Ship Healthcare : Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021 (Consolidated)

Summary of Financial Statements

for First Quarter of Fiscal Year Ending March 31, 2021 [Japanese GAAP]

(Consolidated)

				August 7, 2020
Name of listed company:	SHIP HEALTHCARE HOLDINGS, INC.
		Shares listed on: Tokyo Stock Exchange
Code:		3360	URL	https://www.shiphd.co.jp/
Representative:	Kunihisa Furukawa, Chairman and CEO
Contact:	Hiroshi Yokoyama, Executive Director	Tel.: [phone]
Scheduled date for filing quarterly report:	August 12, 2020	Scheduled start date of dividend payments: -
Supplementary briefing materials on results:	None
Briefing on quarterly results:		None

(All figures are rounded down to the nearest million yen.)

1. Consolidated financial results for the first quarter of fiscal year ending March 31, 2021 (April 1 - June 30, 2020)

(1) Consolidated operating results (cumulative)								(Percentages represent year-on-year changes.)
	Net sales		Operating profit			Ordinary profit			Profit attributable to
						owners of parent
	(Millions yen)		%		(Millions yen)		%			(Millions yen)		%		(Millions yen)	%
Q1 FY ending March 2021	105,455		(3.3)			2,887		(4.7)			3,064		(5.5)	1,643	(11.4)
Q1 FY ended March 2020	109,005		10.6			3,030		10.2			3,242		8.7	1,855	4.7
Note: Comprehensive income: Q1 FY ending March 2021: ¥3,343 million (94.4%)
Q1 FY ended March 2020: ¥1,719 million ((17.3)%)
	Basic earnings per		Diluted earnings per
	share			share
				(Yen)					(Yen)
Q1 FY ending March 2021		34.70					31.45
Q1 FY ended March 2020		38.96					35.36
(2) Consolidated financial condition
	Total assets			Net assets		Equity capital ratio
	(Millions yen)			(Millions yen)				%
Q1 FY ending March 2021		298,628					104,280					33.7
FY ended March 2020		308,873					104,681					33.0
Reference: Equity: Q1 FY ending March 2021: ¥100,753 million; FY ended March 2020: ¥101,784 million
2. Dividends
							Annual dividends
	End Q1			End Q2	End Q3		Year-end		Total
	(Yen)		(Yen)			(Yen)		(Yen)				(Yen)
FY ended March 2020		-		0.00			-		75.00			75.00
FY ending March 2021		-
FY ending March 2021						0.00			-				77.00			77.00
(forecast)
Notes: Revisions made in most recently announced dividend forecasts: None

3. Forecast of consolidated financial results for fiscal year ending March 31, 2021 (April 1, 2020 - March 31, 2021)

(Percentages represent changes from previous year for full-year figures and year-on-year changes for quarterly figures.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings
		owners of parent	per share
Cumulative through	(Millions yen)		%	(Millions yen)	%	(Millions yen)	%	(Millions yen)	%	(Yen)
240,000		(0.9)	6,900	(31.6)	6,900	(37.3)	4,000	(40.2)	84.55
second quarter
Full-year	500,000		3.2	21,000	11.7	21,000	5.4	12,100	2.5	255.96
Note: Revisions made in most recently announced forecasts of business performance: None

Notes

(1)	Changes made in significant subsidiaries during consolidated cumulative quarter under review:	None
(2)	Special account processing applied in preparation of quarterly consolidated financial statements:	None
(3)	Changes made in accounting policies, accounting estimates, and/or restatements
	(i)	Changes in accounting policies associated with changes in accounting standards, etc.:	None
	(ii)	Any changes in accounting policies other than those under (i) above:	None
	(iii) Changes in accounting estimates:	None
	(iv) Restatements:	None
(4)	Number of shares issued and outstanding (common shares)

1. Number of shares issued and outstanding at the end of the period (including treasury shares)
2. Number of treasury shares at the end of the period
3. Average number of shares during the period (quarterly cumulative total)

Q1 FY ending	50,834,700 shares	FY ended March	50,834,700 shares
March 2021	2020
Q1 FY ending	3,600,927 shares	FY ended March	3,420,627 shares
March 2021	2020
Q1 FY ending	47,361,298 shares	Q1 FY ended	47,630,157 shares
March 2021	March 2020

• This quarterly summary of financial results is not subject to quarterly review by a Certified Public Accountant or an audit firm.
• Information on appropriate use of financial forecasts and other special notes:
• • The forecasts of financial results and other forward-looking statements provided herein are based on information available to the Company and assumptions considered reasonable at the time this document was prepared. They are not guarantees that the Company will achieve such forecasts. Actual results may differ significantly from the forecasts for various reasons. For the assumptions on which financial forecasts are based, notes on using financial forecasts, and other information, please refer to "Information on consolidated financial forecasts and other forward-looking statements" on page 3 of the attached materials.

SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

• Index of attached materials

1.	Qualitative information on quarterly results .....................................................................................................	2
	(1)	Description of business results ................................................................................................................	2
	(2)	Analysis of financial position ..................................................................................................................	3
	(3)	Information on consolidated financial forecasts and other forward-looking statements ..........................	3
2.	Quarterly consolidated financial statements and notes thereto .........................................................................	4
	(1)	Quarterly consolidated balance sheet.......................................................................................................	4

1. Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive

income .....................................................................................................................................................	6
(3) Notes on quarterly consolidated financial statements ..............................................................................	8
(Notes on the going concern assumption) ................................................................................................	8
(Notes on marked changes to shareholders' equity) .................................................................................	8
(Segment information).............................................................................................................................	8

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

1. Qualitative information on quarterly results

(1) Description of business results

During the first quarter of the current consolidated cumulative period, business confidence in Japanese economy deteriorated rapidly due to the expansion of COVID-19, which significantly limited economic and social activities, and reduced personal consumption and corporate profits. As for the global economy, the outlook remains uncertain due to the rapid expansion of COVID-19 and the intensifying conflict between the United States and China.

Within the healthcare industry in which the Group operates, it is at the forefront of the field against COVID-19, and while medical staff are doing their utmost work day and night regardless of the risk of the infectious disease, the Group has also endeavored to secure necessary items such as medical equipment and medical materials, and provided maximum support. On the other hand, with regard to conventional medical care, there are some situations in which hospital earnings must be difficult, as treatment that is not urgent has been delayed.

Under these economic conditions, the Group's Medical Supply business performed steadily, and high occupancy rate has been maintained in Life Care business as in the previous term. On the other hand, the projects in Total Pack Produce business tended to be weighted in the second half compared to the previous fiscal year, and Dispensing Pharmacy business remained difficult due to the effects of revisions of dispensing fees and drug prices.

During this consolidated cumulative first quarter, the various factors noted above resulted in net sales of 105,455 million yen (down 3.3% YoY), operating profit of 2,887 million yen (down 4.7% YoY), ordinary profit of 3,064 million yen (down 5.5% YoY), and profit attributable to owners of the parent of 1,643 million yen (down 11.4% YoY).

Business results by segment are summarized below.

1. Total Pack Produce business
   Total Pack Produce business was in difficult situation due to the tendency that the projects weighted in the second half compared to the previous fiscal year although the performance of the newly consolidated medical device distribution company in Myanmar contributed.
   As a result, this segment recorded net sales of 16,806 million yen (down 13.1% YoY) and segment profit (operating profit) of 976 million yen (down 14.4% YoY).
2. Medical Supply business
   Driven by group cooperation and improvements in operational efficiency, Medical Supply business was generally in line with the plan although the profitability has continued to be difficult due to the impact of the redemption price revision.
   As a result, this segment recorded net sales of 74,275 million yen (down 2.1% YoY) and segment profit (operating profit) of 850 million yen (up 8.0% YoY).
3. Life Care business
   As management efficiency has advanced due to the well-established nationwide integrated management and increase in occupancy rate, Life Care business performed steadily.
   As a result, this segment recorded net sales of 6,069 million yen (up 1.6% YoY) and segment profit (operating profit) of 580 million yen (up 31.4% YoY).
4. Dispensing Pharmacy business
   In the Dispensing Pharmacy business, the condition remained difficult due to the restraint in visiting medical institutions as the expansion of COVID-19 in addition to the effects of revisions to dispensing fees and drug prices.
   As a result, this segment recorded net sales of 6,551 million yen (down 1.0% YoY) and segment profit (operating profit) of 446 million yen (down 28.5% YoY).
5. Other businesses
   Other businesses resulted in inactive as the security support company performed poorly due to the decline in operation ratio of the facilities of clients while the performance of building management company newly contributed.
   As a result, this segment recorded net sales of 1,753 million yen (up 47.0% YoY) and segment profit (operating profit) of 86 million yen (down 13.2% YoY).

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

(2) Analysis of financial position

Assets at the end of the consolidated first quarter under review stood at 298,628 million yen, down 10,244 million yen from the end of the previous consolidated fiscal year. The primary reasons for this decline included decreases of 14,705 million yen in cash and deposits, and 11,327 million yen in notes and accounts receivable - trade, despite increases of 11,348 million yen in investment securities, and 2,872 million yen in merchandise and finished goods.

Liabilities stood at 194,347 million yen, down 9,844 million yen from the end of the previous consolidated fiscal year. The primary reasons for this decline included decreases of 11,731 million yen in notes and accounts payable - trade, and 3,284 million yen in income taxes payable, despite increases of 3,775 million yen in short-term loans.

Net assets were 104,280 million yen, down 400 million yen from the end of the previous consolidated fiscal year. The primary reasons for this decline included a decrease of 3,556 million yen in retained earnings due to payment of dividends, despite increase of 1,707 million yen in valuation difference on available-for-sale securities, and 1,643 million yen in retained earnings from profit attributable to owners of parent.

As a result of all these factors, the equity capital ratio at the end of the consolidated first quarter under review stood at 33.7%. (up 0.7% from the end of the previous consolidated fiscal year)

(3) Information on consolidated financial forecasts and other forward-looking statements

In general, business performance matched financial forecasts made at the start of the period. The consolidated financial forecasts for the cumulative second quarter and the full fiscal year remain unchanged from the forecasts announced on May 12, 2020.

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

2. Quarterly consolidated financial statements and notes thereto

1. Quarterly consolidated balance sheet

							(Unit: Millions yen)
				March 31, 2020		June 30, 2020
	Assets
	Current assets
	Cash and deposits			78,717			64,012
	Notes and accounts receivable - trade	95,623	84,295
	Electronically recorded monetary claims - operating			3,611			3,885
	Lease investment assets	3,500	3,454
	Merchandise and finished goods			14,029			16,902
	Work in process	1,511	2,009
	Raw materials and supplies			845			1,035
	Other	12,731	10,421
	Allowance for doubtful accounts			(71)			(141)
	Total current assets	210,499	185,876
	Non-current assets
	Property, plant, and equipment
	Buildings and structures, net			18,534			18,423
	Land	16,100	16,095
	Real estate for rent, net			11,213			11,155
	Other, net	11,166	11,130
	Total property, plant, and equipment			57,014			56,804
	Intangible assets
	Goodwill			8,548			11,055
	Other	972	941
	Total intangible assets			9,520			11,997
	Investments and other assets
	Investment securities			14,535			25,883
	Long-term loans receivable	7,810	7,742
	Other			11,209			12,043
	Allowance for doubtful accounts	(1,716)	(1,719)
	Total investments and other assets			31,838			43,950
	Total non-current assets	98,373	112,752
	Total assets			308,873			298,628

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

							(Unit: Millions yen)
				March 31, 2020		June 30, 2020
	Liabilities
	Current liabilities
	Notes and accounts payable - trade			90,121			78,389
	Electronically recorded obligations - operating	19,598	19,379
	Short-term loans			935			4,710
	Income taxes payable	4,400	1,115
	Provision for bonuses			2,194			2,394
	Other	15,864	17,913
	Total current liabilities			133,115			123,903
	Non-current liabilities
	Bonds with share acquisition rights			25,091			25,085
	Long-term loans	36,987	35,878
	Net defined benefit liability			2,873			2,871
	Asset retirement obligations	838	842
	Other			5,284			5,767
	Total non-current liabilities	71,076	70,444
	Total liabilities			204,191			194,347
Net assets
	Shareholders' equity
	Capital stock	15,553	15,553
	Capital surplus			23,895			23,887
	Retained earnings	74,841	72,928
	Treasury stock			(14,447)			(15,262)
	Total shareholders' equity	99,841	97,107
	Accumulated other comprehensive income
	Valuation difference on available-for-sale securities	2,019	3,726
	Foreign currency translation adjustment			(152)			(154)
	Remeasurements of defined benefit plans	75	73
	Total accumulated other comprehensive income			1,942			3,645
	Non-controlling interests	2,897	3,527
	Total net assets			104,681			104,280
Total liabilities and net assets	308,873	298,628

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

1. Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive income

Quarterly consolidated statement of income

Consolidated cumulative first quarter

						(Unit: Millions yen)
				Three months ended		Three months ended
				June 30, 2019		June 30, 2020
	Net sales			109,005		105,455
Cost of sales	98,739	94,823
	Gross profit			10,265		10,631
Sales, general, and administrative expenses		7,234	7,744
	Operating profit			3,030		2,887
Non-operating income
	Interest income			84		84
	Dividend income	188	185
	Amortization of negative goodwill			58		－
	Share of profit of entities accounted for using equity-method	31	34
	Foreign exchange gains	3		70
	Reversal of allowance for doubtful accounts	－	37
	Other			95		101
	Total non-operating profit		461	514
	Non-operating expenses
	Interest expenses	63	90
	Provision of allowance for doubtful accounts			170		6
	Commission fee	2	194
	Other			13		45
	Total non-operating expenses		248	337
	Ordinary profit			3,242		3,064
Extraordinary profit
	Gains on sales of non-current assets			0		0
	Total extraordinary profit		0	0
	Extraordinary losses
	Losses on step acquisitions	－	92
	Losses on sales of non-current assets			2		－
	Losses on retirement of non-current assets	0	18
	Total extraordinary losses			2		111
Total profit before income taxes		3,241	2,952
	Income taxes - current			1,288		1,033
Income taxes - deferred	70	270
	Total income taxes			1,358		1,303
Profit		1,883	1,649
	Profit attributable to non-controlling interests			27		5
Profit attributable to owners of parent		1,855	1,643

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

Quarterly consolidated statement of comprehensive income

Consolidated cumulative first quarter

							(Unit: Millions yen)
				Three months ended		Three months ended
				June 30, 2019		June 30, 2020
	Profit			1,883			1,649
Other comprehensive income
	Valuation difference on available-for-sale securities			(12)			1,707
	Foreign currency translation adjustments	(153)	(11)
	Remeasurements of defined benefit plans			2			(1)
	Total other comprehensive income		(163)	1,694
	Comprehensive income			1,719			3,343
(Breakdown)
	Comprehensive income attributable to owners of parent			1,742			3,346
	Comprehensive income attributable to non-controlling interests	(22)	(3)

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

(3) Notes on quarterly consolidated financial statements

(Notes on the going concern assumption) Not applicable

(Notes on marked changes to shareholders' equity) Not applicable

(Segment information, etc.) [Segment information]

1. Previous consolidated cumulative first quarter (April 1 - June 30, 2019) 1 Net sales and profit (loss) by reportable segment

								(Unit: Millions yen)
		Reportable segment					Amount
									recorded on
	Total Pack	Medical	Life Care	Dispensing		Other*1	Total	Adjustments	quarterly
		*2	consolidated
	Produce	Supply	Pharmacy	Subtotal
	business				income
	business	business	business
						statement*3
Net sales
(1) Sales to outside	19,332	75,882	5,976	6,621	107,812	1,192	109,005	－	109,005
customers
(2) Intersegment	474	239	45	451	1,210	76	1,286	(1,286)	－
sales or transfers
Subtotal	19,807	76,121	6,021	7,072	109,022	1,268	110,291	(1,286)	109,005
Segment profit	1,141	788	441	624	2,996	99	3,095	(64)	3,030
Notes:

1. The "Other" category includes businesses not included in reportable business segments, such as the veterinary hospital business, sales of physical and chemical apparatus, and the security business.
2. The figure of (64) million yen in adjustments to segment profit includes (23) million yen in cancellation of intersegment transactions and (41) million yen in companywide costs not allocated among reportable segments. These companywide costs consist mainly of parent company operating expenses and sales, general, and administrative expenses not attributable to individual reportable segments.
3. Segment profit is adjusted against the operating profit reported on the quarterly consolidated statement of income.

2 Information on impairment loss on fixed assets or goodwill, per reporting segment

During this consolidated cumulative first quarter, no significant impairment loss on fixed assets and no significant change in amounts of goodwill or significant gains on negative goodwill were identified.

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SHIP HEALTHCARE HOLDINGS, INC. (3360): Summary of Financial Statements for First Quarter of Fiscal Year Ending March 31, 2021

1. Consolidated cumulative first quarter under review (April 1 - June 30, 2020) 1 Net sales and profit (loss) by reportable segment

(Unit: Millions yen)

		Reportable segment					Amount
									recorded on
	Total Pack	Medical	Life Care	Dispensing		Other*1	Total	Adjustments	quarterly
		*2	consolidated
	Produce	Supply	Pharmacy	Subtotal
	business				income
	business	business	business
						statement*3
Net sales
(1) Sales to outside	16,806	74,275	6,069	6,551	103,702	1,753	105,455	－	105,455
customers
(2) Intersegment	467	336	45	6,400	7,249	100	7,349	(7,349)	－
sales or transfers
Subtotal	17,273	74,611	6,114	12,952	110,952	1,853	112,805	(7,349)	105,455
Segment profit	976	850	580	446	2,855	86	2,941	(53)	2,887
Notes:

1. The "Other" category includes businesses not included in reportable business segments, such as the veterinary hospital business, sales of physical and chemical apparatus, and the security business.
2. The figure of (53) million yen in adjustments to segment profit includes (21) million yen in cancellation of intersegment transactions and (32) million yen in companywide costs not allocated among reportable segments. These companywide costs consist mainly of parent company operating expenses and sales, general, and administrative expenses not attributable to individual reportable segments.
3. Segment profit is adjusted against the operating profit reported on the quarterly consolidated statement of income.

1. Information on assets of each reportable segments
   During the first quarter of the current consolidated cumulative period, the Company acquired the shares of STK Co., Ltd. and it is included in the scope of consolidation. The Company also acquired equity interests of Charm Care Corporation., and it is included in the scope the equity-method applied.
   Due to the above acquisition, assets in "Life Care business" segment increased by 9,859 million yen from the end of the previous consolidated fiscal year.
2. Information on impairment losses on non-current assets or goodwill of each reportable segments
   (Significant impairment losses on non-current assets) Not applicable.
   (Significant changes in the amount of goodwill)
   During the first quarter of the current consolidated cumulative period, the Company acquired the shares of Okkar Thiri Co., Ltd. and Snow Everest Co., Ltd., and they are included in the scope of consolidation.
   The increase in goodwill in "Total Pack Produce business" segment due to the above event is 3,013 million yen.
   (Significant gain on negative goodwill) Not applicable.

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