Business Results for the Second Quarter of the Year Ending December 31, 2018
(Six Months Ended June 30, 2018)[Japan GAAP] (Consolidated)
August 7, 2018

Company:
The Pack Corporation
Listed on the TSE1
Stock code:
3950
URL: http://www.thepack.co.jp
Representative: Mitsuo Inada, President & CEO
Contact:
Michihisa Fujii, Managing Director, Divisional General Manager of Administration HQ
TEL: +81-6-6972-1221
Expected date of filing of quarterly report:
August 10, 2018
Expected starting date of dividend payment:
September 5, 2018
Preparation of supplementary quarterly financial document:
Yes
Quarterly results briefing:
Yes (for institutional investors and securities analysts)(Rounded down to million yen)

1. Consolidated business results for the second quarter of the year ending December 31, 2018
(January 1, 2018 through June 30, 2018)(1) Consolidated results of operations(% change from the previous corresponding period)
Net sales

Operating profit

Million yen

Six months ended Jun. 30, 2018
Six months ended Jun. 30, 2017
(Note) Comprehensive income%

Million yen

Profit attributable toowners of parent

Ordinary profit

Million yen%

42,0540.8
2,695 (11.7)
2,858 (11.1)
1,927
41,729
1.0
3,053
20.9
3,217
18.0
2,107
Six months ended Jun. 30, 2018: 1,765 million yen (down 26.0%)
Six months ended Jun. 30, 2017: 2,384 million yen (up 157.3%)

(8.5)
26.5

Basic earnings per
share
Six months ended Jun. 30, 2018
Six months ended Jun. 30, 2017%

Million yen%

Diluted earnings per
share

Yen

Yen

98.22
107.42

98.11
107.31(2) Consolidated financial position
Total assets

Net assets

Million yen

Capital adequacy ratio

Million yen

80,79754,82381,92853,457
As of Jun. 30, 2018: 54,656 million yen

As of Jun. 30, 2018
As of Dec. 31, 2017
(Reference) Owner’s equity

%

67.6
65.1
As of Dec. 31, 2017: 53,372 million yen

2. Dividends
End of 1Q

End of 2Q

Dividend per share
End of 3Q

Year-end

Total

Yen

Yen

Yen

Yen

Yen

-

25.00
25.00

-

25.00

50.00

-

25.00

50.00

Year ended Dec. 31, 2017
Year ending Dec. 31, 2018Year ending Dec. 31, 2018
(forecasts)(Note) Revisions to the most recently announced dividend forecast: None

3. Forecast of consolidated business results for the year ending December 31, 2018
(January 1, 2018 through December 31, 2018)(% change from the previous corresponding period)
Net sales
Million yen

Operating profit%

Million yen

Profit attributable toowners of parent

Ordinary profit%

Million yen

Basic earnings per
share

%

Million yen%

Yen

Full year
94,000
4.1
7,400
1.7
7,700
1.5
(Note) Revisions to the most recently announced consolidated forecast: None

5,400

3.6

275.23

* Notes(1) Material changes in subsidiaries during this period (Changes in scope of consolidations resulting from changes
in subsidiaries): None
(2) Applying of specific accounting of the consolidated quarterly financial statements: None
(3) Changes in accounting policies, accounting estimates and retrospective restatement
1) Changes in accounting policies based on revisions of accounting standard: None
2) Changes in accounting policies other than ones based on revisions of accounting standard: None
3) Changes in accounting estimates: None
4) Retrospective restatement: None

(4) Number of issued and outstanding shares (common stock)1) Number of issued and outstanding shares at the end of fiscal year (including treasury stock)
As of Jun. 30, 2018:

19,900,000 shares

As of Dec. 31, 2017:

19,900,000 shares

As of Dec. 31, 2017:

280,247 shares

2) Number of treasury stock at the end of fiscal year
As of Jun. 30, 2018:278,526 shares

3) Average number of shares
Six months ended Jun. 30, 2018:

19,620,748 shares

Six months ended Jun. 30, 2017:19,617,519 shares*The current quarterly financial summary is not subject to quarterly review by certified public accountants or auditing
firms.
*Explanation regarding appropriate use of business forecasts and other special instructions
Forecasts regarding future performance in these materials are based on information that was available when this document was
released and incorporates a number of current assumptions about uncertainties that may affect future results of operations.
Therefore, actual results may differ significantly from the forecasts due to various factors. Please refer to "Explanation ofConsolidated Forecasts and Other Forward-looking Statements" on page 3 for forecast assumptions.

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

3(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements

3

2. Matters Related to Summary Information (Notes)

3(1) Material Changes in Subsidiaries during This Period

3(2) Applying of Specific Accounting of the Consolidated Quarterly Financial Statements

3(3) Changes in Accounting Policies, Accounting Estimates and Retrospective Restatement

3

3. Quarterly Consolidated Financial Statements and Notes

4(1) Quarterly Consolidated Balance Sheet

4(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive
Income6(3) Quarterly Consolidated Statement of Cash Flows

8(4) Notes to Quarterly Consolidated Financial Statements

9

Going Concern Assumption

9

Significant Changes in Shareholders’ Equity

9

Business Combinations

9-1-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
In the first half of 2018, the Japanese economy continued to recover gradually as the employment and income
environment improved supported by the government’s economic and monetary policies. Nevertheless, the overall
economic situation continues to be difficult amid higher crude oil prices, rising wages of temporary staff due tolabor shortages and an increase in logistics costs.
Demand from foreign tourists in Japan is expected to remain firm. However, the outlook is uncertain because of
global economic slowdown triggered by U.S. trade policies, concerns over political trends in the U.S. and Europe,and geopolitical risks involving East Asia and the Middle East.
During the first half, there were many activities to accomplish the goals of the medium-term management planunder the slogan of “Adapt to Changes and Advance with Vigor—Become an Even More Powerful Group—.” Allgroup companies were focused on entering new markets and selling products at adequate prices . Group
companies are also engaged in activities such as making substantial capital expenditures, developing new
products and improving quality management in order to increase earnings.
Net sales increased 0.8% year-on-year to 42,054 million yen, operating profit decreased 11.7% to 2,695 million
yen, ordinary profit decreased 11.1% to 2,858 million yen, and profit attributable to owners of parent decreased
8.5% to 1,927 million yen.
Business segment performance was as follows.
(Paper Products)
The paper products segment accounted for 62.6% of consolidated sales in the first half of 2018. Sales of paperbags, which accounted for 31.3% of consolidated sales, decreased 1.4% to 13,134 million yen. This decrease wasattributable to lower sales of specialty retail stores in Japan.
Sales of paper folding cartons, which accounted for 17.3% of consolidated sales, increased 8.6% to 7,275 million
yen. Sales of cartons for food products were firm. Sales to the e-commerce sector were also favorable. Sales of
Kannaru Printing Co., Ltd., a new subsidiary included in the consolidation from the current fiscal year,
contributed to higher segment sales.
Sales of corrugated boxes, which accounted for 11.7% of consolidated sales, increased 3.3% to 4,934 million yen.
This increase was attributable to strong sales of boxes to manufacturers and e-commerce sector.
Printing sales, which accounted for 2.3% of consolidated sales, decreased 2.6% to 977 million yen as sales wereweak at NIKKO PRINT CORPORATION.
Overall, sales in this segment increased 2.0% to 26,321 million yen. Operating profit was down 7.1% to 2,092
million yen.
(Film Packaging)
The film packaging segment accounted for 21.1% of consolidated sales in the first half of 2018. There was adecrease in sales for products for disposable diapers. As a result, sales decreased 1.2% to 8,867 million yen.
Operating profit was down 28.2% to 363 million yen.
(Other Businesses)
Other businesses accounted for 16.3% of consolidated sales in the first half of 2018. While sales of promotional
items at Kannaru Printing were included in the consolidation, there was a decline in sales of products used inconjunction with the Pack Assortment Service system, which is the parent company’s comprehensive outsourcing
vendor system that covers everything from manufacturing and procuring packaging materials and other products
to inventory control and delivery. As a result, sales decreased 1.3% to 6,865 million yen. Operating profit
decreased 5.2% to 618 million yen.

-2-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

(2) Explanation of Financial Position
1) Balance sheet position
Assets totaled 80,797 million yen at the end of the second quarter of 2018, down 1,130 million yen from the endof 2017. The main factors were increases of 1,240 million yen in cash and deposits, 490 million yen inmerchandise and finished goods, 317 million yen in buildings and structures and 4,369 million yen in investment
securities, and decreases of 5,653 million yen in notes and accounts receivable-trade and 2,599 million yen insecurities.
Liabilities decreased 2,496 million yen to 25,974 million yen. The main factors were an increase of 206 million
yen in long-term loans payable and a decrease of 2,688 million yen in notes and accounts payable-trade.
Net assets increased 1,366 million yen to 54,823 million yen. The main factor was an increase of 1,436 million
yen in retained earnings.
2) Cash flow position
The balance of cash and cash equivalents at the end of the second quarter of 2018 decreased 1,619 million yen, or
7.7% from the end of the second quarter of 2017 to 19,471 million yen.
Cash flows from operating activities
Operating activities provided net cash of 5,000 million yen (net cash provided of 5,498 million yen in the firsthalf of 2017).The principal factors were profit before income taxes of 2,858 million yen and a decrease of 6,231
million yen in notes and accounts receivable-trade, while there was a decrease of 3,450 million yen in notes andaccounts payable-trade.
Cash flows from investing activities
Investing activities used net cash of 3,171 million yen (net cash provided of 3,191 million yen in the first half of2017). The principal factor were outlays of 4,090 million yen for the purchase of investment securities and 1,300
million yen for the purchase of securities, while there were proceeds from sales of securities of 2,900 million
yen.
Cash flows from financing activities
Financing activities used net cash of 1,572 million yen (net cash used of 485 million yen in the first half of 2017).
This was mainly due to outlays of 672 million yen for repayments of long-term loans payable and 490 million
yen for the cash dividends paid.
(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements
The consolidated forecasts announced on February 9, 2018 remain unchanged.
2. Matters Related to Summary Information (Notes)(1) Material Changes in Subsidiaries during This Period
Not applicable.
(2) Applying of Specific Accounting of the Consolidated Quarterly Financial Statements
Not applicable.
(3) Changes in Accounting Policies, Accounting Estimates and Retrospective Restatement
Not applicable.

-3-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

3. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet
Previous fiscal year
(As of December 31, 2017)(Million yen)
Second quarter ofthe current fiscal year
(As of June 30, 2018)

AssetsCurrent assets
Cash and deposits

13,308

14,549Notes and accounts receivable-trade24,227

18,574

Securities

10,0997,499

Merchandise and finished goods

5,232

5,722

Work in process

761

844

Raw materials and supplies

759

719

Deferred tax assets

260

251

Other

613

723

Allowance for doubtful accounts

(28)

(29)

55,23548,855

Buildings and structures, net

6,878

7,196

Machinery, equipment and vehicles, net

5,132

5,360

199

219

8,122

8,397

Total current assets
Non-current assets
Property, plant and equipment

Tools, furniture and fixtures, net
LandConstruction in progress

272

90

20,606

21,265186

165

Investment securities

4,944

9,314

Deferred tax assets

423

446

Other

637

807

Total property, plant and equipment
Intangible assets
Investments and other assets

Allowance for doubtful accounts

(106)

(57)

Total investments and other assets

5,899

10,511

26,692

31,942

81,92880,797

Total non-current assets
Total assets-4-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

(Million yen)
Second quarter ofthe current fiscal year
(As of June 30, 2018)

Previous fiscal year
(As of December 31, 2017)
Liabilities
Current liabilities
Notes and accounts payable-trade

14,486

11,797

Electronically recorded obligations-operating

5,246

4,674

Current portion of long-term loans payable-

84

Income taxes payable

1,353

966

Provision for bonuses

289

280

Provision for directors’ bonuses

44

23

Other

2,567

3,330

Total current liabilities

23,987

21,158Long-term loans payable-

206

Deferred tax liabilities

326

525

4,009

3,932

Non-current liabilities

Net defined benefit liability
Other

146

152

4,483

4,816

28,47025,974

Capital stock

2,553

2,553

Capital surplus

3,166

3,166

Retained earnings

46,88348,320Treasury shares

(728)

(723)

Total shareholders’ equity

51,87553,316

2,023

1,871

Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

72Foreign currency translation adjustment

(181)

(225)

Remeasurements of defined benefit plans

(353)

(308)

Total accumulated other comprehensive income

1,496

1,340

56

81

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

-5-

28

85

53,45754,82381,92880,797

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Compre hensive
IncomeQuarterly Consolidated Statement of Income(For the Six-month Period)

Net sales
Cost of sales

First six months ofthe previous fiscal year
(from January 1, 2017
to June 30, 2017)
41,72931,590(Million yen)First six months ofthe current fiscal year
(from January 1, 2018
to June 30, 2018)
42,05432,034Gross profit

10,13910,019Selling, general and administrative expenses
Freightage and packing expenses
Salaries and allowances
Directors’ compensations
Provision of allowance for doubtful accounts
Provision for bonuses
Provision for directors’ bonuses
Retirement benefit expenses
Depreciation
Rent expenses
Other

1,923
1,863
254
(5)
148
21
221
199
1,123
1,335

2,031
1,913
263
(8)
137
20
194
190
1,164
1,418

7,086

7,324

3,053

2,695

47
50
30
26
26

40
50
28
33
25

180

178

0
6
9

5
5
2
1

Total selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Rent income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Cost of lease revenue
Sales discounts
Other
Total non-operating expenses

16

15

3,217

2,858

0
0
-

54

1

54

3
-

47
8

Total extraordinary losses

3

55

Profit before income taxes

3,215

2,858

Income taxes-current
Income taxes-deferred

1,033
74

891
44

Total income taxes

1,107

935

Profit

2,108

1,922

0

(4)

2,107

1,927

Ordinary profit
Extraordinary income
Gain on sales of investment securities
Gain on sales of non-current assets
Gain on bargain purchaseTotal extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on sales of non-current assets

Profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent-6-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

Quarterly Consolidated Statement of Comprehensive Income(For the Six-month Period)First six months ofthe previous fiscal year
(from January 1, 2017
to June 30, 2017)
2,108(Million yen)First six months ofthe current fiscal year
(from January 1, 2018
to June 30, 2018)
1,922

Valuation difference on available-for-sale securities

274

(151)

Deferred gains or losses on hedges

(17)

(4)

Foreign currency translation adjustment

ProfitOther comprehensive income

(35)

(45)

Remeasurements of defined benefit plans, net of tax

55

44

Total other comprehensive income

276

(156)

2,384

1,765

2,383

1,770

0

(5)

Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests-7-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018(3) Quarterly Consolidated Statement of Cash Flows(Million yen)First six months ofthe current fiscal year
(from January 1, 2018
to June 30, 2018)

First six months ofthe previous fiscal year
(from January 1, 2017
to June 30, 2017)
Cash flows from operating activities
Profit before income taxes
Depreciation
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors’ bonuses
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expenses
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Other, net

3,215
790
(6)
11
(24)
115
(97)
0
(0)
3
(0)
5,680
(260)
(2,961)
150

2,858
837
(54)
(56)
(36)
(22)
(88)
(91)
5
8
47
6,231
(391)
(3,450)
331

6,618
100
(0)
(1,219)

6,128
105
(5)
(1,227)

5,498

5,000

(83)
83
(2,501)
6,002
0
(279)
1
(60)
(14)
1

(69)
68
(1,300)
2,900
8
(613)
3
(2)
(4,090)
-

-

(28)

(2)
45

(84)
36

3,191

(3,171)

(490)
4

(672)
(398)
(490)
(10)

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

(485)
(13)

(1,572)
(13)

8,190

242

Cash and cash equivalents at beginning of period

12,90019,228Cash and cash equivalents at end of period

21,091

19,471

SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities
Proceeds from sales of securities
Collection of loans receivable
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Payments for lease and guarantee deposits
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Repayments of long-term loans payable
Redemption of bonds
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities-8-

The Pack Corporation (3950) Financial Report for the Second Quarter of 2018(4) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Changes in Shareholders’ Equity
Not applicable.
Business Combinations
Business combination through acquisition(1) Summary of business combination
1) Name of company acquired and its business activity
Name of company acquired: Kannaru Printing Co., Ltd.
Business activities: Printing, and manufacture and sale of paper products
2) Reasons for business combination
The Pack Group is a comprehensive manufacturer of packaging products and is engaged in the production
and sale of packaging products, mainly paper bags, paper folding cartons, film packaging, and corrugatedboxes. The Group plans to enter the medical packaging market, one of growing markets, to further expand
its business lines.
Kannaru Printing Co., Ltd., a corporation with a history going back 70 years, specializes in the production
and sale of packaging for drugs. The inclusion of Kannaru Printing in the consolidation is expected toenable the Group to acquire advanced quality control capability and know-how that Kannaru Printing has
developed in the medical packaging market and lead to the strengthening and expansion of the its business.
3) Date of business combination
April 1, 2018 (assumed acquisition date)4) Method of business combination
Acquisition of stock with cash5) Name of the company after business combination
There is no change.
6) Ratio of voting rights acquired
93.7%7) Main reason for choosing the company to acquire
Because The Pack Corporation purchased the stock of Kannaru Printing with cash, and acquired 93.7% of
its voting rights.
(2) Period of business results of the acquired company included in the quarterly consolidated statement of income
From April 1, 2018 to June 30, 2018
(3) Acquisition cost of the acquired company and breakdown by type of co nsideration
Payment for the acquisition (Cash and deposits)
Acquisition cost

882 million yen
882 million yen(4) Details of major acquisition-related costs
Due diligence cost, etc.: 4 million yen-9-The Pack Corporation (3950) Financial Report for the Second Quarter of 2018

(5) Amount of gain on bargain purchase and its cause
1) Amount of gain on bargain purchase
54 million yen
The amount of gain on bargain purchase is calculated provisionally.
2) Cause for recognizing gain on bargain purchase
Since the market value of net assets at the time of the business combination exceeded the acquisition cost,
the difference was recognized as gain on bargain purchase.

* This financial report is solely a translation of summary of “Kessan Tanshin” (in Japanese, including attachments), which
has been prepared in accordance with accounting principles and practices generally accepted in Japan, for theconvenience of readers who prefer an English translation.

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