Consolidated Summary Report of Operating Resultsfor Fiscal 2018 (Year ended December 2018) [Japan GAAP]
February 6, 2019
Company name:

Future Corporation

Shares listed on:First Section of Tokyo Stock Exchange

Security code number:

4722

Website:http://www.future.co.jp/hd

Representative:

Yasufumi Kanemaru, Chairman and President

Contact:

Yoshihiko Nakajima, Executive Officer

TEL:+81-3-5740-5724

Scheduled date of annual generalshareholders’ meeting:March 26, 2019

Scheduled date for filing the securities
report:March 27, 2019

Scheduled date for distribution of dividend
payments:

March 27, 2019

Creation of supplemental material on financial results:

Yes • No

Holding of financial results briefing:Yes • No (For institutional investors and analysts)(Amount rounded off to million yen)

1.
Consolidated Results for Fiscal 2018 (January 1, 2018 to December 31, 2018)(1) Consolidated operating results(Percentages are year-on-year changes)
Net sales

Operating income

Million yen

Fiscal 2018
Fiscal 2017
(Note) Comprehensive income%

Profit attributable to owners of parent

Million yen%

40,21810.9
5,824
36,265
7.8
4,458
Fiscal 2018: 5,284 million yen (-32.8%)
Profit per share

Million yen

%

30.6
4,094
22.4
3,733
Fiscal 2017: 7,865 million yen (242.1%)

Return on equity

9.7
69.1

Operating income ratio

Yen%

Fiscal 2018
91.60
Fiscal 2017
83.52
(Reference) Equity in (earnings) losses of affiliates Fiscal 2018: 67 million yen

%

15.7
18.1
Fiscal 2017: 84 million yen

14.5
12.3

(2) Consolidated financial position
Total assets

Net assets

Million yen

Fiscal 2018
Fiscal 2017
(Reference) Shareholders’ equity

Shareholders’ equity ratio

Million yen

37,43532,522
Fiscal 2018: 28,008 million yen

Net assets per share%

Yen

28,10874.8
24,488
73.8
Fiscal 2017: 24,000 million yen

626.53536.87(3) Consolidated cash flow position

Fiscal 2018
Fiscal 20172.

Net cash provided by(used in) operating
activities
Million yen
7,965
2,459

Net cash provided by(used in) investing
activities
Million yen(1,199)(3,537)

Net cash provided by(used in) financing
activities
Million yen(2,333)(1,209)Cash and cash equivalents at theend of the period
Million yen
13,908
9,478

Dividends
End of the
firstquarter
dividend
Yen

Dividends per share (yen)End of the End of thesecondthird
Year-endquarterquarter
dividend
dividend
dividend
Yen

Yen

Yen

Total
Yen

Annualdividends(Total)Million yen

Dividend
payout ratio(consolidated)

Ratio ofdividends to
net assets(consolidated)%%

Fiscal 2017
13.00
13.00
26.00
1,162
31.1
5.6
–
–
Fiscal 2018
15.00
17.00
32.00
1,430
34.9
5.5
–
–
Fiscal 2019 (Forecast)
18.00
21.00
39.00
40.0
–
–
(Note) The year-end dividend of 21 yen for Fiscal 2019 comprises an ordinary dividend of 18 yen and a dividend of 3 yen to commemorate
the 30th anniversary of the Company’s foundation.

3.

Projected Consolidated Results for Fiscal 2019 (January 1, 2019 to December 31, 2019)
Net salesFirst six months(accumulated total)
Full year(Percentages are year-on-year changes)
Profit attributable to owners
Profit per shareof parent

Operating income

Million yen%

Million yen%

Million yen%

Yen

20,88043,500

9.7
8.2

2,920
6,400

11.8
9.9

2,037
4,355

(0.4)
6.4

45.47
97.42

* Notes(1) Changes in significant subsidiaries during the period under review (changes in specified subsidiaries that involved
changes in the scope of consolidation): Yes • No
New: 1 company (company name) dit Co., Ltd.
Exclusion: - companies (company names)(2) Change in accounting policies or estimates and retrospective restatements
1)
Change in accounting policies in accordance with revision of accounting standards: No
2)
Change in accounting policies other than item 1) above: No
3)
Change in accounting estimates: No
4)Retrospective restatements: No(3) Number of outstanding shares (common stock)
1)
2)
3)

Total outstanding shares as of the end of the period(including treasury shares)
Total treasury shares as of the end of the period
Average number of outstanding stocks during theperiod under review

Fiscal 2018
Fiscal 2018
Fiscal 2018

47,664,000
shares2,959,049
shares44,705,037
shares47,664,000
shares2,958,907
shares44,705,125
sharesFiscal 2017
Fiscal 2017
Fiscal 2017

(Reference) Overview of non-consolidated results
Non-consolidated Results for Fiscal 2018 (January 1, 2018 to December 31, 2018)(1) Non-consolidated operating results
Net sales
Fiscal 2018
Fiscal 2017

(Percentages are year-on-year changes)
Operating income
ProfitOperating revenue

Million yen%

Million yen%

Million yen%

Million yen

%

2,074
43

4,700.9(99.1)

4,106
2,943

39.5
286.8

4,170
2,010

107.5
47.9

3,070
2,177

41.0
1,106.1

Profit per share
Yen
68.69
48.71

Fiscal 2018
Fiscal 2017

(2) Non-consolidated financial position
Total assets
Million yen

Fiscal 2018
Fiscal 2017
(Reference) Shareholders’ equity**

Net assets
Million yen

Shareholders’ equity ratio

Net assets per share%

Yen

27,07522,88084.5
23,932
19,867
83.0
Fiscal 2018: 22,880 million yen Fiscal 2017: 19,867 million yen

511.82444.41This financial results report is outside of the scope of an audit procedure by the Certified Public Accountant or Audit firm.
Points to note about the proper use of projections, and other noteworthy events
The earnings forecasts and other information concerning the future contained in these materials are based on information currently
obtained by the Company and on certain premises the Company judges to be rational. The Company does not intend to guarantee theirrealization. Actual results may differ significantly from forecasts due to various uncertain factors.

 Contents
1.

2.
3.
4.

Overview of Operating Results and Other ......................................................................................................................... 2(1) Overview of operating results for fiscal 2018 ........................................................................................................... 2(2) Overview of financial position for fiscal 2018 ......................................................................................................... 4(3) Overview of cash flows for fiscal 2018 .................................................................................................................... 4(4) Future outlook .......................................................................................................................................................... 5(5) Dividend policy and dividends for the current and next year ................................................................................... 6
The Future Group............................................................................................................................................................... 7
Basic Approach to Selection of Accounting Standards ...................................................................................................... 8
Consolidated Financial Statements and Major Notes ......................................................................................................... 9(1) Consolidated balance sheets ..................................................................................................................................... 9(2) Consolidated statements of income and comprehensive income ............................................................................ 11(3) Consolidated statements of changes in net assets ................................................................................................... 13(4) Consolidated statements of cash flows ................................................................................................................... 15(5) Notes to consolidated financial statements ............................................................................................................. 17(Notes regarding the premise of surviving company) ...................................................................................................... 17(Segment information) ..................................................................................................................................................... 17(Per share data) ................................................................................................................................................................ 19(Significant subsequent events)........................................................................................................................................ 19

5.

Other ................................................................................................................................................................................ 19

-1-

1.

Overview of Operating Results and Other(1) Overview of operating results for fiscal 2018
(Overview of fiscal year under review)
The Group’s consolidated earnings results for fiscal 2018 (from January 1, 2018 to December 31, 2018)
are as follows.
Net sales¥40,218 million (up 10.9% year-on-year)
Operating income¥5,824 million (up 30.6% year-on-year)
Profit attributable to owners of parent¥4,094 million (up 9.7% year-on-year)
Under the management policy aiming to design both management and IT, the Future Group has createdan ideal business vision using real-time architecture, and conducted business operations featuring an
improvement of customers’ abilities to handle changes and the enhancement of future value. Morerecently, the Future Group has focused on using AI technologies in business fields that can rapidly enjoy
the relevant effects.
As this policy was well received by not only existing customers but new customers, the Future Group wasable to acquire many projects and its affiliates in the IT Consulting & Service Business increased theirsales and profits significantly during the fiscal year under review. The Business Innovation Business has
also increased sales and substantially reduced their operating losses. As a result, the Future Group
recorded its highest-ever net sales, operating income and profit attributable to owners of parent on aconsolidated basis.
Details of the performance of each segment are as follows.
1. IT Consulting & Service BusinessAs a partner of its new large corporate customers that are facing increasingly fierce competition fromInternet companies, Future Architect, Inc. (including Future Corporation’s Technology Division)increased the number of its next-generation system development projects to realize full-scale digitalstrategies. As a result, its sales increased in a wide range of industries, including retail sales, apparel
manufacturing and news media. In addition, as more and more regional banks (new customers)
considered implementing the Future Group’s business-support and lending-support system“FutureBANK,” project sales to leading Internet-based securities firms increased. The number of projects
using cutting-edge technologies for customers’ operations, such as use of AI technologies for demand
projection, loan application examination, and reading of characters handwritten on slips, also increased.
Future Inspace, Inc. increased both its sales and operating income year-on-year by providing more
maintenance and operation services for projects created by Future Architect, Inc. and acquiring new
development deals, etc.
YDC Corporation marked growth in both net sales and operating income, which was mainly attributable
to strong project sales to customers in the manufacturing industry, such as solid business performance
related to quality information analysis software “YDC SONAR,” and system development centered on
the manufacturing business under entrusted contracts, and growth in sales from projects carried out
through the Future Group’s technological collaboration.
The business of FutureOne, Inc. showed a year-on-year increase in both net sales and operating income,which was attributable to product improvement related to original software including InfiniOne, a sales
management software package, and the effects of improving the system for making sales tomedium-to-large sized firms.
Micro CAD Co., Ltd. showed significant improvement in operating income, which was attributable to anincrease in sales from its own intellectual property management software and system development for the
manufacturing industry, as well as an improved profitability owing to the strengthened project
management.
As a result, the IT Consulting & Service Business showed an increase in both sales and operating income,posting net sales of ¥32,953 million (up 10.8% year-on-year), and operating income of ¥5,651 million
yen (up 18.3% year-on-year).
2. Business Innovation BusinessTokyo Calendar Inc. focused its efforts on in-house video production by strengthening content strategies
focusing on the lifestyles of men and women aged 30 to 49 in urban areas, and saw a surge in monthly
page views (including video views) from 47 million as of December 31, 2017 to 62 million as ofDecember 31, 2018, with 4 million monthly active users. Sales of Tokyo Calendar Date, a service
provided to users (a service taken over from Matchalarm, Inc., which was absorbed and merged in April-2-

2018), increased owing to increased page views and active users, but Internet advertising sales werelower than anticipated. As a result, while Tokyo Calendar posted a year-on-year increase in sales(including those of Matchalarm, Inc.), its operating income declined year-on-year due to continuously
made upfront investments.
eSPORTS Co., Ltd. showed a year-on-year increase in net sales, with improved operating income mainly
due to absence of inventory write-down posted at the end of FY2017. This was attributable to operational
reforms such as the revision of product lineups and inventory reduction despite worsened profitability
from sales of national brand products and an increased burden from sales promotion expenses andlogistics expenses.
CodeCamp, Inc. marked significant growth of operating income on a year-on-year basis, which is
attributable to an increase in sales of programming education services tailored for corporate purposes
including training for new employees, as well as steadily expanding personal online programming
education services.
LaiBlitz, Inc. showed a year-on-year increase in operating income and achieved a turnaround on afull-year basis. This was attributable to sales from system development projects for the strengthening ofprofessional baseball teams and fan club operations.
As a result, the Business Innovation Business showed a significant year-on-year increase in operating
income, posting net sales of ¥7,357 million (up 8.6% year-on-year) and an operating loss of ¥146 million(against a loss of ¥363 million a year earlier).
(Note) Segment business results stated in the paragraphs above are before adjusting for internal sales andtransfers among segments.

-3-(2) Overview of financial position for fiscal 2018
Assets, liabilities and net assets
The following are the status of assets, liabilities and net assets as of the end of fiscal year underreview.
Assets¥37,435 million (up 15.1% year-on-year)
Liabilities¥9,326 million (up 16.1% year-on-year)
Net assets¥28,108 million (up 14.8% year-on-year)
The following is the analysis of financial position for the fiscal year under review.
1) Assets
Current assets were ¥22,911 million on a consolidated basis at the end of the fiscal year underreview, up ¥3,693 million from the preceding year, and non-current assets amounted to ¥14,523
million, up ¥1,219 million, with total assets standing at ¥37,435 million, up ¥4,912 million. The
main underlying factors were increases of ¥4,505 million in cash and deposits due primarily toincreased profit, ¥1,536 million in investment securities due to higher share prices, and ¥350 million
in software, with a decrease of ¥904 million in customer-related assets and goodwill.
2) Liabilities
Current liabilities were ¥6,148 million at the end of the fiscal year under review, up ¥590 million
from the preceding year, and noncurrent liabilities were ¥3,178 million, up ¥702 million, whichbrought total liabilities to ¥9,326 million, up ¥1,293 million. The main factors included increases of¥326 million in accounts payable, ¥605 million in income taxes payable, and ¥380 million indeferred tax liabilities, despite a decrease of ¥615 million in long-term loans payable (including thecurrent portion).
3) Net assets
Net assets were ¥28,108 million at the end of the fiscal year under review, up ¥3,619 million fromthe preceding year. The main factors included an increase of ¥2,843 million in retained earnings and¥1,169 million in valuation difference on available-for-sale securities.
(3) Overview of cash flows for fiscal 2018
The following is the analysis of the Group’s consolidated cash flows for the fiscal year under review.
1) Net cash provided by (used in) operating activities
Net cash from operating activities was an inflow of ¥7,965 million (compared to an inflow of ¥2,459
million in the previous fiscal year), chiefly due to the posting of profit before income taxes of¥6,181 million, an inflow of ¥1,321 million due to a decrease in other assets and an inflow of ¥679
million due to litigation-related proceeds/payments despite payment of income taxes paid of ¥1,507
million.
2) Net cash provided by (used in) investing activities
Net cash from investing activities was an outflow of ¥1,199 million (compared to an outflow of¥3,537 million in the previous fiscal year), chiefly due to the posting of an outflow caused bypurchase of property, plant and equipment of ¥130 million, purchase of intangible assets of ¥901
million, and payments for lease and guarantee deposits of ¥217 million.
3) Net cash provided by (used in) financing activities
Net cash from financing activities saw an outflow of ¥2,333 million (compared to an outflow of¥1,209 million in the previous fiscal year), mainly reflecting the outflow of ¥1,050 million for the
repayment of long-term loans payable and ¥1,250 million for the payment of cash dividends.
4) Cash and cash equivalents at end of the period
Cash and cash equivalents outstanding at the end of the fiscal year under review were ¥13,908
million, with an increase of ¥4,430 million in cash and cash equivalents resulting from operating,investing and financing activities.

-4-(4) Future outlook
The Group’s earnings forecast for the fiscal year ending December 2019 is as follows.

Net sales
Operating income
Profit attributable to owners of parent¥43,500 million (up 8.2% year-on-year)¥6,400 million (up 9.9% year-on-year)¥4,355 million (up 6.4% year-on-year)

Noteworthy events in each business segment for the following fiscal year are as follows.
1. IT Consulting & Service Business
The Future Group has paid attention to AI’s impact on businesses and societies and updated its
management policy by changing it from “Designing Management and IT” to “Designing Management,
IT and AI,” aiming to enhance the future value of customers and societies.
To this end, the Group continues to offer its original high value-added services based on the following
technological strategies:- Providing consistent services from overall design to detailed design, development, maintenance, andoperation by using cutting-edge IT and in-house manufactured components (Future Component), whichenable data processing in real time, while considering business innovation, operational reforms, andsystem improvements as a three-part initiative- Scientifically analyzing legacy IT systems, which have been made into black boxes, and renovating
customers’ complex and multi-layered core systems by using a unique reconstruction method into thelatest open systems (Future Formula)- Designing and developing high-quality systems within a short time by using unique project monitoringand management methods (FutureNavi and Futurefraqta)- Aiming to achieve results that are capable of bringing substantial changes to customer services andoperations, by focusing on the research and development of cutting-edge technologies such as AI and IoT,
as well as on the relevant education, and applying the same to actual projects rather than simply
conducting experiments and research activities
Future Architect, Inc. has participated in newly acquired customers’ innovation projects fornext-generation core systems and the construction of regional banks’ business-support andlending-support systems. Going forward, it will strive to ensure completion of these projects and conduct
activities together with customers as a long-term strategic partner in terms of both management and IT.
In addition, it will actively hire personnel and provide them with education and training. Regarding
education in particular, it will use the Future Group’s original AI training program to educate all
employees, including not only consultants but staff personnel, with the aim of enabling them to actuallyuse AI technologies, such as machine learning and deep learning, for customers and corporate activities.
YDC Corporation will position itself more firmly as a company with strength in IT consulting for
manufacturers, and more actively provide services including solutions that can meet manufacturers’
needs, such as inspection systems using AI or other technologies and strengthened traceability, andoperational reform consulting in the development and design fields. As YDC Corporation has become awholly owned subsidiary of Future Corporation, it will also aim to increase intra-group synergy by suchmeans as improving development efficiency using the Future Group’s technologies and providing YDC
Corporation’s original solution services to customers of Future Architect, Inc.
FutureOne will use the Future Group’s network and expand its collaboration with external sales partners,
aiming to receive more orders for original software packages from larger companies as well as
medium-sized companies and strengthen its structure to enable it to conduct development more
efficiently with respect to orders already received.
2. Business Innovation BusinessTokyo Calendar will limit its target customers to highly ambitious men and women aged 30 to 49 andcreate a unique world view, aiming to continuously increase Website page views and magazine sales andactively provide, in addition to restaurant reservation and “Tokyo Calendar date” services, new fee-based
services in line with users’ lifestyles. Furthermore, the company aims to build a marketing platform byleveraging the Future Group’s IT technologies based on customers’ behavioral data that will be
accumulated in the future.
CodeCamp will add new courses, for example, for data scientists and update courses that may directly
affect career changes, such as job changes and side jobs, aiming to actively enhance courses forindividuals, as well as increase sales related to corporate IT training by strengthening sales activities anddeveloping new training courses. The company will also strive to expand its revenue base byimplementing franchise operations relating to content for kids and classroom management know-how.
-5-

eSPORTS will aim to improve profit by further promoting operational reforms, such as increasing the
speed of private brand development, making its e-commerce website more attractive, and holding anappropriate level of inventory, so that it can deal with price competition in the e-commerce industry,fierce competition in granting reward points, and rising logistics expenses. Using the Future Group’s
technologies, eSPORTS will also establish a system to improve the efficiency of back office operations
and strengthen the scientific analysis of prices and well-selling products.
(5) Dividend policy and dividends for the current and next year
The Company determines its dividend by comprehensively taking into account the state of its accounting
period profit and loss, cash flows and treasury stock purchasing while placing shareholder return as its
priority management issue and securing a proper level of internal reserves for the organization to continue
growing in a sustainable manner.
The Company plans to apply a dividend payout ratio standard of at least 35% of consolidated earnings.
Under the above-mentioned policy, we plan to pay a year-end dividend of surplus for the fiscal year
ended December 31, 2018 of ¥17.00 per share. The full fiscal year dividend comprising the year-end
dividend and the previously-paid interim dividend is expected to be ¥32.00 per share (consolidated
dividend payout ratio of 34.9%).
Moreover, under the above-mentioned policy, we plan to pay an ordinary dividend of ¥36.00 per share as
a dividend from surplus for the next fiscal year. We also plan to pay a commemorative dividend of ¥3.00
per share as we celebrate the 30th anniversary of our foundation in November 2019. The annual dividend
for the next fiscal year, including ordinary dividends, is expected to be ¥39.00 (interim dividend of¥18.00 and year-end dividend of ¥21.00).

-6-

2.

The Future GroupThe Group (the Company and its related companies) has introduced a holding company structure, andconsists of 20 consolidated subsidiaries and six equity-method affiliates as of December 31, 2018.
The Company, as a holding company, establishes the Group’s growth strategy, monitors management of
the Group companies, and provides specialty service to these companies. Details of the business segmentsof the Group and how major related companies in charge are positioned in the relevant segment are as
follows.
(IT Consulting & Service Business)
In this business, the Group helps clients solve problems, by sharing management issues with them from amanagerial perspective, understanding the essence of the clients’ businesses and establishing information
systems for them using advanced IT.
Company nameBusiness activities

Future Architect, Inc. (subsidiary)

Provision of IT consulting services from an objective andindependent standpoint by using leading-edge information
technology

Future Inspace, Inc. (subsidiary)

Additional development as well as maintenance and operation
services for projects primarily developed by Future Architect, Inc.

YDC Corporation (subsidiary)

Provision of IT consulting services, including a solution for
integrating and analyzing quality information, mainly to customers in
the manufacturing business

FutureOne, Inc. (subsidiary)

Development, sales and maintenance of mission-critical packaged
software for sales management, production management, accounting
and other processes as well as provision of cloud-based services

Micro CAD Co., Ltd. (subsidiary)

Development, sales and maintenance of and support for intellectual
property management software packages, and consigned
development of design control systems for manufacturers

dit Co., Ltd. (subsidiary)

Security consulting and sales of products for forensic services
network operations and security

Logizard Co., Ltd. (affiliate)

Development and sales of and support for cloud-based logistics andinventories management software (WMS)(Business Innovation Business)
In this business, the Group provides original services using IT and creates business innovations.
Company nameBusiness activitieseSPORTS Co., Ltd. (subsidiary)

Sales of sports, outdoor and fitness gear on the Internet

Tokyo Calendar Inc. (subsidiary)

Publication of the magazine “Tokyo Calendar,” provision of
information using websites and smartphone applications, andservices including reservations for tables at restaurants

CodeCamp Inc. (subsidiary)

Online and offline educational service including operation of theonline programming school “CodeCamp”

LaiBlitz, Inc. (subsidiary)

Development of sports and entertainment related software andoperation of online services

TrexEdge, Inc. (subsidiary)

Provision of platform services using leading-edge IT such as AI andIoT

Among affiliated companies engaged in businesses that are not included in the two businesses mentioned above,
such as investing in, as well as holding and managing securities, the main companies are as follows:
Major affiliated company
Future Investment Corp. (subsidiary)

-7-

3.

Basic Approach to Selection of Accounting Standards
Taking into consideration the comparability of consolidated financial statements among enterprises, theGroup prepares consolidated financial statements under Japanese GAAP.
The Company intends to apply International Financial Reporting Standards (IFRS) appropriately inconsideration of circumstances inside and outside of Japan.

-8-

4.

Consolidated Financial Statements and Major Notes(1) Consolidated balance sheets(in thousands of yen)Previous consolidated
fiscal year
(December 31, 2017)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Merchandise and finished goods
Work in process
Deferred tax assets
Accounts receivable - other
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
Other
Accumulated depreciation
Other, net
Total property, plant and equipment

Consolidated fiscal year
under review(December 31, 2018)

9,478,336
5,887,600
696,273
238,904
320,085
1,521,867
1,078,867(3,263)

13,984,071
6,234,600
847,865
168,574
279,326
182,123
1,218,228(3,007)

19,218,671

22,911,784

1,279,666(801,002)

1,375,460(882,265)

478,663493,1945,430
2,298,708(1,797,260)

855
2,505,394(2,024,762)

501,448

480,631985,542974,681

Intangible assets
Goodwill
Software
Customer-related assets
Other

656,654
1,356,891
1,120,000
17,75440,516
1,707,624
832,000
3,316

Total intangible assets

3,151,300

2,583,458

Investments and other assets
Investment securities
Lease and guarantee deposits
Other
Allowance for doubtful accounts

7,720,274
1,208,396
262,602(24,547)

9,257,039
1,439,195
290,373(21,441)

Total investments and other assets

9,166,727

10,965,167

13,303,570

14,523,307

32,522,241

37,435,091

Total non-current assets
Total assets-9-

(in thousands of yen)Previous consolidated
fiscal year
(December 31, 2017)
Liabilities
Current liabilities
Accounts payable – trade
Current portion of long-term loans payable
Current portion of bonds
Accounts payable – other
Income taxes payable
Provision for bonuses
Provision for quality assurance
Provision for loss on projects
Other

Consolidated fiscal year
under review(December 31, 2018)959,274
1,000,000–
1,090,085
487,599
195,484
19,994
7,234
1,798,795

1,285,569
161,449
52,0001,129,613
1,093,327
210,913
11,182
26,0582,178,516

Total current liabilities

5,558,468

6,148,629

Non-current liabilities
Bonds payable
Long-term loans payable
Asset retirement obligations
Deferred tax liabilities
Other

–
–
353,495
2,047,555
74,13692,000222,674
354,965
2,427,568
80,831

Total non-current liabilities

2,475,187

3,178,039

Total liabilities

8,033,655

9,326,669

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares

1,421,815
2,507,763
17,396,436(1,499,538)

1,421,815
2,507,763
20,239,578(1,499,778)

19,826,476

22,669,379

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment

4,269,144
738(95,460)

5,438,242(1,220)(97,582)

Total accumulated other comprehensive income

4,174,421

5,339,439

487,687

99,602

Total shareholders’ equity

Non-controlling interests
Total net assets
Total liabilities and net assets- 10 -

24,488,586

28,108,422

32,522,241

37,435,091

(2) Consolidated statements of income and comprehensive income(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2017
to December 31, 2017)

Consolidated fiscal year
under review(from January 1, 2018
to December 31, 2018)

Net sales
Cost of sales

36,265,778
21,525,524

40,218,646
23,643,696

Gross profit

14,740,253

16,574,949

Selling, general and administrative expenses
Directors’ compensations
Salaries and bonuses
Other salaries
Rents
Training expenses
Research and development expenses
Depreciation
Recruiting expenses
Amortization of goodwill
Other

430,081
3,711,390
241,990
1,028,701
382,429
339,508
358,113364,367
373,535
3,051,929

426,201
4,006,593
239,763
988,057
384,842
355,519378,269
369,773
219,819
3,381,699

10,282,048

10,750,539

4,458,205

5,824,410

1,071
62,184
147,396536
160,641–

84,527

67,824

10,234

7,207

305,414236,209

7,099
–

7,218
1,063

7,099

8,282

4,756,519

6,052,337–––
173,905

809,510
100,434
19,482–

173,905

929,427–––
93,278315,274
130,000
354,740–

93,278800,015

4,837,146

6,181,749

Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Share of profit of entities accounted for using equity
methodOther
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on litigation
Gain on change in equity
Gain on step acquisitions
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on retirement of intangible assets
Litigation expenses
Amortization of goodwill
Loss on valuation of investment securities
Total extraordinary losses
Income before income taxes and minority interests- 11 -

(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2017
to December 31, 2017)

Consolidated fiscal year
under review(from January 1, 2018
to December 31, 2018)

Income taxes - current
Income taxes - deferred

1,203,247(126,827)

2,141,042(78,862)

Total income taxes

1,076,419

2,062,179

Profit3,760,727

4,119,569

3,733,618
27,1094,094,884
24,6854,225,112
603(101,146)

1,169,343(2,331)(1,749)(19,946)(420)

4,104,622

1,164,840

7,865,350

5,284,410

7,838,147

5,259,814

27,203

24,596(Profit attributable to)Profit attributable to owners of parent
Profit attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests- 12 -

(3) Consolidated statements of changes in net assets
Previous consolidated fiscal year (from January 1, 2017 to December 31, 2017)(in thousands of yen)
Shareholders’ equity

Balance at the beginning of the period

Capital stock

Capital surplus

1,421,815

2,507,763

Retainedearnings
14,802,799

Treasury shares

Total shareholders’equity(1,499,494)

17,232,883

Changes of items during the period
Dividends from surplus(1,139,980)(1,139,980)

Profit attributable to owners ofparent

3,733,618

3,733,618

Purchase of treasury shares

(43)

(43)

Net changes of items other thanshareholders' equity
Total changes of items during theperiod

––2,593,637(43)

2,593,593

Balance at the end of the period

1,421,815

2,507,763

17,396,436(1,499,538)

19,826,476

Accumulated other comprehensive income
Total
Valuation
Deferred gains Foreign currency accumulateddifference onotheror losses ontranslation
available-for-salecomprehensive
hedgesadjustment
securities
incomeBalance at the beginning of the period

63,691402

5,798

69,892

Noncontrollinginterests

28,466

Total net
assets17,331,242

Changes of items during the period
Dividends from surplus(1,139,980)

Profit attributable to owners ofparent

3,733,618

Purchase of treasury shares
Net changes of items other thanshareholders' equity(43)
4,205,452

335(101,258)

4,104,528

459,221

4,563,750

Total changes of items during theperiod4,205,452

335(101,258)

4,104,528

459,221

7,157,344

Balance at the end of the period

4,269,144

738(95,460)

4,174,421

487,687

24,488,586- 13 -

Consolidated fiscal year under review (from January 1, 2018 to December 31, 2018)(in thousands of yen)
Shareholders’ equity

Balance at the beginning of the period

Capital stock

Capital surplus

1,421,815

2,507,763

Retainedearnings

TreasurysharesTotal shareholders’equity17,396,436(1,499,538)

19,826,476

Changes of items during the period
Dividends from surplus(1,251,741)(1,251,741)

Profit attributable to owners ofparent

4,094,884

4,094,884

Purchase of treasury shares

(239)

(239)

Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at the end of the period––

2,843,142(239)

2,842,902

1,421,815

2,507,763

20,239,578(1,499,778)

22,669,379

Accumulated other comprehensive income

Balance at the beginning of the period

Valuationdifference on
available-forsale securities

Deferred gains
or losses onhedges4,269,144

738

Foreigncurrencytranslation
adjustment(95,460)

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

4,174,421

487,687

Total net
assets

24,488,586

Changes of items during the period
Dividends from surplus(1,251,741)

Profit attributable to owners ofparent

4,094,884

Purchase of treasury shares
Net changes of items other thanshareholders' equity(239)
1,169,097(1,958)(2,121)

1,165,017(388,084)

776,932

Total changes of items during theperiod1,169,097(1,958)(2,121)

1,165,017(388,084)

3,619,835

Balance at the end of the period

5,438,242(1,220)(97,582)5,339,439

99,602

28,108,422- 14 -

(4) Consolidated statements of cash flows(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2017
to December 31, 2017)
Net cash provided by (used in) operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for quality assurance
Increase (decrease) in provision for loss on projects
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)Share of (profit) loss of entities accounted for using
equity method
Loss (gain) on change in equity
Loss (gain) on step acquisitions
Loss (gain) on valuation of investment securities
Loss (gain) on sales of investment securities
Loss on retirement of intangible assets
Gain on litigation
Litigation expenses
Decrease (increase) in notes and accounts receivable –trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable –trade
Increase (decrease) in accounts payable – other
Decrease (increase) in other assets
Increase (decrease) in other liabilities

Consolidated fiscal year
under review(from January 1, 2018
to December 31, 2018)

4,837,146
811,282
373,535(51,284)(1,834)(70,599)
5,371(63,255)
7,099(147,396)

6,181,749
773,250
574,560(3,697)
14,007(5,212)
15,224(161,177)
7,218
1,063

(84,527)(67,824)––
93,278(173,905)–––(100,434)(19,482)––
315,274(809,510)
130,000(930,975)(24,244)

199,778

22,892(153,715)

238,196

260,842(318,920)(474,966)(23,463)
1,321,152
260,015

Subtotal

4,116,954

8,639,559

Interest and dividend income received
Interest expenses paid
Income taxes paid
Litigation-related proceeds/payments

83,362(7,099)(1,733,930)–

161,161(7,480)(1,507,066)
679,510

Net cash provided by (used in) operating activities

2,459,286

7,965,683- 15 -

(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2017
to December 31, 2017)
Net cash provided by (used in) investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for asset retirement obligations
Purchase of shares of subsidiaries resulting in change
in scope of consolidation
Proceeds from purchase of shares of subsidiaries
resulting in change in scope of consolidation
Purchase of shares of subsidiaries
Proceeds from liquidation of subsidiaries andassociates
Purchase of shares of subsidiaries and associates
Purchase of investment securities
Proceeds from sales of investment securities
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee
deposits
Other

Consolidated fiscal year
under review(from January 1, 2018
to December 31, 2018)(695,590)(1,094,205)(37,540)(130,572)(901,337)(11,536)(1,681,201)––

519,249–(560,413)–

48,922(12,000)(299,900)
193,756(23,318)–––(217,255)

107,000

50,696

5,501

3,029

(3,537,497)(1,199,217)(20,500)––(43)(1,139,635)(49,210)(1,050,460)(7,715)(5,000)(239)(1,250,905)(19,000)(1,209,389)(2,333,321)

4,121(2,639)Net increase (decrease) in cash and cash equivalents(2,283,478)

4,430,504

Cash and cash equivalents at beginning of the period

11,761,815

9,478,336

Cash and cash equivalents at end of the period

9,478,336

13,908,840

Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Repayments of long-term loans payable
Repayments of finance lease obligations
Redemption of bonds
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents- 16 -

(5) Notes to consolidated financial statements(Notes regarding the premise of surviving company)
Not applicable.
(Segment information)
Segment information
1. Overview of reportable segments
The reportable segments of the Group are constituent units of the Company for which separate
financial information can be obtained, and the Board of Directors examines such information
on a regular basis to determine the allocation of management resources and evaluate businessperformance.
The Group defines the classification of business segments by comprehensively taking into
account main services, solutions, customers and markets, and has two reportable segments: theIT Consulting & Service Business and Business Innovation Business.
The business operations of the two reportable segments are as follows:2.

Reportable segments

Business operations

IT Consulting & Service BusinessIn this business, the Group helps clients solve problems, by sharing
management issues with them from a managerial perspective,
understanding the essence of the clients’ businesses andestablishing information systems for them using advanced IT.

Business Innovation BusinessIn this business, the Group provides original services using IT and
creates business innovations.

Methods of calculating net sales, income or loss, assets, liabilities, and other items byreportable segment
The accounting method applied to the above-mentioned business segments is a method in
accordance with the accounting policy applied to the preparation of the consolidated financial
statements.
Income of reportable segments is based on operating income.
Inter-segment sales and transfers are based on market prices.

- 17 -

3.

Information on amounts of net sales, profit or loss, assets, and other items by reportablesegment
Fiscal 2017 (from January 1, 2017 to December 31, 2017)(in thousands of yen)
Reportable segments
BusinessInnovation
Business

IT Consulting &Service Business

Total

Other
(Note 1)

Total

Amount stated infinancialstatements(Note 3)Adjustment(Note 2)

Net sales
Net sales to outsideclients

29,520,022

6,745,755

36,265,778–

36,265,778–

36,265,778Inter-segment sales ortransfer

219,526

29,066

248,593–248,593(248,593)–
36,265,778

Total

29,739,549

6,774,822

36,514,371–

36,514,371(248,593)

Segment profit (loss)

4,777,380(363,491)

4,413,889(35,965)

4,377,924

80,2804,458,205

Segment assets

18,735,030

2,546,570

21,281,600

4,354,373

25,635,974

6,886,267

32,522,241

Depreciation

782,380

10,660793,040–

793,040

18,241

811,282

Amortization of
goodwill

129,682

243,852

373,535–

373,535–

373,535

3,167,664

21,0903,188,755–

3,188,755

340,8143,529,569

Other items

Increase in property,
plant and equipment andintangible assets(Notes) 1.
2.
3.

“Other,” a segment not included in the reportable segments, includes securities investment, holding, and management activities.
Adjustments to segment profit (loss) and segment assets represent the amount of inter-segment transactions eliminated andincome, expenses and assets of the holding company.
Segment profit (loss) is adjusted with operating income in consolidated financial statements.

Fiscal 2018 (from January 1, 2018 to December 31, 2018)(in thousands of yen)
Reportable segments
IT Consulting &Service BusinessBusinessInnovation
Business

Other(Note 1)

Total

Total

Amount stated infinancialstatements(Note 3)Adjustment(Note 2)

Net sales
Net sales to outsideclients
Inter-segment sales ortransfer

32,883,395

7,335,250

4,0218,646–

40,218,646–

40,218,646

69,974

21,976

91,951–

91,951(91,951)–
40,218,646

Total

32,953,370

7,357,227

40,310,597–

40,310,597(91,951)

Segment profit (loss)

5,651,265(146.242)

5,505.022(597)

5,504,424

319,9855,824,410

Segment assets

20,770,587

2,453,354

23,223,942

4,694,369

27,918,311

9,569,734

37,488,046

Depreciation

731,824

14,858746,682–746,682

26,567773,250

Amortization of
goodwill

29,674

190,145219,819–

219,819–

219,819

1,073,019

63,146

1,136,165–

1,136,165

73,923

1,210,088

Other items

Increase in property,
plant and equipment
and intangible assets(Notes) 1.
2.
3.
4.

“Other,” a segment not included in the reportable segments, includes securities investment, holding, and management activities.
Adjustments to segment profit (loss) and segment assets represent the amount of inter-segment transactions eliminated andincome, expenses and assets of the holding company.
Segment profit (loss) is adjusted with operating income in consolidated financial statements.
Amortization of goodwill includes an extraordinary loss of ¥354,740,000, in addition to the above amounts.

- 18 -

(Per share data)
Fiscal 2017(from January 1, 2017 to
December 31, 2017)

Fiscal 2018(from January 1, 2018 to
December 31, 2018)

Net asset value per share¥536.87¥626.53

Profit per share¥83.52¥91.60(Notes) 1. Diluted profit per share is not recorded because there are no potential shares.
2. Profit per share and diluted profit per share are calculated based on the following:
Fiscal 2017(from January 1, 2017 to
December 31, 2017)

Fiscal 2018(from January 1, 2018 to
December 31, 2018)

Profit per share
Profit attributable to owners ofparent (thousands of yen)

3,733,618

4,094,884––

Profit attributable to owners ofparent related to common stock(thousands of yen)

3,733,618

4,094,884

Average outstanding shares ofcommon stock during the period(shares)

44,705,125

44,705,037

Amount not available for commonshareholders to common shares(thousands of yen)

(Significant subsequent events)
Not applicable.
5.

Other
Orders received(in thousands of yen)
Fiscal 2017(from January 1, 2017 to
December 31, 2017)
Orders received

IT Consulting & Service BusinessBusiness Innovation Business
Total

Order backlog

29,209,807

9,621,750

Fiscal 2018(from January 1, 2018 to
December 31, 2018)
Orders received
35,128,290

Order backlog
11,898,801

1,188,737

235,529

1,682,538

322,205

30,398,544

9,857,280

36,810,829

12,221,007- 19 -