Translation
Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any
discrepancy between this translated document and the original Japanese document, the latter shall prevail.

Summary of Consolidated Financial Results
for the Three Months Ended June 30, 2016
(Based on Japanese GAAP)
July 28, 2016
Company name:SMS CO., LTD.
Stock exchange listing: Tokyo
Stock code:
Representative:

2175
CEOURLhttp://www.bm-sms.co.jp/Natsuki Goto

Inquiries:
CFO
Scheduled date to file Quarterly Securities Report:

Masato Sugizaki
August 12, 2016

Scheduled date to commence dividend payments:
Preparation of supplementary material on quarterly financial results:–Yes

Holding of quarterly financial results meeting:

Yes

TEL

03-6721-2400(for institutional investors and analysts)(Amounts less than one million yen are rounded down)
1. Consolidated financial results for the three months ended June 30, 2016 (from April 1, 2016 to June 30, 2016)(1) Consolidated operating results (cumulative)
Net sales
Three months ended June 30, 2016
Three months ended June 30, 2015

Millions of yen
6,618
5,421

Percentages indicate year-on-year changes
Profit attributable toOperating income
Ordinary income
owners of parent% Millions of yen% Millions of yen% Millions of yen%
22.1
1,668
14.6
2,165
15.8
1,570
21.5
23.5
1,456
17.7
1,869
24.1
1,292
6.8

Earnings per share

Diluted earnings per share

Yen
38.73
31.87

Three months ended June 30, 2016
Three months ended June 30, 2015

Yen
38.60
31.79

(2) Consolidated financial position
Total assets
As of June 30, 2016
As of March 31, 2016

Net assets

Millions of yen
41,644
41,689Equity ratio

Millions of yen
12,54913,157%
20.2
20.5

2. Cash dividends
Annual dividends per share

Year ended March 31, 2016
Year ending March 31, 2017

1st quarter-end

2nd quarter-end

3rd quarter-end

Fiscal year-end

Yen
––

Yen
0.00

Yen–

Yen
7.00

Yen
7.00

0.00

–––

Year ending March 31, 2017 (Forecast)Total

3. Forecast of consolidated financial results for the year ending March 31, 2017 (from April 1, 2016 to March 31, 2017)
Percentages indicate year-on-year changes
Profit attributable toNet sales
Operating income
Ordinary incomeEarnings per shareowners of parent
Millions of yen% Millions of yen% Millions of yen% Millions of yen%Yen
Six months ending
12,112
29.9
1,956
3.0
2,493
4.2
1,731
8.1
42.69
September 30, 2016
Full year
24,051
26.1
3,432
24.5
4,215
20.1
2,718
20.0
67.03

1

4. Notes(1) Changes in significant subsidiaries during the three months ended June 30, 2016(changes in specified subsidiaries resulting in the change in scope of consolidation):Yes(2) Application of special accounting methods for preparing quarterly consolidated financial statements:

Yes(3) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements
Changes in accounting policies due to revisions to accounting standards and other regulations:
Changes in accounting policies due to other reasons:

Yes
Yes

Changes in accounting estimates:
Restatement of prior period financial statements:

NoNo(4) Number of issued shares (common shares)
Total number of issued shares at the end of the period (including treasury shares)
As of June 30, 2016

41,887,200 shares As of March 31, 201641,887,200 shares

Number of treasury shares at the end of the period
As of June 30, 2016

1,330,272 shares As of March 31, 2016

1,330,272 shares

Average number of shares during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 2016

40,556,928 shares Three months ended June 30, 2015

240,556,928 shares

Quarterly consolidated financial statements
Consolidated balance sheets(Thousands of yen)
As of March 31, 2016

As of June 30, 2016

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade

5,291,7073,982,752

6,916,446
3,278,323

95,83031,18591,52639,0376,770
1,891,531

56,1192,192,744

Prepaid expenses
Deferred tax assets

685,224
268,219759,904
257,396

Other
Allowance for doubtful accounts

140,001(217,510)

37,111(160,086)

12,175,712

13,468,523

383,400(151,756)

384,280(162,684)

231,643

221,595

515,019(366,414)

548,282(372,299)

Tools, furniture and fixtures, net

148,605

175,982

Machinery, equipment and vehicles
Accumulated depreciation

110,080(61,999)

81,050(52,188)

Merchandise and finished goods
Work in process
Supplies
Accounts receivable - otherTotal current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation

Machinery, equipment and vehicles, net

48,081

28,861

428,330

426,439

Goodwill
Software

12,874,322
1,335,532

11,767,356
1,418,735

Trademark right
Customer-related assets

10,046,813
3,046,910

9,386,313
2,786,013

Total property, plant and equipment
Intangible assets

Other
Total intangible assets

5050

27,303,627

25,358,468

1,025,966
211,138

1,530,229
288,307516,448
28,578548,753
24,1401,782,132

2,391,431

29,514,090

28,176,339

41,689,802

41,644,863

Investments and other assets
Investment securities
Deferred tax assets
Lease and guarantee deposits
Other
Total investments and other assets
Total non-current assets
Total assets3

(Thousands of yen)
As of March 31, 2016

As of June 30, 2016

Liabilities
Current liabilities
Accounts payable - trade451,116

372,090

Short-term loans payable
Accounts payable - other

19,002,638
3,443,188

19,002,648
3,676,276

Accrued expenses
Income taxes payable

232,160
947,942

217,685
1,047,416

100,331
1,102,636

319,840
1,246,301

Deposits received
Provision for bonuses

45,718373,715

194,048
185,477

ProvisionForRepayment
Other

129,785
85,266

185,90234,754

Accrued consumption taxes
Advances received

Total current liabilities

25,914,499

26,482,444

Non-current liabilities
Net defined benefit liability

111,938

114,523

Deferred tax liabilities
Other

2,442,393
63,3052,434,974
63,437

Total non-current liabilities
Total liabilities

2,617,637

2,612,935

28,532,136

29,095,379

Net assets
Shareholders' equity
Capital stock

304,166

304,166

Retained earnings
Treasury shares

9,145,508(1,036,485)

10,462,352(1,036,485)

Total shareholders' equity

8,413,190

9,730,033

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

9,888

9,796

Foreign currency translation adjustment

135,593(1,334,988)

Total accumulated other comprehensive income

145,482(1,325,191)

80,10889,052

Subscription rights to shares
Non-controlling interests

4,518,884

4,055,589

Total net assets

13,157,666

12,549,483

41,689,802

41,644,863

Total liabilities and net assets

4Consolidated statements of income (cumulative) and consolidated statements of comprehensive income(cumulative)
Consolidated statements of income (cumulative)(Thousands of yen)Three months ended

Three months ended

June 30, 2015

June 30, 2016

Net sales
Cost of sales

5,421,407
381,669

6,618,796
891,033

Gross profit

5,039,737

5,727,762

Selling, general and administrative expenses

3,583,2064,059,302

Operating income

1,456,531

1,668,460

Share of profit of entities accounted for using equity method
Other402,764
17,800501,918
12,834

Total non-operating income

420,564

514,752

5,173

–

1,514
907

11,651
6,529

Non-operating income

Non-operating expenses
Foreign exchange losses
Interest expenses
Other
Total non-operating expenses

7,595

18,1801,869,500

2,165,032

Gain on sales of shares of subsidiaries and associates–

56,609Total extraordinary income–

56,609Loss on sales and retirement of non-current assets

676–Total extraordinary losses

676–

1,868,823

2,221,641

573,693695,020

1,295,130

1,526,620

Ordinary income
Extraordinary income

Extraordinary losses

Profit before income taxes
Income taxes
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

5

2,593

(44,212)

1,292,536

1,570,833

Consolidated statements of comprehensive income (cumulative)(Thousands of yen)

ProfitOther comprehensive income

Three months ended

Three months ended

June 30, 2015

June 30, 2016

1,295,130

1,526,620

Valuation difference on available-for-sale securities
Foreign currency translation adjustment

171
9,813

(80)
(1,846,930)

Share of other comprehensive income of entities accounted
for using equity method

10,669(9,243)

Total other comprehensive income

20,654(1,856,254)

1,315,784(329,634)

1,314,439

100,158

1,344(429,793)

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

6Consolidated statements of cash flows(Thousands of yen)

Cash flows from operating activitiesProfit before income taxes

Three months ended

Three months ended

June 30, 2015

June 30, 2016

1,868,823

2,221,641

93,355
117,563

252,559
171,058

Loss (gain) on sales of shares of subsidiaries and associates
Loss (gain) on sales and retirement of non-current assets–
676(56,609)–

Share of (profit) loss of entities accounted for using equity
method159,757(501,918)

Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses(7,936)(153,859)(10,928)(188,237)

Increase (decrease) in repayment for bonuses
Increase (decrease) in net defined benefit liability

39,167
3,101

56,117
2,584

Decrease (increase) in notes and accounts receivable - trade
Increase (decrease) in accrued consumption taxes

408,795(94,116)

704,428
219,508

Decrease (increase) in accounts receivable - other
Decrease (increase) in prepaid expenses

74,424
41,769(301,213)(74,301)

Increase (decrease) in advances received
Increase (decrease) in accounts payable - other

59,967(263,737)

143,665
221,300

Decrease (increase) in lease and guarantee depositsOther, net(41,152)(52,720)(70,319)
35,3962,253,879

2,824,733

1,161(1,609)2,522(12,029)

Depreciation
Amortization of goodwill

SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid

(557,993)(667,431)

Net cash provided by (used in) operating activities

1,695,438

2,147,795

Payments into time deposits
Proceeds from withdrawal of time deposits(77,384)––
47,879Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment(12,596)
1,048(13,355)–

Purchase of intangible assets
Purchase of investment securities(162,574)–(223,196)(13,187)

Proceeds from sales of shares of subsidiaries and associates
Payments of loans receivable–(29,108)

46,640(20,000)

Purchase of shares of subsidiaries resulting in change in scopeof consolidation(14,789)

–

819

1,203

(294,586)(174,016)(267,422)(268,803)(4,692)(3,311)

Cash flows from investing activities

Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Cash dividends paid
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Other, net(13,007)–Net cash provided by (used in) financing activities(285,122)(272,114)

Effect of exchange rate change on cash and cash equivalents(2,371)(29,046)

Net increase (decrease) in cash and cash equivalents

1,113,357

1,672,618

Cash and cash equivalents at beginning of period

2,694,008

5,147,343

Cash and cash equivalents at end of period

3,807,366

6,819,961

7