Consolidated Summary Report of Operating Resultsfor Fiscal 2016 (Year ended December 2016) [Japan GAAP]
February 7, 2017
Company name:

Future Architect, Inc.

Shares listed on:First Section of Tokyo Stock Exchange

Security code number:

4722

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

Representative:

Yasuhumi Kanemaru, Chairman and President

Contact:

Yoshihiko Nakajima, Executive Officer

TEL:+81-3-5740-5724

Scheduled date of annual generalshareholders’ meeting:March 28, 2017

Scheduled date for filing the securities
report:March 29, 2017

Scheduled date for distribution of dividend
payments:

March 29, 2017

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 2016 (January 1, 2016 to December 31, 2016)(1) Consolidated operating results(Percentages are year-on-year changes)

Net sales

Operating income

Million yen%

Million yen%

Fiscal 2016
33,653(4.6)
3,642(25.2)
3,589(25.8)
2,208
Fiscal 2015
35,293
2.5
4,869
12.1
4,836
11.8
2,659
(Note) Comprehensive income
Fiscal 2016: 2,299 million yen (-16.2%)
Fiscal 2015: 2,742 million yen (24.6%)(17.0)
19.8

Profit per share

Million yen

Profit attributable toowners of parent

Ordinary income%

Profit per share (fully
diluted)Yen%

Return on equity

Ratio of ordinary income
to total assets

%

%

%

13.2
15.6
17.3
21.7
Fiscal 2015: 23 million yen

10.8
13.8

Yen

Fiscal 2016
49.40
Fiscal 2015
59.52
(Reference) Equity in (earnings) losses of affiliates

Million yen

49.40
59.50
Fiscal 2016: (30) million yen

Operatingincome ratio(2) Consolidated financial position
Total assets

Net assets

Million yen

Fiscal 2016
Fiscal 2015
(Reference) Shareholders’ equity

Shareholders’ equity ratio

Million yen

23,063
22,828
Fiscal 2016: 17,302 million yen

Net assets per share%

Yen

17,33175.0
16,301
70.6
Fiscal 2015: 16,123 million yen

387.04360.67(3) Consolidated cash flow position

Fiscal 2016
Fiscal 20152.

Net cash provided by(used in) operating
activities
Million yen
3,268
2,878

Net cash provided by(used in) investing
activities
Million yen
(24)
(749)

Net cash provided by(used in) financing
activities
Million yen(1,240)(941)

Cash and cash equivalents at theend of the period
Million yen
11,761
9,757

Dividends
End of the
firstquarter
dividend

Fiscal 2015
Fiscal 2016
Fiscal 2016 (Forecast).

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

Total

Annualdividends(Total)Dividend
payout ratio(consolidated)

Ratio ofdividends to
net assets(consolidated)

Yen

Yen

Yen

Yen

Yen

Million yen

%

%

-

9.50
12.50
12.50

-

13.50
12.50
12.50

23.00
25.00
26.00

1,028
1,117

38.6
50.6
42.5

6.8
6.7

3.

Projected Consolidated Results for Fiscal 2017 (January 1, 2017 to December 31, 2017)
Net salesFirst six months(accumulated total)
Full year

Operating income(Percentages are year-on-year changes)
Profit attributable toProfit per
owners of parent
share

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen%

Yen

17,71036,830

2.8
9.4

1,835
4,500

(5.3)
23.5

1,850
4,520

(2.6)
25.9

1,171
2,735

3.7
23.8

26.19
61.18

* 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) Future Architect, Inc.
Exclusion: 1 company (company names) Uoei Corporation(2) Change in accounting policies or estimates and retrospective restatementsa.
Change in accounting policies in accordance with revision of accounting standards: Yesb.
Change in accounting policies other than item 1) above: No
c.
Change in accounting estimates: Nod.
Retrospective restatements: No(3) Number of outstanding shares (common stock)
a.
b.
c.

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 2016
Fiscal 2016
Fiscal 2016

47,664,000
shares2,958,872
Shares44,705,147
shares47,664,000
shares2,958,800
shares44,689,236
sharesFiscal 2015
Fiscal 2015
Fiscal 2015

(Reference) Overview of non-consolidated results1.

Non-consolidated Results for Fiscal 2016 (January 1, 2016 to December 31, 2016)(1) Non-consolidated operating results
Net sales
Fiscal 2016
Fiscal 2015

(Percentages are year-on-year changes)
Ordinary income
ProfitOperating income

Million yen%

Million yen%

Million yen%

Million yen

%

5,841
19,017(69.3)
(3.6)

1,359
4,365

(68.9)
9.1

1,572
4,658

(66.2)
1.9

180
2,809

(93.6)
24.1

Profit per share
Yen
4.04
62.87

Fiscal 2016
Fiscal 2015

Profit per share (fully
diluted)Yen
62.86(2) Non-consolidated financial position
Total assets
Million yen

Fiscal 2016
Fiscal 2015
(Reference) Shareholders’ equity

Net assets
Million yen

Shareholders’ equity ratio

Net assets per share%

Yen

16,53814,65088.6
19,523
15,63080.1
Fiscal 2016: 14,650 million yen Fiscal 2015: 15,630 million yen

327.71
349.63(Note) The Company shifted to a holding company structure effective April 1, 2016. Therefore,
non-consolidated earnings results for the period ended December 2016 do not coincide with those for theperiod ended December 2015.
*

Indication of audit procedure implementation status
This earnings report is exempt from audit procedures based upon the Financial Instruments and Exchange Act. At the time of thisdocument’s release, audit procedures for the financial statements under the Financial Instruments and Exchange Act had not been
completed.

*

Points to note about the proper use of projections, and other noteworthy events
The earnings forecast and statements 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 their realization.
Actual results may differ from forecasts due to various uncertain factors.

 Contents
1.

2.
3.

4.
5.

Analysis of Operating Results and Financial Condition .................................................................................................... 2(1) Analysis of operating results..................................................................................................................................... 2(2) Analysis of financial condition ................................................................................................................................. 5(3) Dividend policy and dividends for the current and next year ................................................................................... 6
The Future Group............................................................................................................................................................... 7
Management Policy ........................................................................................................................................................... 9(1) Basic corporate tenets and management strategies ................................................................................................... 9(2) Goals and objectives ............................................................................................................................................... 10(3) Issues the Company faces ....................................................................................................................................... 11
Basic Approach to Selection of Accounting Standards .................................................................................................... 11
Consolidated Financial Statements .................................................................................................................................. 12(1) Consolidated balance sheets ................................................................................................................................... 12(2) Consolidated statements of income and comprehensive income ............................................................................ 14(3) Consolidated statements of changes in net assets ................................................................................................... 16(4) Consolidated statements of cash flows ................................................................................................................... 18(5) Notes to consolidated financial statements ............................................................................................................. 20(Notes regarding the premise of surviving company) ...................................................................................................... 20(Change of depreciation method) ..................................................................................................................................... 20(Segment information) ..................................................................................................................................................... 21(Per share data) ................................................................................................................................................................ 25(Significant subsequent events)........................................................................................................................................ 25

6.

Other ................................................................................................................................................................................ 26(1) Changes in Directors .............................................................................................................................................. 26(2) Other ....................................................................................................................................................................... 26

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1.

Analysis of Operating Results and Financial Condition(1) Analysis of operating results(Overview of fiscal year under review)
The Group’s consolidated earnings results for Fiscal 2016 (from January 1, 2016 to December 31, 2016)
are as follows:
Net Sales¥33,653 million (down 4.6% year-on-year)
Operating income¥3,642 million (down 25.2% year-on-year)
Ordinary income¥3,589 million (down 25.8% year-on-year)
Profit attributable to¥2,208 million (down 17.0% year-on-year)
owners of parent
The details of the performance of each business segment are as follows.
1. IT Consulting BusinessNet sales in Japan for FY2016 stayed flat year-on-year, which was due to the postponement orcancellation of projects by some financial institutions reflecting the zero-interest-rate policy and a failure
to acquire an order from a prospective client, while revenue from projects related to upgrading andintegrating IT systems at major customers in the distribution and service sectors increased and multiple
regional banks introduced financial cloud computing services (SKYBANK). Segment sales decreased by
2.6% year-on-year due to termination and disposition of operations of subsidiaries in Southeast Asia.
Meanwhile, the quality of projects improved and operation was streamlined by utilizing the Group’s
unique project monitoring and management methods (FUTURE NASA and Future fraqta). However,segment operating income decreased by 626 million yen year-on-year due to an increase in expenses for
personnel, training, and the hiring of more new graduates.
Consequently, net sales of this segment for FY2016 stood at 21,164 million yen, down 2.6% year-on-year,
and its operating income amounted to 3,979 million yen, down 13.6% year-on-year.
2.

Package & Service BusinessDespite the increase in orders acquired after the third quarter and the recovery of both net sales andoperating income, FutureOne Inc. (“FutureOne”) posted a year-on-year decrease in both net sales andoperating income for the cumulative period as sales decreased because new order intake did not advanceduring the first half of the year due to quality issues in some projects and the Company’s reorganizationof unprofitable business units.
Micro CAD Co., Ltd. (“Micro CAD”) posted a year-on-year decrease in both net sales and operating
income for the cumulative FY2016 due to delays until the third quarter of the official start of multiple
projects, in spite of the recovery of sales and profit of its comprehensive intellectual property
management system as well as system development for the manufacturing sector in the fourth quarter.
Consequently, net sales of this segment for FY2016 stood at 3,591 million, down 17.5% year-on-year,
and operating loss, which reflected the amortization of goodwill, amounted to 75 million yen against
operating income of 241 million yen a year earlier.

3. New Media & Web Service BusinesseSPORTS Co., Ltd. (“eSPORTS”) posted a year-on-year increase in net sales and operating income
because sales of private brand outdoor goods, sportswear and shoes performed strongly, although theCompany ceased to distribute fitness-related goods, which recorded significant sales in the previous
fiscal year.
Tokyo Calendar Inc. (“Tokyo Calendar”) increased revenue from advertising, including an acquisition ofa large project tied to a web-linked magazine, thanks to its 30 million monthly page views in December,which represents a tripling over the past one year. Meanwhile, operating loss for the cumulative period
expanded due to an expense recorded for reorganization in preparation for future business expansion.
Newly launched businesses, including an online and offline programming education service by
CodeCamp Inc. (“CodeCamp”), posted higher upfront investment costs related to the preparation for theprovision and marketing of the new services. Consequently, operating loss expanded while net sales
increased.
As a result, net sales for the cumulative period stood at 5,658 million yen, up 15.2% year-on-year, andoperating loss after reflecting the amortization of goodwill amounted to 384 million yen against an-2-

operating loss of 150 million yen a year earlier.
4. Corporate Revitalization Business
The Group excluded Uoei Corporation (“Uoei”) and its subsidiaries from the scope of consolidation as ofthe end of the third quarter because it transferred all the shares of Uoei effective September 7, 2016. As aresult, net sales and operating income of this segment until the third quarter were 3,395 million yen and
33 million yen, down 1,078 million yen and up 22 million yen against the results of the cumulative
consolidated period of a year earlier, respectively.
Note: Segment business results stated in the paragraphs above are before adjusting for internal sales andtransfers among segments. Effective April 1, 2016, the Company shifted to a holding company structure
to realign its organizational platform. Accordingly, starting from the second quarter under review, we
shifted to a method of: 1) recording, as costs under segment income adjustment, Group operation costs,
which were previously included in the costs of the IT Consulting Business; and 2) recording businessoutsourcing service fees and group growth subsidies received from individual Future Group companies
as income under segment income adjustments. Year-on-year changes were calculated for comparison
upon adjusting the values for the previous consolidated fiscal year for the post-segment change
categorization and measurement methods.
(Outlook for the next fiscal year)
The Group’s earnings forecast for the fiscal year ending December 2017 is as follows.
Net sales¥36,830 million (up 9.4% year-on-year)
Operating income¥4,500 million (up 23.5% year-on-year)
Ordinary income¥4,520 million (up 25.9% year-on-year)
Profit attributable to¥2,735 million (up 23.8% year-on-year)
owners of parent
Noteworthy events in each business segment for the following fiscal year are as follows:
1. IT Consulting BusinessIn the fiscal year ending December 2017, the Group will integrate “IT Consulting Business” and“Package & Service Business” into “IT Consulting & Service Business” and advance business in order tostrengthen collaboration among subsidiaries and further improve synergistic effects by taking advantage
of a holding company structure.
Strategies for the fiscal year ending December 2017 are as follows:i) Provision of the Group’s unique added value
The Group strives to contribute to customers’ business renovations through the provision of ourunique added value as follows.
- Providing consistent services from grand design to detailed design, development, maintenance andoperation by using cutting-edge information technology (IT) and components made in-house, whichenable data processing in real time (Future Component), while considering business innovation,
operational reform, and system improvement 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 using a unique method of reconstruction into thelatest open system (Future Formula)- Designing and developing high quality systems in short time by utilizing a proprietary
project-monitoring and management method (FUTURE NASA and Future fraqta)ii) Development of new technology that produces innovation
We will pursue research and development of the latest IT systems that are more sophisticated and tap
into AI, IoT and big data in order to develop next-generation architecture using these new technologies,
while making greater contributions to customers’ business innovation such as realization of a smart
factory.
iii) Expansion of application cloud service
In addition to financial cloud computing services for banks (SKYBANK), which have already been
introduced by many customers, the Group will start conducting consultation for major banks andlarge-sized regional banks in the next fiscal year. Distribution cloud systems tailored to retail chains(SKYRETAIL) have acquired a customer and we’re in the development phase toward a release in
2017.
-3-

iv) Collaboration and synergy generated among subsidiaries
Effective January 5, 2017, the Company acquired 81% of the issued shares of YDC Corporation,
renowned for its experience in system consultation and development for the manufacturing sector,
from Yokogawa Electric Corporation, and made it a consolidated subsidiary. Through this we will
enhance collaboration among Future Architect, Micro CAD and YDC through mutual provision of
their advanced knowledge, solutions, and technical/development capabilities, and enable the provisionof higher added value to customers.
FutureOne aims for a recovery in sales and profit by the release of a new brand ERP package“InfiniOne” which has enhanced compatibility with cloud, multi-database, and multi-language
environment as well as expanded sector-specific templates, and by expanding sales distribution
channels through alliances with external business partners. It will also strengthen collaboration amongsubsidiaries, including Future Architect, to widen its customer base and improve solutions.
2. New Media & Web Service BusinesseSPORTS will promote strategic purchases of casual sportswear and shoes according to consumer needs,
planning for unique private brand products and expansion of its EC site’s operations, thus growing sales
and profits. It will advance development of an already launched online fitness service Pocket Gym(Pockegym) to provide not only goods but also services for potential health-conscious customers. In
addition, with Tokyo Calendar, it will jointly develop an EC and distribute a developed app for
PockeGym to customers.
Tokyo Calendar has obtained support from users and tripled the number of page views in a single year byproviding, in a new web-based form using Future Group’s information technology, its high-quality
content-generating capabilities acquired through magazine media, and thus saw an increase inadvertising-related income and sales. Looking ahead, the company aims to acquire more users byplanning, producing and distributing its own video content. The company will also develop anothersubscription service on top of “TOCALE NIGHT,” and an offline restaurant event that attracted a lot of
participants, aiming to establish a new marketing platform based on an analysis of customer behaviors
and motivations.
CodeCamp will work on expanding its profit base and turning positive for the cumulative period byoffering more online programming education services to corporations and increasing sales from newservices such as “TORAKAJI,” a new business school focusing on UI/UX, data analysis, prototyping,and other technologies, and “CodeIncubate,” an engineer cultivation program for job seekers.

-4-(2) Analysis of financial condition
1. 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¥23,063 million (up 1.0% year-on-year)

Liabilities¥5,732 million (down 12.2% year-on-year)

Net assets¥17,331 million (up 6.3% year-on-year)

The following is the analysis of financial condition for the fiscal year under review.
(1) Assets
Current assets were ¥19,159 million on a consolidated basis at the end of the fiscal year underreview, up ¥1,463 million from the preceding year, and non-current assets amounted to ¥3,904
million, down ¥1,228 million, with total assets standing at ¥23,063 million, up ¥234 million. The
main underlying factors were a fall in investment securities (a decrease of ¥319 million from the endof the previous fiscal year), goodwill (a decrease of ¥618 million) and land (a decrease of ¥75
million), despite an increase in cash and deposits (an increase of ¥2,111 million from the end of theprevious fiscal year) and merchandise and finished goods (an increase of ¥107 million).
For a breakdown of the increase in cash and deposits, see “2. Analysis of cash flows.”(2) Liabilities
Current liabilities were ¥4,457 million at the end of the fiscal year under review, down ¥624 million
from the preceding year, and noncurrent liabilities were ¥1,274 million, down ¥170 million, whichbrought total liabilities to ¥5,732 million, down ¥794 million. The main factors included a fall inaccounts payable - trade (a decrease of ¥436 million from the end of the previous consolidated fiscal
year) and income taxes payable (a decrease of ¥360 million).
(3) Net assets
Net assets were ¥17,331 million at the end of the fiscal year under review, up ¥1,029 million fromthe preceding year. The main factors included an increase of retained earnings (an increase of¥1,045 million from the end of the previous consolidated fiscal year).
2. Analysis of cash flows
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 ¥3,268 million (compared to an inflow of ¥2,878
million in the previous fiscal year), chiefly due to payment of income taxes paid of ¥1,747 million
despite the posting of income before income taxes of ¥33.92 million and an inflow of ¥575 million
due to a decrease in notes and accounts receivable - trade.
(2) Net cash provided by (used in) investing activities
Net cash from investing activities was an outflow of ¥24 million (compared to an outflow of ¥749
million in the previous fiscal year), chiefly due to sale of shares of subsidiaries resulting in change inscope of consolidation of ¥243 million and sale of investment securities of ¥194 million despite theposting of an outflow due to purchase of property, plant and equipment of ¥127 million and an
outflow due to reversal of lease and guarantee deposits of ¥270 million.
(3) Net cash provided by (used in) financing activities
Net cash from financing activities was an outflow of ¥1,240 million (compared to an outflow of¥941 million in the previous fiscal year), mainly reflecting payments for cash dividends paid of¥1,160 million.
(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 ¥11,761
million, with an increase of ¥2,004 million in cash and cash equivalents resulting from operating,investing and financing activities.

-5-(3) 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, 2016 of ¥12.50 per share. The full fiscal year dividend comprising the year-end
dividend and the previously-paid interim dividend is expected to be ¥25.00 yen per share (consolidated
dividend payout ratio of 50.6%).
The Company’s planned payment of dividends of surplus for the next fiscal year is ¥26.00 yen per share(interim dividend of ¥13.00).

-6-

2.

The Future GroupThe Group (the Company and its related companies) has introduced a holding company structure, andconsists of 16 consolidated subsidiaries and five equity-method affiliates as of December 31, 2016.
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, accompanied with a flow chart of the segments.
(IT Consulting 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)

Using its advanced information technology, Future Architect, Inc.
offers IT consulting, hardware and other procurement services froman objective and independent position.

Future Inspace, Inc. (subsidiary)

Consigned development, and maintenance and operation services(Package & Service Business)
In this business, to help clients improve their operational efficiency, the Group introduces or provides, via
cloud and ASP, operating software packages dedicated to highly specialized fields, such as sales
management, ERP and intellectual property management, as well as other IT services, including
consigned development, and maintenance and operation services.
Company nameBusiness activities

FutureOne, Inc. (subsidiary)

Development and sales of and support for “FUTUREONE”
mission-critical software centering on sales management, production
management and accounting, as well as consigned development andEC site development

Micro CAD Co., Ltd. (subsidiary)

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

Logizard Co., Ltd. (affiliate)

Development and sales of and support for cloud-based logistics andinventories management system (WMS)(New Media & Web Service Business)
To create original services that have not existed so far in the Media and Web service area.
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”

Among affiliated companies engaged in businesses that are not included in the three 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-

<Business System Diagram>Contracting[Consolidated subsidiary (Domestic)]
Future Inspace, Inc.
[Equity-method affiliate (Domestic)]
Lawson System Labo Limited Liability
Partnership[Consolidated subsidiaries (Domestic)]
FutureOne, Inc.
Micro CAD Co., Ltd.
[Equity-method affiliate (Domestic)]
Logizard Co, Ltd.

[Consolidated subsidiaries (Domestic)]
Tokyo Calendar Inc.
eSPORTS Co., Ltd.
CodeCamp Inc.

Investment

Investment
targets

Investment[Consolidated subsidiary (Domestic)]
Future Investment Corp.

-8-

Future Corporation (Holding company)

Provision of services/
sales of products, etc.
Provision of services/
sales of products, etc.
Publication/
Sales ofproducts/
Provision ofservices

Clients

Package & Service
Business
New Media & Web
Service BusinessCorporate Clients

IT Consulting
Business[Consolidated subsidiary (Domestic)]
Future Architect, Inc.

3.

Management Policy(1) Basic corporate tenets and management strategies
The basic tenet of the Group is to raise future value of client companies and society by providing theproper state in which business should be and an optimal mechanism to realize it by proactively taking in
cutting-edge IT technologies, with a view to promising the greatest success to clients. Under this basic
tenet, the Company holds “to design management and IT” as the core of its medium- and long-term
management strategies. We also strive to expand business by providing an original service backed by theadvanced IT knowledge and know-how cultivated by the Company.
In addition, we are striving to make all employees share and understand the basic tenets of the Group by
establishing the following corporate philosophies.
(Corporate philosophies) We love science and technology and contribute to corporate and social changes. Also, we continue tochange ourselves.
 We will not be fearful of or daunted by “being insufficient,” and try to change impossibility topossibility using our own ingenuity and enthusiasm.
 We continue to have a desire to improve ourselves and attach importance to the enhancement of
individual capability through constant hart study as well as understand the limit of power ofindividuals and resolve even greater challenges by organically combining power of colleagues.
 We conduct warmhearted and humorous organization operation, which features courtesy and behavior
according to time, place and opportunity though it is based on merits and results.
 We will not be arrogant when we have a pleasant time, and we will never forget hope when we have a
bad time.
 We learn from history, strive to deepen mutual understanding and engage in international exchanges
and cooperation.
Basic policies of each business segment are as follows:[IT Consulting Business]
1) “Trinity” viewpoint
The Company aims to contribute to the customer achieving a business reform by focusing on threedomains of management strategy, business reform, and system reform and using cutting-edge IT, notmerely aiming at the realization of functions by IT. To this end, we are striving to deliver to thecustomer solutions that take into consideration not only partial but also total optimization with a viewto the future as well as the present.
2) “Neutral” position
By specializing in open systems, the Group has maintained a neutral position independent of any
hardware vendors or software vendors, and has been pursuing optimization without being swayed bypreconceived ideas or restrictions of products. Through this approach, we seek to maximize customer
profits at all times from the standpoint akin to that of an outside CIO close to the customer.
3) Provision of comprehensive services from front-end to back-end processes
We are striving to increase future value for customers by providing integrated services, which cover
the consulting phase, design of systems, development of application software, selection andprocurement of hardware and software products, introduction of systems and maintenance andoperation phases, thereby giving a concrete form to the results of consulting as systems rather thanmerely presenting such as a concept, and offering them for actual use by clients to enable them toview the results as the fruit of our business.
4) Grand designs based on scientific system structure analysis along with components that enablereal-time data processing
Many companies find it challenging to improve their IT systems since the existing ones have been
turned into black boxes without any specifications and manuals being available. This is why suchcompanies are unable to deal with the changing business situation, at the same time incurring
persistently high operational costs to preserve the status quo. To address these circumstances, we use amethod of scientifically analyzing existing large IT systems (Future Formula) to overhaul andreconstruct them. At the same time, based on components created in-house, we provide an IT systemthat enables the customer to process product-by-product sales and profit/loss information on areal-time basis. Thus, by delivering high-quality and timely services, we will continue to support-9-

customers in renovating their operations in future.
[Package & Service Business]
1) Expansion of business for small and mid-size companies
Among small and midsize companies whose human and physical resources are limited, needs are
great for realizing improvement of business efficiency and managerial reform through the use of
package solutions and cloud computing that can be introduced at relatively low cost and in short time.
We seek to cater to such needs, growing the Package & Service Business in the process. To this end,
we not only overhaul the functions of package software products created in-house and improve thequality of our implementation products further but also implement ERP and e-commerce-related
solutions created by rival vendors if they can deliver the environment ideal for the customer, thereby
striving to further expand sales and improve operating income margin.
2) Support for customers’ intellectual property right strategies
Japanese companies need to bolster their intellectual property right strategies for the creation andutilization of patent and other intellectual property rights. In this situation, through developing andproviding package software products designed to support the customer’s efforts to acquire, maintainand manage intellectual property rights, we seek to assist the customer in formulating intellectual
property right strategies and accumulating, sharing and using relevant knowledge.
[New Media & Web Service Business]
In the Media and Web service area, we will aim to create original services that have yet to exist. To
this end, we will combine the know-how regarding services and operations of websites that is held by
Web-related companies, including EC-related and e-Learning companies, and the content creation
capabilities owned by publishing and media companies with the IT knowledge and know-how
cultivated by the Company. Also, we will offer values that have not existed so far by feeding backnew knowledge, which we acquire through the provision of these original services, to clientcompanies in the IT Consulting Business.
(2) Goals and objectives
To differentiate ourselves from our competitors and maintain growth, the Group concentrates
management resources on the fields in which it makes strategic investments, such as research anddevelopment, training, and recruiting. At the same time, however, we have set an Operating income ratioof 20% or more a year as our goal for the mainstay IT Consulting Business. We will also aim to achieve
an Operating income ratio of at least 10% for the Package & Service Business and the New Media & Web
Service Business.

- 10 -

(3) Issues the Company faces
1) Enhancement of a support infrastructure for scientific project management [IT Consulting Business]
The Group is strengthening its project management capabilities, which it positions as an importantmanagement issue, and constantly enhances its proprietary tools that are equipped with functions toautomatically create and check source codes and documents and thoroughly promotes training for
consultants. Going forward, we will further promote more efficient and scientific project management.
2) Improving project quality [IT Consulting Business]
We will evolve the system of visualizing the status of projects in real time by improving the
proprietary project information-sharing system and monitoring system, and endeavor to further
improve project quality by not only improving the proprietary project information-sharing system andmonitoring system mentioned above but also by further bolstering our quality control platformcomprising architecture examination, phase-by-phase project review and ultimate operationassessment.
3) Recruitment and training of professionals [All businesses in the four reportable segments]
The Group understands that what is most important for raising corporate value of the Group is
personnel and that it is necessary to ensure and train highly qualified personnel. We continue to create
an environment conducive to proactively attracting talented people by challenging the frontiers of
information technology and training consultants who can grasp the essence of matters and find adirection for solutions in the training and project fields as well as through research and development
activities. In addition, we will train personnel through experience in corporate management in
subsidiaries and mutual exchanges by providing new opportunities for active roles in the creation of
new original services in the New Media & Web Service Business.
4) Enhancement of outside alliances [IT Consulting Business, Package & Service Business]
To consistently provide optimal solutions to clients, the Company will maintain good relations withcorporations that have outstanding technologies and strive to enhance alliances, including M&As,
with them, while grasping the technological trends in the global IT industry.
5) Enhancement of research & development on newest technologies [IT Consulting Business]
The Group will pursue research & development (R&D) on technologies that have been advancing
markedly in recent years on a global basis, such as IoT, AI and data analysis, while simultaneously
applying R&D results to actual projects, instead of merely learning such technologies by establishingdedicated departments and assigning personnel to them.
6) Improving profit margin and expanding market share [Package & Service Business]
As for the Package & Service Business, in an effort to attain an improved profit margin for businessfor small and midsize companies, in particular, and to gain a higher market share in this market
segment, the Group will continue improving functions of its proprietary packages for small andmidsize companies and client support services, while working to expand sales channels by developing
partners.
7) Solidifying earnings foundation and expanding services [New Media & Web Service Business]
In the New Media & Web Service Business, the Group will execute new measures to make each
unprofitable subsidiary achieve profitability as early as possible by solidifying its earnings foundation,and endeavor to grow continuously by making each already-profitable subsidiary expand its services
and improve service quality.
4.

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.

- 11 -

5.

Consolidated Financial Statements(1) Consolidated balance sheets(in thousands of yen)Previous consolidated
fiscal year
(December 31, 2015)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
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
Intangible assets
Goodwill
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets- 12 -

Consolidated fiscal year
under review(December 31, 2016)

9,650,136
5,020,960
108,689
688,591
34,892
216,495
1,415,805
566,157(5,113)

11,761,815
4,242,997
1,800
796,354
59,435
197,714
1,549,740
554,818(5,022)

17,696,614

19,159,655

3,346,284(3,023,246)

855,840(674,904)

323,037

180,935

80,8942,189,531(1,869,459)

5,430
1,840,179(1,618,314)

320,071

221,864

724,003408,230

969,257
472,454
23,175350,312333,201
18,855

1,464,887

702,369

1,729,798
1,032,610
132,819
93,653(45,430)

1,409,923
1,168,231
191,330
89,011(64,950)

2,943,452

2,793,545

5,132,344

3,904,145

22,828,959

23,063,800

(in thousands of yen)Previous consolidated
fiscal year
(December 31, 2015)
Liabilities
Current liabilities
Accounts payable - trade
Current portion of long-term loans payable
Accounts payable - other
Income taxes payable
Provision for bonuses
Provision for quality assurance
Provision for loss on projects
Asset retirement obligations
Other

Consolidated fiscal year
under review(December 31, 2016)

1,303,659
4,800
742,063
1,243,548
236,859
88,1601,463,012

866,932
795,562
883,527
197,318
90,593
1,863
35,763
1,586,389

Total current liabilities

5,082,101

4,457,951

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

1,013,200
408,249
23,9211,000,000
259,509
15,097

Total non-current liabilities

1,445,370

1,274,607

Total liabilities

6,527,472

5,732,558

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

1,421,815
2,507,763
13,756,812(1,499,428)

1,421,815
2,507,763
14,802,799(1,499,494)

16,186,962

17,232,883

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

45,431(108,510)

63,691402
5,798

Total accumulated other comprehensive income(63,078)

69,892

177,60228,466

16,301,486

17,331,242

22,828,959

23,063,800

Total shareholders’ equity

Non-controlling interests
Total net assets
Total liabilities and net assets- 13 -

(2) Consolidated statements of income and comprehensive income(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2015
to December 31, 2015)

Consolidated fiscal year
under review(from January 1, 2016
to December 31, 2016)

Net sales
Cost of sales

35,293,422
21,638,095

33,653,168
20,233,354

Gross profit

13,655,326

13,419,813

Selling, general and administrative expenses
Directors’ compensations
Salaries and bonuses
Other salaries
Training expenses
Research and development expenses
Depreciation
Recruiting expenses
Amortization of goodwill
Other374,8633,626,521
236,958
234,919
154,158
105,320275,134
295,998
3,482,232

374,562
3,958,914
239,258
300,130
332,440
93,739256,885
342,9033,878,187

8,786,107

9,777,023

4,869,219

3,642,790

3,138
33,7501,949
33,382

23,137-

19,735

15,866

79,762

51,198

10,145
72,126

7,912
65,545-30,78630,000-Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity
methodOther
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Share of loss of entities accounted for using equity
methodContributions
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on sales of shares of subsidiaries and associates
Total extraordinary income
Extraordinary losses
Loss on valuation of investment securities
Loss on sales of share of subsidiaries and associates
Impairment loss
Provision of allowance for doubtful accounts
Amortization of goodwill
Loss on change in equity
Litigation expenses
Other
Total extraordinary losses
Income before income taxes and minority interests- 14 -

112,271

104,2444,836,710

3,589,743

35,063
144,153

11,907294,160

179,216

306,067

156,980
161,347
9,343-

150,010808
30,000275,686
1,270
33,00012,463

327,671503,238

4,688,256

3,392,572

(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2015 to
December 31, 2015)

Consolidated fiscal year
under review(from January 1, 2016 to
December 31, 2016)

Income taxes - current
Income taxes - deferred

1,948,709
32,3691,242,257(37,773)

Total income taxes

1,981,078

1,204,484

Profit

2,707,177

2,188,088

2,659,733
47,4442,208,321(20,232)

11,51926,946(1,848)97
92,330(3,560)20,399(Profit attributable to)Profit attributable to owners of parent
Profit (loss) 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- 15 -

34,905110,978

2,742,082

2,299,066

2,715,069

2,324,315

27,013(25,248)

(3) Consolidated statements of changes in net assets
Previous consolidated fiscal year (from January 1, 2015 to December 31, 2015)(in thousands of yen)
Shareholders’ equity

Balance at the beginning of the period

Capital stock

Capital surplus

1,421,815

2,495,772

Retainedearnings
12,012,633

Treasury shares

Total shareholders’equity(1,540,983)

14,389,237

Changes of items during the period
Dividends from surplus(915,554)(915,554)

Profit attributable to owners ofparent2,659,733

2,659,733

Disposal of treasury shares

11,99041,55553,546

Net changes of items other thanshareholders' equity
Total changes of items during theperiod-11,9901,744,178

41,555

1,797,724

Balance at the end of the period

1,421,815

2,507,763

13,756,812(1,499,428)

16,186,962

Valuation and translation adjustments
Valuation
Foreign currency
difference ontranslation
available-for-saleadjustment
securities
Balance at the beginning of the period

34,168(153,008)

Total valuationand translation
adjustments

Non-controllinginterests(118,839)

205,344

Total net assets

14,475,742

Changes of items during the period
Dividends from surplus(915,554)

Profit attributable to owners ofparent2,659,733

Disposal of treasury shares
Net changes of items other thanshareholders' equity

53,546
11,26344,49755,761(27,742)

28,019Total changes of items during theperiod11,26344,49755,761(27,742)

1,825,744

Balance at the end of the period

45,431(108,510)(63,078)

177,602

16,301,486- 16 -

Consolidated fiscal year under review (from January 1, 2016 to December 31, 2016)(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’equity13,756,812(1,499,428)

16,186,962

Changes of items during the period
Dividends from surplus(1,162,334)(1,162,334)

Profit attributable to owners ofparent2,208,321

2,208,321

Purchase of treasury shares

(66)

(66)

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

1,045,986(66)

1,045,920

1,421,815

2,507,763

14,802,799(1,499,494)

17,232,883

Valuation and translation adjustments

Balance at the beginning of the period

Valuationdifference on
available-forsale securities

Deferred gains
or losses onhedges45,431-

Foreigncurrencytranslation
adjustment(108,510)

Noncontrollinginterests

Total net
assetsTotal valuationand translation
adjustments(63,078)

177,602

16,301,486

Changes of items during the period
Dividends from surplus(1,162,334)

Profit attributable to owners ofparentt

2,208,321

Purchase of treasury shares(66)

Net changes of items other thanshareholders' equity

18,260402

114,308

132,971(149,136)(16,164)

Total changes of items during theperiod18,260402

114,308

132,971(149,136)

1,029,755

Balance at the end of the period

63,691402

5,798

69,882

28,466

17,331,242- 17 -

(4) Consolidated statements of cash flows(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2015 to
December 31, 2015)
Net cash provided by (used in) operating activities
Income 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 sales of investment securities
Loss (gain) on valuation of investment securities
Impairment loss
Loss (gain) on sales of shares of subsidiaries andassociates
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, 2016 to
December 31, 2016)

4,688,256
433,425
295,998
14,042
31,571(107,292)(78,500)(36,889)
10,14576,6193,392,572
418,015
618,590
19,429(15,678)
2,433
1,863
(35,331)
7,912
67,187(23,137)

30,786

9,343(35,063)
156,980
161,347

1,270(11,907)150,010-(144,153)(293,351)-

33,000(97,007)575,41170,521(245,836)(71,709)(40,640)(314,251)(95,277)(149)

57,637(76,182)364,610

Subtotal

4,944,820

5,021,798

Interest and dividend income received
Interest expenses paid
Income taxes paid
Contributions paid
Litigation expenses paid

36,920(10,154)(2,063,203)(30,000)-

35,227(7,883)(1,747,176)(33,000)

Net cash provided by (used in) operating activities

2,878,383

3,268,965- 18 -

(in thousands of yen)Previous consolidated
fiscal year
(from January 1, 2015 to
December 31, 2015)
Net cash provided by (used in) investing activities
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for asset retirement obligations
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of shares of subsidiaries and associates
Purchase of shares of subsidiaries resulting in change
in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting
in change in scope of consolidation
Payments for sales of shares of subsidiaries resulting inchange in scope of consolidation
Payments for investments in capital of subsidiaries andassociates
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee
deposits
Other
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Repayments of long-term loans payable
Puechase of treasury shares
Proceeds from sales of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Net cash provided by (used in) financing activities

Consolidated fiscal year
under review(from January 1, 2016 to
December 31, 2016)

40,325(183,473)(123,031)(5,426)(348,373)
49,610(10,255)(127,389)(71,313)(5,839)(30,000)
194,405-(248,571)-

124,222

243,922-(3,770)(19,000)-(19,391)(270,728)

13,25840,663(19,220)

5,177(749,327)(24,873)(1,200)53,546(915,212)(78,411)(18,000)(66)(1,160,875)(61,922)(941,277)(1,240,863)

Effect of exchange rate change on cash and cash
equivalents(45,372)

1,560

Net increase (decrease) in cash and cash equivalents

1,142,406

2,004,788

Cash and cash equivalents at beginning of the period

8,614,620

9,757,026

Cash and cash equivalents at end of the period

9,757,026

11,761,815- 19 -

(5) Notes to consolidated financial statements(Notes regarding the premise of surviving company)
Not applicable.
(Change in accounting policies)(Application of accounting standards for business combinations)“Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013;
hereinafter “Business Combinations Accounting Standard”), “Accounting Standard for Consolidated
Financial Statements (ASBJ Statement No. 22, September 13, 2013, hereinafter “Consolidated
Accounting Standard”), “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
September 13, 2013, hereinafter “Business Divestitures Accounting Standard”) and other standards
became applicable from the fiscal year ending December 31, 2016. Accordingly, the Group changed theaccounting method to record the difference attributable to changes in the Company’s ownership interest
in its controlling subsidiaries as a capital surplus and acquisition-related expenses as costs for the fiscal
year in which such expenses are incurred.
Regarding business combinations taking place after the beginning of the fiscal year ending December 31,
2016, the Company will adopt a method to reflect revised allocated acquisition costs determined by theprovisional accounting treatment in the consolidated financial statements of the fiscal year in which thebusiness combination takes place. In addition, the Company changed the presentation of profit andreplaced the presentation of minority interests with that of non-controlling interests. The consolidated
financial statements for the previous fiscal year were replaced by those reflecting the aforementioned
changes.
The Company began to apply the Accounting Standard for Business Combinations and the like from the
beginning of the fiscal year ending December 31, 2016 in conformity with the transitional treatment
stipulated in the Accounting Standard for Business Combinations No. 58, Paragraph 2 (4), AccountingStandard for Consolidated Financial Statements No. 44, Paragraph 5 (4) and Business Divestiture
Accounting Standard No. 57, Paragraph 4 (4).
The aforementioned application did not affect the consolidated financial statements for the fiscal year
under review.

(Change of depreciation method)
For the fiscal year under review, the Company applied “Practical Solution on Depreciation Method
Change Relating to Fiscal 2016 Tax Regime Revision” (ASBJ Practical Solution Report No. 32, June 17,2016) in response to a revision made to the Corporation Tax Act, and the Company’s depreciation
method for buildings and structures acquired on or after April 1, 2016 was changed from thedeclining-balance method to the straight-line method.
This change had only a negligible effect on the consolidated statements of income for the fiscal year
under review.

- 20 -

(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 four reportable segments: theIT Consulting Business, the Package & Service Business, the New Media & Web Service
Business, and the Corporate Revitalization Business.
The business operations of the four reportable segments are as follows:
Reportable segments

2.

Business operations

IT Consulting 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.

Package & Service BusinessTo introduce or provide via cloud and ASP operations software
packages for highly specialized fields, such as sales management,
ERP and intellectual property management, as well as provide
other IT services, including consigned development, maintenanceand operation services and education, to help clients improve theiroperational efficiency.

New Media & Web Service
Business

To create original services that have not existed so far in the Mediaand Web service area.

Corporate Revitalization BusinessTo get deeply involved in the management team of client firms,
revitalize client firms through drastic reform focusing on IT, andestablish success models for each industry.

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.

3.

Matters related to changes in reportable segments(Changes in reportable segments)
Effective April 1, 2016, the Company shifted to a holding company structure to realign its
organizational platform. Accordingly, starting from the second quarter under review, we
migrated to a method of. 1) recording, as costs under segment income adjustment, Group
operation costs previously included in the costs of the IT Consulting Business; 2) recording
business outsourcing service fees and group growth subsidies received from individual FutureGroup companies as income under segment income adjustment.
As a result, for the fiscal year under review, segment income was higher for the IT Consulting
Business by ¥24,758,000 and for the Adjustment by ¥69,526,000, and was lower for the
Package & Service Business by ¥62,797,000 and for the New Media & Web Service Businessby ¥31,488,000, than if the previous segment accounting treatment had been applied.
Segment information shown above for the previous fiscal year is adjusted for the revised
reporting segment categorization and measurement methods.

- 21 -

4.

Information on amounts of net sales, income or loss, assets, and other items by reportablesegment
Fiscal 2015 (from January 1, 2015 to December 31, 2015)(in thousands of yen)
Reportable segments
Adjustment(Note 2)

Amountstated infinancialstatements(Note 3)35,293,422-

35,293,422-

185,952(185,952)

35,293,422

IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Net sales to outsideclients

21,576,588

4,336,735

4,912,353

4,467,744

35,293,422-

Inter-segment sales ortransfer

160,077

18,926832

6,115

185,952

Total

Other
(Note 1)Total

Net sales

Total

21,736,666

4,355,662

4,913,185

4,473,860

35,479,374-

35,479,374(185,952)

Segment income (loss)

4,606,020

241,163(150,294)

10,841

4,707,731(38,125)

4,669,606

199,613

4,869,219

Segment assets

11,699,151

2,671,988

2,319,933

568,231

17,259,304

3,674,266

20,933,570

1,895,388

22,828,959

Other items
Depreciation
Amortization of
goodwill
Increase in property,
plant and equipment andintangible assets(Notes) 1.

347,124

59,262

6,797

37,225450,410-450,410(16,985)

433,425-

107,328

188,63038

295,998-

295,998-

295,998

120,498

100,285

17,716

16,513

255,014-

255,014-324,052“Other,” a segment not included in the reportable segments, includes securities investment, holding, and management activities.

2.

Adjustments to segment income (loss) and segment assets represent the amount of inter-segment transactions eliminated andincome, expenses and assets of the holding company.

3.

Segment income (loss) is adjusted with operating income in consolidated financial statements.

Fiscal 2016 (from January 1, 2016 to December 31, 2016)(in thousands of yen)
Reportable segments
Adjustment(Note 2)

Amountstated infinancialstatements(Note 3)33,653,168-

33,653,168-

157,388(157,388)-

33,810,556-

33,810,556(157,388)

33,653,168

3,553,029(21,323)

3,531,705

111,084

3,642,790-

16,643,541

3,655,897

20,299,439

2,764,360

23,063,800

7,532

16,370414,989-

414,989

3,025

418,015

107,328

511,19169

618,590-

618,590-

618,590

33,764

7,083-

132,876-

132,876

8,296

141,173

IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Net sales to outsideclients

21,015,112

3,590,174

5,658,120

3,389,760

33,653,168-

Inter-segment sales ortransfer

149,687

1,512

157

6,030

157,388

Total

21,164,800

3,591,687

5,658,277

3,395,791

Segment income (loss)

3,979,869(75,557)(384,418)

33,135

Segment assets

12,324,958

2,316,259

2,002,323

325,420

65,66692,027

Total

Other
(Note 1)Total

Net sales

Other items
Depreciation
Amortization of
goodwill
Increase in property,
plant and equipment
and intangible assets(Notes) 1.

“Other,” a segment not included in the reportable segments, includes securities investment, holding, and management activities.

2.

Adjustments to segment income (loss) and segment assets represent the amount of inter-segment transactions eliminated andincome, expenses and assets of the holding company.

3.

Segment income (loss) is adjusted with operating income in consolidated financial statements.

- 22 -

Related information
Fiscal 2015 (from January 1, 2015 to December 31, 2015)
1.

Information by product and service
Presentation is omitted since comparable information is disclosed in segment information.

2.
(1)

Information by region
Net sales
Presentation is omitted because sales to external customers in Japan accounted for over
90% of net sales shown in consolidated statements of income.

(2)

Property, plant and equipment
Presentation is omitted because the value of property, plant and equipment in Japanaccounted for over 90% of that of property, plant and equipment shown in consolidatedbalance sheets.

3.

Information by principal customer(in thousands of yen)
Customer name

Net sales

SG Systems Co., Ltd.

3,614,314

Related segment
IT Consulting Business

Fiscal 2016 (from January 1, 2016 to December 31, 2016)
1.

Information by product and service
Presentation is omitted since comparable information is disclosed in segment information.

2.
(1)

Information by region
Net sales
Presentation is omitted because sales to external customers in Japan accounted for over
90% of net sales shown in consolidated statements of income.

(2)

Property, plant and equipment
Presentation is omitted because the value of property, plant and equipment in Japanaccounted for over 90% of that of property, plant and equipment shown in consolidatedbalance sheets.

3.

Information by principal customer(in thousands of yen)

Customer name

Net sales

Related segment

Lawson, Inc.

4,463,837

IT Consulting Business

SG Systems Co., Ltd.

3,380,574

IT Consulting Business- 23 -

Information on noncurrent asset impairment losses by reportable segment
Fiscal 2015 (from January 1, 2015 to December 31, 2015)(in thousands of yen)
Reportable segments
IT Consulting
Business

Impairment loss

Package &ServiceBusiness

2,368-

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business-

158,978

Total

Other

161,347

Total-

Corporateor
elimination

Amountstated infinancialstatements-

161,347

161,347

Fiscal 2016 (from January 1, 2016 to December 31, 2016)
Not applicable.
Information on amortization and unamortized balance of goodwill by reportable segment
Fiscal 2015 (from January 1, 2015 to December 31, 2015)(Goodwill)(in thousands of yen)
Reportable segments
Corporateor
elimination

IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Amortization during theperiod-107,328

188,63038

295,998-

295,998-

295,998

Balance at the end of theperiod-214,657

754,175424

969,257-

969,257-

969,257

Total

Other

Total

Total

Fiscal 2016 (from January 1, 2016 to December 31, 2016)(Goodwill)(in thousands of yen)
Reportable segments
Corporateor
elimination

IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Amortization during theperiod-107,328

511,19169

618,590-

618,590-

618,590

Balance at the end of theperiod-107,328

242,983-

350,312-350,312-350,312

Total

Other

Information on gain on bargain purchase by reportable segment
Fiscal 2015 (from January 1, 2015 to December 31, 2015)
Not applicable.
Fiscal 2016 (from January 1, 2016 to December 31, 2016)
Not applicable.

- 24 -

Total

Total

(Per share data)
Fiscal 2015
(from January 1, 2015 to
December 31, 2015)
Net asset value per share
Profit per share
Profit per share (fully diluted)

Fiscal 2016
(from January 1, 2016 to
December 31, 2016)¥360.67¥59.52¥59.50Net income per share (fully diluted) is
not stated because the average stock
price during the period is below theexercise price of stock acquisitionrights and hence net income per shareis not diluted.

¥387.04¥49.40--(Note) Net income per share and net income per share (fully diluted) is calculated based on the following:
Fiscal 2015
(from January 1, 2015 to
December 31, 2015)

Fiscal 2016
(from January 1, 2016 to
December 31, 2016)

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

2,659,733

2,208,321--

Profit attributable to owners ofparent (thousands of yen)

2,659,733

2,208,321

Average outstanding shares ofcommon stock during the period(shares)

44,689,236

44,705,147

Profit adjustment attributable toowners of parent (thousands of yen)--

Increase in the number of common
stock (shares)

11,411-(Stock acquisition rights (shares))(11,411)Amount not available for commonshareholders to common shares(thousands of yen)

Profit per share (fully diluted)

Latent shares that have no dilution
effect and thus are not included in thecalculation of diluted profit per share--(Significant subsequent events)
Business combination through acquisition
The Company acquired 81% of the issued shares of YDC Corporation from Yokogawa Electric
Corporation on January 5, 2017 under a Share Transfer Agreement that the Company executed with
Yokogawa Electric Corporation as of December 6, 2016.
(1) Summary of the business combination(i) Name of the acquired company and its business
Name of the acquired company: YDC Corporation
Description of business: Consulting, design and development of information systems
Sales, maintenance and operation of equipment and software licenses(ii) Main reasons for the business combination
YDC, an IT service provider of Yokogawa Group, has a wealth of experience in the IT solution
business, including development of core systems for production management and accounting for the
manufacturing sector, provision of infrastructure technology services such as EDI and databases,
provision of “YDC SONAR,” a solution for integrating and assessing quality information, andoperational consultation “KYODO SOHATSU” in the design and development fields. In addition,
YDC has many good customers mainly in the manufacturing sector in the Kansai and Chubu- 25 -

regions.
We acquired the shares of YDC Corporation because the acquisition of shares should synchronize
YDC Corporation’s profound manufacturer-related operational knowledge and IT service know-howthat have been cultivated within Yokogawa Group and our Group’s IT-related expertise andtechnical/developmental capabilities, which would eventually create services with higher added
value and contribute to the Group’s further growth.
(iii) Date of business combination
January 5, 2017(iv) Legal form of business combination
Acquisition of shares(v) Name of the combined company
YDC Corporation(vi) Ratio of voting rights acquired
81%(vii) Grounds for determining acquiring company
The Company’s cash acquisition of shares(2) Cost of the acquisition of the acquired company and the breakdown thereof
Value/type of consideration for the acquisition
Acquisition costCash¥2,187,000,000¥2,187,000,000(3) Amount of accrued goodwill, cause of accrual, amortization method, amortization period
Unable to confirm at present.
(4) Amounts of assets accepted and liabilities assumed on the date of business combination and the main
components thereof
Unable to confirm at present.

(Omission of disclosure)Notes other than those mentioned above are omitted because the necessity of their disclosure in thesummary report of operating results is considered to be insignificant.

6.

Other

(1) Changes in Directors
Not applicable.
(2) Other
Orders received(in thousands of yen)
Fiscal 2015
(from January 1, 2015 to
December 31, 2015)
Orders received

Fiscal 2016
(from January 1, 2016 to
December 31, 2016)

Order backlog

Orders received

Order backlog

IT Consulting Business

22,546,589

7,134,669

20,204,627

6,325,629

Package & Service Business

4,131,303

942,666

3,842,826

1,195,318

New Media & Web Service Business

374,083

69,607

714,531

127,914

Total

27,051,975

8,146,943

24,761,985

7,648,861(Notes) 1. Orders received include adjustments for exchange rate fluctuations.

- 26 -