This summary is a translation of ‘KESSAN TANSHIN’ which is an unaudited report.

Summary of Consolidated Financial Results for FY2016(Year ended March 31, 2017) 〔Japanese GAAP〕
April 25, 2017
Company name:SOGO MEDICAL CO., LTD.

Stock exchange listings:

Tokyo 1st Section

Securities code:

4775

Representative:(Title) President & Representative Director(Name) Kenji Sakamoto

Inquiries:(Title) General Manager, Finance and Accounting Department(Name) Osamu Inoue

Tel: +81-92-713-7611

E-mail: ir@sogo-medical.co.jp

URL: http://www.sogo-medical.co.jp/english/

Date of general shareholders’ meeting (as planned) : June 22, 2017
Dividend payable date (as planned) : June 23, 2017
Annual securities report filing date (as planned) :June 22, 2017
Supplemental material of annual results is available.
There will be a convening briefing of annual results for institutional investors and analysts.
(Amounts are rounded down.)

１．Consolidated Financial Results (from April 1, 2016 to March 31, 2017)（１）Consolidated operating results
Net sales(% indicates year-on-year change.)
Profit attributable
Ordinary income
to owners of parent

Operating income

Millions of Yen%

Millions of Yen%

Millions of Yen%

Millions of Yen%

122,216
120,776

1.2
11.9

6,248
6,087

2.6
21.3

6,440
6,196

3.9
18.5

3,779
2,318

63.0
(16.5)Net income toshareholders’equity ratio

Ordinary income tototal assets ratio

FY2016FY2015
Notes: Comprehensive income

FY2017 ¥3,945million (80.4%)
FY2016 ¥2,186 million (-23.7%)

Net income
per share

Diluted net income
per shareYen

FY2016FY2015252.52
154.65

Yen－－

Operating income
to net sales ratio

%

%

%

12.2
8.3

8.0
8.6

5.1
5.0

References: Investment profit (loss) on equity method: ¥－for FY2017 :¥－for FY2016（２）Consolidated financial positions
Total assets
FY2016FY2015

Net assets

Capital adequacy ratio

Net assets per share

Millions of Yen

Millions of Yen%

Yen

86,76074,621

32,88029,64637.6
39.5

2,178.46
1,967.14

References: Owner’s equity: ¥32,605 million for FY2017 :¥ 29,442 million for FY2016

（３）Consolidated cash flows
Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and equivalents,
end of period

Millions of Yen

Millions of Yen

Millions of Yen

Millions of Yen

10,931
7,004(9,933)(4,981)

3,301
(635)

10,6556,356

FY2016FY2015

２．Dividends
Dividend per shareFirst quarter

Second quarter
Yen

FY2015FY2016FY2017(forecast)Third quarter

Yen

－
－
－

－
－
－

22.50
25.00
27.50

FY2015FY2016FY2017(forecast)

Yen

Yen

22.50
25.00
27.50

45.00
50.00
55.00

Ratio of total amount of dividends
to net assets(Consolidated)

Payout ratio(Consolidated)

Total dividend paid

AnnualYear end

Yen

Millions of Yen

%

%

677
748

29.1
19.8
20.4

2.4
2.4

Note: Dated April 1, 2016, Sogo Medical has instituted a 2-for-1 common stock split. The interim dividend and the year-end dividend for FY2016 andFY2017 (estimate base) are therefore stated adjusted for the effects of the stock split.

３．Consolidated forecasts for FY2017 (from April 1, 2017 to March 31, 2018)
Net salesInterim
Full-year

Operating income

Ordinary income(% indicates year-on-year change.)
Profit attributable
Net income
to owners of parent
per share

Millions of Yen%

Millions of Yen%

Millions of Yen%

Millions of Yen%

Yen

64,899135,566

13.2
10.9

2,605
7,001

7.1
12.0

2,608
7,016

8.1
8.9

1,434
4,029

3.9
6.6

95.86
269.19

４．Others（１）Material changes in subsidiaries during this period(Changes in scope of consolidations resulting from change is subsidiaries): None
（２）Changes in accounting policies and accounting estimates, retrospective restatement① Changes in accounting policies based on revisions of accounting standard: Yes② Changes in accounting policies other than ones based on revisions of accounting standard : None
③ Changes in accounting estimates: None
④ Retrospective restatement: None
（３）Number of issued and outstanding shares (common stock）① Number of issued and outstanding shares
FY2016: 15,340,156sharesat the end of fiscal year (including treasury stock):② Number of treasury stock at the end of fiscal year:
FY2016: 372,775shares③ Average number of shares:
FY2016: 14,967,381shares

FY2015: 15,340,156shares
FY2015: 372,775shares
FY2015: 14,990,296shares

(Reference）Summary of Non-consolidated Financial Results
１．Non-consolidated Financial Results (from April 1, 2016 to March 31, 2017)（１）Non-consolidated operating Results
Net sales
FY2016FY2015

Operating income(% indicates year-on-year change.)

Ordinary income

Net income

Millions of Yen%

Millions of Yen%

Millions of Yen%

Millions of Yen%

92,01994,078

(2.2)
6.5

4,703
4,692

0.2
14.3

5,170
4,838

6.9
5.0

3,380
1,396

142.1
(52.0)Net income per share

Diluted net income
per shareYen

FY2016FY2015231.93
93.18

Yen

－
－

（２）Non-consolidated financial positions
Total assets
FY2016FY2015

Net assets

Capital adequacy ratio

Net assets per share

Millions of Yen

Millions of Yen%

yen

75,397
66,78929,67026,91039.4
40.3

1,982.34
1,797.91

References: Owner’s equity: ¥ 29,670 million for FY2017 :¥ 26,910 million for FY2016※Expression of implementation status of audit proceduresThis summary is exempt from financial audit, to conform with “The Financial Instruments and Exchange Law” of Japan.
The financial audit has not been completed.
※ Notes for using forecasted information and others
These forecasts are based on currently available information. Actual financial results could differ from the forecast due tovarious factors. Please refer to “1. Operating Results (1) Analysis of Operating Results” on page.6 for assumptions andcautions on the use of these financial forecasts.

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

Contents
1. Operating Results ..............................................................................................................................2(1) Analysis of Operating Results .....................................................................................................2(2) Analysis of Financial Positions ...................................................................................................6
2. Management Policies ........................................................................................................................8
3. Basic Approach to Selection of Accounting Standards .....................................................................8
4. Summary Information .......................................................................................................................9
5. Consolidated Financial Statements .................................................................................................10(1) Consolidated Balance Sheet ......................................................................................................10(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income .......12(3) Consolidated Statements of Change in Net Assets ....................................................................14(4) Consolidated Statements of Cash Flows ...................................................................................16(5) Notes to Consolidated Financial Statements .............................................................................18(Note on the Going-Concern Assumption) .............................................................................18(Basic Information of Consolidated Financial Statements) ....................................................18(Consolidated Balance Sheet) ................................................................................................. 21(Consolidated Statements of Income) .....................................................................................22(Consolidated Statements of Cash Flows) ..............................................................................23(Segment Information) ............................................................................................................24(Per Share Information) ..........................................................................................................27(Significant Subsequent Events) .............................................................................................27

1

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

1. Operating Results(1) Analysis of Operating Results
Operating Results for FY2016(in millions, except percentages)
FY2015

Sales

Margin¥120,776

Higashinihon

FY2016%

Margin¥122,216

Change%Change¥1,4401.2%

43,83848,0544,215

9.6

Medical practice support

7,750

8,969

1,219

15.7

Pharmacies

36,08839,084

2,996

8.3

33,17632,463

(713)

(2.1)

Medical practice support

6,765

6,254

(511)

(7.6)

Pharmacies

26,41026,208

(202)

(0.8)

39,90537,541(2,364)(5.9)

Medical practice support

6,077

7,001

924

15.2

Pharmacies

33,82830,539(3,288)

(9.7)

3,855

4,157

301

7.8

Nishinihon

KyushuOthersOperating Income

6,087

5.0

6,248

5.1

161

2.6

Higashinihon

1,228

2.8

1,408

2.9

179

14.6

Nishinihon

2,082

6.3

2,197

6.8

115

5.5

Kyushu

2,854

7.2

2,576

6.9

(277)

(9.7)

Others

490

12.7

856

20.6

365

74.6

Reconciliation

(568)

-

(790)

-

(221)

-

Ordinary Income

6,196

5.1

6,440

5.3

244

3.9

Profit attributable to owners of parent

2,318

1.9

3,779

3.1

1,461

63.0

In FY2016, the final year of the medium-term management plan (April, 2014 –March, 2017), wewere undertaking the creation of solutions with our DtoD system and high-value pharmacies to deal
with social issues in the medical and healthcare field.

In the development and expansion of healthcare malls, we opened 10 healthcare malls in FY2016,
bringing the total number of healthcare malls to 75 at the end of March 31, 2017.

In hospital management support, there was an increase in the number of new consultation for
hospital bed reorganization. In FY2016, there were 20 consultations, and we also strengthened our
support for the reorganization of functions in regional healthcare systems.
2

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

In FY2016, we assisted in the opening of 46 medical practices carried on by successors, which we
expect to contribute to our goal to sustain and revitalize local healthcare.

In the pharmacy business, to address the issue of the role and evaluation of primary-care pharmacists
and pharmacies, as covered in the April 2016 dispensing fee revisions, we promoted efforts for each
pharmacy to become a “healthcare station for all” that would fully leverage the function andcapability of each pharmacist and would be chosen by the local community. As a result, we saw arise in the number of consent forms we acquired from patients.

Also, to enhance coordination between pharmacies and medical institutions, we used trace reports toadjust the amount of leftover drugs a patient has or to prevent side-effects. In addition to this, wehave been promoting the training and education of pharmacists that specialize in treating cancer anddiabetes patients and pharmacists that specialize in providing home care (internal certifications) toaddress with the advanced pharmacological management needs of patients, aiming for the initiative
for the “healthcare support pharmacy” program（As of March 31, 2017, we had a total of 35
healthcare support pharmacy）.

In addition, we welcomed the Miyonodai Pharmacy Group, a leader in in-home medical care, into
the Sogo Medical Group in December 2016, to accelerate the implementation of measures tobroaden our in-home care services.

As of the end of March 31, 2017, we were operating a total of 674 pharmacies, reflecting the
opening of 105 pharmacies (including 92 acquired in M&A deals) in FY2016.

In the fiscal year ended March 31, 2017 (FY2016), we posted net sales of ¥122,216 million, an
increase of 1.2% year-on-year. This reflects an increase in sales in consulting and rental in the
medical practice support business which compensated for a decline in sales in the pharmacy business,due to NHI drug price revisions, and a decrease in the number of prescriptions for Hepatitis C
treatments. Meanwhile, in the profit front, we recorded operating income of ¥6,248 million, a growthof 2.6%, and ordinary income of ¥6,440 million, a rise of 3.9%. Meanwhile, we reached a record
high for profit attributable to owners of the parent, booking ¥3,779 million, an improvement of
63.0%, owing in part to a rebound from impairment losses posted in the previous fiscal year.

3

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

Segment financial results were as follows:

A Higashinihon (East Japan)
Net sales came to ¥48,054 million, an increase of 9.6% year-on-year owing to an increase in therental division, and the consulting division. In addition, we garnered benefit from sales growthreflecting the pharmacy openings in this fiscal year. Meanwhile, operating income in this region
totaled ¥1,408 million, a growth of 14.6% year-on-year, owing to sales growth in the rental division,
etc.

B

Nishinihon (West Japan)

We recorded net sales in the region of ¥32,463 million, a decline of 2.1% year-on-year. This
primarily reflects a sales decline in leasing and installment, despite a growth in sales in rental and thedesign and construction of medical facilities.
Meanwhile, operating income in this region totaled ¥2,197 million, a growth of 5.5% year-on-year,
owing to sales growth in rental and the design and construction of medical facilities as well as anincrease in operating income in consulting.

C

KyushuNet sales in this region stood at ¥37,541 million, a decline of 5.9% year-on-year. This mainly reflectsa decline in sales due to a lower unit prescription price at existing pharmacies, which offset the risein sales in rental, leasing/installment, and design and construction. Operating income in the region
totaled ¥2,576 million, a decline of 9.7%, due to a decline in sales in this business.

4

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(2) Analysis of Financial Positions
Analysis of Assets, Liabilities, and Net Assets(in millions except percentages and ratios)
FY2015
Total Assets

FY2016

Change¥74,621¥86,760¥12,138

including Cash and Deposits

6,376

10,8304,454

Liabilities

44,97553,8798,903

including Interest-Bearing Debt *1

18,447

24,5906,143

Net Assets

29,64632,8803,234

Shareholders' Equity Ratio (%)

39.5

37.6

(1.9)

Net Debt-to-Equity Ratio (times) *2

0.41

0.42

0.01

*1.Interest-Bearing Debts include lease obligations and accounts payable-installment purchases.
*2. Net Debt-to-Equity Ratio=( Interest-Bearing Debts－Cash and Deposits) / Shareholders' Equity

Total assets at the end of the fiscal year stood at ¥86,760 million, an increase of ¥12,138 million
versus the end of FY2015. Current assets totaled ¥44,999 million, an increase of ¥5,809 million
year-on-year. This reflects an increase in cash and deposits of ¥4,454 million, and notes and accounts
receivable-trade of ¥1,777 million. Meanwhile, noncurrent assets totaled ¥41,760 million an increaseof ¥6,329 million. This reflects an increase in buildings and structures of ¥1,595 million and anincrease in goodwill of ¥3,870 million.

As of March 31, 2016, our total liabilities stood at ¥53,879 million, an increase of ¥8,903 million
versus the same time a year earlier. Current liabilities were ¥33,228 million an increase of ¥1,990
million. This reflects an increase in notes and accounts payable-trade of ¥1,667 million. Noncurrent
liabilities totaled ¥20,650 an increase of ¥6,913 million. This was primarily attributable to anincrease in long-term loans payable of ¥5,966 million. It should be noted that interest-bearing debt(including lease obligations and accounts payable-installment purchases) increased ¥6,143 million to¥24,590 million. Consequently, the net debt-to-equity ratio (interest-bearing debt less cash anddeposits divided by shareholders’ equity) was 0.42, compared to 0.01 as of the previous fiscal
year-end.

5

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

Net assets at the end of FY2016 totaled ¥32,880 million, an increase of ¥3,234 million versus theend of FY2015. Despite a decrease due to dividend payments of ¥710 million, net assets were
buoyed an increase in net income attributable to owners of the parent of ¥3,779 million.
Extrapolating from this, the equity ratio was 37.6% at the end of FY2016, owing to a 1.9% decrease
from 39.5% at the end of FY2015.

(3) Cash Flows
Cash and cash equivalents ("funds") at the end of the fiscal year under review totaled ¥10,655
million, which was ¥4,299 million (67.6%) more than at the end of the previous fiscal year. This wasdue to the following main factors.

(Cash Flows from Operating Activities)
Net cash provided by operating activities in the fiscal year under review was ¥10,931 million. Main
factors were ¥6,391 in income before income taxes and ¥3,902 million in depreciation andamortization and ¥987 million in amortization of goodwill, ¥2,222 million in expenditure for income
tax payments.

(Cash Flows from Investing Activities)
Net cash used in investing activities in the fiscal year under review was ¥9,933 million. Main factors
were ¥6,440 million in purchase of investments in subsidiaries resulting in change in scope of
consolidation, and ¥3,152 million in purchase of property for lease.

(Cash Flows from Financing Activities)
Net cash used in financing activities was ¥3,301 million. Main factors were ¥10,933 million inincome from long-term loans, ¥4,446 million in expenditure for the redemption of long-term loans,and ¥1,924 million in repayments of installment payables .

6

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(Reference) Cash flow-Related Indicators
FY2012FY2013

FY2014FY2015FY2016

37.8

35.7

37.7

39.5

37.6

41.9

44.6

69.8

76.6

72.3

Interest-bearing debt to cash flows (%)

2.0

2.1

2.8

2.6

2.2

Interest coverage ratio (times)

49.1

57.1

45.8

62.7

105.3

Capital adequacy ratio (%)
Capital adequacy ratio(based on fair value) (%)

Capital adequacy ratio: Shareholders’ equity / Total assets
Capital adequacy ratio (based on fair value): Market capitalization / Total assets
Interest-bearing debt to cash flows: Interest-bearing debt / Cash flows
Interest coverage ratio: Cash flows / Interest paid
(Notes) 1. Each ratio is calculated using consolidated amounts.
2. Market capitalization is calculated using outstanding shares less treasury stock.
3. Cash flows and interest paid are clarified as net cash provided by (used in) operating activities.
4. Interest-bearing debt is all debt for which interest is paid interest.

(4) Forecasts for FY2017
FY2016FY2017(Forecasts)

Change(amount)

Change(%)

Millions of Yen

Millions of Yen

Millions of Yen%

122,216

135,566

13,35010.9

Operating income

6,248

7,001

752

12.0

Ordinary income

6,440

7,016

575

8.9

Profit attributableto owners of parent

3,779

4,029

249

6.6

Net income per share (¥)

252.52269.1916.67-

Net sales

We launched Action 2020, a three-year, medium-term management plan in April 2017. In FY2017,
which is the first year of this plan, our focus will be on healthcare mall development、 hospitalmanagement support, and the creation of valuable pharmacies, as well as the development of an
infrastructure for a regional healthcare network by adding functions to and strengthening existing
businesses, and expanding business domains to healthcare related fields to achieve our vision for
FY2027.
Through these initiatives, we plan to achieve net sales of ¥135,566 million, a growth of 10.9%
year-on-year. We aim to attain operating income of ¥7,001 million, an increase of 12.0%, ordinary
income of ¥7,016 million, a rise of 8.9%, and profit attributable to owners of the parent of ¥4,029
million, an improvement of 6.6%.

The forecasts above were created based on information available as of the date these materials werereleased. Actual financial results could possibly differ from these forecasts due to various factors.
7

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

2. Management Policies(1) Basic management policy
In accordance with the concept of “Good Medical Practice through Good Management”, the basic
policy of Sogo Medical is to “work to build a better society through good medical practice” while
receiving the total healthcare management support that is backed by our consulting business.

(2) Management indicators which serve as goals
We launched Action 2020, a three-year, medium-term plan, from April 2017. The goals for this plan,
which will wrap up in the fiscal year ending March 31, 2020, are as follows.
Consolidated net sales of ¥160,000 million (organic growth)



EBITDA margin of 9% or higher

Appropriation of ¥20,000 million for capital investments during the three years of the plan

(separate capital to be actively used for M&A and partnerships)


Maintain a dividend payout ratio of 20% or higher(3) Medium/long-term corporate strategy①Positioned as the medium-term management plan for the fiscal year ending March 31, 2028
(FY2027)○Mission
We shall work to build a better society through good medical practice.
○Vision for FY2027
Completion of a Japanese healthcare business model that supports a regional comprehensive
healthcare system○Image of the Japanese healthcare business model once completed
Development of an infrastructure for a regional healthcare network by offering hospitalmanagement assistance and ideal healthcare malls through the creation of the DtoD system andvaluable pharmacies○Position of the medium-term management plan Action 2020
This plan aims to realize a Japanese healthcare business model. It is positioned as a three-yearplan that is a stepping stone toward the achievement our vision for FY2027. This plan builds on
those initiatives we carried out through and the results we attained by the end of March 31,
2017.

8

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016②Vision for the fiscal year ending March 31, 2020
Adding home medical and home nursing care functions to healthcare malls, developing a systemfor efficient and effective healthcare by dividing healthcare functions, and strengthening primary
pharmacy functions, thereby contributing to the creation of regional comprehensive healthcare
system. In addition, taking into account future population demographics, healthcare demand, andurban development, healthcare malls will support the formation of compact cities.

Promoting the creation of an infrastructure for a regional healthcare network
1. Developing healthcare malls
Central role in a healthcare complex, which offers medical and nursing functions, and assistancein everyday life as a social infrastructure～Growing to 200 healthcare malls～

2. Supporting hospital management
Assisting in the division of hospital functions and supporting collaborations to build a regional
comprehensive care system～Offering management support to 37 hospitals～

3. Creating valuable pharmacies
Supporting regional comprehensive care systems as a healthcare station for all～Increase by 2.3 million prescriptions (20% rise) owing to organic growth～

4. To achieve our vision for FY2027
Adding functions to and strengthening existing businesses and expanding business domains tohealthcare related fields

See our corporate website for details on our medium-term management plan, Action 2020.
(Corporate website of Sogo Medical)
http://www.sogo-medical.co.jp/english/

3. Basic Approach to Selection of Accounting Standards
Since the business activities of Sogo Medical Group are currently confined to Japan, consolidated
financial statements are prepared according to Japanese accounting standards. However, Sogo
Medical will consider the implementation of International Financial Reporting Standards (IFRS)
taking into account a rising foreign shareholder percentage in the future as well as circumstances inJapan and internationally.

9

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

4. Consolidated Financial Statements(1) Consolidated Balance Sheet(in millions)
FY2015FY2016( As of March.31, 2016)( As of March.31, 2017)

Cash and deposits¥ 6,376¥ 10,830

Notes and accounts receivable-trade19,617

21,395

Accounts receivable-installment sales

1,874

1,821

AssetsCurrent assets

Lease receivables and investment assets

1,403

Inventories*1

Deferred tax assets

6,583

911
*1

6,557

789

811

Other

2,566

2,710

Allowance for doubtful accounts

(20)

(38)

39,18944,999Property for lease, net

5,177

4,823

Buildings and structures, net

11,716

13,312

Land

4,109

4,720

Other, net

2,539

2,216

Total current assets
Noncurrent assets
Property, plant and equipment

Total property, plant and equipment*223,542*2

25,072Intangible assets
Goodwill

5,833

9,703

Other

1,201

1,537

Total intangible assets

7,034

11,241

Investment securities

1,134

1,327

Deferred tax assets

507

445

Investments and other assets

Other

3,231

3,673

Allowance for doubtful accounts

(19)

(0)

Total investments and other assets

4,853

5,446

Total noncurrent assets

35,431

41,760Total assets

74,62186,76010

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(in millions)
FY2015FY2016( As of March.31, 2016)( As of March.31, 2017)

Liabilities
Current liabilities
Notes and¥ 18,590¥ 20,258

Short-term

610

415

4,046

4,607

Current portion
Lease

267

256

Accrued

2,972

2,629

Income taxes

1,572

1,762

182

187

Other

Deferred profit

2,994

3,112

Total current

31,23733,228Long-term

9,204

15,171

Lease
Long-term
accounts

714

920

1,938

2,160

Other

1,880

2,397

Total noncurrent

13,737

20,65044,97553,879

Capital stock

3,513

3,513

Capital surplus

5,566

5,566

Retained

20,94424,012

Treasury stock

(920)

(920)

Total

29,10432,172

338

432

Total

338

432

Minority interests

203

275

Total net assets

29,64632,880Total liabilities and74,62186,760Noncurrent

Total liabilities
Net assets
Shareholders'

Accumulated
Valuationdifference on

11

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income(Consolidated Statements of Income)(in millions)
FY2015FY2016( to March.31, 2016)( to March.31, 2017)¥ 120,776¥ 122,216

Cost of sales

103,178

103,761

Gross profit

17,59818,454

Net sales

Selling, general and administrative expenses*1

Operating income

11,511*1

12,206

6,087

6,248

Dividends income

22

25

Rent income

31

21

Dividends income of life insurance

36

21

Gain on valuation of investment securities

-

168

Other

196

209

Total non-operating income

287

447

Interest expenses

75

81

Loss on valuation of investment securities

-

35

103

137

Non-operating income

Non-operating expenses

Other
Total non-operating expenses
Ordinary income

178

254

6,196

6,440

1,014

*2

Extraordinary loss
Impairment loss
Loss on sales of shares of subsidiaries andassociates

*2

48

87

-

270

-

Total extraordinary loss

1,371

48

Income before income taxes

4,824

6,391

Income taxes-current

2,569

2,452

Income taxes-deferred

(68)

87

Total income taxes

2,501

2,540

2,323

3,851

4

71

2,318

3,779

Loss on valuation of investment securities

Net income
Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent

12

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(Consolidated Statements of Comprehensive Income)(in millions)
FY2015FY2016( to March.31, 2016)( to March.31, 2017)¥ 2,323¥ 3,851

(136)

94

(136)

94

Comprehensive income

2,186

3,945

Comprehensive income attributable toComprehensive income attributable toowners of the parent

2,181

3,873

Comprehensive income attributable tonon-controlling interests

471

Net income
Other comprehensive income
Valuation difference on
available-for-sale securities
Total other comprehensive income

13

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(3) Consolidated Statements of Change in Net Assets(in millions)

FY2015（from April 1, 2015 to March 31,2016）
Shareholders' equity
Capital stock
Balance at the
beginning ofcurrent period

Capital surplus

3,513

Retained earnings

4,136

Treasury stock

19,255(1,044)

Total shareholders'equity25,861

Changes of
items during the period
Dividends from surplus

(629)

(629)

Profit attributable toowners of parent

2,318

2,318

Purchase oftreasury stock
Disposal oftreasury stock

1,429

(708)

(708)

832

2,262

Net changes of items
other thanshareholders' equity
Total changes of items
during the period

-

1,429

1,688

124

3,242

Balance at theend of current period

3,513

5,566

20,944(920)

29,104

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities
Balance at the
beginning ofcurrent period

Non controlling
Interest

475

184

Net assets

26,521

Changes of
items during the period
Dividends from surplus(629)

Profit attributable toowners of parent

2,318

Purchase oftreasury stock(708)

Disposal oftreasury stock

2,262

Net changes of items
other thanshareholders' equity

(136)

18

(117)

Total changes of items
during the period

(136)

18

3,124

Balance at theend of current period

338

203

29,646

14

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

FY2016（from April 1, 2016 to March 31, 2017）(in millions)Shareholders' equity

Capital stock
Balance at the
beginning ofcurrent period

Capital surplus

3,513

Retained earnings

5,566

Total shareholders'equityTreasury stock

20,944(920)

29,104

Changes of
items during the period
Dividends from surplus

(710)

(710)

Profit attributable toowners of parent

3,779

3,779

Purchase oftreasury stock
Disposal oftreasury stock
Net changes of items
other thanshareholders' equity
Total changes of items
during the period

-

-

3,068

-

3,068

Balance at theend of current period

3,513

5,566

24,012(920)

32,172

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities
Balance at the
beginning ofcurrent period

Non controlling
Interest

338

203

Net assets

29,646

Changes of
items during the period
Dividends from surplus(710)

Profit attributable toowners of parent

3,779

Purchase oftreasury stock
Disposal oftreasury stock
Net changes of items
other thanshareholders' equity

94

71

166

Total changes of items
during the period

94

71

3,234

Balance at theend of current period

432

275

32,88015

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(4) Consolidated Statements of Cash Flows(in millions)
FY2015FY2016( to March.31, 2016)( to March.31, 2017)

Income before income taxes¥4,824¥6,391

Depreciation and amortization

3,836

3,902

Amortization of goodwill

1,021

987

Impairment loss

1,014

48

Net cash provided by (used in) operating activities

Interest and dividends income

(23)

(27)

Capital cost and interest expenses

112

105

Decrease (increase) in notes andaccounts receivable-trade

(993)

1,127

Decrease (increase) in
accounts receivable-installment

(75)

57

Net decrease (increase) inlease receivables and investment assets

298

491

1,253

751

(1,436)(670)

Increase/decrease/ in other assets/liabilities

(798)

(193)

Other

620

258

Subtotal

9,652

13,230

23

27

(111)

(103)

Income taxes paid

(2,559)(2,222)

Net cash provided by (used in) operating activities

7,004

10,931(4,233)(3,152)

Proceeds from sales of own-used assets

172

4

Purchase of property for lease

(876)

(264)

Purchase of investment securities

(11)

-

Purchase of investments in subsidiaries
resulting in change in scope of consolidation(147)(6,440)

Other

115

(80)

(4,981)(9,933)

Decrease (increase) in inventories
Increase (decrease) in notes andaccounts payable-trade

Interest and dividends income received
Interest expenses paid

Net cash provided by (used in) investing activities
Purchase of own-used assets

Net cash provided by (used in) investing activities

16

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(in millions)
FY2015FY2016( to March.31, 2016)( to March.31, 2017)

Net increase (decrease) in short-term loans payable¥ 64¥ (224)

Proceeds from long-term loans payable

6,485

10,933

Repayment of long-term loans payable(3,001)(4,446)

(751)

(324)

(2,092)(1,924)

Cash dividends paid

(629)

(710)

Purchase of treasury stock

(708)

-

Net cash provided by (used in) financing activities

(635)

3,301

Net increase (decrease) in cash and cash equivalents

1,387

4,299

Cash and cash equivalents at beginning of period

4,968

6,356

Net cash provided by (used in) financing activities

Repayments of lease obligations
Repayments of installment payables

Cash and cash equivalents at end of period

*1

17

6,356

*1

10,655

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(5) Notes to Consolidated Financial Statements(Note on the Going-Concern Assumption)
None.

(Basic Information of Consolidated Financial Statements)
1. Scope of Consolidation
Number of Consolidated Subsidiaries: 28 Companies
・Somtech Co., Ltd.
・Sogo Medical Pharmacy Chubu Co., Ltd.
・Aoba Pharmacy Co., Ltd.
・Maeda & Co., Ltd.
・Taikodo yakkyoku honten Co., Ltd.
・Beauty Drug Saito Co., Ltd.
・Shokando Co., Ltd.
・Sun Villa Co., Ltd.
・Hokendohjinsha Inc.
・Miyonodai Pharmacy Co. Ltd.
・Motoki Pharmacy Co. Ltd.

From FY2016, Miyonodai Pharmacy Co. Ltd., Motoki Pharmacy Co. Ltd., Ai Dispensing pharmacy
Co. Ltd., Kanamecho Pharmacy Co. Ltd., Tsukasa Dispensing pharmacy Co. Ltd., Koyu Co. Ltd.,
Mitsuhira Co. Ltd., Flower Dispense Co. Ltd., Green Pharmacy Co. Ltd., Koyama Co. Ltd. (100% of
total shares outstanding acquired on December 26, 2016), Mitsuyasu Dispensing pharmacy Co. Ltd.
(100% of total shares outstanding acquired on February 14, 2017), were included into the scope of
consolidation.
Meanwhile, from FY2016, Dradok Co. Ltd., (absorbed into Sogo Medical via a merger on August 1,2016) were removed from the scope of consolidation.

2. Equity-Method
None

3. Fiscal Periods of Consolidated Subsidiaries
Consolidated subsidiaries with fiscal-year ends different from that of the Company:

18

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

April 30

Green Pharmacy Co. Ltd.

May 31

One other company in addition to Nakano Pharmacy Co., Ltd.

June 30

Three other company in addition to Phrma systems Co., Ltd.

July 31

Two other company in addition to GM Co., Ltd.

August 31

One other company in addition to Miyonodai Pharmacy Co. Ltd.

September 30

Two other company in addition to Beauty Drug Saito Co., Ltd.

When preparing consolidated financial statements, financial statements as of March 31, 2015, areused for these companies.

4. Significant Financial Accounting Principles(1) Valuation basis and method of major assets①Investment Securities
With market value:
By the mark-to-market method based on average market value over a period of one month prior
to the date of settlement of the consolidated accounts (valuation differences are reported as aseparate component of net assets and the sale price is determined by the moving-averagemethod).
Without market value:
At cost, using the moving-average method
Investments in a limited investment partnership or a similar partnership (that can be considered
as marketable securities in accordance with the Article 2 (2) of the Financial Instruments andExchange Act) are stated at their net equity value on the most recent financial statements thatare available on the settlement report day as specified in the partnership agreement.
②Inventories
Inventories are mainly reported using the lower of cost or market price. The costs are calculatedusing the gross average method.

(2)Depreciation①Property for lease
Depreciation is calculated by use of the straight-line method over each rental term of the assets.
②Plant, Property and Equipment and Intangible assets (Excluding rental assets, leasd assets (lessee)and plant property and equipment related to pharmacies opened after April 1, 2012)
Depreciation for plant, property and equipment is calculated by use of the declining balancemethod. Depreciation for intangible assets is calculated by use of the straight-line method.
Useful lives of building and structures range from 10 to 47 years.

19

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016③Leased Assets (Lessee)
Leased assets are classified as property, plant and equipment and intangible assets. Depreciation is
calculated by use of the straight-line method over each asset’s lease term of the assets and with noestimated salvage value.
④Plant property and equipment related to pharmacies opened after April 1, 2012
Depreciation is calculated by use of the straight-line method.

(3)Allowance
Allowance for Doubtful Accounts
Allowances are recognized for doubtful accounts. General provisions are determined on the basisof past credit loss experience, and specific provisions, such as loss apprehensive credits, aredetermined by considering individual collectability.

(4)Revenue and Expense Recognition①Financing Leases (Lessor)
When the Company receives a lease payment, the Company recognizes the sale amount and costof sale.
②Installment Sales
When the Company delivers a product through an installment contract, the Company recognizes
the full contract amount as accounts receivable-installment sales. When a due date arrives, theCompany reports both the installment sale and the installment cost. Additionally, the Company
recognizes an unrealized income corresponding to accounts receivable-installment sales for which
the due date has not arrived at year end as deferred profit on installment sales.

(5)Amortization of Goodwill Method and Period
Goodwill is amortized using the straight-line method over a period of no more than 20 years, withthe reasonable period being decided for individual items.

(6) Scope of Funds Used to Prepare Consolidated Cash Flow Statements
Funds used to prepare the consolidated cash flow statements (cash and cash equivalents) include
cash on hand, deposits withdrawable at immediate notice, and easily convertible short-term
investments redeemable within 3 months of acquisition with minimal risk of fluctuations in value.

(7) Others
Consumption and Local Consumption Tax
The Company applies the tax exclusion method for consumption and local consumption tax. The

20

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

consumption tax amount not subject to tax credit related to property, plant and equipment isclassified as an investment and other assets. The other assets are depreciated using thestraight-line method over five years. The other consumption tax amount not subject to tax credit isclassified as a period expense.

(Consolidated Balance Sheet)*1. Inventories(in millions)
FY2015
Medical supplies

FY2016¥ 6,279¥ 6,300

Merchandise

140

82

Costs on uncompleted construction contracts

13

31

Raw materials and supplies

150

142

*2. Accumulated Depreciation(in millions)
FY2015
Accumulated depreciation

FY2016¥ 19,687¥ 21,701

3. Contingent Liabilities(in millions)
FY2015Kaze-No-Suzuran-Kai, etc (7 people)

FY2016¥ 2,111

Kaze-No-Suzuran-Kai, etc (8 people)¥ 2,735(Consolidated Statements of Income)*1. Main Selling General and Administrative Expenses(in millions)
FY2015
Salaries and allowances¥ 3,776

FY2016¥ 3,872*2. Impairment Losses
FY2015（from April 1, 2015 to March 31,2016）
For internal management, the Sogo Medical Group conducts asset grouping based on the minimum
21

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

unit generating cash flows. In the pharmacy business, groupings are conducted for each pharmacy.
For some affiliates, we implemented account groupings based on a company as a single unit, taking
into account factors such as scale.

We reported impairment loss for following groups:
BusinessPlace
8 Pharmacy (4 MinamiKanto,

Higashinihon

4 Tokai)
3Subsidiaries and associates(1 Hokkaido, 2 kanto)

Nishinihon
Kyushu1 Pharmacy (Kinki)
2 Pharmacy (1 Kitakyushu, 1
Nanbukyushu)

Use

Classification

Amount(in millions)Pharmacies

Land, etc

¥ 135

－

Goodwill

868

Pharmacies

Buildings and structures

0

Pharmacies

Buildings and structures, etc

9

Total

1,014

We are reducing the book value to a recoverable amount for those pharmacies that continue togenerate losses from operating activities and for which we do not expect a return to profit moving
forward, or which are scheduled for relocation. We are posting an impairment loss stemming fromthis of ¥145 million as extraordinary loss. This breaks down to an impairment loss on buildings andstructures of ¥58 million, land of ¥82 million, and other assets of ¥4 million. Note that therecoverable amount for pharmacies takes into account the importance of an asset to operations and ismeasured using the net realizable sales price based primarily on the roadside land price andappraised value of the fixed asset.
In addition, we revised our business plan for affiliates taking into account that earnings have been
underperforming the initial business plan since shares were acquired. In line with this revision, we
calculated the recoverable amount by factoring in a discount of 4.2% to future cash flow. We posted
an impairment loss of ¥868 million, which is the unamortized portion of goodwill that exceeded therecoverable amount.

FY2016（from April 1, 2016 to March 31,2017）
For internal management, the Sogo Medical Group conducts asset grouping based on theminimum unit generating cash flows. In the pharmacy business, groupings are conducted for each22

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

pharmacy and for leased assets, for each facility.
We reported impairment loss for following groups:
Business

Place

Use

AmountClassification(in millions)

3 Pharmacy (2 MinamiKanto,
Higashinihon

1 Tokai)

Pharmacies

1 Property for lease (1Property for lease¥ 31

Buildings and structures, etc

MinamiKanto)
Nishinihon
Kyushu1 Pharmacy (1 Shikoku)
1 Pharmacy (1Hokubukyushu)

Pharmacies

Buildings and structures, etc

9Pharmacies

Buildings and structures

7

Total

48

We plan to reduce the book value to a recoverable amount for pharmacies that continue to generate
losses from operating activities and for which we do not expect a return to profit moving forward,
pharmacies that are scheduled to be relocated, and leasing assets slated for disposal. Reflecting thisreduction in book value, we are posting an impairment loss of ¥48 million under extraordinary loss.
This impairment loss consists of an impairment loss of ¥33 million to buildings and structures and a¥15 million loss on other assets. Note that the recoverable amount for pharmacies takes into accountthe importance of an asset to operations and is measured using the net realizable sales price based
primarily on the roadside land price and appraised value of the fixed asset. In addition, therecoverable amount for leasing assets slated for disposal is measured using the net realizable sales
price based on the disposal price.

(Consolidated Statements of Cash Flows)*1. Items of Cash and Cash Equivalents(in millions)
FY2015
Cash and deposits

FY2016¥ 6,376¥ 10,830

Over three-month time deposit

(20)

(174)

Cash and Cash Equivalents

6,356

10,65523

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

2. Significant Non-Cash Transactions
FY2015 (from April 1, 2015 to March 31, 2016)
Assets and liabilities as a result of this fiscal year’s financing lease transactions were ¥313million,and ¥347 million respectively. Assets and liabilities as a result of this fiscal year’s installment
sales transactions were ¥570 million, and ¥633 million respectively.

FY2016 (from April 1, 2016 to March 31, 2017)
Assets and liabilities as a result of this fiscal year’s financing lease transactions were ¥687 million,and ¥758 million respectively. Assets and liabilities as a result of this fiscal year’s installment
sales transactions were ¥1,418 million, and ¥1,540 million respectively.

(Segment Information)
1. Outline of Segment
Reportable segment are components of the Company for which separate financial information isavailable. The board of directors regularly evaluates these segments to make decisions about how
to allocate resources and assess performance.
Our businesses consist of management consulting for medical institutions and medical doctors,
DtoD (support system for medical practice succession, medical cooperatives, and practitioner
recruitment), TV rental for patients in hospitals, leasing and installment payment sales of medical
equipment, design and construction of medical institutions, pharmacies, managing fee-based
residential homes for the elderly.

Our reportable segments are now ‘Higashinihon’, ‘Nishinihon’ and ‘Kyushu’ to allow for
development of regional strategies and rapid decision-making about business operations.

2. Accounting Method for Segment Sales, Profit (Loss), and Assets
The accounting method for reportable segments was almost the same as the ‘Basic Information ofConsolidated Financial Statements’.
Each segment profit (loss) is calculated based on operating income.
Intersegment sales and transfer pricing are calculated by market prices.

24

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

3. Segment Sales, Profit (Loss), and Assets
FY2015 (from April 1, 2015 to March 31, 2016)(in millions)
Reportable Segments

OthersReconciliations

consolidated

Total
*1

*2

amounts*3

Higashinihon

Nishinihon

KyushuTotal

Unaffiliated sales¥ 43,838¥ 33,176¥ 39,905¥ 116,920¥ 3,855¥120,776－¥ 120,776

Intersegment sales

40

560

0

601

6,020

6,622

¥ (6,622)－

120,776

Sales

Total

43,87933,73739,906

117,522

9,875

127,398(6,622)

Segment profit

1,228

2,082

2,854

6,165

490

6,655

(568)

6,087

Segment assets

25,82318,720

16,63561,1804,745

65,926

8,695

74,621

1,314

1,043

919

3,277

194

3,471

364

3,836

678

321

20

1,020

0

1,021

－

1,021

Impairment loss

1,004

0

9

1,014

－

1,014

－

1,014

Increase in assets

4,989

2,764

1,136

8,890

103

8,994

484

9,479

OthersDepreciation
Amortization of goodwill*1. Others include items such as wholesales of pharmaceuticals and healthcare information service, which are notclassified as reportable segments.
*2. Reconciliations were as follows:(1) Reconciliation for reportable segment loss (¥568million) included elimination of intersegment sales(¥1million) and overall corporate expense (¥570million). The overall corporate expense was classified as
selling general and administrative expenses and was not allocated to reportable segments.
(2) Reconciliation for reportable segment assets (¥8,695 million) included elimination investment against equity(¥-9,562 million) and overall corporate assets (¥18,902 million). The overall assets were classified as parent
company’s deposits and were not allocated to reportable segments.
(3) Assets included property, plant and equipment and intangible assets. Reconciliation of increase of those assets(¥484 million) was classified as head office’s networking systems and allocation of other reportable segments.
*3. Reportable segment profits were reconsolidated with the operating income of the consolidated income
statement.

25

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016

FY2016 (from April 1, 2016 to March 31, 2017)(in millions)
Reportable Segments

OthersReconciliations

consolidated

Total
Higashinihon

Nishinihon

Kyushu

*1

Total

*2

amounts*3

Sales
Unaffiliated sales¥ 48,054¥ 32,463¥ 37,541¥ 118,059¥ 4,157¥122,216-¥ 122,216

Intersegment sales

1

368

-

369

5,455

5,825

¥ (5,825)

-

Total

48,05532,83137,541

118,428

9,613

128,042(5,825)

122,216

Segment profit

1,408

2,197

2,576

6,182

856

7,038

(790)

6,248

Segment assets

37,691

18,056

15,04570,793

5,239

76,032

10,72786,760

1,486

1,021

905

3,414

163

3,578

324

3,902
987

OthersDepreciation
Amortization of goodwill

652

319

14

986

0

987

-

Impairment loss

31

9

7

48

-

48

-

48

Increase in assets

8,673

790

884

10,34773

10,421498

10,920*1. Others include items such as wholesales of pharmaceuticals and healthcare information service, which are notclassified as reportable segments.
*2. Reconciliations were as follows:(1) Reconciliation for reportable segment loss (¥790million) included elimination of intersegment sales(¥18million) and overall corporate expense (¥809million). The overall corporate expense was classified as
selling general and administrative expenses and was not allocated to reportable segments.
(2) Reconciliation for reportable segment assets (¥10,727 million) included elimination investment against equity(¥-17,598 million) and overall corporate assets (¥29,410 million). The overall assets were classified as parent
company’s deposits and were not allocated to reportable segments.
(3) Assets included property, plant and equipment and intangible assets. Reconciliation of increase of those assets(¥498 million) was classified as head office’s networking systems and allocation of other reportable segments.
*3. Reportable segment profits were reconsolidated with the operating income of the consolidated income
statement.

26

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2016(Per Share Information)
FY2015FY2016

Net assets per share¥ 1,967.14¥ 2,178.46

Net income per share

154.65252.52

Notes:
1. We calculate net assets per share according to the following financial information:(in millions)
FY2015FY2016

Net assets¥ 29,646¥ 32,880

Deduction

203

275

(Non-controlling interests)

203

275

Net assets attributable to common stocks

29,44232,605

Number of common stocks at end of FY

14,967

14,967

2. We did not issue dilutive potential common shares.
Therefore we did not report diluted earnings per share information.

3. We calculate net income per share according to the following financial information：(in millions)
FY2015
Profit attributable to owners of parent(Preferred dividends)
Profit attributable to owners of parent
attributable to common stocks
Average number of common stocks(Significant Subsequent Events)
None.

27

FY2016¥ 2,318¥ 3,779

-

-

2,318

3,779

14,99014,967