FOR TRANSLATION PURPOSE ONLYDISCLAIMER
This English translation is only for reference purpose. When there are any discrepancies between original
Japanese version and English translation version, the original Japanese version always prevails.
May 11, 2016

Summary of Financial Results for the Fiscal Year Ending March 31, 2016
[Japanese standards] (Consolidated)
Stock Exchange listings: Tokyo

Company name:
SATO RESTAURANT SYSTEMS COMPANY LIMITED
Securities code:
8163
URL: http://www.sato-restaurant-systems.co.jp
Representative:
Yoshitaka Shigesato, President & Chief Executive Officer
Contact:
Tsuyoshi Taguchi, Director & Head of Corporate Planning Division
Tel: +81-6-7222-3101
Scheduled date of ordinary general meeting of shareholders:June 29, 2016
Scheduled date of payment of dividend:
June 30, 2016
Scheduled date of filing securities report:
June 30, 2016
Preparation of supplementary references regarding financial results: No
Holding the briefing of financial results:
Yes (For institutional investors and analysts)(All amounts are rounded down to the nearest million yen)( means negative)

1. Financial results of the Fiscal Year Ending March 31, 2016 (April 1, 2015 – March 31, 2016)(1) Consolidated operating results(Percentages represent changes from previous year)
Net Sales

Operating income

Income attributable toowners of parent

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen%

40,06137,969

5.5
15.9

542
1,183

54.2
33.1

361
1,330

72.8
57.2

6
840

99.2
63.5

FY03/2016
FY03/2015(Note) Comprehensive income

FY03/2016: 126 million yen (－%)
FY03/2015: 974 million yen (93.8%)

Net income
per share

Diluted net income
per share

Ratio of net income
to equity

Ratio of ordinary
income to total assets

Ratio of operating
income to sales

Million yen

%

%

%

0.1
8.5

1.4
5.5

1.4
3.1

Million yen

FY03/2016
FY03/2015

－
－

0.21
29.79

FY03/2016: － million yen
FY03/2015: － million yen(Reference) Equity in earnings of affiliated companies(2) Consolidated financial position
Total assets

Equity ratio

Net assets per share

Million yen%

Yen27,82024,272

14,531
10,45651.8
42.5

434.35365.89FY03/2016
FY03/2015(Reference) Shareholders equity

Net assets

Million yen

FY03/2016:
FY03/2015:

14,424 million yen
10,321 million yen(3) Consolidated cash flow status
Cash flow fromoperating activities

Cash flow frominvestments

Cash flow fromfinancial activities

Balance of cash andcash equivalents

Million yen

Million yen

Million yen

Million yen

1,261
2,721

1,579
1,2203,246
1,597

8,616
5,532

FY03/2016
FY03/2015

2. Dividends
Annual dividend
1Q-end2Q-endYen

FY03/2015
FY03/2016
FY03/2017(forecasts)－－－

3Q-endYen

Year-end

Yen

－
－
－

－
－
－

Annual

Total
Dividend
dividends
ratio(consolidated) (consolidated)

Ratio of dividends
to net assets(consolidated)

Yen

Yen

Million yen

%

%

5.00
5.00
5.00

5.00
5.00
5.00

141
166

16.8
2,331.2
41.5

1.4
1.3

3. Consolidated performance forecasts for the Fiscal Year Ending March 31, 2017 (April 1, 2016 – March 31, 2017)(Percentages represent changes from previous year;  means negative)

Net sales
Million yen%

2Q (cumulative total)

20,900

6.1

Full term

43,400

8.3

Income attributable toowners of parent

Operating income

Ordinary income

Million yen%

Million yen%

Million yen

310 38.5
850
56.8

330

22.9
160.1

20
400

940

Net income
per share
%

－
－

Yen

0.60
12.04

FOR TRANSLATION PURPOSE ONLY
*Notes(1) Changes in important subsidiaries during the current period(changes in specific subsidiaries resulting in modifications of the consolidation scope): None
New company: None
Excluded company: None
(2) Changes in accounting principles, changes and restatements of accounting estimates
1) Changes in accounting principles caused by revision of accounting standards:
2) Changes other than 1):
3) Changes in accounting estimates:
4) Restatements:

Yes
None
None
None

(3) Number of outstanding shares (common shares)
1) Number of shares outstanding at the end of the period (including treasury stock)
FY03/2016:33,209,080 shares
FY03/2015:
28,209,080 shares
2) Number of treasury stock at the end of the period
FY03/2016:
212 shares
FY03/2015:
163 shares
3) Average number of shares outstanding during the period
FY03/2016:
32,055,055 shares
FY03/2015:
28,208,952 shares(Reference) Unconsolidated business results
1. Unconsolidated business results of the Fiscal Year Ending March 31, 2016 (April 1, 2015 – March 31, 2016)(1) Unconsolidated operating results(Percentages represent changes from previous year;  means negative)

Net Sales

FY03/2016
FY03/2015

Operating income

Ordinary income

Net income

Million yen%

Million yen%

Million yen%

Million yen%

33,17329,064

14.1
8.8

113
735

84.6
3.1

159
921

82.7
25.0

11
606

98.2
27.4

Net income per share

Diluted net income per share

Yen

FY03/2016
FY03/2015

Yen

－
－

0.35
21.51

(2) Unconsolidated financial position
Total assets

FY03/2016:
FY03/2015:

Equity ratio

Net assets per share

Million yen%

Yen

25,723
21,841

14,183
10,07655.1
46.1

427.11357.22

FY03/2016
FY03/2015(Reference) Shareholders equity

Net assets

Million yen

14,183 million yen
10,076 million yen

2. Unconsolidated forecast for the Fiscal Year Ending March 31, 2017 (April 1, 2016 - March 31, 2017)(Percentages represent changes from previous year;  means negative)

Net sales

Ordinary profit

Net income

Net income per share

Million yen%

Million yen%

Million yen%

Yen

2Q (cumulative total)

17,100

5.3

110

68.7

100

－

3.01

Full term

35,700

7.6

570

256.8

260

－

7.83

* Presentation concerning implementation status of audit proceduresThis summary of financial results are not the subject of a review procedure based on the Financial Instruments andExchange Act, and at the time of disclosing this summary of financial results, review procedures regarding thefinancial statements based on the Financial Instruments and Exchange Act has not been completed.
* Explanation regarding appropriate use of the earnings forecast and other special notes
Descriptions about the future such as performance forecasts contained in this document are based on information
currently available to the Company and certain presumptions considered to be reasonable, and therefore actual
business performance and other elements may differ substantially due to various factors.

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY
○ Table of Contents: Appendix

1. Operating results ................................................................................................................................................... 2(1) Analysis on operating results .............................................................................................................................. 2(2) Analysis on financial position............................................................................................................................. 3(3) Basic principle of profit allocation and dividends for the current/next term ...................................................... 5(4) Risk of businesses ............................................................................................................................................... 5
2. Corporate group ....................................................................................................................................................... 7
3. Management policy .................................................................................................................................................. 8(1) Basic policy of managing the Company ............................................................................................................. 8(2) Management indicators to be the targets............................................................................................................. 8(3) Middle-and-long term management strategies .................................................................................................... 8(4) Issues to be addressed ......................................................................................................................................... 8
4. Basic idea for the selection of accounting standards ................................................................................................ 8
5. Consolidated financial statements ............................................................................................................................ 9(1) Consolidated balance sheets ............................................................................................................................... 9(2) Consolidated statement of income and statement of comprehensive income ..................................................... 11
Consolidated statement of income ...................................................................................................................... 11
Consolidated statement of comprehensive income ............................................................................................. 13(3) Consolidated statements of shareholders' equity ................................................................................................ 14(4) Consolidated cash flow statement ....................................................................................................................... 15(5) Going concern assumption.................................................................................................................................. 16(6) Significant information regarding the preparation of consolidated financial statements .................................... 16(7) Notes on consolidated financial statements ........................................................................................................ 18(Change in accounting principles) ...................................................................................................................... 18(Change in presentation)..................................................................................................................................... 18(Consolidated balance sheets) ............................................................................................................................ 19(Consolidated profit and loss statement) ............................................................................................................ 20(Consolidated statement of comprehensive income) .......................................................................................... 21(Consolidated statement of changes in net assets) .............................................................................................. 22(Consolidated cash flow statement) .................................................................................................................... 24(Segment information, etc.) ................................................................................................................................ 25(Per share data) ................................................................................................................................................... 26
6. Others ....................................................................................................................................................................... 27(1) Change in directors ............................................................................................................................................. 27(2) Others.................................................................................................................................................................. 27

1

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

1. Analysis on operating results and financial position(1)
Analysis on operating results①

Consolidated performance
Actualresults

FY03/2015+/- amounts
YoY

+/-%
YoY

FY03/2016+/- amounts
YoY

Actualresults+/-%
YoY

Net sales

37,969

5,206

15.9%

40,061

2,091

5.5%

Operating income

1,183

294

33.1%

542

641

54.2%

Ordinary income

1,330

483

57.2%

361

968

72.8%

840

326

63.5%

6

833

99.2%

Income attributableowners of parentto

As for consolidated performance of the current consolidated fiscal year, net sales increased due to increase in
number of restaurants in operation and relatively solid growth of sales of existing restaurants. Profitability in thecurrent fiscal year was, as described in the document "Notice of amendment to performance forecasts" published on
Apr. 28, 2016, lower as compared to the previous year, due to (in addition to the decision to pay unpaid wages forovertime working for the preceding two years) such as increase in labor cost because of raised hourly wages forpart-time employees, increase in expenses associated with opening new restaurants, and occurrence of foreignexchange losses.
②

Measures for opening new restaurants

Category

As of end of theprevious consolidated
fiscal year

Newly opened
restaurants

Closedrestaurants(numbers of restaurants)
Planned to open
As of end of theduring the current
current consolidated
consolidated fiscal
fiscal year
year

Washoku Sato

198 (－)

3 (－)

－ (－)

201 (－)

3 (－)

Sushi-han

14 (－)

－ (－)

－ (－)

14 (－)－ (－)

Tendon & Tenpura
restaurant Santen

12 (－)

10 (－)－ (－)

22 (－)

20 (4)

Nigiri Chojiro

52 (－)

1 (－)

－ (－)

53 (－)

4 (－)

Nigiri Chujiro

3 (－)

3 (－)

－ (－)

6 (－)

3 (－)

Katsuya23 (11)

6 ( 3)1 (－)

28 (14)16 (10)

Miyakobito

21 (20)－ (－)

3 ( 3)

18 (17)－ (－)

323 (31)23 ( 3)
NOTE: Numbers in parentheses represent FC restaurants

4 ( 3)

342 (31)46 (14)Total

In the current consolidated fiscal year, that is, the second year of our mid-term management plan, total 46 of
directly managed and FC restaurants were planned to be opened; in practice, however, 3 directly managed "Washoku
Sato" restaurant, 10 directly managed "Tendon & Tenpura restaurant Santen", 1 directly managed "Nigiri Chojiro"
restaurants, 3 directly managed "Nigiri Chujiro", 6 "Katsuya" restaurants including 3 directly managed and 3 FC
restaurants were newly opened, totaling 23 new restaurants among all categories during the current consolidated fiscal
year. It should be noted that in addition to the abovementioned restaurants already in operation, contracts have been
executed for opening 18 new restaurants (as of March 31, 2016). Meanwhile, 1 directly managed "Katsuya" restaurantand 3 FC restaurants of "Miyakobito", totaling 4 restaurants were closed.
As part of overseas development, President Chain Store Corp. ("PCSC") and President Sato Co., Ltd. ("PSC")
which had been established in Taiwan with responsibilities for developing business of "Washoku Sato" restaurants,
were transferred to the Group together with their entire shares as of February 26, 2016, having become one of thewholly-owned subsidiaries. For this reason, it renamed to SRS Taiwan Company Limited. From now on, SRS Taiwan
will put its efforts into agile restaurant management and opening more new restaurants. In addition, 1 new restaurant
in Indonesia and 2 new restaurants in Thailand were opened, whereas 3 restaurants in Taiwan were closed, so
currently there are 6 restaurants in operation overseas.
These developments have resulted in 348 restaurants of the entire Group in operation domestic and overseas at
the end of the current fiscal year.

2

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY③

Other measures

With respect to human resource measures, 8 female regular employees who had been promoted to regular employees
from part-time workers following the "short-time regular employee system" adopted in October, 2014, have been newly
appointed as store managers. Such enhanced system will make it possible for us to put our efforts to arrange working
environment for our employees to work in a comfortable and stable way, by means of, for example, further driving active
participation of female staff and providing working environment in harmony with changes in their personal life stages.
As operational measures at "Washoku Sato" restaurants, programmable IH cooking heaters have been installed atevery restaurant thereby enhancing basic menu such as "Oyako-don" (bowl of rice topped with boiled chicken and eggs),
and improving efficiency in cooking processes and quality stablity. Moreover, in order to increase sales of "Sato-Shabu"
being the core menu of all-you-can-eat style Shabu-Shabu, "Buta-Shabu" (featuring pork) course has been newly added andoffered at every restaurant.
At "Santen" restaurants, seasonal fair menus are brought forward 7 times in a year in an attempt to attract morecustomers coming more frequently, and at the same time, delivery service started at 3 restaurants, all of which have received
much appreciation.
At "Nigiri Chojiro" restaurants, seasonal menus have been updated and offered every several weeks so that customers
could enjoy various dishes using seasonal fresh materials. Furthermore, foodstuffs direct from the origins such as "Barfin
flounder" are sold in limited quantities, which also have received very much appreciation. In addition, investment inrenovating existing restaurants was actively carried out, including installation of elevator at Uenoshiba branch for purposeof greater convenience.
As part of our efforts across restaurant categories, for purposes of more efficient store operations and improved
working environment, business hours were reviewed and changes were made to times when last orders are taken.
It should be noted that the Group is a single segment of food service business and therefore description of segmental
performance is omitted.
④

Forecasts for the next term

For the next term Japanese economy expects some demand rise associated with growing number of inbound travelers
from abroad, whereas the environment surrounding company management would remain hard due to, on top of decline in
consumer confidence caused by reduced real wages, increased labor cost caused by rising hourly wage, recruitment cost,and expanded scope of social insurance system, etc. In these circumstances, the Group will put its efforts into various
measures focusing on further accelerated opening of new restaurants and increasing profitability, in order to achieve its goalof "being an essential social infrastructure and prosper over 100 years to come" as described in the mid-term management
plan. As for opening of new restaurants, the Group plans to open 4 directly managed "Washoku Sato" restaurants, 25"Tendon & Tenpura restaurant Santen" including 20 directly managed and 5 FC restaurants, 6 directly managed "Nigiri
Chojiro" restaurants, 4 directly managed "Nigiri Chujiro" restaurants, 11 "Katsuya" restaurants including 5 directly
managed and 6 FC restaurants, namely totaling 50 new restaurants. As part of its efforts towards increasing profitability, inorder to minimize influence of steep price rise of raw materials, the Group will further promote improved purchasing powerby using foodstuff common to multiple restaurants and increase proportion of materials directly imported from overseas, aswell as more efficiency in indirect business operations by grouping together financial and accounting departments. Also, in
response to rising labor costs, the Group will continue to build up a mechanism enabling restaurant operations with properlabor costs while observing labor legislation by means of store assistance system, and will try to improve retention of
employees by, for example, enhancing employees evaluation scheme and recruit scheme of regular employees.
In such context, consolidated performance for the next term is at present expected as net sales of 43,400 million yen,operating income of 850 million yen, ordinary income of 940 million yen and income attributable to owners of parent of
400 million yen.

(2)

Analysis on financial position①

Status of assets, liabilities and net assets
Total assets at the end of the current consolidated fiscal year was 27,820 million yen (increase by 3,548 million yen

YOY).
Current assets was 10,765 million yen (increase by 3,239 million yen YOY). It comprises mainly, for example,
increase in cash and deposits by 3,084 million yen and increase in deferred tax assets by 62 million yen.
Non-current assets was 17,053 million yen (increase by 311 million yen YOY). It comprises mainly, for example,
increase in intangible assets - other by 154 million yen and increase in long-term loans receivable by 134 million yen.
Current liabilities was 7,352 million yen (increase by 67 million yen YOY). It comprises mainly, for example,
increase in accounts payable - other by 451 million yen, decrease in reserve for bonuses by 199 million yen and decrease incurrent liabilities - other by 186 million yen.
Non-current liabilities was 5,936 million yen (decrease by 594 million yen YOY). It comprises mainly, for example,
decrease in long-term loans payable by 638 million yen and increase in lease obligations by 65 million yen.
Net assets was 14,531 million yen (increase by 4,074 million yen YOY).

3

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY②

Cash flow status

Cash and cash equivalents (hereinafter, "business fund") at the end of the current consolidated fiscal year was
8,616 million yen (increase by 3,084 million yen YOY).
Each cash flow status and factors thereof in the current consolidated fiscal year are as follows.
(Cash flow from operating activities)
Business fund resulting from operating activities was 1,261 million yen (whereas it was 2,721 million yen in theprevious consolidated fiscal year). It comprises mainly, for example, net income before income taxes of 248 million
yen and depreciation of 1,369 million yen.
(Cash flow from investment activities)
Business fund used for investment activities was 1,579 million yen (whereas it was 1,220 million yen in theprevious consolidated fiscal year). It comprises mainly, for example, purchase of property, plant and equipment of 867
million yen, payments of construction assistance fund receivables of 278 million yen, and purchase of intangible
assets of 242 million yen.
(Cash flow from financial activities)
Business fund resulting from financial activities was 3,246 million yen (whereas 1,597 million yen was spent in
the previous year). It comprises mainly, for example, proceeds from issuance of common stock of 4,313 million yen,
net decrease in long-term loans payable by 605 million yen and repayment of finance lease obligations of 221 million
yen.
(Reference) Transition of cashflow-related indicators
FY03/2012

FY03/2013

FY03/2014

FY03/2015

FY03/2016

Equity ratio (%)

37.1

46.3

39.6

42.5

51.8

Equity ratio based on market value (%)

78.1

84.2

91.4

123.4

94.1

Ratio of cash flow to interest-bearing
liabilities (year)

6.1

4.6

7.9

3.0

6.0

Interest coverage ratio (times)

7.4

9.3

7.5

17.7

9.1

Equity ratio: Equity / Total assets
Equity ratio based on market value: Aggregate market value / Total assets
Ratio of cash flow to interest-bearing liabilities: Interest-bearing liabilities / Cash flow
Interest coverage ratio: Cash flow / Interest payment
NOTES:
1. Aggregate market value is calculated based on the number of shares issued, excluding treasury stock.
2. Cash flow from operating activities is used.
3. Interest-bearing liabilities include all the liabilities listed on the balance sheet for which interests have been paid.

(3)

Basic principle of profit allocation and dividends for the current/next term

Basic idea concerning profit allocation is that in principle it should be determined according to businessperformance, and the Company does not prefer an idea towards keeping a certain level of dividend ratio but has its
policy to retain as much stable dividends as possible. We would like to earmark our retained earnings for investment
in opening new restaurants and in renovation of existing restaurants so that the Company's business quality could beenhanced. Under the abovementioned policy, the Company has carried out business reform to enhance its profitability
and endeavored to improve its financial strength. The Company has, taking into account comprehensively its businessdevelopment in the future and retained earnings, decided to provide year-end dividend of 5.00 yen per share. And also
for the next term, it is expected that year-end dividend of 5.00 yen per share would be paid out.
In accordance with the resolution adopted at the 43rd annual meeting of shareholders held on June 29, 2011, theCompany's articles of incorporation include a stipulation that "The Company may provide dividends of surplus upon
resolution by its board of directors, pursuant to Article 459, Section 1 of the Company Act of Japan".
Dividend of surplus for the current fiscal year is as follows.
Date of resolution

Total amount of dividend(thousand yen)

May 11, 2016
Board of directors

166,044

4

Dividend per share
(yen)
5.00

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

(4)

Risk of businesses

Potential risk factors which may have some impact on, for example, the Group's operating results, share priceand financial position include the following.
It should be noted that descriptions concerning the future in the text are based on judgement of the Company asof the end of the current consolidated fiscal year.
①

Sales fluctuations
The Group operates restaurants as its core business and therefore if sales is substantially reduced due to someevents causing significant decline in incentive for consumers to dine out, namely adverse effects such as large scale
natural disaster, social disruption caused by war and terrorism, new infectious disease, and abnormal weather during
busy season, operating results may be affected.
②

Trend of competition
In the food service industry in which the Group does its business, it is predicted that competition withhome-meal replacement industry such as convenience stores and delicatessens would be tougher, as well as that withconventional competitors. If the Group fails to provide highly value-added commodities meeting consumer needs,
such situation may lead to decline in market share and in brand power of commodities, and eventually operating
results may be affected.
③

Dependence on main restaurant category
Majority of consolidated sales of the Group depends on "Washoku Sato" restaurants. In order to grow out ofsuch dependence on a single category, the Group puts its efforts into fostering other categories such as "Santen","Nigiri Chojiro" and "Katsuya" restaurants, but it still depends heavily on "Washoku Sato" restaurants and therefore
operating results may be affected by business performance of them.
④

Food safety
The Group operates various restaurants as "restaurant business" based on Food Sanitation Act of Japan. As thehighest priority, the Group has organized its internal regime such as appointing persons responsible for "safety andsanitation, SRS Group audit office", and regularly inspects compliance with nationally established criteria, quality
control status of foodstuff and sanitary control conditions of the restaurants. However, if ever any severe problem
questioning food safety occurs inside or outside the Company, operating results may be affected.
⑤

Purchase price fluctuations and stable procurement
Operating results may be affected in the event of substantial fluctuations in prices of items to be purchased andin supplied amount due to, for example, abnormal weather and large scale natural disaster, international conflict,safety issues such as residual pesticides and food additives, outbreak of infectious diseases of livestock, and exchange
rate fluctuations.
⑥

Opening new restaurants
The Group mainly operates Japanese restaurants chains and therefore if appropriate sites for opening newrestaurants could not be acquired or if the Company is forced to withdraw due to unexpected change in roads aroundany planned site for opening new restaurant and/or in development conditions, or due to significant change in location
environment caused by any competitor restaurant opening in the neighborhood, operating results may be affected.
⑦

Dependence on leased properties for restaurants
The Group has most of its offices and premises on leased properties. Duration of lease contract can be renewed
upon agreement with the lessor, whereas lease contract might be terminated due to some reason on the part of thelessor. Unplanned withdrawal might occur due to early termination of lease contract.
In addition, guarantee deposits have been provided to lessors based on contracts with each of them. Although
the Group pays adequate attentions to situations of lessors to ensure recovery of deposits, if such recovery is difficult
due to, for example, bankruptcy of a lessor, operating results may be affected.
⑧

Interest-bearing liabilities
The Group raises funds for opening new restaurants and for other purposes from financial institutions and othersources. Although it aims to operate with conservative financial policies including reduction in outstanding
interest-bearing liabilities, operating results may be affected in the event of interest rate fluctuations.
⑨

Impairment loss and loss on withdrawal
The Group applies "accounting standard for impairment of non-current assets". In the event of significant
decline in profitability in any of the Group's restaurants due to, for example, striking change in external environment,
impairment loss may be declared thereby affecting operating results.
In addition, some underperforming restaurants have been closed based on our withdrawal criteria. If any loss onretirement of non-current assets, any penalty and/or subleasing cost for the relevant property occur upon withdrawal,
or if some allowance should be allocated for expected loss on such withdrawal, operating results may be affected.
⑩

Control of personal information
The Group manages and uses information handled and/or collected by each group companies (including(specific) personal information) as its significant resources. Despite maximum efforts to control personal information,
5

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

including outsourcing those matters related to the governmental "My Number" system to an external professional
agent, operating results may be affected in the event of leak of personal information for some reason that could cause
compensation for damage and collapse of social trust.
⑪

Retaining human resources
In order to continue smooth operation of the Group's business, retaining and fostering human resources
including short-time workers are of importance. The Group puts its efforts into retaining human resources including
personnel relocation and mid-career employment. However, operating results may be affected if in the future humanresources could not be retained as planned or in case of unexpectedly sharp rise in labor costs due to recruit
environment.
⑫

Labor issues
The Group, not only restaurants but also including headquarters, in order to prevent labor issues, puts its efforts
into building up compliance scheme concerning working hours administration and other matters together withawareness raising among employees, and has established its own helpline as internal & external "consultation desk for
employees". However, should any labor issue occur, claim from any injured party for damage, declined
creditworthiness of the Group and other factors might have some impact on the Group's brand image, and even on its
operating results.
⑬

Natural disaster and others
The Group's bases of production, logistics, sales, information control facilities and others may suffer enormous
damage from natural disaster such as earthquake and typhoon. Although the Group inspects its out facilities regularly,
impacts from these disasters may not be completely prevented or mitigated. In the event of natural disaster such aslarge scale earthquake and typhoon, operating results may be affected due to interruption of production activities andto delay in product supply.
⑭

Impairment of goodwill
The Group allocates substantial amount of goodwill associated with acquisition of a corporation on the
consolidated balance sheets. Such allocation of goodwill is considered as properly reflecting the future profitability,
whereas should outcome be less than expected, then impairment loss may be declared for the relevant goodwill
thereby affecting financial position and operating results of the Group.
⑮

Risk in overseas businessIn developing overseas business, there exist various potential risks including laws, systems,
political/economic/social circumstances, cultures, business practices, foreign exchanges in countries where the Group
operates, and if it could not proceed with business development as planned because of, for example, being unable todeal with such risks, operating results may affected by necessity for handling impairment of investment (e.g. handling
impairment of investment securities).

6

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

2. Corporate group
The Group consists of the Company and its four affiliates, main business of which is operating family
restaurants.
Description of the Group's business, relationship with the Company, and systematic chart of business are asshown below.
(1)

Description of the Group's business and relationship with the Company[Operating family restaurants]

The Company operates family restaurants centering on Japanese cuisine. SATO
ARCLAND FOOD SERVICE CO., LTD. operates and manages 14 "Katsuya"
restaurants in Kansai area. FOODSNET Corp. operates and manages 53 "Nigiri
Chojiro" restaurants, 1 "Miyakobito" restaurant and 6 "Nigiri Chujiro" restaurants in
Kansai and Kanto areas. SRS Taiwan Co., Ltd. operates and manages 1 "Wasoku
Sato" restaurant in Taiwan.

[Others]

Space Supply Co., Ltd. engages mainly in real estate leasing.

(2)

Systematic chart of business

Customers
providecommodities

real-estateleasingprovidecommodities

SATO ARCLAND FOODSERVICE CO., LTD.

providecommodities

FOODSNET Corp.

sell raw materials

SATO RESTAURANT SYSTEMS
CO., LTD.

real-estate leasing

Space Supply
Co., Ltd.

SRS Taiwan Co., Ltd.

7

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

3. Management policy(1)
Basic policy of managing the Company
The Group's philosophy is "Contributing to society through food" and aims to realize good life by establishing"food" that is the most important element for people to live as its pillar of business and by providing opportunities toenjoy affluent meals, with its basic policy of being "the restaurant that brings the highest customer satisfaction" as acompany which is essential for the community.
(2)Management indicators to be the targets
The Group has set its goal of increasing ratio of ordinary income on sales, as one of important management
indicators towards improved corporate value and enhanced shareholders profit. Also, it has set its goal to achieve ratioof ordinary income on sales of 5% as its middle-and-long term goal.
(3)

Middle-and-long term management strategies
As middle-and-long term management strategies and towards the basic policy of being "the restaurant thatbrings the highest customer satisfaction", the Group will put its efforts into various business challenges with threeimportant themes of "lowering break-even point by improved productivity", "continued opening new restaurants of
conventional categories and accelerated opening new restaurants in new business domain", and "fundamental reformof financial structure".
(4)

Issues to be addressed
For achieving its middle-and-long term management strategies, the Group continues to consider the years tocome as "periods of growth and development", bring forward the fast-casual categories of "Santen" and "Katsuya"
restaurants as its growth drivers, and put its efforts into various measures so that they would get on track of growthand expansion as early as possible.
Specifically, for "Santen" restaurants, early formation of dominant areas by accelerated opening of newrestaurants will be promoted along with opening them in new areas, business districts and shopping centers, as well as
opening as FC affiliates. For "Katsuya" restaurants, the Group will accelerate further opening new directly managed
and FC restaurants in Kansai area aiming at, like "Santen" restaurants, early formation and expansion of dominant
areas. At "Washoku Sato" restaurants, main category of the Group, it continues to enhance sales of its core menu of"Sato-Shabu" (all-you-can-eat style Shabu-Shabu) and measures for attracting wider range of customers, while forpurpose of profitability it aims at higher efficiency in restaurant operations by table order system using tablet
terminals and functionally strengthened store assistance system. In addition, continued opening new restaurants inpotential areas will take place mainly in Chubu region in Japan.
And at "Nigiri Chojiro" restaurants, the Group continues to realize synergies generated by them forming part of
the Group, and works on management efficiency centered on cost reduction in purchasing by using common materials
and by higher logistic efficiency, along with fostering human resources for opening new restaurants. Proactively
opening new restaurants will also be driven within the Group's logistics network.
In terms of finance, the Group continues putting its efforts to make more sound financial structure by
diversified fund-raising.
As previously announced on April 28, 2016, the Group decided to pay unpaid wages for overtime working forthe preceding two years. The Group shall accept this fact of the matter seriously, and, for purpose of more intensive
compliance, continue to examine its compliance status by means of internal control system, together with reforming
corporate climate and awareness-raising including eradication of working long hours.Also, as part of corrective
measures against improper treatment in working hours administration such as compliance violations and others, newhelpline will be established as an external consultation desk associated with a law firm in addition to the pre-existing
helpline, so that a mechanism could be reinforced to prevent various problems beforehand and respond promptly, bybuilding up such mechanism in which one could consult directly with that external desk.
4. Basic idea for the selection of accounting standards
The Group has decided to adopt Japanese accounting standards for the time being, but taking into account thetrend in proportion of foreign shareholders and in adoption of International Financial Reporting Standards (IFRS) atother domestic companies, it looks to consider when IFRS should be adopted.

8

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

5. Consolidated financial statements(1) Consolidated balance sheets(Thousand yen;  means negative)

Previous consolidated
fiscal year
(Mar. 31, 2015)

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade
Merchandise
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Land
Lease assets
Accumulated depreciation
Lease assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investment and other assets
Investment securities
Long-term loans receivable
Guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Deferred assets
Total assets

5,532,308
541,833
36,395
651,647
250,648514,238
477
7,526,595

10,765,840

17,075,451※3 14,242,874※2 2,832,576
714,244※3 593,039
121,205※2, ※4 4,742,506
1,601,603※3 483,416
1,118,187
49,6503,005,858※3 2,500,593
505,264
9,369,391

17,644,900
14,892,714※2 2,752,185
738,969※3 631,411
107,558※2, ※4 4,742,506
1,839,803※3 659,886
1,179,916
28,341
3,242,428※3 2,679,506
562,922
9,373,431

1,206,282
822,9902,029,273

1,116,373
977,751
2,094,124822,623
698,913
3,051,899
401,559
383,435
14,665
5,343,765
16,742,431
3,259
24,272,286※1, ※29

Current consolidated
fiscal year
(Mar. 31, 2016)

8,616,381
603,001
41,279710,854
312,739
481,583－

805,407
833,7443,039,010
445,963475,766
13,505
5,586,386
17,053,942
649
27,820,432※1, ※2

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

(Thousand yen;  means negative)

Previous consolidated
fiscal year
(Mar. 31, 2015)

Liabilities
Current liabilities
Accounts payable - trade
Current portion of bonds
Current portion of long-term loans payable
Lease obligations
Accounts payable-other
Income taxes payable
Reserve for bonuses
Provision for loss on store closing
Other
Total current liabilities
Non-current liabilities
Bonds
Long-term loans payable
Lease obligations
Deferred tax liabilities for land revaluation
Deferred tax liabilities
Provision for directors’ retirement benefits
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Revaluation reserve for land
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets※2

1,111,667
100,000
2,403,186
214,976
1,686,382
297,104
471,966

Current consolidated
fiscal year
(Mar. 31, 2016)※2－

999,149
7,284,433
50,0004,398,835
989,588※4 289,282
84,71931,403
478,446
208,637
6,530,912
13,815,345※2

10

1,179,980
50,0002,437,500
221,793
2,137,639
230,746
272,916
8,599
812,967
7,352,143

7,352,143
3,759,945
1,055,259※4 274,908
83,74529,578510,772
222,218
5,936,428
13,288,571※2

6,361,756
2,810,575
1,535,148
129
10,707,350

8,532,856
4,981,675
1,400,978
173
14,915,337

228,418※4 614,436
386,018
135,607
10,456,940
24,272,286

108,976※4 600,061
491,085
107,608
14,531,860
27,820,432

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

(2) Consolidated statement of income and statement of comprehensive income)(Consolidated statement of income)(Thousand yen;  means negative)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Directors’ compensations
Salaries and allowances
Employees' bonuses
Provision for bonuses
Welfare expenses
Retirement benefit expenses
Utilities expenses
Supplies expenses
Rent expenses
Repair expenses
Depreciation
Miscellaneous expenses
Amortization of goodwill
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
House rent income
Foreign exchange gains
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Expenses of real estate rent
Foreign exchange losses
Stock issuance cost
Miscellaneous loss
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on sales of noncurrent assets
Loss on valuation of investment securities
Loss on cancellation of rental contracts
Impairment loss
Provision for loss on store closing
Total extraordinary losses
Income before income taxes and minority interests
Income taxes - current
Income taxes - deferred
Total income taxes
Net income or loss ()Net income or loss () attributable to non-controlling interests
Net income attributable to owners of parent

11

Previous consolidated
fiscal year
(Apr. 1, 2014
- Mar. 31, 2015)
37,969,881
12,979,959
24,989,921

Current consolidated
fiscal year
(Apr. 1, 2015
- Mar. 31, 2016)
40,061,632
13,864,299
26,197,333

143,430
10,721,630
251,647
461,972
892,368
206,598
1,817,141
1,034,995
3,935,700
408,026
1,314,188
2,528,726
89,90923,806,336
1,183,585

174,280
11,992,955
284,954
268,467
1,005,468
207,339
1,678,394
1,130,375
4,048,411
439,064
1,360,673
2,974,872
89,90925,655,166
542,166

12,94417,082
101,982
220,910
77,904
430,822

14,18917,762
100,153－
50,295
182,400

153,954
83,883－－
46,477284,3151,330,092

138,821
81,22765,79828,26149,031
363,140
361,427

4,129
4,129

－
－

※1

24,733－26,0842,400－－
53,217
1,281,004
417,944
16,780434,724
846,279
5,822
840,456※1

17,51013,128－5,541※2 68,256
8,599
113,036
248,390339,772※2

70,257
269,514

21,124
27,999
6,875

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY(Consolidated statement of comprehensive income)(Thousand yen;  means negative)

Previous consolidated
fiscal year
(Apr.1, 2014
- Mar.31, 2015)

Net income or loss ()Other comprehensive income
Valuation difference on available-for-sale securities
Revaluation reserve for land
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

12※

Current consolidated
fiscal year
(Apr.1, 2015
- Mar.31, 2016)

846,279

21,124

97,31130,545
127,856
974,135

119,441
14,374
105,067
126,191

968,3135,822※

98,191
27,999

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

(3) Consolidated statements of shareholders' equity
Previous consolidated fiscal year (Apr. 1, 2015 - Mar. 31, 2015)(Thousand yen;  means negative)

Shareholders’ equity
CapitalsurplusCapital stock
Balance at the start of current period

6,361,756

Retainedearnings

2,810,575

779,318

Treasury
stock
85

Total
shareholders’equity9,951,564

Changes of items during the period
Issuance of new shares
Dividends from surplus

84,626

84,626

Income attributable to owners of parent

840,456

840,456

Purchase of treasury stock

43

43

Changes of items other thanshareholders' equity (net)Total changes of items during the period
Balance at the end of current period－－

755,829

43755,786

6,361,756

2,810,575

1,535,148

129

10,707,350

Minorityshareholders'equityTotal net assets

129,785

9,567,474

Accumulated other comprehensive income

Balance at the start of current period

Valuationdifference on
available-for-salesecurities

Revaluation
reserve forland

Total accumulated
othercomprehensive
income131,106

644,981

513,874

Changes of items during the period
Issuance of new shares
Dividends from surplus

84,626

Income attributable to owners of parent

840,456
43

Purchase of treasury stock
Changes of items other thanshareholders' equity (net)97,31130,545

127,856

5,822

133,679

Total changes of items during the period

97,31130,545

127,856

5,822

889,465

Balance at the end of current period

228,418

614,436

386,018

135,607

10,456,940

13

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

Current consolidated fiscal year (Apr. 1, 2015 - Mar. 31, 2016)(Thousand yen;  means negative)

Shareholders’ equity
CapitalsurplusCapital stock
Balance at the start of current period

6,361,756

2,810,575

2,171,100

2,171,100

Retainedearnings
1,535,148

Treasury
stock
129

Total
shareholders’equity10,707,350

Changes of items during the period
Issuance of new shares
Dividends from surplus
Income attributable to owners of parent

4,342,200
141,044

141,044

6,875

6,875

Purchase of treasury stock

43

43

Changes of items other thanshareholders' equity (net)Total changes of items during the period

2,171,100

2,171,100

134,169

43

4,207,986

Balance at the end of current period

8,532,856

4,981,675

1,400,978

173

14,915,337

Minorityshareholders'equityTotal net assets

135,607

10,456,940

Accumulated other comprehensive income

Balance at the start of current period

Valuationdifference on
available-for-salesecurities

Revaluation
reserve forland

Total accumulated
othercomprehensive
income228,418

614,436

386,018

Changes of items during the period
Issuance of new shares

4,342,200

Dividends from surplus

141,044

Income attributable to owners of parent

6,875

Purchase of treasury stock43

Changes of items other thanshareholders' equity (net)Total changes of items during the period
Balance at the end of current period119,441

14,374

105,067

27,999

133,066

119,441

14,374

105,067

27,999

4,074,920

108,976

600,061

491,085

107,608

14,531,860

14

SATO RESTAURANT SYSTEMS COMPANY LIMITED (8163)
Summary of Financial Results of FY03/2016

FOR TRANSLATION PURPOSE ONLY

(4) Consolidated cash flow statement(Thousand yen;  means negative)

Cash flow from operating activities
Net income before income taxes
Depreciation
Amortization of goodwill
Impairment loss
Increase/decrease in reserve for bonuses ( means decrease)
Increase/decrease in allowance for doubtful accounts ( means decrease)
Increase/decrease in provision for directors’ retirement benefits ( means decrease)
Increase/decrease in provision for loss on store closing ( means decrease)
Interest and dividends income
Interest expenses
Profit/loss on valuation of investment securities ( means profit)
Profit/loss on sales of non-current assets ( means profit)
Loss on retirement of non-current assets
Loss on cancellation of leasehold contracts
Increase/decrease in sales credit ( means increase)
Increase/decrease in inventories ( means increase)
Increase/decrease in notes and accounts payable-trade ( means decrease)
Increase/decrease in accounts payable-other ( means decrease)
Increase/decrease in accrued consumption taxes ( means decrease)
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Cash flow from operating activities
Cash flow from investment activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Purchase of intangible assets
Proceeds from sales of intangible assets
Purchase of stocks of subsidiaries and affiliates
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments of construction assistance fund receivables
Collection of construction assistance fund receivables
Other
Cash flow from investment activities
Cash flow from financial activities
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of finance lease obligations
Redemption of bonds
Proceeds from issuance of common stock
Purchase of treasury stock
Cash dividends paid
Cash flow from financial activities
Effect of exchange rate change on cash and cash equivalents
Increase/decrease in cash and cash equivalents ( means decrease)
Balance of cash and cash equivalents at beginning of the period
Balance of cash and cash equivalents at end of the period

15

Previous consolidated
fiscal year
(Apr. 1, 2014
- Mar. 31, 2015)

Current consolidated
fiscal year
(Apr. 1, 2015
- Mar. 31, 2016)

1,281,004
1,322,538
89,909－58,6301,772－－
30,026
153,954
26,084
4,12924,7332,400
56,274
8,511
10,263142,984
469,638
261,167
3,220,261
16,772
155,023
360,657
2,721,353

248,390
1,369,980
89,90968,256
199,050
1,637
1,8258,599
31,951
138,821－
13,12817,5105,541
61,168
64,090
68,313450,095
349,803
87,094
1,856,114
17,608
140,702
471,389
1,261,631－－
829,070
4,239
49,932
237,559－－
88,335
125,986
177,000
91,696
60,031
1,220,007

1,000,000
992,719
867,749
4,382
21,147
242,834
24,443
118,288
102,535
105,422
278,437
95,466
170,874
1,579,430

1,550,000
2,770,449
192,501
100,000－
43
84,626
1,597,621
95,403
871
5,533,179※1 5,532,308

2,000,000
2,605,139
221,011
100,000
4,313,938
43
141,044
3,246,698
155,174
3,084,073
5,532,308※1 8,616,381