Notice: This document has been translated from Japanese original for reference purpose only, without any warranty as toits accuracy or as to the completeness of the information. The Japanese original version is the sole official version.
May 13, 2016

Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2016
[Japanese GAAP]
Company name: EM SYSTEMS CO., LTD.
Stock code:
4820
Representative: Kozo Kunimitsu, Chairman and CEO
Contact:
Ryoko Mitsuhashi, Director
Tel: +81-6-6397-1888
Scheduled date of Annual General Meeting of Shareholders:
Scheduled date of payment of dividend:
Scheduled date of filing of Annual Securities Report:
Preparation of supplementary materials for financial results:
Holding of financial results meeting:

Listing: Tokyo Stock Exchange, First Section
URL: http://www.emsystems.co.jp

June 28, 2016
June 29, 2016
June 28, 2016
Yes
Yes (for securities analysts)(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2016 (April 1, 2015 – March 31, 2016)(Percentages represent year-on-year changes)(1) Consolidated operating results
Net sales

Operating income

Million yen%

Fiscal year ended Mar. 31, 201613,199Fiscal year ended Mar. 31, 2015
11,257
Note: Comprehensive income (million yen):

17.2
(1.0)

Net income pershare

Million yen

Profit attributable toowners of parent

Ordinary income%

Million yen%

Million yen

%

1,861
51.0
2,446
43.7
1,621
68.0
1,232
(26.3)
1,702(25.5)
965(32.0)
Fiscal year ended Mar. 31, 2016:
1,541 (up 51.8%)
Fiscal year ended Mar. 31, 2015:
1,015 (down 30.2%)
Diluted net income
Ordinary income Operating income
Return on equity
per share
on total assets
to net sales

Yen

Yen

Fiscal year ended Mar. 31, 2016
93.38
Fiscal year ended Mar. 31, 2015
59.82
Reference: Equity in earnings of affiliates (million yen):

%

%

%

92.51
14.1
12.4
14.1
59.41
9.6
9.1
11.0
Fiscal year ended Mar. 31, 2016: - Fiscal year ended Mar. 31, 2015: (0)Note: EM SYSTEMS CO., LTD. (hereafter, the “Company”) conducted a common stock split according to a ratio of 1:2 effective on April 1,
2016. Net income per share and diluted net income per share are calculated as if this stock split had taken place at the beginning of theprevious fiscal year.

(2) Consolidated financial position
Total assets

Net assets

Million yen

As of Mar. 31, 2016
As of Mar. 31, 2015
Reference: Shareholders’ equity (million yen)

Net assets per share

Equity ratio

Million yen

20,31019,249As of Mar. 31, 2016:

Yen%

12,172
11,012
12,107

59.6
56.8
As of Mar. 31, 2015:

693.68629.04
10,940Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Net assets per share arecalculated as if this stock split had taken place at the beginning of the previous fiscal year.

(3) Consolidated cash flows
Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash equivalents
at end of period

Million yen

Million yen

Million yen

Million yen

2,108
1,507

597
425

(1,277)
(3)

6,354
4,928

Fiscal year ended Mar. 31, 2016
Fiscal year ended Mar. 31, 2015

2. Dividends
Dividend per share
1Q-endFiscal year ended Mar. 31, 2015
Fiscal year ended Mar. 31, 2016
Fiscal year ending Mar. 31, 2017
(forecast)Year-end

Total
Payout ratio
dividends (consolidated)

Total

Dividend on
equity(consolidated)

2Q-end3Q-end

Yen

Yen

Yen

Yen

Yen

Million yen

%

%

-

15.00
16.00

-

30.00
31.00

45.00
47.00

381
409

37.6
25.2

3.8
3.6

-

8.00

-

17.00

25.00

25.8

Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Dividend per share for the fiscal
years ended March 31, 2015 and 2016 is the actual amount before the stock split.

3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2017 (April 1, 2016 – March 31, 2017)
Net salesFirst half
Full year

Operating income(Percentages represent year-on-year changes)
Profit attributable to
Net income per shareowners of parent

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen

%

Yen

6,518
13,900

4.3
5.3

826
2,050

20.6
10.1

1,083
2,550

15.3
4.2

726
1,680

(9.9)
3.6

41.81
96.75

Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Net income per share forecasts
are calculated based on the number of shares outstanding (excluding treasury shares) after the stock split.

* Notes(1) Changes in significant subsidiaries during the period (changes in scope of consolidation): None
(2) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: Yes
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None
Note: Please refer to “5. Consolidated Financial Statements, (5) Notes to Consolidated Financial Statements, Changes in
Accounting Policies” on page 23 of the attachments for further information.

(3) Number of outstanding shares (common stock)1) Number of shares outstanding at the end of period (including treasury shares)
As of Mar. 31, 2016:

17,855,700 shares

As of Mar. 31, 2015:

17,708,300 shares

As of Mar. 31, 2015:

315,754 shares

2) Number of treasury shares at the end of period
As of Mar. 31, 2016:

400,954 shares

3) Average number of shares outstanding during the period
Fiscal year ended Mar. 31, 2016:

17,366,946 sharesFiscal year ended Mar. 31, 2015:

16,135,338 shares

Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Number ofoutstanding shares (common stock) is calculated as if this stock split had taken place at the beginning of the previous
fiscal year.

Reference: Summary of Non-consolidated Financial Results
1. Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2016 (April 1, 2015 – March 31, 2016)(Percentages represent year-on-year changes)(1) Non-consolidated operating results

Fiscal year ended Mar. 31, 2016
Fiscal year ended Mar. 31, 2015

Net sales
Million yen%
10,956
7.3
10,213(4.2)

Operating income
Million yen
%
1,635
29.7
1,260
(20.9)

Ordinary income
Million yen
%
2,201
24.7
1,765
(16.8)Net income
Million yen
%
1,312
15.1
1,140
(14.9)Net income per share Diluted net income per share
Yen
Yen
Fiscal year ended Mar. 31, 2016
75.58
74.87
Fiscal year ended Mar. 31, 2015
70.70
70.21
Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Net income per share anddiluted net income per share are calculated as if this stock split had taken place at the beginning of the previous fiscal year.

(2) Non-consolidated financial position
Total assets
Net assets
Equity ratio
Net assets per share
Million yen
Million yen%
Yen
As of Mar. 31, 2016
19,568
11,871
60.3
676.44As of Mar. 31, 2015
18,607
10,95058.5
625.46
Reference: Shareholders’ equity (million yen):
As of Mar. 31, 2016: 11,807
As of Mar. 31, 2015: 10,878
Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Net assets per share arecalculated as if this stock split had taken place at the beginning of the previous fiscal year.
* Indication of audit procedure implementation status
This summary report is exempted from audit procedures based on the Financial Instruments and Exchange Act. At the time of
disclosure, the audit procedures for the financial statements have not been completed.
* Explanation of appropriate use of earnings forecasts, and other special items
Forecasts of future performance in this report are based on assumptions judged to be valid and information available to theCompany’s management at the time the materials were prepared. Actual results may differ significantly from these forecasts for anumber of reasons.

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Contents of Attachments
1. Analysis of Operating Results and Financial Position

2(1) Analysis of Operating Results

2(2) Analysis of Financial Position

4(3) Basic Policy for Profit Distribution, and Dividends in the Current and Next Fiscal Years

5(4) Business and Other Risks

5

2. Corporate Group7

3. Management Policies

9(1) Basic Management Policy

9(2) Performance Targets

9(3) Medium- and Long-term Business Plan

9(4) Challenges

10

4. Basic Approach to the Selection of Accounting Standards

10

5. Consolidated Financial Statements

11(1) Consolidated Balance Sheet

11(2) Consolidated Statements of Income and Comprehensive Income

13

Consolidated Statement of Income

13

Consolidated Statement of Comprehensive Income15(3) Consolidated Statement of Changes in Equity

16(4) Consolidated Statement of Cash Flows

18(5) Notes to Consolidated Financial Statements

20

Going Concern Assumption

20

Significant Accounting Policies in the Preparation of Consolidated Financial Statements

20

Changes in Accounting Policies

23

Segment and Other Information

23

Per Share Information

27

Subsequent Events28

6. Others

31

Changes in Directors

31

1

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

1. Analysis of Operating Results and Financial Position(1) Analysis of Operating Results1) Operating results for the fiscal year ended March 31, 2016
The Japanese economy continued to recover slowly in the fiscal year that ended on March 31, 2016 along with the
improvement of the employment situation and corporate earnings. However, the economic outlook is still unclear
due to the prolonged weakness of individual consumption, the weakening economies of emerging countries, lower
prices for natural resources, the sharp decline in stock prices and other factors. The operating environment forpharmacies in Japan, the primary market for our products, continued to be challenging. There are concerns about the
impact on pharmacy earnings of the April 2016 revisions to drug dispensing fees. Another challenge is posed by thereorganization of the pharmacy industry as companies take actions in order to survive. In this difficult environment,
the EM Systems Group remained Japan’s leading source of support for upgrading healthcare services by supplying
solutions incorporating IT that target the needs of the constantly changing healthcare industry.
For the fiscal year that ended on March 31, 2016, EM SYSTEMS (hereafter, the “Company”) reported consolidated
net sales of 13,199 million yen (up 17.2% year on year), operating income of 1,861 million yen (up 51.0%), ordinary
income of 2,446 million yen (up 43.7%) and profit of 1,621 million yen (up 68.0%).
i) Systems and Related Businesses
The sales operations of this segment were reorganized in April 1, 2015 in order to perform even more effective sales
activities. With this new organization, we concentrated on increasing sales of Recepty NEXT, a prescription systemfor pharmacies, the Medical Recepty NEXT (MRN) Clerk Style, a medical accounting systems, UNI-MEDICAL,
and Medical Recepty NEXT Karte Style, an electronic patient record system.
Sales activities for pharmacy prescription systems targeted pharmacies that would be first-time users of thesesystems and pharmacies currently using systems of other companies. Although the sales volume fell short of ourgoal, there were increases in sales of OEM systems and sales of consolidated subsidiary COSMOSYSTEMS Co.,
Ltd. We continued to work on expanding sales channels for medical accounting systems and electronic patient
record systems. Despite these activities, sales were lackluster for both systems sold to first-time users and as
replacements. Billing service sales and sales of supplies remained strong.
Segment operating income was higher than one year earlier because of the benefits of extensive measures to cut thecost of sales and operating expenses and the full fiscal year contribution to earnings by COSMOSYSTEMS.
There were no vacancies in the leased office section of the Shin-Osaka Brick Building at the end of the fiscal yearwith five clinics in the clinic mall. We will carefully consider ways to effectively utilize this building while taking
into account changes in market conditions.
The Strategic Headquarters for an Advanced Information and Telecommunications Network Society (IT Strategic
Headquarters) of the Japanese government announced a new information and telecommunications technology
strategy. One part of the plan for the health care sector is creating an infrastructure where people can view any
hospital or clinic as their own health care provider. The Company is continuing to participate in R&D anddemonstration tests involving the use of personal health records (PHR) and electronic health records (EHR)
associated with digital prescription bag data. The aim is to contribute to progress in the health care industry.
Currently, more than 260 medical institutions in Japan are using services provided by our EHR business.
The Japanese government is working on the establishment of a Regional Comprehensive Care System with a targetof 2025. We plan to develop a support tool that will facilitate the use of Information and Communication Technology(ICT) for efficient links among physicians and nursing care facilities in a particular area. Another project involves
the development of an infectious disease outbreak notification service. Originally a joint research project with the
National Institute of Infectious Diseases, this is now a joint project with the Japan Medical Association, Japan
Pharmaceutical Association and Nihon University. The number of pharmacies using this service is increasing
steadily and more than 10,000 people are registered to receive these notices.

2

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

As a result, the segment recorded sales of 13,206 million yen (up 15.1% year on year) and operating income of
1,793 million yen (up 52.3 %).
ii) Other BusinessThis segment includes the LASANTE fitness club, a conference room rental business and the LaLa Kids nurseryschool, all in the Shin-Osaka Brick Building and operated by LASANTE Co., Ltd. This segment also includes thepharmacy business of new consolidated subsidiary Brick Pharmacy Co., Ltd., which is also in the Shin-Osaka Brick
Building and started operating in May 2015.
Sales in this segment were 1,003 million yen (up 235.6%) and operating income was 92 million yen (up 15.0%). All
businesses in this segment will continue to take actions aimed at supplying services with substantial added value.
Segment sales and operating income in this section are before the inter-segment eliminations.
2) Forecasts for the new fiscal year
Even more measures are expected in Japan in order to hold down the cost of health care. Furthermore, the increasing
pace of mergers and acquisitions among large pharmacy companies and increasing number of drug stores that also
dispense prescriptions are widening the gap between companies with strong earnings and others. As a result,
pharmacy operators with only a single store will continue to face difficulties. To succeed, pharmacies will have to
become even more efficient, such as by increasing the use of generic drugs and more closely managing left-overdrugs. The Ministry of Health, Labour and Welfare no longer prohibits the use of electronic prescription bags whencertain requirements are met and more than 35% of clinics in Japan are using electronic patient records. As acompany already participating in PHR and EHR demonstration trials in various locations, we believe that our role
will become more important as the use of digital data continues to grow. Our goal is to further increase the use of
our services that produce a consistent revenue stream. We will make even greater use of solutions that incorporate IT
to be a leader in the provision of support for more advances with medical services. Furthermore, we have decided tostart developing a nursing care system that will function as a link between health care (medical care andprescriptions) and nursing care facilities.
On April 1, 2016, we revised our organizational structure for the purposes of clarifying authority and responsibilities
in order to adapt to the constant changes in our operating environment. The five former divisions of theDevelopment Division, Sales and Marketing Division, Pharmacy Chain Division, Health Care Division, and Medical
Data Linkage Promotion Division were reorganized into four business units: the Prescription Systems Business,
Medical Systems Business, Health Care-Nursing Care Cooperation Business, and Sales and Service Business. Thesebusiness units have the following functions.
1. Prescription Systems BusinessThis business is a manufacturer of prescription systems, with operations that include determining business strategies,
product planning and development, establishing new sales channels, and other activities.
2. Medical Systems BusinessThis business is a manufacturer of medical systems, with operations that include determining business strategies,
product planning and development, establishing new sales channels, and other activities.
3. Health Care-Nursing Care Cooperation BusinessThis business is a manufacturer and marketer of systems for exchanging and sharing nursing care and medical careinformation. Operations include determining business strategies, product planning and development, establishing
new sales channels, and other activities. The primary goal is increasing the use of electronic health records (EHR) to
provide a link between medical (prescription and medical care) and nursing care information.

3

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

4. Sales and Service Business
By unifying the sales and support services that were previously divided among various divisions and by reorganizingthem by function, this business performs sales activities for all products and services. There is a separateorganizational unit for each job category in order to strengthen specialized skills and achieve greater customer
satisfaction.
The EM Systems Group forecasts FY3/17 consolidated net sales of 13,900 million yen (up 5.3% year on year),
operating income of 2,050 million yen (up 10.1%), ordinary income of 2,550 million yen (up 4.2%), and profit of
1,680 million yen (up 3.7%).
Due to the change to this four business unit structure, the Systems and Related Business segment has been divided
into the Prescription Systems and Related Operations Business and the Medical Systems and Related Operations
Business starting with the fiscal year ending in March 2017. With the Other Business segment, there are now a totalof three business segments.
(2) Analysis of Financial Position
1) Financial position
Total assets were 20,310 million yen at the end of the fiscal year, 1,060 million yen more than one year earlier. Cashand deposits and notes and accounts receivable increased. Property, plant and equipment and real estate forinvestment decreased because of depreciation. There were also decreases resulting from the amortization of Unicon
corporation goodwill due to the integration of its medical sales operation with the Company and from theimpairment of company-owned employee housing caused by a change in the employee housing system.
Total liabilities decreased 99 million yen from the end of the previous fiscal year to 8,137 million yen, due to adecrease in loans payable and an increase in income taxes payable.
Net assets increased 1,159 million yen to 12,172 million yen mainly because of an increase in retained earnings
associated with the fiscal year’s profit.
2) Cash flows
Cash and cash equivalents increased 1,426 million yen to 6,354 million yen at the end of March 2016. This was
mainly attributable to increases in profit before income taxes along with the strong earnings in the current fiscal year
and proceeds from rental of real estate for investment.
Cash flows from operating activities
Net cash provided by operating activities was 2,108 million yen, compared with 1,507 million yen provided in theprevious fiscal year. Strong earnings in the current fiscal year were the primary reason for this increase.
Cash flows from investing activities
Net cash provided by investing activities was 597 million yen compared with 425 million yen provided in theprevious fiscal year, mainly because of proceeds from rental of real estate for investment.
Cash flows from financing activities
Net cash used in financing activities was 1,277 million yen compared with 3 million yen used in the previous fiscal
year. The repayment of loans payable was the primary use of cash.

4EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Reference: Cash flow indicators
FY3/12

FY3/13

FY3/14

FY3/15

FY3/16

Shareholders’ equity ratio (%)

42.0

45.6

50.1

56.8

59.6

Shareholders’ equity ratio based on market value (%)

90.3

82.6

101.3

82.7

113.4

Ratio of interest-bearing debt to cash flows (years)

7.2

5.4

3.5

2.6

1.4

Interest coverage ratio (times)

14.4

22.2

38.0

48.5

82.1

Shareholders’ equity ratio: Shareholders’ equity / Total assets
Shareholders’ equity ratio based on market value: Market capitalization / Total assets
Ratio of interest-bearing debt to cash flows: Interest-bearing debt / Cash flows
Interest coverage ratio: Cash flows / Interest payments
Notes: 1. All indicators are calculated based on consolidated figures.
2. Market capitalization is calculated based on the number of shares outstanding after the deduction of treasury shares.
3. Cash flows are calculated using the figures for operating cash flows in the consolidated statement of cash flows.
4. Interest-bearing debt includes all debt on the consolidated balance sheet that incur interest.

(3) Basic Policy for Profit Distribution, and Dividends in the Current and Next Fiscal Years
Distributing earnings to shareholders is one of the highest management priorities of the Company. The basic policy
is to pay dividends that reflect performance in each fiscal year while retaining sufficient earnings for future business
operations and increasing financial soundness.
For the fiscal year that ended on March 31, 2016, we plan to pay a year-end dividend of 31 yen per share. With theinterim dividend of 16 yen per share, this will result in a fiscal year dividend of 47 yen per share. The General
Meeting of Shareholders makes decisions about this year-end dividend payment from retained earnings. For the
fiscal year ending in March 2017, based on our consolidated payout ratio target of 25%, we plan to pay an interim
dividend of 8 yen and a year-end dividend of 17 yen, resulting in a fiscal year dividend of 25 yen per share.
We use retained earnings for strengthening the foundation for business operations, funding mergers and acquisitions
for business expansion, reinforcing our product and technology development capabilities to meet new market needs
and keep up with information technology progress, adding sales bases to become more competitive, and otheractions that will contribute to shareholder distributions in the future.
(4) Business and Other Risks
This section explains risk factors that may have an effect on the performance of the EM Systems Group.
1) Health insurance revisions in Japan
Japan is continuing to enact health care system reforms as the population ages and the number of children declines.
Depending on the types and size of revisions to the health care system, there may be a decline in capital
expenditures at dispensing pharmacy companies. For example, there may be reforms that reduce the profit margin on
drugs or that raise the amount people pay in addition to health insurance premiums, thus lowering the number ofpeople who see a doctor. These events may affect the EM Systems Group’s performance.
2) Changes to computer programs resulting from health insurance revisions
Japan may make major changes to the health care system in association with health insurance revisions. If thesechanges encompass a broad range of computer programs, the resulting growth in the volume of work due to thecomplexity of creating revised programs may affect the EM Systems Group’s performance.
In addition, if a computer program that has already been distributed to customers requires corrections, thendepending on the size and difficulty of the corrections, there may be an effect on the EM Systems Group’s
performance.

5

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

3) Development of new products
To compete successfully against other companies, we are concentrating on the development of accounting systems
for clinics and nursing care facilities that use electronic patient records and systems for nursing care operators. For
example, one goal is the development of a network system for an Internet-linked prescription insurance billing
support system. However, work on the development of these systems may not proceed as planned and it may not be
possible to offer these services to customers. If there is a delay in launching a service due to revisions,reexaminations or other actions required during the development stage or if development work is suspended, there
may be an effect on the EM Systems Group’s performance.
Most activities involving the development of application software are performed by EM SOFTWARE SYSTEMSDEVELOPMENT (NANJING) Co.,Ltd. and EM SOFTWARE SYSTEMS DEVELOPMENT (SHANGHAI) Co.,Ltd.
Operating expenses at these companies may increase due to the rising wages of engineers associated with economic
growth in China and to tax revisions in China. In addition, if there is a major revision to the current insurance billingsystem or a dramatic shift in market conditions caused by the use of a new technology that was unforeseen by the
EM Systems Group, EM SOFTWARE SYSTEMS DEVELOPMENT (NANJING) Co.,Ltd. and EM SOFTWARESYSTEMS DEVELOPMENT (SHANGHAI) Co.,Ltd. may be unable to adapt to these changes. If these events cause
software and services of the EM Systems Group to become outdated and group companies can no longer meetcustomers’ requirements, there may be an effect on the Group’s performance.
The EM Systems Group may use business alliances, mergers and acquisitions for the purpose of increasing the useof its highly advanced systems for medical institutions. However, there is no assurance that these activities will help
the Group achieve its goals or contribute to results of operations. Consequently, there may be an effect on the EM
Systems Group’s performance.
4) Protection of personal information
The major IT systems used for business operations at the EM Systems Group handle information about patients andother personal information because of the nature of the Group’s activities. At the Group’s data centers, access tocomputer rooms is strictly controlled and individuals who operate data center equipment are carefully selected.
Furthermore, servers are operated in accordance with rules prescribed strictly in a manual. For local systems,
customer (dispensing pharmacies) data are encrypted and other measures are used to protect personal information as
much as possible. If there is a leak of personal information, the resulting loss of public confidence and othersignificant damage to the Group’s operations may have a substantial effect on results of operations of the EM
Systems Group.
5) Shin-Osaka Brick Building
The EM Systems Group purchased land in Osaka’s Yodogawa-ku in February 2005 and constructed the Shin-Osaka
Brick Building on the site to serve as the new head office building. Construction was completed in March 2008. Thisbuilding houses the head office departments. In addition, there are tenants that include health care providers in thebuilding’s clinic mall and companies in the office space.
Due to the following risk factors, the revenue and expenditure plan for the Shin-Osaka Brick Building may differ
from the initial assumption. If this building does not perform as anticipated, there may be a substantial effect on the
EM Systems Group’s performance, financial condition and cash flows.
i) Risk concerning leasing income
The revenue and expenditure plan for the Shin-Osaka Brick Building includes the risk of vacancies to a certain
degree. However, if vacancies are higher than expected or space is leased at rates that are lower than expected, there
may be an effect on the EM Systems Group’s performance and financial condition.

6

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

ii) Risk concerning impairment
Changes in the Japanese economy may cause higher vacancies, lower leasing rates or other difficulties that require a
reduction in the book value of the Shin-Osaka Brick Building. An impairment charge may have an effect on the EM
Systems Group’s performance and financial condition.
iii) Risk concerning natural disasters and other events
If the Shin-Osaka Brick Building is damaged, destroyed or deteriorated by an earthquake, fire, accident, terrorism orsome other event, there may be an effect on the EM Systems Group’s performance and financial condition.
6) Changes in interest rates
The EM Systems Group used loans from a number of financial institutions through over-the-counter transactions tofund the construction of the Shin-Osaka Brick Building. Some of these loans have a floating interest rate. Depending
on future changes in interest rates, there may be an effect on the EM Systems Group’s performance and financial
condition.
2. Corporate GroupThe EM Systems Group consists of EM SYSTEMS CO., LTD., five consolidated subsidiaries, one affiliate notaccounted for using the equity method and two non-consolidated subsidiaries. These companies operate systems andrelated businesses, and other businesses.
The major product is computer systems that perform health care administrative tasks at dispensing pharmacies.
Group companies also sell associated supplies and provide maintenance services.
(1) Systems and Related Businesses
Group companies develop and sell computer systems that perform health care administrative tasks for medical
institutions. Dispensing pharmacies are the primary market for these systems. Group companies also sell supplies forthese systems and provide maintenance services.
1) Prescription systems
The core product is computer systems that perform administrative tasks for dispensing pharmacies. These systems
are supplied with the installation of software developed by the Company on customers’ PCs. The Company and its
consolidated subsidiary COSMOSYSTEMS Co., Ltd. sell these systems and software and there are also sales
through agents. Consolidated subsidiary EM SOFTWARE SYSTEMS DEVELOPMENT (NANJING) Co.,Ltd.
performs development activities that are outsourced from the Company.
2) Medical systems
In this category, the core products are computer systems for administrative tasks at clinics and electronic patient
record systems. These systems are supplied with the installation of software developed by the Company and its
consolidated subsidiary Unicon corporation on customers’ PCs. EM Systems and its agents sell these systems. EM
SOFTWARE SYSTEMS DEVELOPMENT (SHANGHAI) Co.,Ltd. and EM SOFTWARE SYSTEMSDEVELOPMENT (ZHENJIANG) Co.,Ltd., which are non-consolidated subsidiaries, perform development
activities that are outsourced from the Company.
3) Network systems
This business is mostly an application service provider (ASP) for a prescription support system that uses the Internet.
This business also includes a system for exchanging data among a company’s pharmacies and for the centralized
oversight of pharmacies by the head office. Another system allows sharing inventory and other data aboutpharmacies operated by other companies.
7

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

4) Supplies
The major products in this category, which are sold by the Company, are insurance billing forms used byprescription dispensing systems and medical systems, bags used when selling drugs to individuals, printer ink andother items.
5) Maintenance services
This business provides maintenance services to customers that use a system purchased from the Company.
(2) Other Business
Consolidated subsidiary LASANTE Co., Ltd. manages the LASANTE fitness club and the LaLa Kids nursery school,
and operates a rental conference room. Brick Pharmacy Co., Ltd. operates a dispensing pharmacy.
The discussion above can be illustrated by the following business diagram.

Systems and Related Businesses(Development and sales of products
and provision of support services)*1 COSMOSYSTEMS Co., Ltd.
*2 Meishou Systems Co., Ltd.

Other Business*1 LASANTE Co., Ltd.
Outsources software development*1 EM SOFTWARE SYSTEMS DEVELOPMENT(NANJING) Co.,Ltd.

*1 Brick Pharmacy Co., Ltd.

*3 EM SOFTWARE SYSTEMS DEVELOPMENT(ZHENJIANG) Co.,Ltd.

*1 Consolidated subsidiaries*2 Affiliates not accounted for using the equity method*3 Non-consolidated subsidiaries not accounted for using the equity method

8

General consumers

EM SYSTEMS CO., LTD.

*1 Unicon corporation*3 EM SOFTWARE SYSTEMS DEVELOPMENT(SHANGHAI) Co.,Ltd

Notes:

Customers

Sales agent

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

3. Management Policies(1) Basic Management Policy
Since the start of operations at the Company and its group companies, operating as an organization that provides
benefits for the public has been the basic management policy. The EM Systems Group is dedicated to making thegreatest possible contribution to society. Group companies create products and software that reflects a broad spectrumof demands from customers and society. Training the people needed to perform these tasks is another central element ofoperations. Supplying advanced technologies and expertise is not the only goal of the Group. The ultimate objective isto supply products, systems and services that precisely match the requirements of customers.
The EM Systems Group has always focused on capturing market share and constantly meeting the changing needs ofcustomers to achieve the highest possible satisfaction. Group companies accomplish this by supplying a distinctive andfully integrated lineup that begins with the development of products and includes IT system construction, sales activities
and maintenance. Through these activities, the Group has established an infrastructure capable of accurately responding
to customers’ needs. Group companies are dedicated to supplying products and systems with even better quality andconvenience as well as developing a workforce that responds to changes in the health care and nursing care industries
by using an aggressive stance and creative thinking to meet the needs of customers. The EM Systems Group’s goal is tomeet the expectations and earn the trust of the public while continuing to fulfill our corporate citizen responsibilities forthe realization of a better society.
The EM Systems Group is guided by the following policies.
Establish an environment in which medical institutions and individuals can view at any time and place the “medical
information that individuals have received.” This will allow people to receive the best possible health care withconfidence.
Furthermore, in the spirit of the following slogan, the EM Systems Group wants to enable people to use a medical data
network for viewing past medical records whenever necessary. Group companies are constantly working on this goal,
which will make it possible for people to select the best possible health care.
CHALLENGE M.I.N.D.
(Medical Information Network Design)(2) Performance Targets
The goal of the EM Systems Group is becoming highly profitable in order to maintain the stability of business
operations while aggressively evolving and advancing. Consequently, the key performance targets are operating income
growth and a high return on equity.
(3) Medium- and Long-term Business Plan
The operations of the EM Systems Group are closely linked with the dispensing pharmacy industry and the medicalcare and nursing care industries. Significant changes are foreseen in these industries. Japan’s consumption tax rate is
expected to rise to 10%, there is an urgent need for more measures by the national government to hold down health careexpenses, and revisions to health care and nursing care national health insurance payments are planned for 2018. Due tothese events, all medical care and nursing care organizations will have to cut costs and become more efficient.
The EM Systems Group plans to respond quickly to changes in these markets by launching new products for theprescription, medical and nursing care systems with the goal of capturing larger shares of these markets.
We are using the Recepty NEXT prescription insurance billing computer to streamline administrative procedures at
pharmacies. Furthermore, we are using our NET-α, infectious disease outbreak notification service, and the Medical
Recepty NEXT and UNI-MEDICAL medical systems as a base for making advances in step with progress involving IT
and the IT infrastructure. Our corporate mission is creating networks for medical data and facilitating the sharing of data.

9EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Our goal is to accomplish this by achieving the seamless integration of systems for pharmacies and systems for medical
and nursing care.
The utilization of electronic patient records in Japan is increasing, although at a very slow pace. We will continue tobuild and enlarge our technology and product development and our sales infrastructures. We will also aggressively
target opportunities in the market for nursing care systems as we continue to aim for more growth.
(4) Challenges
The EM Systems Group is aiming for even higher customer satisfaction while continuing to contribute to society as
rapid changes take place in the operating environment. Accomplishing these goals will require reinforcing training
programs to maintain a workforce that can drive growth. The Group will also concentrate on increasing sales of medical
systems for the purpose of building a stronger business model capable of consistent earnings growth.
4. Basic Approach to the Selection of Accounting Standards
The EM Systems Group currently applies Japanese accounting standards for its consolidated financial statements.
We will take suitable actions with regard to the application of International Financial Reporting Standards (IFRS) by
taking into account associated factors in Japan and other countries.

10

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

5. Consolidated Financial Statements(1) Consolidated Balance Sheet(Millions of yen)
FY3/16(As of Mar. 31, 2016)

FY3/15(As of Mar. 31, 2015)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Securities
Merchandise and finished goods
Raw materials and supplies
Consumption taxes receivable
Income taxes receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Lease asset
Accumulated depreciation
Lease asset-net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Software
Software in progress
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Real estate for investment
Accumulated depreciation
Real estate for investment, net
Lease and guarantee deposits
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Deferred assets
Share issuance cost
Total deferred assets
Total assets
11

4,828
2,271
211
415
3
6
10
136
368
(1)
8,251

6,354
2,622
172
1
244
365
(2)
9,757

1,586
(640)
945
702
545
(374)
170
37
(14)
23
12
690
(569)
121
1,976

1,545
(682)
862
670
225
(126)
99
52
(26)
25
3
673
(574)
98
1,761

392
19
316
7
735

313
6
368
7
696

45
9,962
(2,316)
7,645
150
247
145
46
(0)
8,281
10,99335
9,960(2,542)
7,418
146
315
132
43
(0)
8,091
10,5495
519,2493
3
20,310EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(Millions of yen)
FY3/16(As of Mar. 31, 2016)

FY3/15(As of Mar. 31, 2015)
Liabilities
Current liabilities
Notes and accounts payable-trade

895

915

Short-term loans payable

598

500

Current portion of long-term loans payable

675

590

Accounts payable-other

382

401

Lease obligations

112

61

Income taxes payable

191

718

Accrued consumption taxes

216

169

Provision for bonuses

343

394

Provision for point card certificates
Other
Total current liabilities

1

2

751

855

4,167

4,609

2,385

1,778

Non-current liabilities
Long-term loans payable
Lease obligations

83

61

Net defined benefit liability

691

797

Provision for directors’ retirement benefits

70-

Provision for product warranties

183

220

Long-term guarantee deposited

656

671

Total non-current liabilities
Total liabilities

4,069

3,528

8,237

8,137

Net assets
Shareholders’ equity
Capital stock

2,243

2,306

Capital surplus

2,551

2,614

Retained earnings

6,212

7,435

Treasury shares

(123)

(223)

Total shareholders’ equity

10,884

12,132

Valuation difference on available-for-sale securities

9-

Foreign currency translation adjustment

68

56

Remeasurements of defined benefit plans

(21)

(80)

Total accumulated other comprehensive income

56

(24)

Accumulated other comprehensive income

Subscription rights to shares
Total net assets
Total liabilities and net assets

12

71

64

11,012

12,172

19,24920,310EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statement of Income
FY3/15(Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)
FY3/16(Apr. 1, 2015 – Mar. 31, 2016)

Net sales

11,257

13,199

Cost of sales

4,992

6,119

Gross profit

6,264

7,080

Promotion expenses

23

30

Packing and transportation expenses

27

38

Advertising expenses

45

43

Selling, general and administrative expenses

Provision of allowance for doubtful accounts-

1

Provision for product warranties

79

116

Directors’ compensations

226

240

Salaries and allowances

2,116

2,011

Bonuses

218

252

Provision for bonuses

330

373

Retirement benefit expenses

107

115

Legal welfare expenses

376

395

Traveling and transportation expenses

159

160

Communication expenses

97

101

Depreciation

177

164

Amortization of goodwill

64

101

Rents

297

292

Research and development expenses
Other
Total selling, general and administrative expenses
Operating income

1

-

680

779

5,032

5,218

1,232

1,861

Non-operating income
Interest income

2

1

Dividend income

16

26

Rent income of real estate

956

946

Reversal of allowance for doubtful accounts

0-Gain on sales of securities-

33

Miscellaneous income
Total non-operating income

25

15

1,000

1,023

30

24

Non-operating expenses
Interest expenses
Commission fee

70

5Rent expenses on real estates

422

386

Share of loss of entities accounted for using equity method0-

Amortization of share issuance cost

01

Miscellaneous loss

6

20

Total non-operating expenses
Ordinary income

13

531

439

1,702

2,446

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

FY3/15(Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)
FY3/16(Apr. 1, 2015 – Mar. 31, 2016)

Gain on sales of investment securities-

226

Gain on reversal of subscription rights to shares

7

2

Total extraordinary income

7

228

15

19

Extraordinary income

Extraordinary losses
Loss on retirement of non-current assets
Loss on sales of non-current assets

0-

Impairment loss

55

80

Amortization of goodwill-

115

Loss on cancellation of leases

08Loss on liquidation of subsidiaries and associates-

1

Total extraordinary losses
Profit before income taxes
Income taxes-current

72

225

1,637

2,449

597

977

Income taxes-deferred

75

(149)

Total income taxes

672

827

Profit965

1,621

Profit attributable to owners of parent

965

1,621

14

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Consolidated Statement of Comprehensive Income
FY3/15(Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)
FY3/16(Apr. 1, 2015 – Mar. 31, 2016)

965

1,621

Valuation difference on available-for-sale securities

9(9)ProfitOther comprehensive income
Foreign currency translation adjustment

26

(12)

Remeasurements of defined benefit plans, net of tax

14

(58)

Total other comprehensive income

49

(80)

1,015

1,541

1,015

1,541

-

-

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

15

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(3) Consolidated Statement of Changes in Equity
FY3/15 (Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

Retained earnings

Treasury shares

5,584

Total shareholders’equity

1,674

1,982

Issuance of new shares

544

544

1,088

Exercise ofsubscription rights toshares24

24

49

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesNet changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

(123)

9,117

(336)

(336)

965

965
(0)

(0)

569

569

628

(0)

1,767

2,243

2,551

6,212

(123)

10,884(Millions of yen)
Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities
Balance at beginning ofcurrent period
Changes of items during
period-Foreigncurrencytranslation
adjustment

Total
Remeasurements accumulated
otherof definedcomprehensive
benefit plansincome

42

(35)

6

Subscription
rights to shares

Total net assets

81

9,205

Issuance of new shares

1,088

Exercise ofsubscription rights toshares49

Dividends of surplus(336)

Profit attributable toowners of parent
Purchase of treasury
sharesNet changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

965
(0)
9

26

14

49

(9)

40

9

26

14

49

(9)

1,807

9

68

(21)

56

71

11,01216

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

FY3/16 (Apr. 1, 2015 – Mar. 31, 2016)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

2,243

Retained earnings

2,551

Treasury shares

6,212

Total shareholders’equity(123)

10,884Issuance of new shares-

Exercise ofsubscription rights toshares

62

62

125

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesNet changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

(399)

(399)

1,621

1,621
(99)

(99)

62

62

1,222

(99)

1,247

2,306

2,614

7,435

(223)

12,132(Millions of yen)
Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities
Balance at beginning ofcurrent period
Changes of items during
period9Foreigncurrencytranslation
adjustment

Total
Remeasurements accumulated
otherof definedcomprehensive
benefit plansincome

68

(21)

56

Subscription
rights to shares

Total net assets

71

11,012Issuance of new shares-

Exercise ofsubscription rights toshares125

Dividends of surplus(399)

Profit attributable toowners of parent
Purchase of treasury
sharesNet changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

1,621
(99)
(9)

(12)

(58)

(80)

(7)

(88)

(9)

(12)

(58)

(80)

(7)

1,159

-

56

(80)

(24)

64

12,17217

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(4) Consolidated Statement of Cash Flows(Millions of yen)
FY3/15
FY3/16(Apr. 1, 2014 – Mar. 31, 2015) (Apr. 1, 2015 – Mar. 31, 2016)
Cash flows from operating activities
Profit before income taxes

1,637

2,449

Depreciation

668

673

Amortization of goodwill

64

216

Amortization of share issuance cost

01

Impairment loss

55

80

Loss on liquidation of subsidiaries and associates-

1

Decrease (increase) in net defined benefit asset

(12)

(3)

Increase (decrease) in net defined benefit liability

61

42

Increase (decrease) in provision for directors’ retirement benefits

-

(70)

Increase (decrease) in provision for product warranties

14

36

Increase (decrease) in provision for bonuses

(26)

50

Increase (decrease) in provision for point card certificates(8)0Increase (decrease) in allowance for doubtful accounts

1

1

Interest and dividend income

(18)

(28)

Rent income of real estate

(956)

(946)

Expenses of real estate rent

182

161

Interest expenses

30

24

Loss on retirement of non-current assets

15

19

Loss on cancellation of leases

08Gain on reversal of subscription rights to shares
Share of (profit) loss of entities accounted for using equity
methodLoss (gain) on sales of securities

(7)

(2)

0

-

-

(33)

Loss (gain) on sales of non-current assets

0-Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories

-

(226)

511

(350)

1

285

Decrease (increase) in other current assets

308

28

Increase (decrease) in notes and accounts payable-trade

(133)

20

(6)

6

Increase (decrease) in accrued consumption taxes

115

(47)

Increase (decrease) in other current liabilities

(33)

132

Other, net

1729

Subtotal

2,485

2,564

18

28

Decrease (increase) in consumption taxes refund receivable

Interest and dividend income received
Interest expenses paid

(31)

(25)

Income taxes paid

(964)

(458)

Net cash provided by (used in) operating activities

1,507

2,108

18

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(Millions of yen)
FY3/15
FY3/16(Apr. 1, 2014 – Mar. 31, 2015) (Apr. 1, 2015 – Mar. 31, 2016)
Cash flows from investing activities
Purchase of securities
Proceeds from sales of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of investment securities
Purchase of shares of subsidiaries resulting in change in scopeof consolidation
Purchase of shares of subsidiaries and associates
Payments for transfer of business(96)(1,084)

-

1,213

(138)

(63)

0

1

(74)

(132)

-

226

(23)

-

(17)

(10)

-

(367)

Proceeds from rental of real estate for investment

954

948

Payments for rental of real estate for investment

(190)

(173)

Collection of loans receivable

20

24

Payments of loans receivable(1)-

Proceeds from guarantee deposits received

33

19

Repayments of guarantee deposits received

(42)

(3)

Net cash provided by (used in) investing activities

425

597

(1)

(98)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Repayments of long-term loans payable

(672)

(692)

Repayments of lease obligations

(145)

(106)

Payments for long-term accounts payable-other(1)-

Proceeds from sales and leasebacks

21-

Proceeds from issuance of common shares

1,130

119

(0)

(99)

(336)

(399)

(3)

(1,277)

13(11)

Net increase (decrease) in cash and cash equivalents

1,942

1,416

Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents from newly consolidated
subsidiary

2,985

4,928

-

10

Cash and cash equivalents at end of period

4,928

6,354

Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

19

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(5) Notes to Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Accounting Policies in the Preparation of Consolidated Financial Statements
1. Scope of consolidation(1) Number of consolidated subsidiaries: 5
Names of consolidated subsidiaries:
LASANTE Co., Ltd.
Unicon corporation
COSMOSYSTEMS Co., Ltd.
Brick Pharmacy Co., Ltd.
EM SOFTWARE SYSTEMS DEVELOPMENT (NANJING) Co.,Ltd.
Brick Pharmacy Co., Ltd., which was established in February 2015, is newly included in the scope of
consolidation due to the start of operations in the current fiscal year.
(2) Number of non-consolidated subsidiaries: 2
Names of consolidated subsidiaries:
EM SOFTWARE SYSTEMS DEVELOPMENT (SHANGHAI) Co.,Ltd.
EM SOFTWARE SYSTEMS DEVELOPMENT (ZHENJIANG) Co.,Ltd.
Reason for exclusion from the scope of consolidation
These subsidiaries are not included in the scope of consolidation since they are small-scale businesses whose
total assets, net sales, profit/loss (equity in earnings) and retained earnings (equity in earnings) have nosignificant effect on the overall results of consolidated financial statements.
2. Application of the equity method(1) Affiliates accounted for using the equity method
Not applicable.
(2) Number of non-consolidated subsidiaries and affiliates not accounted for using the equity method: 3Names of non-consolidated subsidiaries and affiliates:
EM SOFTWARE SYSTEMS DEVELOPMENT (SHANGHAI) Co.,Ltd.
EM SOFTWARE SYSTEMS DEVELOPMENT (ZHENJIANG) Co.,Ltd.
Meishou Systems Co., Ltd.
Reason for not accounted for using the equity method
These non-consolidated subsidiaries and affiliates are not accounted for using the equity method, since they
have a very minor effect on profit/loss (equity in earnings) and retained earnings (equity in earnings) and are
relatively insignificant in the context of the consolidated financial statements.
3. Fiscal year of consolidated subsidiaries
The fiscal year-end of EM SOFTWARE SYSTEMS DEVELOPMENT (NANJING) Co.,Ltd. is December 31.
The consolidated financial statements include the financial statements of this consolidated subsidiary as ofDecember 31, and necessary adjustments have been made for the consolidation concerning material transactions
arising between January 1 and March 31.
The fiscal year-end of Unicon corporation is February 28.
The consolidated financial statements include the financial statements of this consolidated subsidiary as of February
28, and necessary adjustments have been made for the consolidation concerning material transactions arising
between March 1 and March 31.
The fiscal year-end of Brick Pharmacy Co., Ltd. is December 31.
The consolidated financial statements include the preliminary financial statements of this consolidated subsidiary
as of March 31, 2016.
4. Accounting standards
20

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(1) Valuation standards and methods for principal assets
1) Marketable securities
Available-for-sale securities
Securities with market quotations
Stated at market value at the end of the fiscal year. (Unrealized gain or loss is included in net assets. Cost of
securities sold is determined by the moving-average method.)
Securities without market quotations
Stated at cost determined by the moving-average method.
2) Inventories
Merchandise, finished goods and raw materials
Stated at cost determined by the gross average method. (The carrying value on the balance sheet is written down
to reflect the effect of lower profit margins.)(2) Depreciation and amortization of significant depreciable assets
1) Property, plant and equipment, and real estate for investment (excluding lease assets)
Calculated by using the declining-balance method, except for buildings (excluding attached structures) acquired on orafter April 1, 1998 and assets for rent on which depreciation is calculated by the straight-line method.
Useful life of principal assets:
Buildings and structures:
8-52 years
Others:
4-15 years
2) Intangible assets (excluding lease assets)
Software for sale is amortized during the fiscal year in which it was acquired because the expected useful life is one
year. Software for internal use is amortized over an expected useful life of five years by the straight-line method.
3) Lease assets
Depreciation of finance lease transaction where there is transfer of ownership is calculated by the same method as
depreciation method used for non-current assets held by the Company.
Depreciation of finance lease transaction where there is no transfer of ownership is calculated based on the straight-line
method, assuming the lease period to be the useful lives and a residual value of zero.
(3) Recognition of significant allowances
1) Allowance for doubtful accounts
To prepare for credit losses on accounts receivable, allowances equal to the estimated amount of uncollectible
receivables are booked for general receivables based on the historical write-off ratio, and bad receivables based on
case-by-case determination of collectability.
2) Provision for bonuses
To provide for employee bonus obligation, an amount accrued for the current fiscal year within the estimated future
obligations is designated in the reserve account.
3) Provision for point card certificates
To provide for expenses resulting from future utilization of the EM Online Shop, a provision is made in the amountrequired for the points that would be used in or after the next fiscal year based on the actual utilization rate in thepast.
4) Provision for product warranties
To provide for expenses for after-sales services for finished goods and merchandise sold with warranties at no extra
cost that are performed during the warranty period, a provision is made in the amount required based on an estimate
using actual expenses in the current fiscal year.

21

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(4) The accounting treatment methods for retirement benefits
1) Method of attributing estimated retirement benefit obligations to periods
In calculation of retirement benefit obligations, the Company uses the straight-line method for attributing estimatedretirement benefit obligations to periods.
2) Amortization of actuarial differences
Actuarial differences are amortized and charged to expenses in the year following the fiscal year in which such gainor loss is recognized by the straight-line method over a certain period (five years) which is within the averageremaining years of service of the eligible employees.
3) Adoption of simplified method by small-scale companies, etc.
Domestic consolidated subsidiaries calculate net defined benefit liability and retirement benefit expenses by using asimplified method in which the retirement benefit obligations are equal to the amount that would be paid if all
employees voluntarily requested retirement benefits at the end of the fiscal year.
(5) Accounting for hedges
1) Hedging method
The Company applies exceptional accounting treatment for interest rate swaps when certain conditions are fulfilled.
2) Hedging instruments and hedged items
Heading instruments and hedged items to which the hedge accounting is applied are as follows:
Hedging instruments: Interest rate swaps
Hedged items:
Interest on loans payable3) Hedging policy
The Company enters into interest rate swaps for the purpose of mitigating future interest rate fluctuation risks or
reducing interest expenses.
The Company conducts derivative transactions only in the scope of actual demand, and does not enter into
derivative transactions for speculative purposes.
4) Evaluation method for the effectiveness of hedges
Hedge effectiveness is evaluated every six months by each transaction based on contract amounts, market value andthe basis for the market value calculation.
(6) Amortization method and amortization period of goodwill
Goodwill is amortized over five years or 12 years by the straight-line method.
(7) Scope of cash and cash equivalents on the consolidated statement of cash flows
Cash and cash equivalents consist of vault cash, deposits that can be withdrawn on demand, and short-term
investments, with original maturities of three months or less, that are readily convertible to known amounts of cash andpresent insignificant risk of change in value.
(8) Other significant accounting policies in the preparation of the consolidated financial statements
Accounting for consumption taxes
National and local consumption taxes are accounted by the tax-exclusion method.

22

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Changes in Accounting Policies
Application of the Accounting Standard for Business Combinations, etc.
The Company has applied the “Accounting Standard for Business Combinations” (Accounting Standards Board ofJapan (ASBJ) Statement No. 21, September 13, 2013), “Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No. 22, September 13, 2013), “Accounting Standard for Business Divestitures” (ASBJ Statement No.
7, September 13, 2013), etc. from the current fiscal year. Accordingly, difference arising from changes in the
Company’s ownership interests in subsidiaries in cases where control is retained is recognized in capital surplus, andthe acquisition costs in connection with business combinations are recognized as expenses in the fiscal year in which
they arise. Regarding business combinations that take place on or after the beginning of the current fiscal year, theCompany has revised the method to reflect reviewed allocation of the acquisition costs arising from determination of
the provisional accounting treatment on the consolidated financial statements to which the date of the businesscombination belongs. In addition, the presentation of net income and other items has been revised, and the minority
interests item has been renamed non-controlling interests. For consistency with these changes, the consolidated
financial statements for the previous fiscal year have been revised.
The Company has adopted these accounting standards, etc. from the beginning of the current fiscal year, in accordancewith the transitional accounting treatments set forth in Article 58-2 (4) of the Accounting Standard for Business
Combinations, Article 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, and Article 57-4 (4)of the Accounting Standard for Business Divestitures.
There is no impact on the consolidated financial statements.
Segment and Other Information[Segment information]
1. Overview of reportable segment
Segments used for financial reporting are the EM Systems Group’s constituent units for which separate financial
information is available and for which the Board of Directors performs periodic studies for the purposes of determining
the allocation of resources and evaluating performance.
In the EM Systems Group, the Company, COSMOSYSTEMS Co., Ltd., Unicon corporation and EM SOFTWARESYSTEMS DEVELOPMENT (NANJING) Co.,Ltd. are engaged in the Systems and Related Businesses segment, and
LASANTE Co., Ltd. and Brick Pharmacy Co., Ltd. operate activities in the Other Business segment.
The business operations of the Group are categorized by businesses conducted by each group companies. Consequently,
there are two reportable segments: “Systems and Related Businesses” and “Other Business.”
Major products for each reportable segment are as follows:
Reportable segment

Major products

Systems and Related Businesses

Prescription insurance billing system, medical care insurance billing system,
network systems, prescription drug bag printer, supplies and maintenance services

Other Business

Management of a fitness club, nursery school and pharmacy

2. Calculation methods for net sales, profit/loss, assets, liabilities and other items for each reportable segment
The accounting methods for reportable segments are the same as those listed in “Significant Accounting Policies in the
Preparation of Consolidated Financial Statements.”
Profit for reportable segments is operating income figures.
Inter-segment sales and transfers are based on prevailing market prices.

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EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

3. Information related to net sales, profit/loss, assets, liabilities and other items for each reportable segment
FY3/15 (Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)Amounts recordedin consolidated
statement ofincome (Note)

Reportable segment
Systems andRelatedBusinesses

Other Business

Adjustment

Total

Net sales
External sales

11,106226

11,332(74)

11,257

Inter-segment sales and transfers

365

72

438

(438)

-

Total

11,471

298

11,770(513)

11,257

Segment profit

1,177

80

1,258

(25)

1,232

Segment assets

11,941

195

12,137

7,112

19,249Other items
Depreciation
429
3
432
235
Increase in property, plant and
447
2
449
65
equipment and intangible assets
Note: Segment profit is adjusted to be consistent with operating income recorded in the consolidated statement of income.
FY3/16 (Apr. 1, 2015 – Mar. 31, 2016)

Other Business

Adjustment

Total

514

(Millions of yen)Amounts recordedin consolidated
statement ofincome (Note)

Reportable segment
Systems andRelatedBusinesses

668

Net sales
External sales

12,325962

13,288(88)

13,199Inter-segment sales and transfers

881

40

922

(922)

-

Total

13,206

1,003

14,210(1,011)

13,199Segment profit

1,793

92

1,886

(24)

1,861

Segment assets

20,553715

21,269(959)

20,310

Other items
Depreciation
446
8
455
218
Increase in property, plant and
222
29
252
(0)
equipment and intangible assets
Note: Segment profit is adjusted to be consistent with operating income recorded in the consolidated statement of income.

673
251

4. Reconciliation of reported consolidated financial statements with total profit (or loss) for reportable segments(Millions of yen)
Net sales

FY3/15

Total for reportable segments

FY3/16
11,77014,210Transfer to non-operating income

(74)

(88)

Eliminations for inter-segment transactions

(438)

(922)

Net sales on the consolidated financial statements

11,257

13,199(Millions of yen)

ProfitFY3/15

FY3/16

Total for reportable segments

1,258

1,886

Transfer to non-operating income

(14)

(15)

Eliminations for inter-segment transactions
Operating income on the consolidated financial
statements

(10)

(9)

1,232

1,861

24

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16(Millions of yen)
AssetsFY3/15

FY3/16

Total for reportable segments

12,137

21,269Corporate assets (Note)

7,645

7,418

Eliminations for inter-segment transactions(532)(8,377)

Total assets on the consolidated financial statements

19,24920,310Note: Corporate assets mainly include real estate for investment that is not attributable to reportable segments.

Other items

Total reportable segment
FY3/15432

Depreciation

FY3/16(Millions of yen)Amounts recorded inconsolidated financial
statements
FY3/15
FY3/16

Adjustment
FY3/15455

235

FY3/16
218

668

673

Increase in property, plant and
449
252
65
(0)
514
251
equipment and intangible assets
Note: The adjustment to increase in property, plant and equipment and intangible assets includes eliminations for inter-segment transactions.

[Related information]
FY3/15 (Apr. 1, 2014 – Mar. 31, 2015)
1. Information by product or service
This information is omitted because the same information is presented in segment information.
2. Information by region(1) Net sales
This information is omitted since sales to external customers in Japan exceeded 90% of net sales in the consolidated
statement of income.
(2) Property, plant and equipment
This information is omitted since property, plant and equipment in Japan exceeded 90% of property, plant andequipment on the consolidated balance sheet.
3. Information by major client
This information is omitted because no specific external client accounts for more than 10% of net sales in the
consolidated statement of income.
FY3/16 (Apr. 1, 2015 – Mar. 31, 2016)
1. Information by product or service
This information is omitted because the same information is presented in segment information.
2. Information by region(1) Net sales
This information is omitted since sales to external customers in Japan exceeded 90% of net sales in the consolidated
statement of income.
(2) Property, plant and equipment
This information is omitted since property, plant and equipment in Japan exceeded 90% of property, plant andequipment in the consolidated balance sheet.
3. Information by major client
Name(Millions of yen)
Net sales

MEDICEO CORPORATION

Related segments
1,345

25

Systems and Related Businesses

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16[Information related to impairment loss of non-current assets for each reportable segment]
FY3/15 (Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)

Systems and Related Businesses
Impairment loss

Other Business

55

Total
-

FY3/16 (Apr. 1, 2015 – Mar. 31, 2016)(Millions of yen)

Systems and Related Businesses
Impairment loss

55

Other Business

80

Total
-

80

[Information related to goodwill amortization and unamortized balance for each reportable segment]
FY3/15 (Apr. 1, 2014 – Mar. 31, 2015)(Millions of yen)

Systems and Related Businesses

Other business

Total

Amortization for the period

64

-

64

Balance at the end of period

316

-

316

FY3/16 (Apr. 1, 2015 – Mar. 31, 2016)(Millions of yen)

Systems and Related Businesses
Amortization for the period

Other business

196

Total
20

216

Balance at the end of period
120
248
368
Note: Amortization of goodwill in the Systems and Related Businesses for FY3/16 includes amortization of goodwill under
extraordinary losees in the consolidated statement of income.

[Information related to gain on bargain purchase for each reportable segment]
FY3/15 (Apr. 1, 2014－Mar. 31, 2015)
Not applicable.

FY3/16 (Apr. 1, 2015－Mar. 31, 2016)
Not applicable.

26

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Per Share Information(Yen)
FY3/15(Apr. 1, 2014 – Mar. 31, 2015)

FY3/16(Apr. 1, 2015 – Mar. 31, 2016)

Net assets per share

629.04

Net assets per share

693.68Net income per share

59.82

Net income per share

93.38

Diluted net income per share

59.41

Diluted net income per share

92.51

Notes: 1. The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Net assets per
share, net income per share and diluted net income per share are calculated as if this stock split had taken place at the
beginning of the previous fiscal year.
2. The basis of calculating net income per share and diluted net income per share is as follows:(Millions of yen)
FY3/16(Apr. 1, 2015 – Mar. 31, 2016)

FY3/15(Apr. 1, 2014 – Mar. 31, 2015)
Net income per share
Profit attributable to owners of parent
Amounts not available to common stock
shareholders
Profit attributable to owners of parent available
to common stock
Average number of shares outstanding during
the period (Shares)

965

1,621

-

-

965

1,621

16,135,338

17,366,946--

112,113

164,442

Diluted net income per share
Adjusted profit attributable to owners of parent
Increase in the number of shares of common
stock (Shares)
Summary of potential stock not included in thecalculation of “Diluted net income per share”
since there was no dilutive effect

-

27

-

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

Subsequent Events
Granting of stock options (stock acquisition rights)
In accordance with the provisions of Articles 236, 238 and 239 of the Companies Act, the Board of Directors
approved a resolution on May 13, 2016 to submit a proposal at the 33rd Annual General Meeting of Shareholders tobe held on June 28, 2016 for the delegation to the Board of Directors of the determination of terms for stockacquisition rights to be issued as stock options for the directors and employees of the Company and its subsidiaries
as follows. Stock acquisition rights granted to the Company’s directors are remuneration, etc. as defined in Article
361, Paragraph 1-3 of the Companies Act.
1. Reason for need to grant stock acquisition rights at particularly favorable terms
Stock acquisition rights are granted at no cost to the directors and employees of the Company and its subsidiaries
for the purpose of further motivating these individuals to improve the performance of the EM Systems Group. In
addition, stock acquisition rights granted to directors for the purpose of granting stock options are regarded asremuneration for these directors. The fair price of the stock acquisition rights granted as remuneration, etc. is
calculated by using the stock option price calculation model in the ASBJ Statement “Accounting Standards for
Stock Options, Etc.” on the terms as of the date the rights are granted.
2. Amounts to be paid upon allocation of the stock acquisition rights
No monetary payment is required for the stock acquisition rights.
3. Allotment date of stock acquisition rights
Each allotment date is determined by the Board of Directors of the Company that is issuing the corresponding
stock acquisition rights.
4. Details of stock acquisition rights(1) Class and number of shares to be issued upon exercise of stock acquisition rights
Up to 600,000 shares of the Company’s common stock.
The number of shares will be adjusted by using the following formula if there is a split or consolidation of theCompany’ stock. However, this adjustment will be performed only for shares applicable to stock acquisition rightsthat have not been exercised at the time of the split or consolidation. Any fraction of one share resulting from theadjustment is discarded.
Number of shares after adjustment = Number of shares before adjustment x Ratio of the split or consolidation
In the event of a merger, divestiture, or exchange or transfer of stock (hereafter, “merger, etc.”), a gratis
distribution of stock, or any other action that requires an adjustment in the number of shares for stock acquisitionrights, the number of shares may be adjusted within a reasonable scope based on the terms of the merger, etc. or
gratis stock distribution, and on other applicable factors.
(2) Total number of stock acquisition rights
Maximum of 6,000 rights, including a maximum of 2,400 rights that are granted to the directors of the Company.
(The number of shares per stock acquisition right is 100, but this number is instead the adjusted number if anadjustment described in item (1) above is performed.)(3) Value of the assets to be contributed upon the exercise of stock acquisition rights
The monetary payment upon the exercise of a stock acquisition right is the amount to be paid per share upon theexercise of a stock acquisition right (hereafter, “exercise price”) multiplied by the number of shares of stock foreach stock acquisition right. The exercise price is the average closing price of the Company’ common stock on theTokyo Stock Exchange on each day of the month (except days when there was no trading of the Company’s stock)prior to the month in which the applicable stock acquisition rights were allotted multiplied by 1.05, with any
fraction of one yen rounded up. However, if this amount is lower than the closing price (if there is no closing price,
the most recent closing price prior to this date) of the Company’ common stock on the Tokyo Stock Exchange on
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EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

the date of allotment of the stock acquisition rights, the closing price on this date shall apply. If there is a split or aconsolidation of the Company’ common stock, the exercise price will be adjusted using the following formula inaccordance with the split or consolidation and any fraction of one yen resulting from the adjustment is rounded up.
1
Exercise price
Exercise price=×
after adjustment
before adjustment
Ratio of split or consolidation
If the Company issues new common stock or disposes of treasury shares at a price below market price (except
sales of treasury shares in accordance with the Article 194 of the Companies Act (request from odd-lot shareholder
for sale of shares of less than one unit (“tangen”)) and the conversion or exercise of securities that will or can beconverted into the Company’ common stock and stock acquisition rights (including stock acquisition rights
attached to bonds) with the right to demand delivery of the Company’ common stock), the exercise price will be
adjusted using the following formula and any fraction of one yen resulting from the adjustment is rounded up.
Number ofAmount to be paid per
newly issued ×
Numbershare
sharesof issued+
Market pricesharesExercise
Exercise price= price before × Number of issued shares + Number of newly issued
after adjustment
adjustment
sharesIn the above formula, “Number of issued shares” is defined as the total number of shares of the Company’ common
stock less the number of shares of common stock held by the Company as treasury shares. In addition, in case that
the Company disposes its treasury shares, “Number of newly issued shares” shall be replaced by “Number oftreasury shares to be disposed.”
Furthermore, in the event of a merger, etc., a gratis distribution of stock or any other event that requires anadjustment to the exercise price as shown above, the exercise price will be adjusted within a reasonable scope
based on the terms of the merger, etc. or gratis stock distribution.
(4) Exercise period of stock acquisition rights
From July 1, 2018 to June 30, 2020
(5) Increases in capital stock and legal capital surplus resulting from stock issued upon exercise of stock acquisitionrights1) In the case that stock is issued due to the exercise of stock acquisition rights, the amount added to capital stock
shall be half of the maximum increase in capital stock, etc. as prescribed in Company Calculation Rules Article
17, Paragraph 1 with any fraction of one yen resulting from the calculation is rounded up.
2) In the case that stock is issued due to the exercise of stock acquisition rights, the amount added to the legal
capital surplus shall be the maximum increase in capital stock in item 1) above less the amount added to capitalstock described in item 1) above.
(6) Conditions for exercise of stock acquisition rights
1) An individual who received stock acquisition rights (hereafter, a “rights holder(s)”) must still be a director,
auditor or employee of the Company or its subsidiary when exercising the rights. However, an individual who
has retired at the end of his or her term or reached the mandatory retirement age, or who has obtained an
approval from the Board of Directors, shall be able to exercise stock acquisition rights continuously.
2) Upon the death of rights holders, their heirs shall not be entitled to exercise their stock acquisition rights.
3) Other conditions for the exercise of the stock acquisition rights will be determined in the Stock Acquisition
Rights Contract signed by the Company and right holders in accordance with resolutions approved at the Annual
General Meeting of Shareholders and resolutions of the Board of Directors covering the granting of stockacquisition rights.
(7) Terms on acquisition of stock acquisition rights by the Company
1) The Company may acquire the stock acquisition rights at no cost in the event that a rights holder no longer
fulfills the requirements for eligibility to exercise the rights as listed in item (6) above.
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EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

2) The Company may acquire the stock acquisition rights at no cost in the event that the shareholders approve aresolution for a merger in which the Company will be dissolved or that the shareholders approve a resolution for
the exchange or transfer of stock in which the Company will become a wholly owned subsidiary of anothercompany.
(8) Restriction on acquisition of stock acquisition rights through transfer
Acquisition of stock acquisition rights through transfer requires the approval of the Board of Directors.
(9) Handling of stock acquisition rights following a reorganization of the Company
If the contract, plan or other document that prescribes a reorganization of the Company stipulates that the company
defined below shall distribute stock acquisition rights, the company defined below shall distribute stockacquisition rights in proportion to the applicable reorganization ratio.
1) Merger (only when the Company is dissolved)
The company that remains after the merger or the company that is established by the merger
2) Absorption or divestiture
The company that inherits all or part of the rights and obligations concerning the business activities of thecompany that is absorbed or divested.
3) Divestiture that creates a new company
The company established due to the divestiture4) Exchange of stock
The company that receives all of the stock issued by the company that conducts the exchange of stock5) Transfer of stock
The company established due to the transfer of stock(10) Discarding fractions of shares resulting from exercise of stock acquisition rights
Any fraction of one share of stock that is to be delivered to a rights holder shall be discarded.
(11) Other items concerning the stock acquisition rights
Other items concerning the stock acquisition rights will be determined along with other offering items at theupcoming meeting of the Board of Directors concerning the offering of stock acquisition rights.

30

EM SYSTEMS CO., LTD. (4820) Financial Results for FY3/16

6. Others
Changes in directors
Changes in directors scheduled for June 28, 2016 are as follows.
1) Changes in representative
Not applicable.
2) Changes in other officers
1. Candidates for new directors
Director and Executive Officer: Hirokazu Kawanohara
Director and Executive Officer: Takeshi Shigeyama
2. Change in director
Managing Director and Executive Officer: Motoki Nishimura (current Director and Executive Officer)

This financial report is solely a translation of the Company’s Kessan Tanshin (including attachments) in Japanese, which has been
prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who
prefer an English translation.

31