Financial Results for the Fiscal Year Ended May 15, …...3. Consolidated financial forecast for the fiscal year ended May 15, 2013 (May 16, 2012 – May 15, 2013) (Percentage figures

Financial Results for the Fiscal Year Ended May 15, 2012 [J-GAAP]

June 19, 2012

Name of listed company: TSURUHA Holdings, Inc. Listed on: Tokyo Stock Exchange, 1st Section

Securities code: 3391 URL: http://www.tsuruha-hd.co.jp

Representative: Tatsuru Tsuruha, President and Representative Director

Contact: Masahiro Ofune, Director, Managing Executive Officer, Chief Financial Officer and Chief Administrative Officer TEL: +81-11-783-2755

Scheduled date of holding the ordinary general meeting of shareholders August 9, 2012

Scheduled date of filing the financial report: August 9, 2012

Scheduled date to start dividends distribution: July 24, 2012

Supplementary documents for this summary of financial statements: Yes

Explanation meeting for financial results Yes (for institutional investors and analysts) (Figures shown are rounded down to the nearest million yen.)

1. Consolidated results for the year ended May 15, 2012 (May 16, 2011 – May 15, 2012)

(1) Consolidated operating results (Percentage figures show changes from the previous year.)

Net Sales Operating Income Ordinary Income Net Income

Millions of yen % Millions of yen % Millions of yen

enyen

% Millions of yen %

Year ended May 15, 2012 320,969 7.1 19,067 20.9 19,948 20.7 10,594 34.4

Year ended May 15, 2011 299,579 7.1 15,771 28.6 16,521 27.8 7,881 20.2

Note: Comprehensive income: Year ended May 15, 2012: ¥11,731 million (48.6%) Year ended May 15, 2011: ¥7,894 million (–%)

Net Income per

Share

Diluted Net

Income per Share

Return on

Shareholders’

Equity

Ordinary Income

to Total Assets

Operating Income

to Net Sales

Yen Yen % % %

Year ended May 15, 2012 449.74 447.18 12.7 14.0 5.9

Year ended May 15, 2011 332.48 331.65 10.4 12.1 5.3

(Reference) Equity in earnings of affiliates: Year ended May 15, 2012: ¥–million Year ended May 15, 2011: ¥–million

(2) Consolidated financial position

Total Assets Net Assets Shareholders’ Equity

Ratio Net Assets per Share

Millions of yen Millions of yen % Yen

As of May 15, 2012 142,694 88,410 61.6 3,736.65

As of May 15, 2011 141,457 79,253 55.7 3,325.66

(Reference) Equity capital: As of May 15, 2012: ¥87,825 million As of May 15, 2011: ¥78,832 million

(3) Consolidated cash flows

Cash Flows from

Operating Activities Cash Flows from

Investing Activities Cash Flows from

Financing Activities

Cash and Cash Equivalents at End of

Year

Millions of yen Millions of yen Millions of yen Millions of yen

Year ended May 15, 2012 387 (988) (1,871) 33,111

Year ended May 15, 2011 15,277 (3,983) (2,427) 35,583

2. Dividends

Dividends per Share

Total Dividends

(annual)

Dividends

Payout Ratio

(consolidated)

Dividends on

Net Assets

(consolidated)

First

Quarter

-end

Second

Quarter

-end

Third

Quarter

-end

Year-end Annual

Yen Yen Yen Yen Yen Millions of yen % %

Year ended May 15, 2011 ― 31.00 ― 44.00 75.00 1,777 22.6 2.3

Year ended May 15, 2012 ― 37.50 ― 62.50 100.00 2,372 22.2 2.8

Year ended May 15, 2013

(Forecast) ― 50.00 ― 50.00 100.00 20.3

3. Consolidated financial forecast for the fiscal year ended May 15, 2013 (May 16, 2012 – May 15, 2013)

(Percentage figures show changes from the same period in the previous year.)

Net sales Operating income Ordinary income Net income

Net income per share

Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen

First six months 168,866 4.7 10,392 7.6 10,738 6.3 5,892 6.8 250.72

Full year 339,600 5.8 20,380 6.9 21,167 6.1 11,587 9.4 493.02

* Notes

(1) Significant changes to subsidiaries during the term (Transfers of specific subsidiaries with changes in the scope of consolidation): None (2) 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): None

3) Changes in accounting estimates: None

4) Restatement of revisions: None

(3) Number of outstanding shares (common stock):

1) Number of shares issued and

outstanding (including treasury

stock)

As of May 15, 2012 23,735,334 shares As of May 15, 2011 23,706,734 shares

2) Number of treasury stock As of May 15, 2012 231,542 shares As of May 15, 2011 2,463 shares

3) Average number of shares issued

and outstanding in each period Year ended May 15, 2012 23,557,571 shares Year ended May 15, 2011 23,703,990 shares

(References) Overview of the non-consolidated business results

1. Non-consolidated results for the year ended May 15, 2012 (May 16, 2011 – May 15, 2012)

(1) Non-consolidated operating results

(Percentage figures show changes from the previous year.)

Net Sales Operating Income Ordinary Income Net Income

Millions of yen % Millions of yen % Millions of yen % Millions of yen %

Year ended May 15, 2012 4,861 24.5 3,412 36.8 3,457 35.1 3,005 26.9

Year ended May 15, 2011 3,904 18.1 2,494 23.1 2,559 21.6 2,368 23.7

Net Income per

Share (Yen)

Diluted Net Income per

Share (Yen)

Year ended May 15, 2012 127.57 126.85

Year ended May 15, 2011 99.91 99.66

(2) Non-consolidated financial position

Total Assets Net Assets Equity Ratio

(%) Net Assets per Share

(Yen)

Millions of yen Millions of yen % Yen

As of May 15, 2012 53,700 52,182 96.1 2,195.28

As of May 15, 2011 52,070 51,751 98.6 2,165.48

(Reference) Equity capital: As of May 15, 2012: ¥51,597 million As of May 15, 2011: ¥51,331 million

* Implementation status of review procedures

The review procedure based on the Financial Instruments and Exchange Act does not apply to the consolidated financial results and the

procedure based on this Act was not complete as of the release of these Consolidated Financial Results.

* 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 2 of the supplementary materials for

further details about the above financial forecasts.

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Contents

1. Financial results ........................................................................................................................................................................ 2

(1) Analysis of financial results .................................................................................................................................................. 2

(2) Analysis of financial position ............................................................................................................................................... 3

(3) Basic policy on distribution of profits and dividends ........................................................................................................... 3

(4) Business risks ....................................................................................................................................................................... 3

2. Group Companies..................................................................................................................................................................... 5

3. Management policies ................................................................................................................................................................ 7

(1) Basic management policy ..................................................................................................................................................... 7

(2) Targeted performance indicators .......................................................................................................................................... 7

(3) Medium- to long-term management strategies ..................................................................................................................... 7

(4) Issues to be addressed ........................................................................................................................................................... 7

4. Consolidated financial statements........................................................................................................................................... 9

(1) Consolidated balance sheets ................................................................................................................................................. 9

(2) Consolidated statements of income and comprehensive income ........................................................................................ 11

(Consolidated statements of income) ................................................................................................................................... 11

(Statements of comprehensive income) ............................................................................................................................... 13

(3) Consolidated statements of changes in net assets ............................................................................................................... 14

(4) Consolidated statements of cash flows ............................................................................................................................... 16

(5) Notes related to the going concern assumption .................................................................................................................. 18

(6) Basic important matters for preparing the consolidated financial statements ..................................................................... 18

(7) Changes in presentation methods ....................................................................................................................................... 18

(8) Notes related to consolidated balance sheets ...................................................................................................................... 18

(Segment information, etc.) ................................................................................................................................................. 18

(Per share information) ........................................................................................................................................................ 19

5. Production, orders and sales ................................................................................................................................................. 20

(1) Purchasing results. .............................................................................................................................................................. 20

(2) Sales results. ....................................................................................................................................................................... 20

6. Non-consolidated Financial Statements................................................................................................................................ 21

(1) Balance sheets .................................................................................................................................................................... 21

(2) Statements of income ......................................................................................................................................................... 23

(3) Statements of changes in net assets .................................................................................................................................... 24

(4) Notes related to the going concern assumption .................................................................................................................. 27

(5) Changes in presentation methods ....................................................................................................................................... 27

TSURUHA Holdings, Inc. (3391) Financial Results for the Fiscal Year Ended May 15, 2012

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1. Financial results

(1) Analysis of financial results

(Financial results for the year ended May 15, 2012)

In the fiscal year under review (May 16, 2011 to May 15 2012), the economy showed some signs of recovery from the

effects of the Great East Japan Earthquake, including a moderate improvement in production activity and consumer spending.

However, employment conditions remained difficult and the outlook for the economy was unclear due to the debt crisis in

Europe and yen appreciation. Consumers therefore continued to show a preference for low-price products in order to

maintain their standard of living. In the drugstore sector, the pace of consolidation and realignment accelerated as companies

sought to remain competitive, as did the pace of business and capital tie-ups with partners beyond the traditional boundaries

of the sector. Intensifying competition to open stores and reduce prices also contributed to an increasingly challenging

operating environment.

Against this backdrop, the TSURUHA Group continued to offer a high level of customer service mainly through

advice-based sales, and implemented a number of strategic business initiatives in order to counter the fallback in sales from last

year’s strong showing in summer products due to the hot weather. Specifically, in addition to generating strong sales from the

high-quality low-price range of private brand products marketed under the “M’s one” name, the Group secured profits through

advice-based sales and rescheduled store opening hours to suit local needs. Summer products also contributed to sales owing to

the hot summer and restrictions on electricity use, and the Group continued to implement creative initiatives in sales promotion

and product display. As a result, sales were strong on a same-store basis.

The Group opened new stores and rebuilt closed stores in the disaster-affected areas of the Tohoku region to provide essential

support to local communities, and it continued to target specific areas for multiple store openings as part of its area dominance

store-opening strategy. The Group opened 80 stores and closed 22 from the start of the year, with the number of stores in the

Group rising past the 1,000 level in April 2012. As a result, the number of directly managed stores totaled 1,008 as of the end

of the fiscal year.

TSURUHA Group store openings and closures (Number of stores)

End of previous period

Store openings

Store closures Net change End of

current period

Of which dispensing pharmacies

Hokkaido 308 16 4 12 320 57

Tohoku 296 38 10 28 324 60

Kanto, Koshin 300 18 8 10 310 81

Chubu, Kansai 11 2 – 2 13 2

Chugoku 35 6 – 6 41 15

Directly-managed stores

950 80 22 58 1,008 215

(Store network also includes 11 franchise stores)

As a result of the above, in the current fiscal year, TSURUHA Holdings achieved sales and profit growth on a consolidated

basis compared with the same period a year earlier. It reported net sales of ¥320,969 million (up 7.1% year on year), operating

income of ¥19,067 million (up 20.9%), ordinary income of ¥19,948 million (up 20.7%), and net income of ¥10,594 million (up

34.4%).

(Outlook for the year ending May 15, 2013)

For the fiscal year ending May 15, 2013, we expect the economic outlook to remain uncertain due to concerns about the

impact of power shortages on the domestic economy and unease about the economic situation overseas. We therefore expect

consumers to remain cautious as they seek to maintain their standard of living. In the drugstore sector, the operating

environment is likely to remain challenging amid intensifying competition to open stores and reduce prices, in addition to an

accelerating pace of sector restructuring through M&As and business and capital tie-ups.

Against this backdrop, we will work to create convenient drugstores that are close to home and satisfy customers, guided by

our business philosophy of “making life better for our customers.” This will include continued efforts to enhance our

advice-based services, which draw on our high level of expertise in health and beauty, while working to offer convenience

through lineups of high-quality, affordable products. In store openings, we plan to open 91 stores targeting specific locations,

including new areas, in order to strengthen our store network using our area dominance store-opening strategy.

Based on the above, our consolidated financial forecasts for the fiscal year ending May 15, 2013 are net sales of ¥339,600

million (up 5.8% year on year), operating income of ¥20,380 million (up 6.9%), ordinary income of ¥21,167 million (up 6.1%),

and net income of ¥11,587 million (9.4%).


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(2) Analysis of financial position

As of the end of the fiscal year under review, cash and cash equivalents (cash) totaled ¥33,111 million, a decline of ¥2,472

million from the end of the previous fiscal year.

The Group’s cash flow position and factors affecting cash flows during the current fiscal year were as follows:.

Cash flows from operating activities

Operating activities provided net cash of ¥387 million (down 97.5% year on year). This mainly reflected income before

income taxes and minority interests of ¥1,957 million (up 35.7%), against cash negative items such as decrease in notes and

accounts payable – trade of ¥10,841 million (up ¥2,933 million), as the settlement date for the previous fiscal year fell on a

non-business day for financial institutions, increase in inventories of ¥3,966 million (up 1,441.8%), and income taxes paid of

¥7,579 million (up 15.3%).

Cash flows from investing activities

Investing activities used net cash of ¥988 million (down 75.2%). This mainly reflected cash used of ¥1,968 million (down

1.5%) for payments for guarantee deposits related to store openings and ¥1,839 million (up 32.9%) for the purchase of property,

plant and equipment, against cash provided of ¥1,506 million from proceeds from withdrawal of time deposits.

Cash flows from financing activities

Financing activities used net cash of ¥1,871 million (down 22.9%). This mainly reflected procurement of new short-term

loans of ¥1,120 million through an ESOP trust for the purchase of treasury stock of ¥1,030 million, and cash dividends paid of

¥1,924 million.

Trends in cash flow indicators are summarized below.

Year ended May 15, 2010 2011 2012

Equity ratio (%) 55.5 55.7 61.5

Market value-based equity ratio (%) 59.9 62.3 76.3

Cash flow to interest-bearing debts (%) 0.1 0.0 3.2

Interest coverage ratio (times) 766.0 941.7 24.3

Equity ratio: Equity capital / net assets

Market value-based equity ratio: Market capitalization / total assets

Cash flow to interest-bearing debts: Interest-bearing debts / cash flow from operating activities

Interest coverage ratio: Cash flow from operating activities / interest payments

Notes: 1. Financial figures are calculated on a consolidated basis.

2. Market capitalization is calculated as the closing stock price at the end of the fiscal year multiplied by the number of outstanding

shares at the end of the fiscal year (net of treasury stock).

3. Cash flow from operating activities is used for cash flow calculations.

4. Interest-bearing debt is the entire portion of debt shown on the balance sheet on which interest is paid.

(3) Basic policy on distribution of profits and dividends

The Group’s basic policy is focused on shareholder returns through the payment of stable dividends, while taking into

account the need for funds to reinforce the operating base and support future business development. The Group plans to use the

dividend payout ratio as a benchmark for the distribution of profits to shareholders.

In accordance with this policy, the Group pays an interim dividend and a year-end dividend.

For the fiscal year under review, the Group paid an interim dividend of ¥37.5 per share, in line with its dividend forecast. The

Group has decided to pay a year-end dividend of ¥62.5 per share, an increase of ¥25.0 from its original forecast of ¥37.5 per

share in light of business results. As a result, the Group will pay a full-year dividend of ¥100 per share.

For the fiscal year ending May 15, 2013, the Group plans to pay an interim dividend and a year-end dividend for shareholders

of record on the final days of those fiscal periods.

The Group intends to use retained earnings for investments to boost corporate value, such as capital investment to open new

stores and expand and refurbish existing stores, and to fund M&A deals and other initiatives that support growth.

(4) Business risks

The Group has identified the following risks that may have a material impact on its operating results and financial position,

and should therefore be taken into account in investment decisions.

Forward-looking statements are based on information available to the Group as of May 15, 2012.

1) Risk related to position as a complete holding company

Risk related to changes in business performance at Group companies


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The Group’s operating results may be affected by sharp fluctuations in business performance at Group companies as a

result of a number of factors.

2) Risk related to legal regulations

i) Regulations related to the Pharmaceutical Affairs Law

Regulations related to the sale of pharmaceutical products under the Pharmaceutical Affairs Law require the Group to

gain permits, registration, certification and licenses from each prefectural government where it operates, and to provide

notification to these local governments. Also, in accordance with the Food Sanitation Act and other laws and regulations,

the Group is required to gain permits, licenses and registration from the relevant public offices for the sale of food,

cigarettes and alcohol. The Group’s operating results may be affected by revisions to these laws and regulations.

Under the revised Pharmaceutical Affairs Law, which came into effect in June 2009, a new registered salesclerk

system was introduced. The introduction of this system may affect the Group’s operating results, as companies from

other sectors may move into the drugstore market, leading to an increase in competition.

ii) Risk related to new store regulations

Under the Large-Scale Retail Stores Location Law, retailers are required to notify prefectural governors (or the mayor

in the case of government-designated cities) of plans to open new stores or renovate existing stores with sales areas in

excess of 1,000m2. Plans for these stores are then assessed based on their impact on the local community in terms of

noise pollution, traffic congestion, waste disposal and other criteria.

As a result, these legal regulations could prevent the Group from opening new stores or expanding existing stores,

which may affect the Group’s store opening strategy.

3) Risk related to recruiting qualified personnel

Under the Pharmaceutical Affairs Law and the Pharmacists Act, drugstore companies are required to staff their stores

with pharmacists or registered salesclerks. Recruiting these qualified personnel to sell pharmaceutical products is a key

requirement of sales strategy.

Under the revised Pharmaceutical Affairs Law, which came into effect in June 2009, a new registered salesclerk

system was introduced. The Group conducts in-house training for its personnel in accordance with the requirements of

the system. Also, the Group expects competition for qualified pharmacists to intensify going forward.

A failure to recruit a sufficient number of qualified personnel may affect the Group’s store opening strategy.

4) Risks related to dispensing pharmacy business

The Group operates dispensing pharmacies and drugstores with dispensing pharmacy facilities. The Group takes

active steps to increase the specialist knowledge and enhance the skills of its pharmacists, including through the

provision of training at dispensing pharmacy training centers for its staff. It also takes the utmost care in its dispensing

operations to prevent dispensing errors, including a cross-checking system (one pharmacist prepares the prescription,

while another monitors the process) and confirmation of details such as drug names and doses when explaining

prescriptions to customers. Also, as a precaution, all our dispensing pharmacies are covered by pharmacist liability

insurance. However, the Group’s operating results may be affected by a loss of public trust due to litigation related to

alleged deficiencies or errors in dispensing operations.

5) Risk related to store opening strategy

The Group employs an area dominance store-opening strategy in order to increase market share in targeted areas by

raising brand visibility, and to control store operating costs. Store profitability may deteriorate in the future in the event

that this store opening strategy takes longer than expected to create a dominant market position due to a lack of suitable

store locations. This may affect the Group’s operating results.

6) Risk related to protection of personal information

The Group holds customer information related to the operation of a point card system and patient information related

to its dispensing pharmacy operations. This information contains the personal information of customers and patients and

is managed using the Group’s computers. The Group has established internal rules governing the use and management of

this information by staff responsible for information management, and makes every effort to protect this data. However,

the Group’s operating results may be affected by a loss of public trust in the event of a leak of personal information

caused by computer defects, criminal activity or a similar incident.

7) Risk related to natural disasters

The Group’s operating results may be affected in the event of an unforeseen accident or a natural disaster such as a

major earthquake that causes damage to the Group’s facilities or injury to its employees at the head office, stores,

logistics centers and other sites throughout Japan.


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2. Group Companies

The TSURUHA Group comprises TSURUHA Holdings, Inc. and 16 subsidiaries.

The Group’s main companies and details of their businesses and position in the Group are shown below.

Company name Main business

TSURUHA Holdings, Inc. Administration and management of drugstores selling pharmaceutical

products, cosmetics and general merchandise

TSURUHA drug, Inc.

Sales of pharmaceutical products and other products through dispensing

pharmacies and drugstores, and operation of a wholesale business supplying

franchise stores

RIVERS Co., Ltd. Sales of pharmaceutical products and other products through dispensing

pharmacies and drugstores in the Kanto region

Kusurinofukutaro Co., Ltd. Sales of pharmaceutical products and other products through dispensing

pharmacies and drugstores in the Kanto region

SPARK Co., Ltd. Sales of pharmaceutical products and other products through dispensing

pharmacies and drugstores in the Chubu region

Wellness Co., Ltd. Sales of pharmaceutical products and other products through dispensing

pharmacies and drugstores in the Sanin region

TSURUHA Group Merchandising Co., Ltd. Planning, negotiation and procurement operations related to the

procurement and distribution of products for the whole Group

TSURUHA e-commerce Co., Ltd. Mail-order sales of products handled by the Group via the telephone,

internet and other sales channels

TSURUHA Financial Service K.K. Operation, administration and management of insurance agency operations

in the Group

TSURUHA Corporation Kita Hokkaido Co.,

Ltd.

Sales of pharmaceutical products and other products through drugstores in

the northern Hokkaido region

TSURUHA Corporation Minami Hokkaido

Co., Ltd.

Sales of pharmaceutical products and other products through drugstores in

the southern Hokkaido region

TSURUHA Corporation Tohoku Co., Ltd. Sales of pharmaceutical products and other products through drugstores in

Kanto and Tohoku region

TSURUHA Pharmacy K.K. Real estate leasing operations

WING Co., Ltd. Planning, development and sales promotion for the Group’s private brand

products

Couture Co., Ltd. Importation, manufacture and sale of cosmetics and other products, and

mail-order sales of cosmetics and other products via the internet

Several Co., Ltd. Vending machine leasing and beverage sales

TSURUHA Career Support Co., Ltd. Staffing services

Note: TSURUHA Group merged with Sakura Drug Co., Ltd. on May 16, 2011.


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[Diagram of the TSURUHA Group]

The following diagram illustrates the structure of the TSURUHA Group.


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3. Management policies

(1) Basic management policy

The Group’s basic policy since its establishment has been to put “customers first.” Guided by this policy and our business

philosophy of “making life better for our customers,” we aim to provide convenience and expertise, and contribute to the

health and comfort of our customers by creating drugstores that are close to home and welcoming. All the Group’s strategic

functions have been concentrated in a holding company, which sits at the core of the Group. As a result, decision-making

processes are faster and more dynamic, and all subsidiaries implement the Group’s business philosophy, allowing them to

focus on business activities.

Going forward, we plan to actively open more stores through our area dominance store-opening strategy and boost

operational efficiency by focusing on profitability through low-cost operations. In addition, we intend to step up employee

training in order to build a drugstore chain that remains trusted by the public.

(2) Targeted performance indicators

In order to attain our goals of 1,500 stores and sales of ¥500 billion in the fiscal year ending May 15, 2016, we are using

operating margin and ROE as medium-term consolidated performance targets. Our targets at the moment are an operating

margin of at least 6.0% and ROE of at least 12.5% for the fiscal year ending May 15, 2016.

(3) Medium- to long-term management strategies

1) We will actively open new stores using our area dominance store-opening strategy and M&A deals, and revitalize our

existing network by refurbishing stores or closing unprofitable locations.

In particular, we plan to reinforce our earnings base in the Tohoku region and Kanto region by focusing new store

openings on both areas.

2) In order to increase the management capabilities of supervisors and store managers and improve the customer service

skills of employees, we plan to further enhance personnel development programs, such as training courses, on-the-job

training for sales staff, and e-learning to increase specialist knowledge.

3) We aim to speed up and increase the efficiency of private brand product development, with a particular focus on

reinforcing the “M’s one” brand. This process will give us high-quality, affordable products that incorporate feedback

from customers, but that also remain unique in the market, which we will actively market to customers. Also, we will

boost earnings and work to cut indirect expenses by reducing distribution costs and securing lower rents for stores as part

of efforts to ensure low-cost operations focused on profitability.

4) We plan to step up overseas business development through Tsuruha (Thailand) Co., Ltd., a joint venture with our

business partner in Thailand, the Saha Group. We intend to open new stores in Thailand and other markets in Southeast

Asia and rapidly build a dominant position through store openings targeting specific areas. We also plan to offer a mix of

products from both Japan and Thailand, including our private brand products.

5) By analyzing and using data related to customer buying habits gathered from our point card system, we will revise the

areas and frequency of sales flyer distribution. We will also develop effective sales promotion campaigns by providing

sales event and service information through our mobile website TSURUHA MOBILE, and work to build a base of loyal

customers.

6) We aim to reinforce our dispensing pharmacy business by actively opening new dispensing pharmacies through the

addition of dispensing pharmacy functions to existing drugstores, and by enhancing the skills of our pharmacists through

ongoing specialist training.

7) We will reinforce our nursing care business by working to offer products and information that help elderly customers

lead more comfortable lives. Specifically, we plan to set up counters in our stores staffed by specialist employees from

head office to provide advice to the elderly, and set up dedicated sales areas for nursing care products in key stores.

8) Protecting personal information and other customer information held by the Group is a basic part of our business

activities and our responsibility to society as a company. We will do whatever we can to reinforce corporate and personal

information management systems.

(4) Issues to be addressed

We expect the drugstore sector to face further changes in the operating environment going forward amid rising interest in

health and beauty among customers and as Japan’s society ages more rapidly. Companies from other sectors are moving into

the drugstore sector, leading to increased competition to reduce prices and open stores. We therefore expect this process to

accelerate further, with even tougher conditions in the operating environment set to drive sector realignment.

Against this backdrop, we are aiming to build a national chain of drugstores with 1,500 stores that generate sales of ¥500

billion by the fiscal year ending May 15, 2016. In order to achieve these goals, we will aggressively open new stores in Japan

and overseas, actively forge business and capital tie-ups and use M&A, and create a business structure that allows us to respond


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quickly and accurately to rapid shifts in the operating environment. We understand that enhancing competitiveness and

earnings capabilities are priority issues for the near term, and we will work as hard as possible to further maximize the

corporate value of the TSURUHA Group under the holding company system.

In addition, we will reinforce the compliance system and strengthen the capabilities of our risk management and internal

control systems in order to create an operating framework that enables us to rapidly and accurately assess and respond to a

range of factors that impact on our business. This will be part of wider efforts to fulfill our corporate social responsibility and

win even greater trust from the public.


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4. Consolidated financial statements

(1) Consolidated balance sheets (Millions of yen)

As of May 15, 2011 As of May 15, 2012

Assets

Current assets

Cash and deposits 22,313 13,536

Accounts receivable – trade 7,449 7,238

Short-term investment securities 6,000 19,600

Merchandise and finished goods 36,815 40,777

Raw materials and supplies 13 18

Deferred tax assets 1,574 1,864

Short-term loans receivable 8,798 21

Others 4,675 4,786

Total current assets 87,640 87,843

Non-current assets

Property, plant and equipment

Buildings and structures 17,208 17,524

Accumulated depreciation (8,889) (9,438)

Buildings and structures, net 8,318 8,086

Machinery, equipment and vehicles 54 54

Accumulated depreciation (49) (51)

Machinery, equipment and vehicles, net 5 3

Tools, furniture and fixtures 13,189 14,030

Accumulated depreciation (10,656) (11,425)

Tools, furniture and fixtures, net 2,533 2,604

Land 2,080 2,494

Lease assets 236 236


Lease assets, net 164 126

Construction in progress 9 －

Total property, plant and equipment 13,111 13,316

Intangible assets

Goodwill 11,964 10,865

Software 387 320

Telephone subscription right 54 54

Others 67 129

Total intangeble assets 12,474 11,370

Investments and other assets

Investment securities 4,610 6,187

Long-term loans receivable 88 59

Deferred tax assets 354 411

Guarantee deposits 21,317 21,849

Others 1,922 1,713

Allowance for doubtful accounts (63) (57)

Total investments and other assets 28,229 30,164


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(Millions of yen)

As of May 15, 2011 As of May 15, 2012

Total non-current assets 53,816 54,850

Total assets 141,457 142,694

Liabilities

Current liabilities

Accounts payable－trade 44,602 33,760

Short-term loans payable － 1,120

Current portion of bonds 100 －

Current portion of long-term loans payable 30 －

Accounts payable－other 5,886 5,277

Lease obligations 35 36

Income taxes payable 3,701 5,301

Provision for bonuses 2,336 2,348

Provision for directors’ bonuses 327 352

Provision for point card certificates － 869

Others 1,283 976

Total current liabilities 58,304 50,042

Non-current liabilities

Long-term loans payable 64 －

Lease obligations 133 96

Deferred tax liabilities 1,309 1,674

Provision for retirement benefits 299 346

Provision for directors’ retirement benefits 15 15

Asset retirement obligations 797 846

Others 1,280 1,262

Total non-current liabilities 3,899 4,242

Total liabilities 62,204 54,284

Net assets

Shareholders’ equity

Common stock 6,629 6,691

Capital surplus 22,217 22,282

Retained earnings 47,655 56,327

Treasury stock (9) (953)

Total shareholders’ equity 76,492 84,348

Accumulated other comprehensive income

Valuation difference on available-for-sale securities 2,339 3,476

Total accumulated other comprehensive income 2,339 3,476

Subscription rights to shares 420 584

Minority interests －－

Total net assets 79,253 88,410

Total liabilities and net assets 141,457 142,694


- 11 -

(2) Consolidated statements of income and comprehensive income

(Consolidated statements of income) (Millions of yen)

Year ended May 15, 2011 Year ended May 15, 2012

Net sales 299,579 320,969

Cost of sales 215,914 230,173

Gross profit 83,664 90,796

Selling, general and administrative expenses

Employees’ salaries and allowances 25,127 26,692

Employees’ bonuses 1,943 1,937

Provision for bonuses 2,325 2,352


Provision for retirement benefits 65 77

Rents 16,256 16,899

Provision for point card certificates － 869

Others 21,845 22,546

Total selling, general and administrative expenses 67,892 71,728

Operating income 15,771 19,067

Non-operating income

Interest income 104 125

Dividends income 67 64

Gain on donation of equipment 355 388

Rent income 83 91

Others 178 235

Total non-operating income 790 905

Non-operating expenses

Interest expenses 17 16

Installment interest 0 －

Provision of allowance for doubtful accounts 16 －

Loss on insurance cancellation － 6

Others 6 2

Total non-operating expenses 40 25

Ordinary income 16,521 19,948

Extraordinary income

Gain on sales of investment securities 4 0

Reversal of allowance for doubtful accounts 3 －

Gain on reversal of subscription rights to shares 115 －

Gain on sales of non-current assets 0 －

Others 3 －

Total extraodinary income 127 0


- 12 -

(Millions of yen)


Extraordinary losses

Loss on retirement of non-current assets 182 104

Loss on sales of non-current assets 1 5

Loss on valuation of investment securities 0 －

Impairment loss 302 267

Loss on disaster 1,432 23

Loss on cancellation of lease contracts 9 7

Loss on adjustment for changes of accounting standard

for asset retirement obligations 283 －

Others 60 33

Total extraordinary losses 2,273 441

Income before income taxes and minority interests 14,374 19,507

Income taxes – current 6,710 9,212

Income taxes – deferred (229) (299)

Total income taxes 6,481 8,912

Income before minority interests 7,893 10,594

Minority interests in income 12 －

Net income 7,881 10,594


- 13 -

(Statements of comprehensive income)

(Millions of yen)


Income before minority interests 7,893 10,594

Other comprehensive income

Valuation difference on available-for-sale securities 1 1,137

Total other comprehensive income 1 1,137

Comprehensive income 7,894 11,731

(Breakdown of comprehensive income)

Parent company portion of comprehensive income 7,882 11,731

Minority interest portion of comprehensive income 12 －


- 14 -

(3) Consolidated statements of changes in net assets

(Millions of yen)



Common Stock

Balance at the beginning of current period 6,628 6,629

Changes of items during the period

Issuance of new shares 1 62

Total changes of items during the period 1 62

Balance at the end of current period 6,629 6,691

Capital surplus




Disposal of treasury stock － 2



Retained earnings



Dividends from surplus (1,540) (1,922)

Net income 7,881 10,594

Change of scope of consolidation (267) －

Total changes of items during the period 6,073 8,672


Treasury stock

Balance at the beginning of current period (8) (9)


Purchase of treasury stock (0) (1,031)


Total changes of items during the period (0) (944)

Balance at the end of current period (9) (953)

Total shareholders’ equity





Net income 7,881 10,594







- 15 -

(Millions of yen)


Accumulated other comprehensive income

Valuation difference on available-for-sale securities



Net changes of items other than shareholders’ equity 1 1,137

Total changes of items during the period 1 1,137


Total accumulated other comprehensive income






Subscription rights to shares

Balance at the beginning of current period 373 420


Net changes of items other than shareholders’ equity 47 164


Balance at the end of current period 420 584

Minority interests

Balance at the beginning of current period 21 －


Net changes of items other than shareholders’ equity (21) －

Total changes of items during the period (21) －

Balance at the end of current period －－

Total net assets





Net income 7,881 10,594






Balance at the end of previous period 79,253 88,410


- 16 -

(4) Consolidated statements of cash flows

(Millions of yen)


Cash flows from operating activities

Net income before income taxes 14,374 19,507

Depreciation and amortization 2,261 2,235

Impairment loss 302 267

Loss on disaster 1,432 23

Amortization of goodwill 1,087 1,099

Loss on adjustment for changes of accounting standard

for asset retirement obligations 283 －

Increase (decrease) in allowance for doubtful accounts 3 (6)

Increase (decrease) in provision for bonuses 115 11

Increase (decrease) in provision for directors’ bonuses 52 24

Increase (decrease) in provision for retirement benefits 55 47

Increase (decrease) in provision for point card certificates － 869

Interest and dividends income (172) (189)

Interest expenses paid on loans and installment interests 17 16

Gain on donation of equipment (355) (388)

Loss on retirement of non-current assets 182 104

Loss (gain) on sales of non-current assets 0 5

Loss (gain) on valuation of investment securities 0 －

Loss (gain) on sales of investment securities (4) (0)

Gain on reversal of subscription rights to shares (115) －

Decrease (increase) in notes and accounts receivable –

trade (698) 211

Decrease (increase) in inventories (257) (3,966)

Increase (decrease) in notes and accounts payable – trade 2,933 (10,841)

Increase (decrease) in accrued consumption taxes (5) (292)

Others 266 (868)

Subtotal 21,759 7,868

Interest and dividends income received 108 114

Interest expenses paid (16) (15)

Income taxes paid (6,574) (7,579)

Net cash provided by (used in) operating activities 15,277 387


- 17 -

(Millions of yen)


Cash flows from investing activities

Payments into time deposits (1,517) (2)

Proceeds from withdrawal of time deposits － 1,506

Purchase of property, plant and equipment (1,383) (1,839)

Proceeds from sales of property, plant and equipment 0 12

Purchase of software (166) (85)

Purchase of investment securities (1) (126)

Proceeds from sales of investment securities 11 4

Purchase of investments in subsidiaries (21) －

Payments of loans receivable (2) (15)

Collection of loans receivable 26 24

Payments for guarantee deposits (1,998) (1,968)

Proceeds from collection of guarantee deposits 1,275 1,468

Others (207) 34

Net cash provided by (used in) investing activities (3,983) (988)

Cash flows from financing activities

Proceeds from short-term loans payable 480 1,120

Repayment of short-term loans payable (497) －

Repayment of long-term loans payable (635) (94)

Redemption of bonds (200) (100)

Repayments of lease obligations (34) (35)

Proceeds from issuance of new shares 1 106

Proceeds from sales of treasury stock － 86


Cash dividends paid (1,539) (1,924)

Others (1) 1

Net cash provided by (used in) financing activities (2,427) (1,871)

Net increase (decrease) in cash and cash equivalents 8,866 (2,472)

Cash and cash equivalents at the beginning of period 26,680 35,583

Increase (decrease) in cash and cash equivalents resulting

from change of scope of consolidation 36 －

Cash and cash equivalents at the end of period 35,583 33,111


- 18 -

(5) Notes related to the going concern assumption

There is no related information.

(6) Basic important matters for preparing the consolidated financial statements

Items related to the scope of consolidation

Number of consolidated subsidiaries: 16

Names of important consolidated subsidiaries

Please refer to “2. Group Companies” on page 5.

Additional information has been omitted, as there has been no material change to the scope of consolidation since the

most recent securities filing (August 11, 2011).

(7) Changes in presentation methods


(8) Notes related to consolidated balance sheets

(Disclosure omitted)

Notes related to lease transactions, information on related parties, tax effect accounting, financial products, marketable

securities, derivative transactions, retirement benefits, stock options, corporate combinations, and asset retirement

obligations have been omitted, as their disclosure has been deemed immaterial to this summary of consolidated financial

results.

(Segment information, etc.)

a. Segment information

Segment information has been omitted, as the Group’s only business segment is product sales, primarily of

pharmaceutical products and cosmetics.

b. Related information

1. Information by product and service

Information has been omitted, as the Group’s only segment is product sales, and sales to external customers in this

business account for more than 90% of sales recorded in the consolidated statements of income.

2. Information by region

(1) Net sales

Information has been omitted, as the Group does not record net sales to external customers outside Japan.

(2) Property, plant and equipment

Information has been omitted, as the Group does not own property, plant and equipment outside Japan.

3. Information by major customer

Information has been omitted, as the Group does not have an external customer that accounts for more than 10% of net

sales recorded in the consolidated statements of income.

c. Information on fixed asset impairment losses by reportable segment

Information has been omitted, as the Group’s only segment is product sales.

d. Information on goodwill amortization amounts and outstanding amortization balances by reportable segment

Information has been omitted, as the Group’s only segment is product sales.

e. Information on gains on negative goodwill by reportable segment



- 19 -

(Per share information)


Net assets per share 3,325.66 Net assets per share 3,736.65

Net income per share 332.48 Net income per share 449.74

Fully diluted net income per share 331.65 Fully diluted net income per share 447.18

Note: Amounts for net income per share and fully diluted net income per share are calculated based on the following items.


Net income per share

Net income (millions of yen) 7,881 10,594

Amounts not attributable to owners of

common stock (millions of yen) －－

Net income associated with common

stock (millions of yen) 7,881 10,594

Average number of shares of common

stock during fiscal year (stock) 23,703,990 23,557,571

Fully diluted net income per share

Adjustment to net income －－

Increase in number of shares of

common stock (share) 58,893 134,882

(Of which, subscription rights to

shares) (58,893) (134,882)

Details of shares not included in

calculation of fully diluted net income pre

share due to non-dilutive effect

Subscription rights to shares: 1 type

(Number of subscription rights to

shares: 2,479）


- 20 -

5. Production, orders and sales

(1) Purchasing results.

Items Year ended May 15, 2012

Amount (Millions of yen) Composition ratio

(%) Change (%)

Pharmaceuticals 46,485 19.8 109.7

Cosmetics 45,183 19.3 109.9

Daily necessities 78,548 33.5 110.2

Child care products 10,918 4.7 93.8

Other products 51,188 21.9 110.4

Subtotal 232,323 99.2 109.2

Real estate leasing costs 41 0.0 100.0

Internet sales, etc. 1,770 0.8 127.0

Total 234,135 100.0 109.0

Notes: 1. Amounts are actual purchasing prices.

2. Other products mainly comprise food products, health food products and medical devices.

(2) Sales results.

Items Year ended May 15, 2012

Amount (Millions of yen) Composition ratio

(%) Change (%)

Pharmaceuticals 79,349 24.7 108.8

Cosmetics 62,191 19.4 106.2

Daily necessities 97,646 30.4 107.6

Child care products 12,410 3.9 95.2

Other products 66,057 20.6 108.2

Subtotal 317,656 99.0 107.2

Real estate leasing costs 137 0.0 113.9

Commission income 699 0.2 108.8

Internet sales, etc. 2,476 0.8 129.4

Total 320,969 100.0 107.1

Note: Other products mainly comprise food products, health food products and medical devices.


- 21 -

6. Non-consolidated Financial Statements

(1) Balance sheets

(Millions of yen)

As of May 15, 2011 As of May 15, 2012

Assets

Current assets

Cash and deposits 1,799 1,086

Accounts receivable – trade 98 36

Short-term investment securities 3,800 6,100


Short-term loans receivable from subsidiaries and

affiliates 95 1,612

Others 433 520

Total current assets 6,266 9,394

Non-current assets

Property, plant and equipment

Buildings 7 7


Buildings, net 5 5

Tools, furniture and fixtures 31 32


Tools, furniture and fixtures, net 19 14

Total property, plant and equipment 25 19

Intangible assets

Telephone subscription right 0 0

Software in progress － 61

Total intangible assets 0 61

Investments and other assets

Stocks of subsidiaries and affiliates 43,896 44,040

Long-term loans receivable from subsidiaries and

affiliates 1,845 346


Others 16 16

Allowance for doubtful accounts (45) (248)

Total investments and other assets 45,778 44,224

Total non-current assets 45,803 44,306

Total assets 52,070 53,700


- 22 -

(Millions of yen)

As of May 15, 2011 As of May 15, 2012

Liabilities

Current liabilities

Short-term loans payable － 1,120

Accounts payable – other 104 146

Accrued expenses 0 0

Income taxes payable 17 55

Deposits received 1 1

Unearned revenue 1

Provision for bonuses 51 50


Others 18 18

Total current liabilities 310 1,509

Non-current liabilities

Others 8 8

Total non-current liabilities 8 8

Total liabilities 318 1,518

Net assets


Common stock 6,629 6,691

Capital surplus

Legal capital surplus 39,912 39,975

Other capital surplus － 2

Total capital surplus 39,912 39,978

Retained earnings

Legal retained earnings 15 15

Other retained earnings

General reserve 861 861

Retained earnings brought forward 3,921 5,004

Total retained earnings 4,798 5,881

Treasury stock (9) (953)

Total shareholders’ equity 51,331 51,597

Subscription rights to shares 420 584

Total net assets 51,751 52,182

Total liabilities and net assets 52,070 53,700


- 23 -

(2) Statements of income

(Millions of yen)


Operating revenue

Commission income 1,417 1,576

Dividends income 2,486 3,285

Total operating revenue 3,904 4,861

Operating expenses

Directors’ compensations 128 106

Employees’ salaries and allowances 521 535

Provision for bonuses 51 50


Welfare expenses 87 92

Rents 31 32

Commission fee 127 156

Entertainment expenses 34 77

Others 312 281

Total operating expenses 1,409 1,449

Operating income 2,494 3,412

Non-operating income

Interest income 50 23

Interest on securities 10 17

Others 2 8

Total non-operating income 64 49

Non-operating expenses

Interest expenses － 3

Total non-operating expenses － 3

Ordinary income 2,559 3,457

Extraordinary income

Gain on sales of investment securities 0 －

Gain on reversal of subscription rights to shares 115 －

Total extraodiary income 116 －

Extraordinary losses

Loss on valuation of subsidiaries’ stocks 109 41

Provision of allowance for doubtful accounts for

subsidiaries and affiliates 45 203

Loss on disaster 100 －

Total extraodiary losses 254 244

Income before income taxes 2,421 3,212

Income taxes – current 124 210

Income taxes – deferred (71) (3)

Total income taxes 53 207

Net income 2,368 3,005


- 24 -

(3) Statements of changes in net assets

(Millions of yen)



Common stock






Capital surplus

Legal capital surplus






Other capital surplus

Balance at the beginning of current period

－



Total changes of items during the period － 2

Balance at the end of current period － 2

Total capital surplus







Retained earnings

Legal retained earnings



Total changes of items during the period －－


Other retained earnings

General reserve



Total changes of items during the period －－



- 25 -

(Millions of yen)


Retained earnings brought forward







Total retained earnings







Treasury stock

Balance at the beginning of current period (9) (9)



Disposal of treasury stock

86

Total changes of items during the period (0) (944)

Balance at the end of current period (9) (953)

Total shareholders’ equity






Changes of items during the period (0) (1,031)




Subscription rights to shares







- 26 -

(Millions of yen)


Total net assets












- 27 -

(4) Notes related to the going concern assumption


(5) Changes in presentation methods

(Statements of income)

In the previous fiscal year, “Entertainment expenses” was included in “Other” under “Operating expenses.” From the fiscal

year under review, “Entertainment expenses” has been shown as a separate item, as it accounts for more than 5.0% of total

operating expenses. Also, in the previous fiscal year “Contribution” was shown as a separate item under “Operating expenses.”

However, in the fiscal year under review it has been included in “Other,” as it accounts for less than 5.0% of total operating

expenses. The financial statements for the previous fiscal year have been modified to reflect these changes in presentation.

As a result, ¥73 million for “Contribution” and ¥273 million for "Other" shown under “Operating expenses” in the statements

of income in the previous fiscal year have been recombined as ¥34 million for “Entertainment expenses” and ¥312 million for

“Other."

Documents

Financial Results for the Fiscal Year Ended May 15, …...3. Consolidated financial forecast for the fiscal year ended May 15, 2013 (May 16, 2012 – May 15, 2013) (Percentage figures