* Notes(1) Changes in significant subsidiaries during the period (changes in scope of consolidation): None
(2) Application of special accounting methods for presenting quarterly consolidated financial statements: Yes(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: Yes
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None
Note: Please refer to “2. Matters Related to Summary Information (Notes), (3) Changes in Accounting Policies andAccounting-based Estimates, and Restatements” on page 4 of the attachments for further information.

(4) Number of outstanding shares (common stock)1) Number of shares outstanding at the end of period (including treasury shares)
As of Dec. 31, 2016:

17,989,500 shares

As of Mar. 31, 2016:

17,855,700 shares

As of Mar. 31, 2016:

400,954 shares

2) Number of treasury shares at the end of period
As of Dec. 31, 2016:

400,954 shares

3) Average number of shares outstanding during the period
Nine months ended Dec. 31, 2016:

17,521,634 shares

Nine months ended Dec. 31, 2015: 17,349,280 shares

Note: The Company conducted a common stock split according to a ratio of 1:2 effective on April 1, 2016. Number ofoutstanding shares (common stock) is calculated as if this stock split had taken place at the beginning of the fiscal year
ended March 31, 2016.

* Information regarding the implementation of quarterly review proceduresThis quarterly summary report is exempted from quarterly review procedures based on the Financial Instruments and ExchangeAct. At the time of disclosure, the review procedures for the quarterly consolidated financial statements have not been completed.
* Explanation of appropriate use of earnings forecasts, and other special items
Forecasts of future performance in this report are based on assumptions judged to be valid and information available to theCompany’s management at the time the materials were prepared. Actual results may differ significantly from these forecasts for anumber of reasons.

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

4(3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements

42. Matters Related to Summary Information (Notes)

4(1) Changes in Significant Subsidiaries during the Period

4(2) Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements

4(3) Changes in Accounting Policies and Accounting-based Estimates, and Restatements

43. Quarterly Consolidated Financial Statements

5(1) Quarterly Consolidated Balance Sheet

5(2) Quarterly Consolidated Statements of Income and Comprehensive Income

7Quarterly Consolidated Statement of Income
For the Nine-month Period

7

Quarterly Consolidated Statement of Comprehensive Income
For the Nine-month Period8(3) Notes to Quarterly Consolidated Financial Statements

9Going Concern Assumption

9Significant Changes in Shareholders’ Equity

91

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
The Japanese economy continued to recover at a moderate pace in the first nine months of the fiscal year thatending on March 31, 2017 as economic and monetary policy initiatives of the Japanese government and the Bankof Japan contributed to improvements in corporate earnings and employment situation. However, the outlook
remains unclear due to negative consumer sentiment caused by concerns about the future and other reasons. The
operating environment for dispensing pharmacies in Japan, the primary market for products of EM SYSTEMS(hereafter, the “Company”), is challenging. A realignment of this business sector is taking place as pharmacy
companies use mergers, acquisitions and other actions in response to the April 2016 revisions to drug dispensing
fees and National Health Insurance (NHI) drug prices. As a result, many companies are suspending or postponing
new investments. Revisions to medical care payments planned for 2018 will make the operating environment
even more challenging. To help pharmacies overcome these challenges so they can continue using the Company’s
products for many more years, the monthly basic fee was reduced by 10% beginning with January 2017 invoices.
In addition, customers using the Company’s products for more than six years are receiving additional basic
monthly fee discounts that increase depending on the length of use.
One significant source of change is Japan’s aging population. This is symbolized by the so-called 2025 problem,
which is about when the cost of senior healthcare is expected to start to skyrocket. To achieve closer ties between
healthcare (clinics and dispensing pharmacies) and senior nursing care, the Company started a full-scale
operation of the systems for nursing care operators. The Company aims for realizing efficient ties between healthcare
and senior nursing care by newly developing Solutions for Linking Healthcare and Senior Nursing Care and creating
functions for seamless ties with systems that the Company provides to clinics, pharmacies and senior nursing care
operators.
For the first nine months, the Company reported consolidated net sales of 9,843 million yen (up 3.6% year onyear), operating income of 1,773 million yen (up 54.9%), ordinary income of 2,189 million yen (up 42.8%) andprofit attributable to owners of parent of 1,436 million yen (up 19.5%).
Results by business segment were as follows. Segment sales and operating income (loss) in this section are before
the inter-segment eliminations.
Starting in the first quarter of the current fiscal year, the Company is using revised reportable segments inassociation with the new organizational structure. In prior years there were two segments: Systems and Related
Businesses and Other Business. Now there are three segments: Prescription Systems and Related Operations
Business, Medical Systems and Related Operations Business, and Other Business. Segment information for thefirst nine months of the previous fiscal year has been restated based on these new segments.
Prescription Systems and Related Operations Business
Major activities in this segment included measures to strengthen sales activities targeting dispensing pharmacy
chains, using sales agents and OEM supply agreements to continuously expand sales channels, and increasing
sales of the Recepty NEXT prescription system and the Bungyo-mate system for dispensing pharmacies.
Although the number of systems sold was below the first nine-month plan, there was steady growth in billing
service sales due to the increasing number of users. Steady replacement demand for hardware and continuing
growth in sales of supplies also contributed to this segment’s performance. As a result, sales met the firstnine-month plan. Earnings benefited from ongoing measures to cut the cost of sales and operating expenses.
Consolidated subsidiary COSMOSYSTEMS Co., Ltd. continued to make a contribution to sales and earnings.
As a result, the segment recorded sales of 8,034 million yen (up 5.8% year on year) and operating income of
1,869 million yen (up 45.2%).

2

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17

Medical Systems and Related Operations Business
Sales of Ortia, software for an electronic patient record system, began in July 2016 and there were numerous
activities for establishing sales channels for this software throughout Japan. The Company proactively
participated in industry exhibitions to maximize the exposure of our products while increasing referrals fromexisting clients and from websites specializing in medical services. In addition, the Company continued to focus
on increasing sales of the Medical Recepty NEXT (MRN) Clerk Style and UNI-MEDICAL medical accounting
systems and the Medical Recepty NEXT (MRN) Karte Style electronic patient record system.
These activities have started to expand sales channels, resulting in higher sales of MRN products than in theprevious fiscal year. A decrease in UNI-MEDICAL replacement orders negatively affected segment performance.
However, growth in billing service sales reduced the segment loss. Measures to lower the cost of sales andoperating expenses continued during the first nine months.
As a result, the segment recorded sales of 1,147 million yen (down 6.1% year on year) and operating loss of 75
million yen (compared with operating loss of 213 million yen one year earlier).
Other Business
The Health Care-Nursing Care Cooperation Business Division is working on the development of Solutions for
Linking Healthcare and Senior Nursing Care, which is provided to clinics, pharmacies and senior nursing care
operators for supporting the Regional Comprehensive Care System of the Japanese government. Development
activities also under way for Tsunagaru Care NEXT, an ASP system for supporting senior nursing care operators,
was completed and its shipments started at the end of October 2016. On December 2, 2016, the Hiroshima officeof the Japan Health Insurance Association asked for bids for the establishment of an online insurance coverage
qualification verification system for systems used to help produce forms for health insurance claims at dispensing
pharmacies. The Company was selected on December 13 to conduct this project. Using this system allows
pharmacies to confirm the qualifications of an individual with the Japan Health Insurance Association coverage
on a computer screen on a real-time basis as part of standard procedures. This improves pharmacy efficiency byeliminating the need to deal with insurance claims rejected due to ineligibility and reissue invoices. Research anddevelopment activities as well as demonstration projects for electronic prescriptions, electronic health records(EHR) and personal health records (PHR) were completed in the previous fiscal year. To contribute to progress inthe healthcare industry, the Company will continue to participate in these activities for increasing the use ofinformation and communication technologies in the healthcare sector. The Company has been participating in ajoint research program with the Japan Medical Association, Japan Pharmaceutical Association and Nihon
University concerning an infectious disease outbreak notification service. Currently, about 10,000 pharmacies inJapan are using this service. In addition, consolidated subsidiary Brick Pharmacy Co., Ltd. operates a dispensing
pharmacy, and consolidated subsidiary LASANTE Co., Ltd. operates fitness clubs, a conference room rental
business and a nursery school business.
The Health Care-Nursing Care Cooperation Business Division made no contribution to sales and earnings in thefirst nine months of the current fiscal year because full-scale operations started in the second half of the fiscalyear. Sales in the dispensing pharmacy business increased because there were more business days than in the firstnine months of the previous fiscal year. However, earnings were lower than one year earlier in part because ofrevisions to drug dispensing fees and NHI drug prices. LASANTE’s performance exceeded the first nine-monthplan, although sales and earnings were down from one year earlier due to the reorganization of this company’soperations. Sales in this segment were 737 million yen (down 6.8% year on year) and operating loss was 8 million
yen (compared with operating income of 90 million yen one year earlier).

3

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17(2) Explanation of Financial Position
AssetsAt the end of the first nine months of the current fiscal year, current assets were 9,813 million yen, an increase of
55 million yen from the end of the previous fiscal year. This was mainly due to a 30 million yen increase in cash
and deposits. Non-current assets decreased 287 million yen to 10,262 million yen, mainly because of a 151
million yen decrease in real estate for investment.
As a result, total assets decreased 232 million yen to 20,077 million yen.
Liabilities
Current liabilities decreased 984 million yen to 3,624 million yen. The main factors were decreases of 444 million
yen in income taxes payable and 200 million yen in short-term loans payable. Non-current liabilities decreased
401 million yen to 3,127 million yen, mainly due to a 390 million yen decrease in long-term loans payable.
As a result, total liabilities decreased 1,385 million yen to 6,752 million yen.
Net assets
Net assets increased 1,153 million yen to 13,325 million yen mainly because of an increase in retained earnings.
Consequently, the equity ratio was 65.9% (compared with 59.6% at the end of the previous fiscal year).
(3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements
There are no revisions at this time to the full-year consolidated earnings forecast that was announced on May 13,
2016 because of uncertainty about the performance after the first nine months of the current fiscal year of
dispensing pharmacies, which are the primary market for products of the Company. An announcement will bemade promptly if the Company decides that the forecast needs to be revised.
2. Matters Related to Summary Information (Notes)(1) Changes in Significant Subsidiaries during the Period
Not applicable to specified subsidiaries.
(2) Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements
The tax expense was calculated by first reasonably estimating the effective tax rate after the application of tax
effect accounting with respect to profit before income taxes during the fiscal year, and multiplying that rate by thequarterly profit before income taxes.
(3) Changes in Accounting Policies and Accounting-based Estimates, and Restatements
Changes in Accounting Policies
Application of Practical Solution on a Change in Depreciation Method due to Tax Reform 2016
Following the revision of the Corporation Tax Act, the Company has applied the “Practical Solution on a Changein Depreciation Method due to Tax Reform 2016” (Accounting Standards Board of Japan (ASBJ) Practical Issues
Task Force (PITF) No. 32, June 17, 2016) from the first quarter of the current fiscal year, and changed the method
for the depreciation of facilities attached to buildings and structures acquired on or after April 1, 2016, from thedeclining-balance method to the straight-line method.
The effect of this change on profit/loss is insignificant.

4

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17

3. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheet(Millions of yen)
Third quarter of FY3/17(As of Dec. 31, 2016)

FY3/16(As of Mar. 31, 2016)
AssetsCurrent assets
Cash and deposits

6,354

6,385

Notes and accounts receivable-trade

2,622

2,289

172

157

Merchandise and finished goods
Raw materials and supplies

10

Other

609

983

Allowance for doubtful accounts

(2)

(3)

9,757

9,813

Buildings and structures, net

862

839

Land

670

647

Leased assets, net

99

69

Rental assets, net

2520

Construction in progress

373

Other, net

98

75

1,761

1,726

313

288

6

3368

325

75696

622

7,418

7,266

Total current assets
Non-current assets
Property, plant and equipment

Total property, plant and equipment
Intangible assets
Software
Software in progress
Goodwill
Other
Total intangible assets
Investments and other assets
Real estate for investment, netNet defined benefit asset

132

134

Other541

513

Allowance for doubtful accounts

(0)

(0)

Total investments and other assets
Total non-current assets
Deferred assets
Total assets

58,091

7,913

10,54910,2623

220,31020,077

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17(Millions of yen)
Third quarter of FY3/17(As of Dec. 31, 2016)

FY3/16(As of Mar. 31, 2016)
Liabilities
Current liabilities
Notes and accounts payable-trade

915

747

Short-term loans payable

500

300

Current portion of long-term loans payable

590

526

Accounts payable-other

401

335

Lease obligations

61

50

Income taxes payable

718

274

Provision for bonuses

394

245

22

Other

1,024

1,142

Total current liabilities

4,609

3,624

1,778

1,387

61

38

Provision for point card certificates

Non-current liabilities
Long-term loans payable
Lease obligations
Net defined benefit liability

797

827

Provision for product warranties

220

178

Long-term guarantee deposited

671

695

3,528

3,127

8,137

6,752

Capital stock

2,306

2,364

Capital surplus

2,614

2,673

Retained earnings

7,435

8,460

Treasury shares

(223)

(223)

Total shareholders’ equity

12,132

13,275

Foreign currency translation adjustment

56

20

Remeasurements of defined benefit plans

(80)

(58)

Total accumulated other comprehensive income

(24)

(38)

64

88

12,172

13,325

20,31020,077

Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income

Subscription rights to shares
Total net assets
Total liabilities and net assets

6

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statement of Income(For the Nine-month Period)First nine months of FY3/16(Apr. 1, 2015 – Dec. 31, 2015)(Millions of yen)First nine months of FY3/17(Apr. 1, 2016 – Dec. 31, 2016)

Net sales

9,497

9,843

Cost of sales

4,445

4,310

Gross profit

5,052

5,532

Selling, general and administrative expenses

3,907

3,759

Operating income

1,144

1,773

Interest income

10Dividend income

9-Rent income of real estate707727

Gain on sales of securities

4-

Non-operating income

Other
Total non-operating income

97732

735

Non-operating expenses
Interest expenses

1913Rent expenses on real estates

290

282

Other

3423

Total non-operating expenses

343

319

1,533

2,189

226

-

Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on reversal of subscription rights to shares

2-

Gain on sales of non-current assets-11228110

3Loss on sales of non-current assets-11

Loss on cancellation of leases

80

Loss on liquidation of subsidiaries and associates

1-Total extraordinary losses

915

1,752

2,185

Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets

Profit before income taxes
Income taxes

549748

Profit

1,202

1,436

Profit attributable to owners of parent

1,202

1,436

7

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17

Quarterly Consolidated Statement of Comprehensive Income(For the Nine-month Period)First nine months of FY3/16(Apr. 1, 2015 – Dec. 31, 2015)(Millions of yen)First nine months of FY3/17(Apr. 1, 2016 – Dec. 31, 2016)

1,202

1,436

Valuation difference on available-for-sale securities(3)-Foreign currency translation adjustment

(1)

(35)

Remeasurements of defined benefit plans, net of tax

1321

ProfitOther comprehensive income

Total other comprehensive income
Comprehensive income

9(14)

1,212

1,422

1,212

1,422

-

-

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

8EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/17(3) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Changes in Shareholders’ Equity
Not applicable.

This financial report is solely a translation of the Company’s Kessan Tanshin (including attachments) in Japanese, which has been
prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who
prefer an English translation.

9