,658
61.7(Reference) FY 2005
85,24051,24160.1[Note] The figures shown above have not been audited by the auditing firm.

1,443.67
1,451.60[Qualitative information on changes in consolidated financial state]
The total assets for this first quarter increased by 3,604 million yen to 88,844 million yen over the previous fiscal
year-end, mainly due to the increase in notes and accounts receivable as well as buildings and structures.
The liabilities increased by 3,819 million yen to 37,681 million yen over the previous fiscal year-end, due to the increasein short-term loans payable, accrued expenses and allowance for employee bonuses.
The shareholders' equity decreased by 222 million yen to 51,019 million yen from the previous fiscal year-end for
acquisition of treasury stock, etc.

[Reference] Non-consolidated data
(1) Progress of non-consolidated operating results(Amounts are rounded to the nearest million yen.)
Quarterly net
Operating income
Ordinary income
incomeNet sales
Millions of Yen%

Millions of Yen %Millions of Yen %Millions of Yen %1st quarter FY 2006
48,756
2.4
1,385
12.6
1,477
10.3
822
34.4
st
1 quarter FY 2005
47,591
6.2
1,229
△65.6
1,338
△63.9
611
△70.1
(Reference) FY 2005
190,638
6,188
6,438
3,407
[Note] 1. The percentages shown in net sales, operating income, etc. represent the rates of change
on ayear-on-year basis.
2. The figures shown above have not been audited by the auditing firm.
(2) Change in non-consolidated financial state

Total assets

Shareholders’equityMillions of Yen

Millions of Yen

1st quarter FY 2006
84,71650,282st
1 quarter FY 2005
78,332
48,982(Reference) FY 2005
80,20450,385[Note] The figures shown above have not been audited by the auditing firm.

3. Forecast of consolidated operating performance for the year ending March 2006
(April 1, 2005 through June 30, 2005)
The six months and full year forecasts of operating performance for the year ending March 2006 remain the same as publishedin the “Annual Report for the year ended March 2005 (consolidated)” on May 23, 2005.
Please note, however, the above forecast is based on the available information as of the release date of this report. The actual
results of operating performance could be different from this forecast, depending on various factors.

‐3‐

Quarterly Consolidated Financial Statements (summary)
1. Quarterly Consolidated Balance Sheet (summary)
Period(Thousands of Yen)
Corresponding Quarter ofCurrent Quarter
Previous Year
(1st quarter FY 2006) (1st quarter FY 2005)(Reference)

ChangeFY 2005

Item
AmountAmountRC

Amount％ASSETSI.

AmountCurrent assets△

664,557 △ 13.4

1. Cash and deposits

4,278,692

4,943,249

2. Notes and accounts receivable

25,845,698

24,796,717

1,048,981

4.2

24,801,790

3. Inventories

4,621,284

4,496,113

125,1702.8

4,698,454

59,892441,980△

382,087 △ 86.4

38,066

5. Deferred tax assets

2,686,542

2,934,385△

247,843△ 8.4

1,847,149

6. Other current assets

3,549,562

2,664,984

884,577

33.2

3,133,566

78,532355.5

4. Short-term loans receivable

7. Allowance for doubtful accounts△

Total current assets

100,622△

22,089△4,058,021△

74,97440,941,050

40,255,341

685,708

1.7

38,502,074

1. Buildings and structures

20,124,568

15,468,651

4,655,917

30.1

18,853,855

2. Land

8,002,867

8,002,867－－

8,002,867

3. Other tangible fixed assets

1,622,641

2,670,785△ 1,048,144 △ 39.2

1,758,022

29,750,077

26,142,304

3,058,569

3,264,341

909,334

II. Fixed assets(1) Tangible fixed assets

Total tangible fixed assets

3,607,773

13.8

28,614,744

205,772△ 6.3

3,112,075

382,384

526,950137.8

798,8423,967,904

3,646,726

321,1788.8

3,910,917

1. Investment securities

1,649,315

2,887,220△ 1,237,905 △ 42.9

1,831,087

2. Guarantee money deposited

5,113,922

4,581,746

532,175

11.6

5,022,467

3. Long-term loans receivable

5,114,573

4,309,693

804,880

18.7

5,089,519

4. Deferred tax assets

1,022,723

932,71290,011

9.7

976,169

5. Other investments

1,345,490

1,015,547

329,94332.5

1,361,414(2) Intangible fixed assets
1. Consolidated adjustment account
2. Other intangible fixed assets

Total intangible fixed assets△(3) Investments and other assets

6. Allowance for doubtful accounts△

60,726△70,3229,596 △ 13.6△

68,257

14,185,299

13,656,597

528,701

3.9

14,212,400

Total fixed assets

47,903,281

43,445,628

4,457,653

10.3

46,738,062

Total Assets

88,844,331

83,700,969

5,143,362

6.1

85,240,136

Total investments and other assets‐4‐

(Thousands of Yen)

PeriodCorresponding Quarter ofCurrent Quarter
Previous Year
(1st quarter FY 2006) (1st quarter FY 2005)(Reference)

ChangeFY 2005

Item
AmountAmountRC

Amount％LIABILITIESI.

AmountCurrent liabilities

1. Notes and accounts payable

2,623,323

2,020,986

602,33729.8

2,391,017

2. Short-term loans payable

5,405,000

1,025,839

4,379,160

426.9

4,717,000

74,307

63,783

10,524

16.5

78,734

4. Income taxes payable

1,755,459

2,151,621

396,162 △ 18.4

978,119

5. Consumption taxes payable

1,230,712

949,494281,21729.6

1,205,357

6. Accrued expenses

14,923,153

11,716,682

3,206,471

27.4

13,866,697

7. Allowance for employee bonuses

5,561,663

5,740,155△

178,492△ 3.1

3,681,227

8. Other current liabilities

3,320,118

5,889,427△ 2,569,309 △ 43.6

4,254,868

34,893,738

29,557,991

61,28966,1162,506,793

2,106,880

129,339

130,609

4. Other long-term liabilities

90,145

Total long-term liabilities
Total Liabilities

3. Current installments of long-term debt

△

18.1

31,173,021

4,827

△ 7.3

57,822399,91219.0

2,414,372

1,270

△ 1.0

128,281

65,31524,82938.0

87,9502,787,567

2,368,922

418,64517.7

2,688,427

37,681,306

31,926,914

5,754,391

18.0

33,861,449

143,747

115,481

28,266

24.5

137,380

Common stock

11,933,790

11,933,790－－

11,933,790

II. Capital surplus

17,354,214

17,354,214－－

17,354,214

III. Retained earnings
IV. Gain or loss from revaluationof marketable securities
V. Treasury stock

27,452,893

26,587,776

865,117

3.3

27,562,047

193,700

39,605

154,095

389.1

182,888△ 5,915,321△ 4,256,812△ 1,658,508

39.0△ 5,791,633

Total shareholders' equity

51,019,278

51,658,574

639,295△ 1.2

51,241,307

Total liabilities, minority
interests, and shareholders' equity

88,844,331

83,700,969

5,143,362

6.1

85,240,136

Total current liabilities
II.

5,335,746

Long-term liabilities

1. Long-term loans payable
2. Allowance for
employee retirement benefits
3. Allowance for directors'
and auditors' retirement benefits△△

MINORITY INTERESTS
Minority interests
SHAREHOLDERS’ EQUITY

I.

‐5‐

△

2. Quarterly Consolidated Statements of Income (summary)
PeriodItem(Thousands of Yen)

Corresponding Quarter ofCurrent Quarter
Previous Year
(1st quarter FY 2006) (1st quarter FY 2005)
AmountAmount(Reference)

ChangeFY 2005

RC

AmountAmount％I.

Net sales

51,390,295

49,781,087

1,609,208

3.2

201,590,179

II. Cost of sales

40,808,058

39,755,948

1,052,110

2.6

160,854,542

Gross profit
III. Selling, general andadministrative expenses
Operating income

10,582,237

10,025,139

557,098

5.6

40,735,636

9,228,553

8,695,527

533,026

6.1

35,450,954

1,353,683

1,329,612

24,071

1.8

5,284,682

1. Interest income

20,25523,6303,374△ 14.390,424

2. Dividend income

19,605

16,880

2,725

16.1

27,391

19,857

18,7141,142

6.1

77,8094. Income from lease of fixed assets

6,525

9,326

△

2,801

△ 30.025,215

5. Others

18,52438,293△

19,769△ 51.682,99584,767

106,845△

22,078△ 20.7

303,835

1. Interest expenses

10,744

5,816

4,927

84.7

44,036

2. Compensation for damages

2,032

4,423

△

2,390

△ 54.042,9602,784

10,995△8,211△ 74.7

21,473

4,268

1,108

3,160

285.0

7,367

19,83022,3442,513△ 11.3

115,838

1,418,620

1,414,113

4,507

0.3

5,472,679

1. Gain on sale of fixed assets

－

1,596

△

1,596

－

1,596

2. Others

－

2,217

△

2,217

－

3,981

Total extraordinary income

－

3,814

△

3,814

－

5,577

－

244,706△

244,706－

244,706

5,100

22,332△

17,232△ 77.2

71,812

－

－

－

－

4,849

－

112,048△

112,048－

112,048

－

－

1,750

△

373,986△ 98.7435,167

374,680

36.1

5,043,089

301,010△ 15.93,440,687

IV. Non-operating income

3. Commission on consignment
for office work

Total non-operating income

V.

△

Non-operating expenses

3. Loss on disengagement ofguarantee money deposited
4. Others
Total non-operating expenses

Ordinary income
VI.

VII.

△

Extraordinary income

Extraordinary losses

1. Loss on sale of fixed assets
2. Loss on retirement of
fixed assets
3. Loss on revaluation ofgolf club membership
4. Loss on closedown of offices
5. Others
Total extraordinary losses

Quarterly income before income
taxes
Income, inhabitants
and business taxes
Adjustments for income
and other taxes
Minority interest
Quarterly net income

△

－

－

5,100

379,087

1,413,520

1,038,839

1,594,371

1,895,381

893,146△ 1,399,678

506,531△ 36.2

8,767

5,745

3,021

52.6

27,644

703,528

537,391

166,13730.9

2,029,019

‐6‐

△

△

454,261