consolidated financial statements for the third quarter of ... · consolidated financial statements...
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Consolidated Financial Statements for the Third Quarter of
the Fiscal Year Ending March 31, 2018
[Japanese GAAP]
February 5, 2018
Company name: VITAL KSK HOLDINGS, INC.
Stock exchange listing: Tokyo Stock Exchange
Code number: 3151
URL: http://www.vitalksk.co.jp/
Representative: Mr. Taisuke Murai, President & CEO
Contact: Mr. Kiharu Takahashi, General Manager of Accounting & Finance
Phone: +81-03-3275-3303
Scheduled date of filing quarterly report: February 13, 2018
Scheduled date of commencing dividend payments: ─
Preparation of supplementary explanatory materials: None
Quarterly financial results meeting: None
(Amounts of less than one million yen are rounded down.)
1. Consolidated Results for the Third Quarter of the Fiscal Year Ending March 31, 2018
(April 1, 2017 – December 31, 2017)
(1) Consolidated Operating Results (% indicates changes from the previous corresponding period.)
Net sales Operating profit Ordinary profit Profit attributable to
owners of parent Nine months ended Million yen % Million yen % Million yen % Million yen %
December 31, 2017 433,608 (2.7) 1,672 (39.4) 4,438 (20.2) 3,243 (14.6)
December 31, 2016 445,667 (3.6) 2,757 (34.2) 5,563 (20.7) 3,796 (19.7)
(Note) Comprehensive income: Nine months ended December 31, 2017: ¥5,954 million [(5.0)%]
Nine months ended December 31, 2016: ¥6,265 million [(18.1)%]
Basic earnings per share
Diluted earnings per share
Nine months ended Yen Yen
December 31, 2017 57.56 49.53
December 31, 2016 67.36 58.00
(2) Consolidated Financial Position Total assets Net assets Equity ratio
Million yen Million yen %
As of December 31, 2017 343,184 94,828 27.4
As of March 31, 2017 305,375 90,007 29.3
(Reference) Equity: As of December 31, 2017: ¥94,179 million
As of March 31, 2017: ¥89,415 million
2. Cash Dividends
Annual dividends
1st quarter-end
2nd quarter-end
3rd quarter-end
Year-end Total
Yen Yen Yen Yen Yen
Year ended March 31, 2017 - 10.00 - 10.00 20.00
Year ending March 31, 2018 - 10.00 -
Year ending March 31, 2018 (Forecast)
10.00 20.00
(Note) Revision to the forecast for dividends announced most recently: None
3. Forecast of Consolidated Results for the Fiscal Year Ending March 31, 2018
(April 1, 2017 - March 31, 2018)
(% indicates changes from the previous corresponding period.)
Net sales Operating profit Ordinary profit Profit
attributable to owners of parent
Basic earnings per share
Million yen % Million yen % Million yen % Million yen % Yen
Full year 570,000 (1.9) 2,100 (34.5) 5,800 (17.0) 4,070 (14.8) 72.22
(Note) Revision to forecast of consolidated results announced most recently: None
* Notes:
(1) Changes in significant subsidiaries during the period under review: None (2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: Yes
* For details, please see “(3) Notes to Quarterly Consolidated Financial Statements (Accounting policies adopted specially for the preparation of quarterly consolidated financial statements)” on page 8 of the attached materials.
(3) Changes in accounting policies, changes in accounting estimates and retrospective restatement
1) Changes in accounting policies due to the revision of accounting standards: None
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting estimates: None
4) Retrospective restatement: None
(4) Total number of outstanding shares (common shares)
1) Total number of outstanding shares at the end of the period (including treasury stocks):
December 31, 2017: 61,224,796 shares
March 31, 2017: 61,224,796 shares
2) Total number of treasury stocks at the end of the period:
December 31, 2017: 4,868,826 shares
March 31, 2017: 4,868,605 shares
3) Average number of shares during the period:
Nine months ended December 31, 2017: 56,356,117 shares
Nine months ended December 31, 2016: 56,356,337 shares
* These quarterly financial results are outside the scope of quarterly review.
* Explanation of the proper use of performance forecast and other notes
The earnings forecast and other forward-looking statements herein are based on the information currently
available and certain assumptions deemed reasonable by the Company, and thus actual results may differ
significantly from these forecasts due to a wide range of factors.
1
Table of Contents
1. Qualitative Information on Quarterly Financial Results .................................................................................. 2
Explanation of Operating Results .................................................................................................................... 2
2. Quarterly Consolidated Financial Statements and Primary Notes.................................................................... 4
(1) Quarterly Consolidated Balance Sheets ....................................................................................................... 4
(2) Quarterly Consolidated Statements of Income and Comprehensive Income ............................................... 6
(3) Notes to Quarterly Consolidated Financial Statements ................................................................................ 8
(Notes on going concern assumption) ..................................................................................................... 8
(Notes in the case of significant changes in amount of shareholders’ equity) ......................................... 8
(Accounting policies adopted specially for the preparation of quarterly consolidated financial statements) ......... 8
(Segment information) ............................................................................................................................ 8
2
1. Qualitative Information on Quarterly Financial Results
Explanation of Operating Results
The Japanese economy during the nine months ended December 31, 2017 continued to be on a moderate
recovery trend as seen in improvements in corporate earnings and the employment situation, led by the
government’s economic and financial policies and other factors. However, factors such as concern over policies
overseas have created an uncertain outlook.
In the pharmaceutical wholesale industry, our Group’s primary business segment, Japan’s medical expense
curbing policy led to drug price revision in April 2016, which lowered drug price standards by 7.8%. The
government is likely to continue with its policy to limit medical costs in the future.
Under these circumstances, the Group is in the second year of its third medium-term management plan for
the three-year period from the year ended March 31, 2017 to the year ending March 31, 2019. In the third
medium-term management plan, the Company defines its long-term vision with a 10-year goal of “Becoming
an indispensable presence in regional and community healthcare by strategically providing products and
services to support medicine and nursing.” Furthermore, under this long-term vision, as its medium-term vision
during the third medium-term management plan, the Company defined the two visions of “1. Even in the
Generic Medicine 80% era, construct a system to create profits,” and “2. Move deeper into regional healthcare
by establishing a business foundation for a medicine-nursing cooperative business.” Additionally, to realize this
medium-term vision, the Company has been working toward the four basic principles of “1. Demonstrating the
comprehensive strength of the Group by implementing effective and efficient Group management,” “2.
Promoting and further deepening area marketing that always emphasizes the viewpoint of the local people,” “3.
Fostering and retaining healthcare coordinators,” and “4. Becoming a solutions company for the medical and
nursing sectors.”
In April 2017, the Company absorbed its wholly-owned consolidated subsidiary VK Shared Service, Inc.
The Information Systems Department of the subsidiary was transferred to the Information Systems Department
Office, the ICT Strategy Department of the Company. Moving forward, the ICT Strategy Department will
manage and control the Group’s entire IT system, and review ICT investments. Meanwhile, the head office of
KSK CO., LTD. moved into a new building in December 2017, and the new Osaka Branch created through
integrating the Osaka Sales Department with the Osaka Daiichi Chuo Branch and Osaka Daiichi Kita Branch
was relocated to the new building in January 2018. Additionally, through also integrating the Osaka Daini
Branch in February 2018, the Company seeks to consolidate its business locations.
For the nine months ended December 31, 2017, in the pharmaceutical wholesale business, the core
business of the Group, the effects of declines in sales of hepatitis C medication and the emergency price
revision of OPDIVO, an antineoplastic agent were significant, and as a result, net sales were ¥433,608 million
(97.3% of that of the same period of the previous year), operating profit was ¥1,672 million (60.6% of that of
the same period of the previous year), ordinary profit was ¥4,438 million (79.8% of that of the same period of
the previous year) and profit attributable to owners of parent was ¥3,243 million (85.4% of that of the same
period of the previous year).
Performance results by business segment are as follows.
1) Pharmaceutical Wholesale Business
In the pharmaceutical wholesale business, sales of long-listed drugs continued its previous decline due to
category changes. In the medical payment revisions in April 2016 as well, further measures for promoting use
of generic drugs were proposed, and declines in sales of long-listed drugs were persistent during the nine
months ended December 31, 2017. Under such circumstances, the Group focused on the sales of new products
(original drugs) and products covered by the premium pricing scheme for the promotion of new drug creation
and resolution of unapproved drugs/off-label use. Additionally, its focus was also placed on promoting
negotiations by single unit and single price, an initiative to improve logistics for which efforts have been made
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across the pharmaceutical wholesale industry. Furthermore, the Group conducted business activities across a
wide area in the medical and nursing sectors, including the establishment of domain-based liaisons (Note 1) to
strengthen specialization in domains such as residential care and cancer treatment, strengthening the sales and
rental business of welfare equipment through the acquisition of “welfare equipment consultant” certifications
by 32 MS (Note 1) staff, and expansion of “Meron Support,” (Note 2) which provides support for creating
regular pharmacies and pharmacies that provide health support for local residents. However, as mentioned
earlier, the effects of declines in sales of hepatitis C medication were significant, and as a result, net sales were
¥412,242 million (97.2% of that of the same period of the previous year), and segment income (operating
profit) was ¥1,465 million (55.5% of that of the same period of the previous year).
At present, the Hyogo Logistics Center for KSK CO., LTD. is currently under construction. The Hyogo
Logistics Center is scheduled to begin operations in May 2018, and through creating frameworks in response to
urban logistics, the Company seeks to improve logistics efficiency.
(Note 1) Domain-based liaisons, MS
Wholesale MSs (marketing specialists; sales representatives for pharmaceutical wholesale) that possess
specialized knowledge in specific patient and medical fields, and can provide information, etc. from a customer
perspective.
(Note 2) Meron Support
“Meron” is customer support centered on the pharmacy portal website provided by the Group, and is a
platform that matches regional residents with their regular pharmacies. “Meron Support” is one of the “Meron”
services, and provides support for holding events at pharmacies through the rental of various simplified testing
and measurement equipment.
Meron website URL (in Japanese): http://www.meron-net.jp/
2) Other Businesses
In other businesses, net sales were ¥21,365 million (99.1% of that of the same period of the previous year)
due mainly to a decline in sales in the veterinary drug wholesale business, but as a result of a recovery in
business performance in the dispensing pharmacy business, segment income (operating profit) was ¥158
million (269.0% of that of the same period of the previous year).
4
2. Quarterly Consolidated Financial Statements and Primary Notes (1) Quarterly Consolidated Balance Sheets
(Million yen)
As of March 31, 2017 As of December 31, 2017
Assets
Current assets
Cash and deposits 23,022 37,238
Notes and accounts receivable - trade 125,788 137,883
Inventories 29,137 32,967
Accounts receivable - other 15,125 16,493
Other 2,318 1,800
Allowance for doubtful accounts (293) (79)
Total current assets 195,098 226,303
Non-current assets
Property, plant and equipment
Buildings and structures, net 15,447 15,932
Land 19,880 19,874
Other, net 3,855 6,080
Total property, plant and equipment 39,183 41,887
Intangible assets
Goodwill 4,239 4,007
Other 3,181 2,845
Total intangible assets 7,421 6,853
Investments and other assets
Investment securities 51,732 55,387
Other 12,970 13,711
Allowance for doubtful accounts (1,030) (959)
Total investments and other assets 63,673 68,139
Total non-current assets 110,277 116,880
Total assets 305,375 343,184
5
(Million yen)
As of March 31, 2017 As of December 31, 2017
Liabilities
Current liabilities
Notes and accounts payable - trade 170,688 204,712
Short-term loans payable 1,330 1,350
Current portion of long-term loans payable 2,261 518
Income taxes payable 370 839
Provision for bonuses 1,723 666
Other provision 202 223
Other 3,513 3,935
Total current liabilities 180,089 212,245
Non-current liabilities
Convertible bond-type bonds with subscription
rights to shares 10,029 10,022
Long-term loans payable 4,812 4,800
Other provision 182 184
Net defined benefit liability 7,058 7,341
Negative goodwill 1,473 920
Other 11,723 12,840
Total non-current liabilities 35,278 36,110
Total liabilities 215,368 248,356
Net assets
Shareholders’ equity
Capital stock 5,000 5,000
Capital surplus 12,739 12,739
Retained earnings 49,726 51,840
Treasury shares (3,759) (3,759)
Total shareholders’ equity 63,706 65,820
Accumulated other comprehensive income
Valuation difference on available-for-sale
securities 24,204 26,941
Remeasurements of defined benefit plans 1,503 1,416
Total accumulated other comprehensive
income 25,708 28,358
Non-controlling interests 592 648
Total net assets 90,007 94,828
Total liabilities and net assets 305,375 343,184
6
(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statements of Income
Nine Months Ended December 31, 2016 and 2017
(Million yen)
For the nine months ended
December 31, 2016
For the nine months ended
December 31, 2017
Net sales 445,667 433,608
Cost of sales 412,072 401,215
Gross profit 33,595 32,393
Reversal of provision for sales returns 240 202
Provision for sales returns 235 223
Gross profit - net 33,600 32,373
Selling, general and administrative expenses 30,843 30,701
Operating profit 2,757 1,672
Non-operating income
Interest income 104 107
Dividend income 640 667
Share of profit of entities accounted for using
equity method 93 89
Office work fee 1,086 1,091
Amortization of negative goodwill 552 552
Other 422 352
Total non-operating income 2,899 2,861
Non-operating expenses
Interest expenses 29 34
Rent expenses 49 44
Other 14 14
Total non-operating expenses 93 94
Ordinary profit 5,563 4,438
Extraordinary income
Gain on sales of non-current assets 1 2
Gain on sales of investment securities 57 113
Gain on investment in partnership - 172
Other 25 4
Total extraordinary income 84 292
Extraordinary losses
Loss on sales of non-current assets 11 -
Impairment loss 27 15
Loss on retirement of non-current assets 5 9
Dismantlement expense 59 -
Other 22 1
Total extraordinary losses 127 26
Profit before income taxes 5,519 4,705
Income taxes 1,645 1,401
Profit 3,874 3,304
Profit attributable to non-controlling interests 78 60
Profit attributable to owners of parent 3,796 3,243
7
Quarterly Consolidated Statements of Comprehensive Income
Nine Months Ended December 31, 2016 and 2017
(Million yen)
For the nine months ended
December 31, 2016
For the nine months ended
December 31, 2017
Profit 3,874 3,304
Other comprehensive income
Valuation difference on available-for-sale
securities 2,302 2,720
Remeasurements of defined benefit plans, net of
tax (163) (86)
Share of other comprehensive income of entities
accounted for using equity method 252 16
Total other comprehensive income 2,390 2,650
Comprehensive income 6,265 5,954
Comprehensive income attributable to
Comprehensive income attributable to owners of
parent 6,187 5,893
Comprehensive income attributable to non-
controlling interests 78 60
8
(3) Notes to Quarterly Consolidated Financial Statements
(Notes on going concern assumption)
For the nine months ended December 31, 2017 (from April 1, 2017 to December 31, 2017)
Not applicable.
(Notes in the case of significant changes in amount of shareholders’ equity)
For the nine months ended December 31, 2017 (from April 1, 2017 to December 31, 2017)
Not applicable.
(Accounting policies adopted specially for the preparation of quarterly consolidated financial statements)
Calculation of tax expenses
Tax expenses are calculated by the method in which the effective tax rate on profit before income taxes for
the current consolidated fiscal year after application of tax effect accounting is reasonably estimated, and
profit before income taxes was multiplied by the estimated effective tax rate.
(Segment information)
I. For the nine months ended December 31, 2016 (from April 1, 2016 to December 31, 2016)
Information on net sales and income (loss) by reportable segment
(Million yen)
Reportable segment
Others
(Note 1) Total
Adjustment
(Note 2)
Amount recorded in Quarterly
Consolidated Statements of
Income (Note 3)
Pharmaceuti-cal
Wholesale Business
Total
Net sales
Net sales to outside customers 424,101 424,101 21,566 445,667 – 445,667
Inter-segment net sales or
transfers 3,784 3,784 1,938 5,722 (5,722) –
Total 427,885 427,885 23,504 451,390 (5,722) 445,667
Segment income 2,638 2,638 58 2,697 60 2,757
(Notes) 1. “Others” is the segment which is not included in reportable segments, including such businesses as
dispensing pharmacy business, retail of pharmaceuticals, etc., wholesale of agricultural chemicals and
veterinary drugs, transportation business, nursing care service business and consulting services for
medical institutions.
2. Adjustment of segment income of ¥60 million refers to elimination of inter-segment transactions.
3. Adjustments are made to reconcile segment income to operating profit reported on the quarterly
consolidated statements of income.
9
II. For the nine months ended December 31, 2017 (from April 1, 2017 to December 31, 2017)
(Million yen)
Reportable segment
Others
(Note 1) Total
Adjustment
(Note 2)
Amount recorded in Quarterly
Consolidated Statements of
Income (Note 3)
Pharmaceuti-cal
Wholesale Business
Total
Net sales
Net sales to outside customers 412,242 412,242 21,365 433,608 – 433,608
Inter-segment net sales or
transfers 3,785 3,785 1,610 5,396 (5,396) –
Total 416,028 416,028 22,976 439,005 (5,396) 433,608
Segment income 1,465 1,465 158 1,623 48 1,672
(Notes) 1. “Others” is the segment which is not included in reportable segments, including such businesses as
dispensing pharmacy business, retail of pharmaceuticals, etc., wholesale of agricultural chemicals and
veterinary drugs, transportation business, nursing care service business and consulting services for
medical institutions.
2. Adjustment of segment income of ¥48 million refers to elimination of inter-segment transactions.
3. Adjustments are made to reconcile segment income to operating profit reported on the quarterly
consolidated statements of income.