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 Six Months Ended September 30, 2016
(Based on Japanese GAAP)
October 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
November 11, 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 six months ended September 30, 2016 (from April 1, 2016 to September 30, 2016)(1) Consolidated operating results (cumulative)
Net sales
Six months ended September 30, 2016
Six months ended September 30, 2015

Millions of yen
11,9909,325

Percentages indicate year-on-year changes
Profit attributable toOperating income
Ordinary income
owners of parent% Millions of yen% Millions of yen% Millions of yen
%
28.6
2,311
21.7
2,930
22.5
1,843
15.0
24.5
1,899
46.2
2,391
44.3
1,602
23.7

Earnings per share

Diluted earnings per share

Yen
45.44
39.50

Six months ended September 30, 2016
Six months ended September 30, 2015

Yen
45.29
39.40

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

Net assets

Millions of yen
40,503
41,689Equity ratio

Millions of yen
10,82813,157

%
17.5
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
0.00

Yen–

Yen
7.00

Yen
7.00

–––

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 income
Earnings per shareowners of parent
Millions of yen% Millions of yen% Millions of yen% Millions of yen%
Yen
Full year
24,051
26.1
3,650
32.4
4,450
26.8
2,800
23.6
69.03

14. Notes(1) Changes in significant subsidiaries during the six months ended September 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 September 30, 2016

41,906,400 shares As of March 31, 2016

41,887,200 shares

Number of treasury shares at the end of the period
As of September 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)
Six months ended September 30, 2016

40,561,195 shares Six months ended September 30, 2015

240,556,928 shares

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

As of September 30, 2016

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade

5,291,707
3,982,752

8,166,769
3,544,818

95,83031,18582,465
19,6076,770
1,891,531

66,5362,309,886

Prepaid expenses
Deferred tax assets

685,224
268,219

791,676
249,906

Other
Allowance for doubtful accounts

140,001(217,510)

26,293(145,852)

12,175,712

15,112,108

383,400(151,756)

370,257(168,937)

231,643

201,319

515,019(366,414)

529,666(368,397)

Tools, furniture and fixtures, net

148,605

161,269

Machinery, equipment and vehicles
Accumulated depreciation

110,080(61,999)

40,992(17,530)

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

Machinery, equipment and vehicles, net

48,081

23,461

428,330

386,051

Goodwill
Software

12,874,322
1,335,532

10,191,203
1,386,843

Trademark right
Customer-related assets

10,046,813
3,046,910

8,572,403
2,489,135

Total property, plant and equipment
Intangible assets

Other
Total intangible assets

50

50

27,303,627

22,639,635

1,025,966
211,1381,498,799
287,368

516,448
28,578558,903
20,598

1,782,132

2,365,670

29,514,090

25,391,356

41,689,802

40,503,465

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 ofMarch 31, 2016

As of September 30, 2016

Liabilities
Current liabilities
Accounts payable - trade451,116

328,860

Short-term loans payable
Current portion of long-term loans payable

19,002,638–

7,000,0001,201,200

Accounts payable - otherAccrued expenses

3,443,188
232,160

4,011,893
188,348

Income taxes payable
Accrued consumption taxes

947,942
100,3311,206,984
259,625

1,102,636
45,718

1,338,602
46,901

Provision for bonuses
Provision for repayment

373,715
129,785

272,534
158,080

Other

85,266319,620

25,914,499

16,332,652–
111,938

10,810,800
111,449

2,442,393
63,3052,402,419
17,663

Advances received
Deposits received

Total current liabilities
Non-current liabilities
Long-term loans payable
Net defined benefit liability
Deferred tax liabilities
Other
Total non-current liabilities

2,617,637

13,342,331

28,532,136

29,674,984

Shareholders' equity
Capital stock

304,166

307,288

Retained earnings
Treasury shares

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

10,723,338(1,036,485)

Total shareholders' equity

8,413,190

9,994,142

Total liabilities
Net assets

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

9,888

7

Foreign currency translation adjustment

135,593(2,899,159)

Total accumulated other comprehensive income

145,482(2,899,151)

80,10895,449Subscription rights to shares
Non-controlling interests

4,518,884

3,638,040

Total net assets

13,157,666

10,828,481

41,689,802

40,503,465

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)Six months ended

Six months ended

September 30, 2015

September 30, 2016

Net sales
Cost of sales

9,325,242
697,246

11,990,790
1,762,776

Gross profit

8,627,99510,228,014

Selling, general and administrative expenses

6,728,567

7,916,715

Operating income

1,899,428

2,311,299

Share of profit of entities accounted for using equity method
Other496,586
21,732609,155
54,410Total non-operating income

518,319

663,566

19,292

–

4,489
2,086

24,965
19,443Non-operating income

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

25,86744,4092,391,880

2,930,456

Gain on sales of shares of subsidiaries and associates–

58,645

Total extraordinary income–

58,645

1,479––
20,000Ordinary income
Extraordinary income

Extraordinary losses
Loss on sales and retirement of non-current assets
Loss on sales of investment securities
Loss on sales of shares of subsidiaries and associates
Total extraordinary losses
Profit before income taxes
Income taxes
ProfitLoss attributable to non-controlling interests
Profit attributable to owners of parent

5–

143,543

1,479

163,5432,390,401

2,825,557

788,550

988,604

1,601,851

1,836,953(329)(6,074)

1,602,180

1,843,028

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

ProfitOther comprehensive income

Six months ended

Six months ended

September 30, 2015

September 30, 2016

1,601,851

1,836,953

Valuation difference on available-for-sale securities
Foreign currency translation adjustment(1,012)(97,406)(9,742)(3,822,382)

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

19,320(22,157)

Total other comprehensive income(79,098)(3,854,282)

1,522,752(2,017,329)

1,529,473(1,201,605)(6,721)(815,723)

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 activities
Profit before income taxes

Six months ended

Six months ended

September 30, 2015

September 30, 2016

2,390,401

2,825,557

195,819
178,870

501,879
334,050

Loss (gain) on sales of investment securities
Loss (gain) on sales of shares of subsidiaries and associates––

20,00084,898Loss (gain) on sales and retirement of non-current assets
Share of (profit) loss of entities accounted for using equity

1,479

–

Depreciation
Amortization of goodwill

methodIncrease (decrease) in allowance for doubtful accounts

65,934(427,093)(17,647)(25,161)

Increase (decrease) in provision for bonuses
Increase (decrease) in provision for repayment(78,169)
22,406(101,180)
28,295

Increase (decrease) in net defined benefit liability
Decrease (increase) in notes and accounts receivable - trade

3,926
287,848(488)
437,934

Increase (decrease) in accrued consumption taxes
Decrease (increase) in accounts receivable - other(185,283)(296,509)

159,293(418,355)

Decrease (increase) in prepaid expenses
Increase (decrease) in advances received

33,72832,410(105,386)
235,965

Increase (decrease) in accounts payable - other
Decrease (increase) in lease and guarantee deposits(85,735)(36,542)556,917(83,425)

Other, net(131,386)

203,519

Subtotal

2,381,552

4,227,218

4,089

6,673

Interest expenses paid
Income taxes paid

(4,692)(580,272)(26,031)(825,572)

Net cash provided by (used in) operating activities

1,800,676

3,382,288

Interest and dividend income received

Cash flows from investing activities
Payments into time deposits(78,882)–

Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment–(44,766)

85,285(67,769)

Proceeds from sales of property, plant and equipment
Purchase of intangible assets

911(329,873)–(430,101)––(33,187)
391,892

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

Payments of loans receivableOther, net(28,416)
1,643(20,000)
1,203

Net cash provided by (used in) investing activities(494,174)(72,676)

Purchase of investment securities
Proceeds from sales of shares of subsidiaries and associates

7(Thousands of yen)

Cash flows from financing activities
Decrease in short-term loans payable

Six months ended

Six months ended

September 30, 2015

September 30, 2016–

(12,000,000)

Proceeds from long-term loans payable
Proceeds from issuance of subscription rights to shares––

12,012,000
1,236

Proceeds from issuance of shares resulting from exercise ofsubscription rights to shares–4,089(281,068)(286,688)

Cash dividends paid
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Other, net(4,692)(3,311)(13,007)–

Net cash provided by (used in) financing activities(298,768)(272,673)

Effect of exchange rate change on cash and cash equivalents(51,168)(76,591)

Net increase (decrease) in cash and cash equivalents

956,565

2,960,346

Cash and cash equivalents at beginning of period

2,694,008

5,147,343

Cash and cash equivalents at end of period

3,650,573

8,107,690

8