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 Nine Months Ended December 31, 2016
(Based on Japanese GAAP)
January 30, 2017
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
February 13, 2017

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 nine months ended December 31, 2016 (from April 1, 2016 to December 31, 2016)(1) Consolidated operating results (cumulative)
Net sales
Nine months ended December 31, 2016
Nine months ended December 31, 2015

Millions of yen
16,713
12,842

Percentages indicate year-on-year changes
Profit attributable toOperating income
Ordinary income
owners of parent% Millions of yen% Millions of yen% Millions of yen
%
30.1
2,332
48.4
3,045
40.3
1,805
31.6
20.4
1,572
16.7
2,170
20.7
1,371
(0.5)

Earnings per share

Diluted earnings per share

Yen
44.18
33.83

Nine months ended December 31, 2016
Nine months ended December 31, 2015

Yen
44.04
33.73

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

Net assets

Millions of yen
39,19541,689Equity ratio

Millions of yen
17,47013,157

%
35.1
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
68.50

1

4. Notes(1) Changes in significant subsidiaries during the nine months ended December 31, 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 December 31, 2016

43,379,400 shares As of March 31, 2016

41,887,200 shares

Number of treasury shares at the end of the period
As of December 31, 2016

113 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)
Nine months ended December 31, 2016

40,878,346 shares Nine months ended December 31, 2015

2

40,556,928 shares

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

As of December 31, 2016

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade

5,291,707
3,982,752

7,988,006
2,745,469

95,83031,18581,090
25,9416,770
1,891,531

42,7642,434,729

Prepaid expenses
Deferred tax assets

685,224
268,219

810,572
251,307

Other
Allowance for doubtful accounts

140,001(217,510)

19,374(147,204)

12,175,712

14,252,052

383,400(151,756)

367,142(178,327)

231,643

188,814515,019(366,414)

535,115(383,741)

Tools, furniture and fixtures, net

148,605

151,373

Machinery, equipment and vehicles
Accumulated depreciation

110,080(61,999)

39,569(16,696)

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

22,872

428,330

363,061

Goodwill
Software

12,874,322
1,335,532

9,886,010
1,461,314

Trademark right
Customer-related assets

10,046,813
3,046,910

8,423,296
2,391,488

Total property, plant and equipment
Intangible assets

Other
Total intangible assets

5050

27,303,627

22,162,159

1,025,966
211,138

1,491,295287,251

516,448
28,578613,006
27,155

1,782,132

2,418,708

29,514,090

24,943,928

41,689,802

39,195,981

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 December 31, 2016

Liabilities
Current liabilities
Accounts payable - trade451,116

211,521

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

19,002,638––
1,201,200

Accounts payable - otherAccrued expenses

3,443,188
232,160

4,207,291
262,887

Income taxes payable
Accrued consumption taxes

947,942
100,331884,202
197,803

1,102,636
45,7181,093,496
30,880

Provision for bonuses
ProvisionForRepayment

373,715
129,785

180,694
115,818

Other

85,266

6,520

25,914,499

8,392,318–
111,938

10,810,800
115,069

2,442,393
63,3052,390,150
17,463

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

13,333,483

28,532,136

21,725,801

Shareholders' equity
Capital stock

304,166

2,152,525

Capital surplus
Retained earnings–
9,145,508

4,150,944
10,667,757

Treasury shares(1,036,485)(173)

Total shareholders' equity

8,413,190

16,971,054

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

9,888
135,593274(3,200,761)

Total accumulated other comprehensive income

145,482(3,200,487)

Subscription rights to shares
Non-controlling interests

80,1084,518,884

100,560
3,599,051

Total net assets

13,157,666

17,470,179

41,689,802

39,195,981

Total liabilities
Net assets

Accumulated other comprehensive income

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)

Net sales
Cost of sales

Nine months ended

Nine months ended

December 31, 2015

December 31, 2016

12,842,667
1,031,735

16,713,361
2,650,807

Gross profit

11,810,932

14,062,553

Selling, general and administrative expenses

10,238,544

11,729,655

Operating income

1,572,388

2,332,898

Share of profit of entities accounted for using equity method
Other605,904
35,655709,069
92,746

Total non-operating income

Non-operating income

641,559

801,815

Non-operating expenses
Foreign exchange losses

19,424–

Interest expenses
Share issuance cost

21,321–37,64429,523

Other

2,668

22,066

Total non-operating expenses

43,414

89,2342,170,534

3,045,480–

56,408–56,408

1,468–

55,201––
20,000–146,523

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

556,669

166,523

2,113,864

2,935,364

736,691

1,036,362

1,377,173

1,899,0025,274

93,137

1,371,898

1,805,864

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

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of entities accounted
for using equity method
Total other comprehensive income
Comprehensive income

Nine months ended

Nine months ended

December 31, 2015

December 31, 2016

1,377,173

1,899,002(1,047)(264,975)(9,475)(4,184,286)

11,599(25,069)(254,422)(4,218,831)

1,122,750(2,319,829)

1,124,001(1,540,105)(1,251)(779,724)

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

Nine months ended

Nine months ended

December 31, 2015

December 31, 2016

2,113,864

2,935,364

Depreciation
Amortization of goodwill

308,136
222,562642,559
480,162

Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities–
55,201

20,000–Loss (gain) on sales of shares of subsidiaries and associates
Loss (gain) on sales and retirement of non-current assets

–
1,468

90,115–

Share of (profit) loss of entities accounted for using equity
method(43,383)(527,007)

Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses(13,344)(157,288)(23,810)(193,020)

Increase (decrease) in repayment for bonuses
Increase (decrease) in net defined benefit liability(24,704)
7,320(13,966)
3,130

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

790,618(240,120)

1,237,282
97,471

Decrease (increase) in accounts receivable - other
Decrease (increase) in prepaid expenses(494,195)
40,022(543,198)(124,738)

Increase (decrease) in advances received
Increase (decrease) in accounts payable - other(9,229)122,014(9,139)781,837

Decrease (increase) in lease and guarantee deposits
Other, net(12,689)(122,387)(135,000)(164,152)

Subtotal

2,543,865

4,553,892

7,260(21,924)

7,915(38,254)

Income taxes paid

(1,121,659)(1,209,664)

Net cash provided by (used in) operating activities

1,407,541

3,313,888

Payments into time deposits
Proceeds from withdrawal of time deposits(65,700)–(996,446)
85,253Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment(55,094)
881(77,117)–

Purchase of intangible assets
Purchase of investment securities(533,823)–(599,906)(33,187)–

391,892(17,907,051)–(37,680)(38,500)

Interest and dividend income received
Interest expenses paid

Cash flows from investing activities

Proceeds from sales of shares of subsidiaries and associates
Purchase of shares of subsidiaries resulting in change in scopeof consolidation
Payments of loans receivable
Other, net
Net cash provided by (used in) investing activities

7

2,470

70,603(18,595,998)(1,197,407)

(Thousands of yen)

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

Nine months ended

Nine months ended

December 31, 2015

December 31, 2016

19,004,038–Decrease in short-term loans payable
Proceeds from long-term loans payable––(19,000,000)
12,012,000

Proceeds from issuance of common shares
Proceeds from issuance of subscription rights to shares––

3,678,706
1,236

Proceeds from sales of treasury shares
Purchase of treasury shares––

3,324,989(117)(281,323)(289,212)(4,692)(3,311)(13,007)–18,705,014(275,708)(55,094)(55,666)

Net increase (decrease) in cash and cash equivalents

1,461,463

1,785,105

Cash and cash equivalents at beginning of period2,694,008

5,147,343

Cash and cash equivalents at end of period

4,155,471

6,932,448

Cash dividends paid
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents8