Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending May 15, 2018 [J-GAAP]

Transcription

1 Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending May 15, 2018 [J-GAAP] December 19, 2017 Name of listed company: TSURUHA Holdings, Inc. Listed on: Tokyo Stock Exchange, 1st Section Securities code: 3391 URL: Representative: Masashi Horikawa, President and Representative Director Contact: Naoto Aoki, Executive Officer and Chief Administrative Officer TEL: Scheduled date of filing quarterly financial report: December 28, 2017 Scheduled date to start dividends distribution: January 9, 2018 Supplementary quarterly materials prepared: Yes Quarterly results information meeting held: Yes (for institutional investors and financial analysts) (Figures shown are rounded down to the nearest million yen.) 1. Consolidated financial results for the second quarter ended November 15, 2017 (May 16, 2017 November 15, 2017) (1) Consolidated operating results (Percentage figures show changes from the same period in the previous year.) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Millions of yen % Millions of yen % Millions of yen % Millions of yen % November 15, , , , , November 15, ,079 17,687 18,596 12,515 Note: Comprehensive income: November 15, 2017: 15,868 million yen (44.0%) November 15, 2016: 11,021 million yen ( %) Net Income per Share Diluted Net Income per Share Yen Yen November 15, November 15, Note: Year-on-year growth figures for the second quarter of the fiscal year ended May 15, 2017 have been omitted due to the retroactive application of changes in accounting policy. (2) Consolidated financial position Total Assets Net Assets Equity Ratio Net Assets per Share Millions of yen Millions of yen % Yen As of November 15, , , , As of May 15, , , , Reference: Equity capital: As of November 15, 2017: 177,702 million yen As of May 15, 2017: 165,866 million yen Note: Financial figures for the fiscal year ended May 15, 2017 have been adjusted to reflect the retroactive application of changes in accounting policy. 2. Dividends Annual Dividends (Yen) First Quarter-end Second Quarter-end Third Quarter-end Year-end Annual Year ended May 15, Year ending May 15, Year ending May 15, 2018 (Forecast) Note: Revisions to the most recently announced dividend forecast during the period: None

2 3. Consolidated financial forecasts for the year ending May 15, 2018 (May 16, 2017 May 15, 2018) (Percentage figures show changes from the same period in the previous year.) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Net Income per Share Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen Full year 600, , , , Note: Revisions to the most recently announced earnings forecasts during the period: None Due to the retroactive application of changes in accounting policy, year-on-year growth figures have been calculated using retroactively adjusted figures for the previous fiscal year. Notes (1) Significant changes to subsidiaries during the period (Transfers of specific subsidiaries with changes in the scope of consolidation): None (2) Application of the specific accounting methods for preparing the quarterly consolidated financial statements: None (3) Changes in accounting policies, accounting estimates and restatement of revisions 1) Changes in accounting policies due to revision of accounting standard, etc.: None 2) Changes in accounting policies other than 1): Yes 3) Changes in accounting estimates: None 4) Restatement of revisions: None Note: For more details, please refer to 2. Quarterly consolidated financial statements and related notes (4) Notes on quarterly consolidated financial statements (Change in accounting policy), on page 10 of the supplementary materials. (4) Number of shares issued and outstanding (common shares) 1) Number of shares issued and outstanding (including treasury stock) As of November 15, ,032,168 shares As of May 15, ,933,968 shares 2) Number of treasury stock As of November 15, ,038 shares As of May 15, ,038 shares 3) Average number of shares issued and outstanding in each period (quarterly consolidated cumulative period) November 15, ,087,015 shares November 15, ,879,951 shares * This financial results report is outside the scope of audit procedures. * Explanation of appropriate use of financial forecasts and other special items This document contains projections of performance based on information currently available. Actual performance may differ from these projections due to changes in the economic environment and other uncertainties. Please refer to page 3 of the supplementary materials for further details about the above financial forecasts.

3 Contents 1. Qualitative information on quarterly financial results... 2 (1) Explanation of consolidated financial results... 2 (2) Explanation of consolidated financial position... 2 (3) Explanation of consolidated financial forecasts and other forward-looking statements Quarterly consolidated financial statements and related notes... 4 (1) Quarterly consolidated balance sheets... 4 (2) Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income... 6 (Quarterly consolidated statements of income)... 6 (Quarterly consolidated statements of comprehensive income)... 7 (3) Quarterly consolidated statements of cash flows... 8 (4) Notes on quarterly consolidated financial statements (Notes on premise of a going concern) (Notes on significant changes in the amount of shareholders equity) (Change in accounting policy)

4 1. Qualitative information on quarterly financial results (1) Explanation of consolidated financial results In the first six months of the current fiscal year (May 16, 2017 to November 15, 2017), the Japanese economy continued to recover at a moderate pace and consumer confidence showed signs of picking up, despite an uncertain outlook in overseas economies, fluctuations in financial markets and other concerns. In the drugstore sector, the operating environment remained challenging, with the pace of consolidation and realignment accelerating, as competition to open stores and reduce prices continued to intensify. Against this backdrop, the TSURUHA Group continued to offer a high level of customer service mainly through advicebased sales, and implemented a number of strategic business initiatives. Specifically, in addition to focusing on advice-based sales of high value-added products that satisfy customer needs, the Group improved convenience for customers through store renovations centered on food sales areas in order to address the shrinking market caused by Japan s aging population and intensifying competition. Also, in order to strengthen the competitiveness and value of the Group s private brands, M s one and Medis one, the Group took a number of steps to boost the quality of the product range, such as rolling out new packaging with a more visible, unified brand and updating products. In store openings, the Group targeted specific areas for multiple store openings as part of its area dominance store-opening strategy and implemented a scrap and build approach for existing stores. In the second quarter under review, the Group opened 61 new stores and closed 24 existing stores. Kyorindo Group Holdings Co., Ltd. (Kyorindo HD) became a subsidiary of the Company on September 29, As a result, 78 drugstores and dispensing pharmacies in Shizuoka Prefecture operated by Kyorindo Co., Ltd., a subsidiary of Kyorindo HD, became part of the Group, resulting in a total of 1,870 directly managed stores at the end of the second quarter. TSURUHA Group store openings and closures (Number of stores) End of previous fiscal year Store openings Became subsidiary Store closures Net change End of current period Of which dispensing pharmacies Hokkaido Tohoku Kanto, Koshinetsu Chubu, Kansai Chugoku Shikoku Kyushu Total 1, , (The figure at the end of the current period excludes 19 overseas stores and two franchise stores.) As a result of the above, in the first six months of the current fiscal year, TSURUHA Holdings reported net sales of 307,859 million (up 6.5% year on year), operating income of 20,053 million (up 13.4%), ordinary income of 20,831 million (up 12.0%), and net income attributable to owners of the parent of 13,041 million (up 4.2%). (2) Explanation of consolidated financial position (Assets, liabilities and net assets) As of the end of the second quarter, assets totaled 323,690 million, an increase of 41,678 million compared with the end of the previous fiscal year. This mainly reflected an increase in assets due to the acquisition of Kyorindo Group Holdings Co., Ltd. Liabilities totaled 133,978 million, an increase of 22,308 million compared with the end of the previous fiscal year. This mainly reflected an increase in liabilities due to the acquisition of Kyorindo Group Holdings Co., Ltd. Net assets totaled 189,711 million, an increase of 19,369 million compared with the end of the previous fiscal year. As a result, the equity ratio was 54.9%, down 3.9 points from the previous fiscal year-end. (Cash flows) As of the end of the second quarter, cash and cash equivalents (cash) totaled 43,847 million, an increase of 1,355 million compared with the end of the previous fiscal year. The Group s cash flow position and factors affecting cash flows during the first six months of the fiscal year were as follows: (Cash flows from operating activities) In the first six months, operating activities provided net cash of 14,475 million, compared with net cash used of 8,198 million in the same period a year earlier. This mainly reflected income before income taxes of 20,778 million, cash negative - 2 -

5 items such as income taxes paid of 7,216 million and increase in inventories of 5,317 million, and cash positive items such as increase in notes and accounts payable trade of 2,948 million. (Cash flows from investing activities) In the first six months, investing activities used net cash of 8,614 million, an increase of 24.1% compared with the same period a year earlier. This primarily reflected 12,000 million from proceeds from sales of securities, and cash used of 14,841 million for purchase of shares of subsidiaries, 3,356 million for payments for guarantee deposits related to new store openings and 3,511 million for purchase of property, plant and equipment. (Cash flows from financing activities) In the first six months, financing activities used net cash of 4,505 million, an increase of 43.5% compared with the same period a year earlier. This mainly reflected cash used of 4,129 million for cash dividends paid. (3) Explanation of consolidated financial forecasts and other forward-looking statements The full-year financial forecasts announced on June 20, 2017 are unchanged

6 2. Quarterly consolidated financial statements and related notes (1) Quarterly consolidated balance sheets (Millions of yen) As of May 15, 2017 As of November 15, 2017 Assets Current assets Cash and deposits 33,516 43,005 Accounts receivable-trade 17,371 22,185 Securities 21,000 1,000 Merchandise 69,965 82,852 Raw materials and supplies Deferred tax assets 5,289 5,278 Short-term loans receivable 2 2 Others 12,113 10,919 Total current assets 159, ,299 Non-current assets Property, plant and equipment Buildings and structures, net 19,986 26,852 Machinery, equipment and vehicles, net 0 3 Tools, furniture and fixtures, net 8,229 9,277 Land 7,716 8,359 Leased assets, net 1,428 4,091 Construction in progress 963 1,962 Total property, plant and equipment 38,326 50,547 Intangible assets Goodwill 15,133 29,882 Software Telephone subscription right Others Total intangible assets 16,121 30,947 Investments and other assets Investment securities 23,100 26,525 Long-term loans receivable Deferred tax assets 1,333 1,709 Guarantee deposits 39,908 44,003 Others 4,010 4,724 Allowance for doubtful accounts (88) (88) Total investments and other assets 68,285 76,895 Total non-current assets 122, ,390 Total assets 282, ,

7 (Millions of yen) As of May 15, 2017 As of November 15, 2017 Liabilities Current liabilities Notes and accounts payable - trade 65,434 80,122 Current portion of long-term loans payable 1,206 1,206 Accounts payable-other 9,418 10,510 Lease obligations Income taxes payable 8,070 6,895 Provision for bonuses 3,380 3,960 Provision for directors bonuses Provision for point card certificates 2,247 3,567 Others 3,803 4,655 Total current liabilities 94, ,806 Non-current liabilities Long-term loans payable 4,116 3,513 Lease obligations 1,734 4,279 Deferred tax liabilities 6,378 7,405 Net defined benefit liability 1,150 1,780 Provision for directors retirement benefits Asset retirement obligations 1,799 2,352 Others 2,222 2,431 Total non-current liabilities 17,406 22,171 Total liabilities 111, ,978 Net assets Shareholders equity Capital stock 8,960 9,291 Capital surplus 27,013 27,343 Retained earnings 119, ,884 Treasury stock (5,311) (5,311) Total shareholders equity 150, ,208 Accumulated other comprehensive income Valuation difference on available-for-sale securities 15,280 17,538 Remeasurements of defined benefit plans (51) (43) Total accumulated other comprehensive income 15,228 17,494 Subscription rights to shares 985 1,043 Non-controlling interests 3,490 10,965 Total net assets 170, ,711 Total liabilities and net assets 282, ,

8 (2) Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income (Quarterly consolidated statements of income) November 15, 2016 (Millions of yen) November 15, 2017 Net sales 289, ,859 Cost of sales 207, ,974 Gross profit 81,358 88,884 Selling, general and administrative expenses 63,671 68,830 Operating income 17,687 20,053 Non-operating income Interest income Dividends income Gain on donation of equipment Rent income Compensation income Insurance income 13 5 Others Total non-operating income 1, Non-operating expenses Interest expenses Early withdrawal penalty Provision of allowance for doubtful accounts 1 - Others 2 8 Total non-operating expenses Ordinary income 18,596 20,831 Extraordinary income Gain on sales of non-current assets 1 - Gain on reversal of subscription rights to shares 39 - Gain on sales of investment securities 0 - Settlement received Others 7 4 Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on sales of non-current assets 0 0 Donation for reconstruction Charge for agreed cancellation of lease agreement 71 - Others 14 - Total extraordinary losses Income before income taxes 18,629 20,778 Income taxes-current 6,280 5,966 Income taxes-deferred (441) 1,210 Total income taxes 5,838 7,176 Income 12,791 13,601 Net income attributable to non-controlling interests Net income attributable to owners of the parent 12,515 13,

9 (Quarterly consolidated statements of comprehensive income) November 15, 2016 (Millions of yen) November 15, 2017 Income 12,791 13,601 Other comprehensive income Valuation difference on available-for-sale securities (1,708) 2,257 Remeasurements of defined benefit plans (61) 9 Total other comprehensive income (1,769) 2,266 Comprehensive income 11,021 15,868 (Breakdown of comprehensive income) Comprehensive income attributable to owners of the parent 10,772 15,307 Comprehensive income attributable to non-controlling interests

10 (3) Quarterly consolidated statements of cash flows November 15, 2016 (Millions of yen) November 15, 2017 Cash flows from operating activities Income before income taxes 18,629 20,778 Depreciation and amortization 2,462 2,570 Amortization of goodwill 1,177 1,110 Increase (decrease) in allowance for doubtful accounts 1 (0) Increase (decrease) in provision for bonuses (275) 171 Increase (decrease) in provision for directors bonuses (182) (238) Increase (decrease) in net defined benefit liability Increase (decrease) in provision for point card certificates 70 (210) Increase (decrease) in provision for directors retirement benefits (0) (5) Interest and dividends income (172) (174) Compensation income (128) (57) Insurance income (13) (5) Interest expenses paid on loans Gain on donation of equipment (578) (516) Loss on retirement of non-current assets Loss (gain) on sales of non-current assets (1) 0 Loss (gain) on sales of investment securities 0 - Gain on reversal of subscription rights to shares (39) - Decrease (increase) in notes and accounts receivable trade 4,878 (1,328) Decrease (increase) in inventories (2,710) (5,317) Increase (decrease) in notes and accounts payable trade (25,476) 2,948 Increase (decrease) in accrued consumption taxes 15 (715) Others (759) 2,388 Subtotal (2,742) 21,654 Interest and dividends income received Proceeds from insurance income 13 5 Proceeds from compensation Interest expenses paid (154) (145) Income taxes paid (5,576) (7,216) Net cash provided by (used in) operating activities (8,198) 14,

11 November 15, 2016 (Millions of yen) November 15, 2017 Cash flows from investing activities Payments into time deposits (0) (0) Proceeds from withdrawal of time deposits 5 - Proceeds from sales of securities - 12,000 Purchase of property, plant and equipment (4,170) (3,511) Proceeds from sales of property, plant and equipment 1 33 Purchase of software (116) (88) Purchase of investment securities (311) - Proceeds from sales of investment securities 0 - Purchase of shares of subsidiaries resulting in change in scope of consolidation - (14,841) Payments of loans receivable (0) (0) Collection of loans receivable 2 3 Payments for guarantee deposits (3,506) (3,356) Proceeds from collection of guarantee deposits 1,130 1,033 Others Net cash provided by (used in) investing activities (6,939) (8,614) Cash flows from financing activities Repayments of long-term loans payable (603) (603) Repayments of lease obligations (141) (117) Proceeds from issuance of new shares Cash dividends paid (3,059) (4,129) Dividends paid to non-controlling interests (42) (91) Net cash provided by (used in) financing activities (3,139) (4,505) Net increase (decrease) in cash and cash equivalents (18,277) 1,355 Cash and cash equivalents at the beginning of period 69,317 42,492 Cash and cash equivalents at the end of period 51,039 43,

12 (4) Notes on quarterly consolidated financial statements (Notes on premise of a going concern) There is no related information. (Notes on significant changes in the amount of shareholders equity) There is no related information. (Change in accounting policy) (Change in inventory valuation method) The Company has valued merchandise at cost using the retail price method (balance sheet values are written down in line with any decline in profitability). However, effective from the first quarter of the current fiscal year, merchandise, excluding medicines used in dispensing activities, are now valued at cost using the monthly moving average method (balance sheet values are written down in line with any decline in profitability). The Company has decided to adopt this method to improve the accuracy of profit management as its business expands, allowing it to ascertain inventory values more rapidly and calculate profit and loss within a more appropriate timeframe. Together with system upgrades, this change will enable the Company to visualize average unit prices for individual products (excluding medicines used in dispensing activities). This change in accounting policy has been retroactively applied and the quarterly consolidated financial statements and consolidated financial statements have been prepared using retroactively adjusted figures for the respective previous periods. The retroactive application of the new accounting method to the quarterly consolidated financial statements for the previous second quarter reduces operating income, ordinary income and net income attributable to owners of the parent each by 1,116 million. In addition, the cumulative impact of the change has been reflected in net assets at the start of the previous fiscal year, reducing start-of-year balances for merchandise and for retained earnings by 6,628 million and 4,324 million, respectively