QUARTERLY BUSINESS REPORT for the 3rd quarter of the year ending March 2006
(Consolidated)
Listed company name: Nichii Gakkan Company

February 16, 2006
Code number: 9792
Listed on: Tokyo Stock Exchange 1st Section(URL: http://www.nichiigakkan.co.jp)
Representative

Title: President & CEO

Contact

Title: Director, Vice President of Accounting Division and General Manager of Accounting Department
Name: Koichi Terada

Name: Takashi Mori
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) Scope of consolidation and application of equity method
Number of consolidated subsidiaries: 7
Number of non-consolidated subsidiaries covered by equity method: None
Number of related companies covered by equity method: None
2. Operating performance highlights for the 3rd quarter of the year ending March 2006
(October 1, 2005 through December 31, 2005)(1) Progress of consolidated operating results(amounts are rounded to the nearest million yen)
Net salesOperating income
Ordinary income
Quarterly net income％ Millions of yen
Millions of yen％
Millions of yen％ Millions of yen
4,058
5.5
4,235
5.8
3 rd quarter FY 2006
0,008
154,967
2.9
3,848
△62.7
4,004
△61.8
1,097
3 rd quarter FY2005
150,616
6.4(Reference) FY 2005
201,590
5,284
5,472
2,029
[Note]
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.

％
△99.2
△80.8

[Qualitative information on the progress of consolidated operating results]
During the 3rd quarter under review, the Japanese economy faced a few bearish factors, such as rising oil prices and uncertain U.S. economy. Ingeneral, however, the Japanese economy made a gradual recovery, aided by an increase in capital investment, growth in personal consumption,and improvement in employment as corporate profits continued to improve.
The medical and welfare industry in which we operate, is approaching a major crossroads, where medical service fees and nursing care insurance
system will be simultaneously revised in April 2006. Medical service fees are expected to be cut by 3.16%, while nursing care compensation isexpected to be reduced by 2.40%. As medical institutions and nursing care businesses can expect a severe business environment, they must run
their businesses more efficiently. In addition, as the basic objectives of the nursing care insurance system revision are to improve support for
in-home patients that are in moderate to serious condition, promote services to prevent nursing, and to improve collaboration between medicalcare and nursing care, it is important for nursing care businesses to expand into new business domains and develop total support systems withmedical institutions.
Against such a backdrop, Nichii Gakkan group has striven to adapt to changing systems promptly and properly. To this end, we have converged
and collaborated the business resources held by Medical Support Business, Health Care Business, and Education Business to build a service
provision system that can fully achieve a synergetic effect. In addition, with "user-orientation" as our business concept, we have developed andprovided high-quality, high-value services that satisfy customers.
As a result, during the 3 rd quarter under review, net sales were ¥154,967 million (up 2.9% year-on-year), operating income ¥4,235 million (up5.8%), and net income ¥8 million (down 99.2%).
Net income for the quarter fell 99.2% year-on-year as additional special losses were posted to allowance for doubtful accounts and productvaluation loss for welfare equipment.

Shown below is the segment information on net sales and operating income by business category.
In Medical Support Business, we launched the development and provision of management consulting services using a new medical management
analysis support system in addition to the contracting service to provide total support for the management of medical institutions. To prepare forthe revision of medical service fees in April 2006, we have aggressively promoted support services for medical institutions, such as seminars on
the revision of medical service fees and input services for the new medical service fee points and codes. As a result, net sales increased 3.3%
year-on-year.
We have successfully reduced operating expenses, and thus improved our profit margin, by improving the shift management of field staff andcontinuing our efforts to improve the efficiency of operations. As a result, net sales were ¥80,766 million (up 3.3% year-on-year) and operating
income ¥8,351 million (up 37.9%).
In Health Care Business, we are advancing the establishment of multi-functional care centers with preventative care function (composite carefacilities with day care centers as their core) to prepare for the introduction of new preventative benefits and local support businesses pursuant tothe revision of the nursing care insurance system in April 2006. By the third quarter, we have opened 77 centers that can provide preventative
care and 224 locations that can provide day care services (up 34 location year-on-year). We are also working to open the second group home(group living and care facility that caters to dementia, scheduled to open in Yokohama, Kanagawa in January 2006), revise menus for foodservice to further expand our total nursing care services. Such conventional services as home-visit care services and day care services have only
seen limited increases in use.
Operation cost has increased from investment as we aggressively advanced the multi-functional care center plan during the quarter under review.
As a result, net sales increased to ¥59,505 million (up 7.3% year-on-year) and operating income decreased to ¥1,762 million (down 7.6%).
We will continue to strive to provide high value-added services and efficiently operate our centers by catering to the needs of users.
In Education Business, we are currently thoroughly reviewing our sales promotion strategy and improving the efficiency of class operations.
Our principal class, medical administration course, has captured students at a pace exceeding that in the last fiscal year. Our efforts to revamp
the home helper course has had limited effect, as we have not been able to overcome the difficulties in the market environment. We have held apreventative care project instructor training course, a new class designated to train specialists in preventative care, from late May 2005. Thisclass has seen its student body grow as it helps field staff to brush up on their skills.
As a result, net sales fell to ¥10,174 million (down 15.1% year-on-year) and operating loss amounted to ¥1,642 million (¥167 million in the samequarter last fiscal year).
As for sales promotion strategy, we will strive to maximize the cost-benefit effect by aggressively and yet efficiently integrating and selecting
sales channels that are best suited to the needs of the times.

In Other Businesses, as stock of Sun Medic Co., Ltd. has been assigned, the company's financial results were removed from the consolidated
results as of October 1, 2005.
Other service businesses have achieved consistent sales, and profits are also on the rise.
As a result, net sales amounted to ¥4,520 million (down 10.2% year-on-year) and operating income ¥180 million (operating loss of ¥188 million
in the same quarter last fiscal year).

(2)Changes in consolidated financial status
Total assets

Shareholders' equity

Equity ratio

Millions of yen
50,56950,325

％
55.1
60.6

(Reference) FY 2005
85,24051,241[Note] The figures shown above have not been audited by an auditing firm.

60.1

3 rd quarter FY 2006
3 rd quarter FY 2005

Millions of yen
91,77083,098

Shareholders' equity pershareYen
1,435.60
1,426.60
1,451.60［Qualitative information on changes in consolidated financial status］
During the 3rd quarter under review, total assets increased by ¥6,530 million to ¥91,770 million from the end of the last fiscal year primarily due
to increases in cash and deposits, and buildings and structures.
Liabilities increased by ¥7,179 million to ¥41,041 million from the end of the last fiscal year primarily due to increases in short-term loans
payable and accrued expenses.
As for shareholders' equity, capital surplus fell ¥671 million to ¥50,569 million from the end of the last fiscal year

[Reference] Non-consolidated data(1)Progress of non-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
3 rd quarter FY 2006
147,890
3.4
3,889
△24.6
4,082
△23.4 00000△873△131.6
143,008
6.3
5,163
△48.7
5,333
△48.0
3 rd quarter FY 2005
2,760
△51.5(Reference) FY 2005
190,638
6,188
6,438
3,407
[Note]
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
3 rd quarter FY 2006
88,0103 rd quarter FY 2005
78,338

Shareholders' equity
Millions of yen
48,83349,754(Reference) FY 2005
80,20450,385[Note] The figures shown above have not been audited by an auditing company.

3.Forecast of consolidated operating performance for the year ending March 2006
(1)Correction of forecast of consolidated operating performance for the year ending March 2006 (April 1, 2005 through March 31, 2006)(Millions of yen)Previous forecast (A)New forecast (B)Change (B - A)RC
Actual performance last
fiscal year
(year ended March 2005)
Net sales
208,700
205,800△ 2,900△ 1.4％
201,590
Ordinary income
6,410
4,840
△ 1,570△ 24.5％
5,472
Net income
3,390690△ 2,700△ 79.6％2,029

[Qualitative information on performance forecast]
The forecasts of both consolidated and non-consolidated operating performance for the year ending March 2006 announced on November 21,
2005 will be corrected based on the performance trends, and due to additional extraordinary losses such as amount transferred to allowance for
doubtful accounts, and revaluation loss on merchandise, until the 3 rd quarter. For details, please refer to the "Notice on Corrections to Forecasts
for Operating Performance for the Year Ending March 2006" released on February 16.
In addition, as the revision of nursing care insurance system in April 2006 include major changes to the leases and sales of welfare equipment, it
is extremely difficult to forecast the future demand for welfare equipment at this point. Therefore, depending on the upcoming demand forecasts
and operation of the nursing care insurance system, the revaluation loss on merchandise might increase.

[Reference] Correction of forecast of non-consolidated operating performance for the year ending March 2006 (April 1, 2005 throughMarch 31, 2006)(Millions of yen)

Net sales
Ordinary income
Net income

Previous forecast (A)New forecast (B)Change (B - A)RC

200,000
6,300
2,420

197,200
4,780
△ 240

△ 2,800△ 1,520−

0△ 1.4％△ 24.1％−

Actual performance last
fiscal year
(year ended March 2005)
190,638
6,438
3,407

[Note] The forecast is based on information that is currently available, and actual results are subject to change depending on numerous
factors such as the economic environment and business environment.

(Quarterly Consolidated Financial Statements (Summary)
1. Quarterly Consolidated Balance Sheet (Summary)Current Quarter(3rd quarter FY 2006)
AmountASSETSⅠ 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.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
6.Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

Corresponding Quarter ofPrevious Year
(3rd quarter FY 2005)
Amount(Thousands of yen)
(Reference)
FY 2005

ChangeAmountRC

Amount%10,094,126
25,524,784
3,359,628
33,1701,407,442
3,396,644△ 236,588
43,579,207

3,497,689
24,709,410
4,674,306
160,746
951,551
3,651,048△ 21,641
37,623,112

6,596,436
815,373△1,314,678△ 127,576
455,890△ 254,403△ 214,946
5,956,095

188.6
3.3
△ 28.1△ 79.4
47.9
△ 7.0
993.2
15.8

4,058,021
24,801,790
4,698,454
38,066
1,847,149
3,133,566△ 74,974
38,502,074

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

19,070,157
8,002,867
742,527
27,815,552

3,522,149△ 44,813
1,086,764
4,564,101

18.5
△ 0.6
146.4
16.4

18,853,855
8,002,867
1,758,022
28,614,744

2,951,558
893,553
3,845,111

3,165,580
745,797
3,911,378△ 214,022
147,755△ 66,266

△ 6.8
19.8
△ 1.7

3,112,075
798,8423,910,917

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

1,848,088
5,001,869
4,933,537
951,8021,138,610△ 125,063
13,748,844
45,475,775
83,098,888

147,475△ 13,729
44,650111,248
283,707△2,355,388△1,782,035
2,715,799
8,671,894

8.0
△ 0.3
0.9
11.7
24.9
1883.4△ 13.0
6.0
10.4

1,831,087
5,022,467
5,089,519
976,169
1,361,414△ 68,257
14,212,400
46,738,062
85,240,136

Current Quarter(3rd quarter FY 2006)
AmountLIABILITIESⅠ Current liabilities
1.Notes and accounts payable
2.Short-term loans payable
3.Current installments oflong-term debt
4.Income taxes payable
5.Consumption taxes payable
6.Accrued expenses
7.Allowance for employee bonuses
8.Other current liabilities
Total current liabilities
Ⅱ Long-term liabilities
1.Long-term loans payable2.Allowance for employee
retirement benefits
3.Allowance for directors' andauditors' retirement benefits
4.Other long-term liabilities
Total long-term liabilities
Total Liabilities(Minority interest)
Minority interests

Corresponding Quarter ofPrevious Year
(3rd quarter FY 2005)
Amount(Thousands of yen)
(Reference)
FY 2005Change

AmountRC

Amount%1,935,995
11,405,000

2,441,231
5,155,839△505,235
6,249,160△ 20.7121.2

2,391,017
4,717,000

63,283
252,713
1,716,011
16,209,078
1,667,676
4,822,873
38,072,633

76,431
502,155
1,105,405
14,718,530
1,728,653
4,305,255
30,033,501△ 13,147△249,442
610,606
1,490,548△ 60,976
517,618
8,039,131△ 17.2△ 49.7
55.2
10.1
△ 3.5
12.0
26.8

78,734
978,119
1,205,357
13,866,697
3,681,227
4,254,868
31,173,021

42,431

68,323△ 25,891△ 37.957,822

2,703,468

2,327,099

376,36816.2

2,414,372

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

132,12184,4272,611,971
32,645,473

4,813
11,156356,820
8,395,951

△ 3.6
13.2
13.7
25.7

128,281
87,9502,688,427
33,861,449

159,917

127,652

32,265

25.3

137,380△

SHAREHOLDERS' EQUITYⅠ Common stock
Ⅱ Capital surplus
Ⅲ Retained earnings
Ⅳ Gain or loss from revaluation ofmarketable securities
Ⅴ Treasury stock
Total shareholders' equity

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

11,933,790
17,354,21426,630,808

127,001

0.5

11,933,790
17,354,214
27,562,047

451,426△ 5,927,802
50,569,439

192,972△ 5,786,024
50,325,761

258,453△141,777
243,677

133.9
2.5
0.5

182,888△ 5,791,633
51,241,307

Total liabilities, minority interests,
and shareholders' equity

91,770,782

83,098,888

8,671,894

10.4

85,240,136

2. Quarterly Consolidated Statement of Income (Summary)Current Quarter (3rdquarterFY2006)
AmountⅠ Net sales
Ⅱ Cost of sales
Gross profit
Ⅲ Selling, general andadministrative expenses
Operating income
Ⅳ Non-operating income
1.Interest income
2.Dividend income
3.Commission on consignment
for office work
4.Income from lease of fixed assets
5.Others
Total non-operating income
Ⅴ Non-operating expenses
1.Interest expenses
2.Compensation for damages
3.Loss on disengagement ofguarantee money deposited
4.Others
Total non-operating expenses
Ordinary income
Ⅵ Extraordinary income
1.Gain on sale of fixed assets
2.Gain on sale of stock of affiliatedcompanies
3.Others
Total extraordinary income
Ⅶ Extraordinary losses
1.Los on sale of fixed assets
2.Loss on retirement of fixed assets3.Loss on revaluation of golf clubmembership
4.Loss on closing of offices
5.Loss on revaluation of stock ofaffiliated companies
6.Loss on revaluation ofmerchandise
7.Impairment loss
8.Transfer to allowance for doubtful
accounts
9.Loss on disposal of merchandise
10.Others
Total extraordinary losses
Quarterly income before income taxes
net income
Income tax, inhabitant tax, and business tax
Adjustments for income tax and other taxes
Minority interest
Quarterly net income(Thousands of Yen)
(Reference)
FY 2005

ChangeCorresponding Quarter ofPrevious Year
(3rd quarter FY 2005)
AmountAmountRC

Amount154,967,301
123,844,697
31,122,603

150,616,404
119,926,654
30,689,749

4,350,897
3,918,043
432,853

%
2.9
3.3
1.4

27,063,972
4,058,631

26,841,516
3,848,233

222,456
210,3970.8
5.5

35,450,954
5,284,682

61,261
27,911

69,59627,391△ 8,335520△ 12.01.9

90,42427,391

68,38020,03659,148
236,739

62,90425,92065,125250,938

5,476△ 5,884△ 5,976△ 14.198

8.7△ 22.7△ 9.2△ 5.7

77,80925,21582,995
303,835

39,3995,052

29,47838,8809,921△ 33,827

33.7△ 87.044,03642,960854
14,431
59,73817,2108,624
94,194△ 16,355
5,806△ 34,455△ 95.067.3△ 36.6

21,473
7,367
115,838

4,235,631

4,004,977

230,6545.8

5,472,679

4

1,596

△ 1,592△ 99.7

1,596

1,489,112
1,489,116

3,981
5,577

1,489,112△ 3,981
1,483,539

26596.9

3,981
5,577

65,402

244,706
60,627△244,706
4,775

7.9

244,706
71,812

7,552

3,499
112,048△ 3,499△104,495△ 93.34,849
112,048

97,493-97,493--

1,174,757
131,098-

1,174,757
131,098--

2,528,000
31,382
4,035,686
1,689,062

3,894
424,776
3,585,778

2,528,000
31,382△ 3,894
3,610,909△1,896,716

850.1△ 52.91,750
435,167
5,043,089

1,487,245
168,030
24,9378,848

2,011,341
458,762
17,917
1,097,756△ 524,096△ 290,732
7,020△1,088,908△ 26.1△ 63.439.2△ 99.23,440,687△ 454,261
27,6442,029,019

201,590,179
160,854,542
40,735,636