Aramark (ARMK) 10-K 2015 FY Annual report

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of

AIM SERVICES Co., Ltd.

Tokyo, Japan:

We have audited the accompanying consolidated financial statements of AIM SERVICES Co., Ltd. and its subsidiaries (the "Company"), which comprise the consolidated balance sheets as of March 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended March 31, 2015, and the related notes to the consolidated financial statements (all expressed in Japanese yen).

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan ("Japanese GAAP"); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AIM SERVICES Co., Ltd. and its subsidiaries as of March 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2015 in accordance with Japanese GAAP.

Emphasis of Matter

Japanese GAAP varies in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 15 to the consolidated financial statements. Our opinion is not modified with respect to this matter.

Convenience Translations

Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

/s/DELOITTE TOUCHE TOHMATSU LLC

Tokyo, Japan

June 30, 2015

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Balance Sheets

March 31, 2015 and 2014

	Thousands of Yen						Thousands of U.S. Dollars (Note 1)
	2015			2014			2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2.b)	¥	6,698,926		¥	7,090,200		$	55,824
Time Deposit	100,000			100,000			833
Receivables:
Trade notes	2,300			3,490			19
Trade accounts	15,647,190			14,432,939			130,393
Other	317,368			364,654			2,645
Inventories (Notes 2.c and 4)	1,926,467			1,907,259			16,054
Short-term loans	1,825			2,275			15
Deposit (Notes 2.b and 12)	4,500,000			5,250,000			37,500
Deferred tax assets (Notes 2.p and 7)	1,542,068			1,867,208			12,851
Prepaid expenses and other	569,158			518,700			4,743
Allowance for doubtful accounts	(4,910		)	(4,668		)	(41		)
Total current assets	31,300,392			31,532,057			260,836
PROPERTY, PLANT AND EQUIPMENT (Notes 2.f, 2.h, 2.m, 2.n, 8 and 9):
Land	213,239			213,238			1,777
Buildings and structures	1,332,410			1,258,555			11,103
Machinery and equipment	349,679			326,741			2,914
Furniture and fixtures	1,657,239			1,706,971			13,810
Lease assets	1,991,275			1,791,451			16,594
Total	5,543,842			5,296,956			46,198
Accumulated depreciation	(3,466,259		)	(3,110,669		)	(28,885		)
Net property, plant and equipment	2,077,583			2,186,287			17,313
INTANGIBLE ASSETS (Note 2.h):
Software (Note 2.g)	692,220			589,720			5,769
Goodwill (Note 2.a)	616,357			934,295			5,136
Other assets	41,044			47,128			342
Total intangible fixed assets	1,349,621			1,571,143			11,247
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 2.d and 3)	1,081,669			841,751			9,014
Investment in an associated company (Note 2.e)	1,092,845			1,001,298			9,107
Golf membership (Note 2.i)	143,087			190,155			1,192
Lease deposits (Note 2.j)	941,652			921,493			7,847
Insurance deposits (Note 2.k)	327,873			311,986			2,732
Deferred tax assets (Notes 2.p and 7)	365,909			691,854			3,049
Other assets (Note 5)	165,927			247,520			1,383
Allowance for doubtful accounts	(10,075		)	(58,837		)	(84		)
Total investments and other assets	4,108,887			4,147,220			34,240
TOTAL	¥	38,836,483		¥	39,436,707		$	323,636

Continued on following page.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Balance Sheets

March 31, 2015 and 2014

	Thousands of Yen						Thousands of U.S. Dollars (Note 1)
	2015			2014			2015
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Payables:
Trade notes	¥	133,014		¥	162,880		$	1,108
Trade accounts (Note 12)	8,636,391			8,426,198			71,970
Other	168,464			167,014			1,404
Income tax payable	624,577			1,603,427			5,205
Consumption tax payable	3,135,610			783,006			26,130
Accrued bonuses to employees	3,502,444			3,926,631			29,187
Accrued bonuses to directors and corporate auditors	23,250			29,250			194
Other accrued expenses	7,423,833			6,777,089			61,865
Other current liabilities (Notes 2.m and 8)	1,682,736			1,144,098			14,023
Total current liabilities	25,330,319			23,019,593			211,086
LONG‑TERM LIABILITIES:
Liability for retirement benefits (Notes 2.l and 5)	1,238,771			1,784,428			10,323
Retirement benefits for directors and corporate auditors (Note 2.l)	64,788			61,358			540
Long-term lease obligations (Notes 2.m and 8)	605,297			699,597			5,044
Other long-term liabilities (Notes 2.n and 9)	268,603			272,450			2,238
Total long-term liabilities	2,177,459			2,817,833			18,145
CONTINGENT LIABILITIES (Note 13)
EQUITY (Notes 6 and 14)
Common stock—authorized, 7,000,000 shares; issued, 556 shares in 2015 and 2014; and class shares subject to call option-authorized, 14,000,000 shares; issued, 11,507,826 shares in 2015 and 2014	1,909,797			1,909,797			15,915
Class A shares—authorized, 7,000,000 shares; issued, no shares in 2015 and 2014	—			—			—
Additional paid-in capital	2,591,398			2,591,398			21,595
Retained earnings (Note 2.q)	7,237,421			10,169,355			60,312
Treasury stock—at cost:
Common stock—2 shares in 2015 and 2014; and class shares subject to call option—11,507,826 shares in 2015 and 2014	(680,820		)	(680,820		)	(5,674		)
Accumulated other comprehensive income
Unrealized gain on available-for-sale securities	285,667			118,295			2,381
Remeasurements of defined benefit plans (Note 2.l)	(14,758		)	(508,744		)	(124		)
Total equity	11,328,705			13,599,281			94,405
TOTAL	¥	38,836,483		¥	39,436,707		$	323,636

See notes to consolidated financial statements.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Statements of Income

Years Ended March 31, 2015, 2014 and 2013

	Thousands of Yen									Thousands of U.S. Dollars (Note 1)
	2015			2014			2013			2015
NET SALES (Note 2.s)	¥	159,889,685		¥	156,001,090		¥	151,125,577		$	1,332,414
COST OF SALES (Notes 8 and 12)	142,363,720			138,273,766			133,416,552			1,186,364
Gross profit	17,525,965			17,727,324			17,709,025			146,050
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 2.j, 8 and 12)	12,643,991			12,389,362			12,252,188			105,367
Operating income	4,881,974			5,337,962			5,456,837			40,683
OTHER INCOME (EXPENSES):
Interest and dividend income	30,531			19,862			21,252			254
Interest expense	(22,076		)	(23,523		)	(24,168		)	(184		)
Loss on impairment of long-lived assets (Note 2.h)	(6,138		)	(79,184		)	(2,749		)	(51		)
Gain on insurance claim (Note 2.k)	—			124,029			—
Compensation for loss due to disaster (Note 2.t)	—			41,542			—
Equity in earnings of associated company (Note 2.e)	126,144			109,690			97,328			1,051
Other-net	61,711			36,626			22,990			515
Other income-net	190,172			229,042			114,653			1,585
INCOME BEFORE INCOME TAXES	5,072,146			5,567,004			5,571,490			42,268
INCOME TAXES (Notes 2.p and 7):
Current	1,933,713			2,793,881			2,714,671			16,114
Deferred	495,067			(13,975		)	(36,737		)	4,126
Total income taxes	2,428,780			2,779,906			2,677,934			20,240
NET INCOME	¥	2,643,366		¥	2,787,098		¥	2,893,556		$	22,028

	Yen						U.S. Dollars (Note 1)
	2015		2014		2013		2015
PER SHARE OF COMMON STOCK (Note 2.r):
Net income	¥	4,771,418.23	¥	5,030,864.47	¥	5,223,024.82	$	39,761.82
Cash dividends applicable to the year	9,605,000		2,515,000		9,831,000		80,042

See notes to consolidated financial statements.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended March 31, 2015, 2014 and 2013

	Thousands of Yen							Thousands of U.S. Dollars (Note 1)
	2015		2014			2013		2015
NET INCOME	¥	2,643,366	¥	2,787,098		¥	2,893,556	$	22,028
OTHER COMPREHENSIVE INCOME:
Unrealized holding gain on available-for-sale securities (net of tax)	167,372		52,234			68,864		1,395
Remeasurements of defined benefit plans (net of tax) (Note 2.l)	493,986		(508,744		)	—		4,116
Total other comprehensive income (loss)	661,358		(456,510		)	68,864		5,511
COMPREHENSIVE INCOME	¥	3,304,724	¥	2,330,588		¥	2,962,420	$	27,539

See notes to consolidated financial statements.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Statements of Changes in Equity

Years Ended March 31, 2015, 2014 and 2013

			Thousands of Yen
	Outstanding Number of Shares of Common Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Unrealized Gain (Loss) on Available- for-Sale Securities			Remeasurements of defined benefit plans			Total Equity
BALANCE, APRIL 1, 2012	¥	554	¥	1,909,797	¥	2,591,398	¥	11,339,464		¥	(680,820	)	¥	(2,803	)	¥	—		¥	15,157,036
Net income	—		—		—		2,893,556			—			—			—			2,893,556
Cash dividends, ¥9,868,000 per share	—		—		—		(5,466,872		)	—			—			—			(5,466,872		)
Net change in the year	—		—		—		—			—			68,864			—			68,864
BALANCE, MARCH 31, 2013	554		1,909,797		2,591,398		8,766,148			(680,820		)	66,061			—			12,652,584
Net income	—		—		—		2,787,098			—			—			—			2,787,098
Cash dividends, ¥2,498,000 per share	—		—		—		(1,383,891		)	—			—			—			(1,383,891		)
Net change in the year	—		—		—		—			—			52,234			(508,744		)	(456,510		)
BALANCE, MARCH 31, 2014	554		1,909,797		2,591,398		10,169,355			(680,820		)	118,295			(508,744		)	13,599,281
Cumulative effects of accounting							(264,656		)										(264,656		)
change (Note 2.1)
Net income	—		—		—		2,643,366			—			—			—			2,643,366
Cash dividends, ¥9,586,000 per share	—		—		—		(5,310,644		)	—			—			—			(5,310,644		)
Net change in the year	—		—		—		—			—			167,372			493,986			661,358
BALANCE, MARCH 31, 2015	¥	554	¥	1,909,797	¥	2,591,398	¥	7,237,421		¥	(680,820	)	¥	285,667		¥	(14,758	)	¥	11,328,705

	Thousands of U.S. Dollars (Note 1)
	Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Unrealized Gain (Loss) on Available- for-Sale Securities		Remeasurements of defined benefit plans			Total Equity
BALANCE, MARCH 31, 2014	$	15,915	$	21,595	$	84,745		$	(5,674	)	$	986	$	(4,240	)	$	113,327
Cumulative effects of accounting					(2,206		)									(2,206		)
change (Note 2.1)
Net income	—		—		22,028			—			—		—			22,028
Cash dividends, $79,883 per share	—		—		(44,255		)	—			—		—			(44,255		)
Net change in the year	—		—		—			—			1,395		4,116			5,511
BALANCE, MARCH 31, 2015	$	15,915	$	21,595	$	60,312		$	(5,674	)	$	2,381	$	(124	)	$	94,405

See notes to consolidated financial statements.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended March 31, 2015, 2014 and 2013

	Thousands of Yen									Thousands of U.S. Dollars (Note 1)
	2015			2014			2013			2015
OPERATING ACTIVITIES:
Income before income taxes	¥	5,072,146		¥	5,567,004		¥	5,571,490		$	42,268
Adjustments for:
Income taxes-paid	(2,916,312		)	(2,460,167		)	(3,362,203		)	(24,303		)
Depreciation and amortization	931,257			913,587			816,840			7,760
Amortization of goodwill	317,938			317,938			317,938			2,649
Reversal of allowance for doubtful receivables	(48,520		)	(16,873		)	(1,472		)	(404		)
Equity in earnings of an associated company	(126,144		)	(109,690		)	(97,328		)	(1,051		)
Loss (gain) on sales of property, plant and equipment	77			(200		)	5,280			1
Loss on disposal of property, plant and equipment	5,832			20,204			5,763			49
Loss on impairment of long‑lived assets	6,138			79,184			2,749			51
Write-off of investment securities				104
(Increase) decrease in receivables-trade accounts	(1,212,727		)	(134,642		)	326,483			(10,106		)
Increase in inventories	(19,208		)	(144,458		)	(71,333		)	(106		)
Increase (decrease) in trade payables	180,328			318,116			(394,907		)	1,503
Increase (decrease) in consumption tax payable	2,376,129			(208,131		)	24,585			19,801
Decrease (increase) in current assets	1,560			(355,671		)	(33,864		)	13
Increase (decrease) in other current liabilities	1,120,330			(695,581		)	433,510			9,336
(Decrease) increase in accrued bonus to employees	(424,187		)	339,082			128,757			(3,535		)
Decrease in accrued employees’ retirement benefits	(214,917		)	(113,910		)	(108,814		)	(1,791		)
Decrease (increase) in accrued retirement benefits for director and corporate auditors	3,430			(2,238		)	7,530			29
Decrease in prepaid pension costs	90,504			49,545			133,121			754
Other-net	26,390			21,485			32,361			220
Total adjustments	97,898			(2,182,316		)	(1,835,004		)	816
Net cash provided by operating activities—(Forward)	¥	5,170,044		¥	3,384,688		¥	3,736,486		$	43,084

Continued on following page.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended March 31, 2015, 2014 and 2013

	Thousands of Yen									Thousands of U.S. Dollars (Note 1)
	2015			2014			2013			2015
Net cash provided by operating activities—(Forward)	¥	5,170,044		¥	3,384,688		¥	3,736,486		$	43,084
INVESTING ACTIVITIES:
Payments into time deposit	(100,000		)	(100,000		)	—			(833		)
Redemption of time deposits	100,000			—			—			833
Redemption of marketable securities	—			—			100,000			—
Purchases of property, plant and equipment	(199,149		)	(269,458		)	(355,616		)	(1,660		)
Proceeds from sales of property, plant and equipment	1,416			5,580			1,431			12
Purchases of software	(301,515		)	(139,043		)	(327,493		)	(2,513		)
Purchases of other intangible assets	—			(1,936		)	(3,022		)	—
Proceeds from sales of intangible assets	—			496			—			—
Purchases of investment securities	(9,442		)	(9,536		)	(10,804		)	(79		)
Proceeds from sales of investment securities	1,884			4,594			57,861			16
Change in deposit to a subsidiary of a shareholder	746,175			(1,752,376		)	2,497,890			6,218
Proceeds from collections of loans	4,369			2,808			3,486			36
Other	(91,202		)	(4,315		)	(48,320		)	(760		)
Net cash provided by (used in) investing activities	152,536			(2,263,186		)	1,915,413			1,270
FINANCING ACTIVITIES:
Increase in short‑term bank loans	15,000,000			11,950,000			13,500,000			112,500
Decrease in short‑term bank loans	(15,000,000		)	(11,950,000		)	(13,500,000		)	(112,500		)
Repayments of capital lease obligation	(403,210		)	(356,620		)	(301,269		)	(3,360		)
Dividends paid	(5,310,644		)	(1,383,891		)	(5,466,872		)	(44,255		)
Net cash used in financing activities	(5,713,854		)	(1,740,511		)	(5,768,141		)	(47,615		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(391,274		)	(619,009		)	(116,242		)	(3,261		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	7,090,200			7,709,209			7,825,451			59,085
CASH AND CASH EQUIVALENTS, END OF YEAR	¥	6,698,926		¥	7,090,200		¥	7,709,209		$	55,824

Continued on following page.

AIM SERVICES Co., Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended March 31, 2015, 2014 and 2013

ADDITIONAL INFORMATION

Interest and dividend receipts and interest payments for the years ended March 31, 2015, 2014 and 2013 were as follows:

	Thousands of Yen						Thousands of U.S. Dollars (Note 1)
	2015		2014		2013		2015
Interest and dividend receipts	¥	54,217	¥	39,136	¥	43,608	$	452
Interest payments	¥	22,076	¥	23,523	¥	24,168	$	184

Non-cash investing and financing activities were as follows:

	Thousands of Yen						Thousands of U.S. Dollars (Note 1)
	2015		2014		2013		2015
Acquisition of lease assets and obligations under finance leases	¥	291,563	¥	346,531	¥	541,644	$	2,430

See notes to consolidated financial statements.

AIM SERVICES Co., Ltd. and Subsidiaries

Notes to Consolidated Financial Statements

1.    BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

AIM SERVICES Co., Ltd. (the “Company”) mainly provides business dining services in Japan and is owned 50 percent by Mitsui & Co., Ltd. and 50 percent by Aramark Services Inc. and Aramark Japan Inc., which are subsidiaries of Aramark. ARAMARK Holding Corporation and ARAMARK Corporation were renamed Aramark and Aramark Service Inc., respectively, on May 9, 2014.

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Companies Act of Japan (the “Companies Act”) and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”). Japanese GAAP varies in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). Information relating to the nature and effect of such differences is presented in Note 15 to the consolidated financial statements.

In preparing these consolidated financial statements, certain reclassifications and rearrangements, including additions of the consolidated statements of cash flows and footnote disclosures, have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2014 and 2013 consolidated financial statements to conform to the classifications used in 2015.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of ¥120 to $1, the approximate rate of exchange at March 31, 2015. Such translation should not be construed as a representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Consolidation—The consolidated financial statements as of March 31, 2015 include the accounts of the Company and all 11 subsidiaries (together, the “Group”). Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated.

An investment in an associated company (a company over which the Company has the ability to exercise significant influence) is accounted for by the equity method. Refer to Note 2.e.

The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiaries at the date of acquisition is represented as “Goodwill” on the consolidated balance sheets and is being amortized on a straight-line basis over a period from 10 to 13 years.

Intercompany balances and transactions have been eliminated in consolidation. Unrealized profit included in assets resulting from transactions within the Group is eliminated.

b. Cash and Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits which mature or become due within three months of the date of acquisition.

A deposit is a contract in which cash is trusted to the subsidiary of the Company’s shareholder. The cash can be readily withdrawn within a few days, however the Company does not have the intention to do so as the Company has sufficient working capital and does not need this deposit within a short period of time (i.e., three months). Based on this, the Company did not treat deposits as cash and cash equivalents.

c. Inventories—Inventories are mainly stated at the latest purchase price which approximates the first-in, first-out cost method. In accordance with Accounting Standard Board of Japan (the “ASBJ”) Statement No. 9, “Accounting Standard for Measurement of Inventories,” inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if appropriate.

d. Investment Securities—Investment securities are classified and accounted for, depending on management’s intent, as follows: (1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are reported at amortized cost and (2) available-for-sale securities, which are not classified as the aforementioned securities, are reported at fair value with unrealized gains and losses, net of applicable taxes,

reported in a separate component of equity.

Declines in fair value of held-to-maturity and available-for-sale securities are analyzed to determine if the decline is temporary or “other than temporary.” When other than temporary declines occur, the investment is reduced to its fair value and the amount of the reduction is reported as a loss. Any subsequent increases in other than temporary declines in fair value will not be realized until the securities are sold.

Non-marketable available-for-sale securities are stated at cost determined by the moving-average cost method. For other than temporary declines in fair value, non-marketable available-for-sale securities are reduced to net realizable value by a charge to income.

e. Investment in Associated Company—The Company uses the equity method of accounting for its investment in and earnings or losses of an associated company that the Company does not control but over which the Company does exert significant influence. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of an investee of between 20% and 50%. The Company determines whether a decline in fair value is other than temporary by considering various factors, such as historical financial data, product development activities and the overall health of the affiliate’s industry. If the Company considers any such decline to be other than temporary, then a write-down to the estimated fair value is recorded.

f. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Group is computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to the buildings which were acquired after April 1, 1998. The range of useful lives is principally from 3 to 47 years for buildings and structures, from 2 to 10 years for machinery and equipment, from 5 to 20 years for furniture and fixtures, and 5 years for lease assets.

Amendments to the Corporate Tax Law in Japan have resulted in changes to the depreciation methods used for property, plant and equipment acquired since April 1, 2007. Prior to these amendments, the Group’s depreciation methods were based on a depreciation limit of 95% and a residual value of 5% of the acquisition price of an asset. This depreciation limit and residual value were removed and the full acquisition price can now be depreciated to the nominal value of ¥1 at the end of the asset’s useful life, either on a straight-line basis or on a declining-balance basis. The depreciation rates for both methods, set forth by the Corporate Tax Law, were also amended. Assets acquired on or after April 1, 2007 are depreciated according to the new depreciation methods while existing assets acquired on or before March 31, 2007 are depreciated based on the traditional methods with the depreciation limit written off equally over 5 years.

Effective April 1, 2012, as a result of the revision of the Corporate Tax Law in Japan, the Company and its consolidated subsidiaries changed their depreciation method for property, plant and equipment acquired on or after April 1, 2012 to the method stipulated under the revised corporate tax law. The effect of this change was immaterial.

g. Software—Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. Costs directly associated with identifiable and unique software products, which are likely to generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Software is carried at cost less accumulated amortization, which is calculated using the straight-line method over the estimated useful lives of 5 years.

h. Impairment of Long-Lived Assets—The Group reviews its long-lived assets including goodwill for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

For the fiscal years ended March 31, 2015, 2014 and 2013, the Company wrote down the book value of its idle assets amounting to ¥6,138 thousand ($51 thousand), ¥79,184 thousand and ¥2,749 thousand, respectively, as an impairment loss.

i. Golf Membership—Golf membership is stated at cost. For other than temporary declines in fair value, golf membership is reduced to net realizable value by a charge to income.

j. Lease Deposits—Lease deposits are mainly related to the Group’s office spaces and are refundable at the termination of each lease contract.

k. Insurance Deposits—Insurance deposits consist of life insurance policies for ex-directors for which the Company is the named beneficiary. Most of the insurance deposits are refundable. Gain on insurance claim of ¥124,029 thousand recorded in the consolidated statement of income for the year ended March 31, 2014 includes that related to the life

insurance claim against the death of ex-director by ¥82,679 thousand.

l. Retirement and Pension Plans—The Company and certain subsidiaries have defined benefit corporate pension plans covering substantially all of their regular employees. The Group measures and accounts for the liability for retirement benefits using actuarial computations based on projected benefit obligations and plan assets at the balance sheet date.

Retirement benefits to directors and corporate auditors are provided at the amount which would be required if all directors and corporate auditors retired at the balance sheet date.

In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits”.

In accordance with the revised standard and the other related practical guidance, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within shareholders’ equity (accumulated other comprehensive income, hereinafter, “AOCI”), after adjusting for tax effects, and the difference between projected retirement benefit obligations and plan assets shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits). Moreover, actuarial gains and losses and past service costs that arose in the current period and yet to be recognized in profit or loss shall be included in AOCI and actuarial gains and losses and past service costs that were recognized in other comprehensive income, hereinafter ‘‘OCI’’, in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments. No retrospective application of this accounting standard to consolidated financial statements in prior periods is required.

The Company adopted those new requirements in the revised standard during the year ended March 31, 2014. As a result of the change, the liability for retirement benefits increased by ¥788,823 thousand with a corresponding decrease in AOCI by ¥508,744 thousand, net of tax effect, at March 31, 2014.

In addition, effective from the year ended March 31, 2015, the Company adopted other requirements in the revised accounting standard, which allows a choice of the method of attributing expected benefits to years of service between the “Straight-line basis” and the “Benefit formula basis” based on the nature of pension plans. Previously, only the Straight-line basis was permitted. The revised standard also changed the calculation method of the discount rate to require that the discount rate reflect the expected timing of each benefit payment. The change in the method of attributing expected benefits to years of service and the calculation method of the discount rate in estimating the amount of projected benefit obligations were accounted for as an adjustment to retained earnings at the beginning of the year ended March 31, 2015 in accordance with the standard, resulted in the decrease of retained earnings by ¥264,656 thousand ($2,206 thousand) with net of tax effect.

m. Leases—In March 2007, the ASBJ issued an Accounting Standard-ASBJ Statement No. 13, “Accounting Standard for Lease Transaction and its Implementation Guidance” and ASBJ Guidance No. 16, “Guidance on Accounting Standard for Lease Transactions.” The new standard and related implementation guidance eliminated a transitional rule where companies were allowed to account for finance leases that did not transfer ownership at the end of the lease term as operating leases and required the companies to recognize them as finance leases on their balance sheet.

In accordance with new accounting standard for lease, the Company capitalized all finance leases on its consolidated balance sheets and is depreciating the lease assets by the straight-line method over their respective lease terms. However, finance leases that do not transfer ownership and whose commencement day falls prior to April 1, 2008 continue to be accounted for as operating leases with required disclosure in the notes in accordance with an exceptional rule in the new accounting standard.

n. Asset Retirement Obligations—ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations” require companies to recognize asset retirement obligations as liabilities and the corresponding asset retirement costs as tangible fixed assets.

The Group leases several corporate and regional offices and has installed leasehold improvements, such as partitions, counters and phone systems, in these leased properties. Most lease agreements in Japan require the lessee to restore the leased property to its original condition, including removal of the leasehold improvements the lessee has installed when the lessee moves out of the leased property. As a result, the Group will incur certain future costs for the restorations that are required under the lease agreements.

o. Financial Instruments—In accordance with ASBJ Statement No. 10, “Accounting Standard for Financial Instruments” and ASBJ Guidance No. 19, “Guidance on Disclosures about Fair Value of Financial Instruments”, the Group discloses fair value information for items that meet the definition of financial instruments.

p. Income Taxes—The Group adopted the accounting standard for interperiod allocation of income taxes based on the asset and liability method. Deferred income taxes are recorded to reflect the impact of operating loss carryforwards and temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred taxes are measured by applying currently enacted tax laws to the operating

loss carryforwards and temporary differences. The Group determined the recoverability of deferred tax assets based on all future information currently available.

Amendments to the Japanese tax regulations were enacted into law on March 20, 2014 and March 31, 2015. As a result of these amendments, (1) the statutory income tax rate was reduced from approximately 40% to 38% effective from the fiscal year beginning April 1, 2012, (2) was reduced to approximately 35% effective from the fiscal year beginning April 1, 2014 and (3) was further reduced to 32.5% effective from the fiscal year beginning April 1, 2015, with a further reduction to 31.7% effective from the year beginning April 1, 2016. Consequently, the statutory income tax rate utilized for deferred tax assets and liabilities expected to be settled or realized in the fiscal year ended March 31, 2016 is 32.5% and for subsequent periods is approximately 31.7%.

q. Appropriations of Retained Earnings—Appropriations of retained earnings at each year-end are reflected in the consolidated financial statements in the year following shareholders’ approval.

r. Per Share Information—Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective years including dividends to be paid after the end of the year.

s. Revenue Recognition—Most of the operating businesses of the Group have contractual relationships with customers. In these businesses, revenue is recognized in the period in which the services are provided pursuant to the terms of the contracts. Revenue from dining, delivery food and beverage services is recognized upon delivery of food and beverage products.

t. Other Income—Compensation for loss due to disaster of ¥41,542 thousand recorded in the consolidated statement of income for the year ended March 31, 2014 is compensation received from Tokyo Electronic Power Company, Incorporated (“TEPCO”) for lost earnings during the period of business suspension due to the nuclear accident at TEPCO's facility.

u. Dividend Distribution—Dividend distribution to the Company's shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

3.    INVESTMENT SECURITIES

Investment securities at March 31, 2015 and 2014, consisted of the following:

	Thousands of Yen				Thousands of U.S. Dollars
	2015		2014		2015
Non‑current-Investment securities:
Marketable equity securities	¥	760,983	¥	518,106	$	6,342
Non‑marketable equity securities	320,686		323,645		2,672
Total	¥	1,081,669	¥	841,751	$	9,014

Information regarding marketable equity securities classified as available-for-sale and held-to-maturity debt securities at March 31, 2015 and 2014, was as follows:

	Thousands of Yen
March 31, 2015	Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available‑for‑sale marketable equity securities	¥	263,375	¥	498,384	¥	776	¥	760,983
March 31, 2014
Available‑for‑sale marketable equity securities	¥	253,959	¥	268,578	¥	4,429	¥	518,106

	Thousands of U.S. Dollars
March 31, 2015	Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available‑for‑sale marketable equity securities	$	2,195	$	4,153	$	6	$	6,342

Carrying amounts of available-for-sale securities whose fair value is not readily determinable as of March 31, 2015 and 2014 were as follows:

Available-for-sale---Non-marketable equity securities

Thousands of Yen				Thousands of U.S. Dollars
2015		2014		2015
¥	320,686	¥	323,645	$	2,672

4.    INVENTORIES

Inventories at March 31, 2015 and 2014, consisted of the following:

	Thousands of Yen				Thousands of U.S. Dollars
	2015		2014		2015
Merchandise	¥	519,793	¥	511,842	$	4,332
Raw materials	1,143,814		1,140,494		9,532
Supplies	262,860		254,923		2,190
Total	¥	1,926,467	¥	1,907,259	$	16,054

5.    LIABILITY FOR EMPLOYEES’ RETIREMENT BENEFITS

The Company and certain subsidiaries have defined benefit corporate pension plans for employees.

Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from certain subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, or by death.

The liability for employees’ retirement benefits at March 31, 2015 and 2014, consisted of the following:

	Thousands of Yen						Thousands of U.S. Dollars
	2015			2014			2015
Projected benefit obligation	¥	10,505,162		¥	9,722,444		$	87,543
Fair value of plan assets	(9,266,391		)	(8,028,910		)	(77,220		)
Net amount on the consolidated balance sheets	1,238,771			1,693,534			10,323
Prepaid pension costs (included in other assets)	—			(90,894		)	—
Employees’ retirement benefits	¥	1,238,771		¥	1,784,428		$	10,323

The components of net periodic benefit costs are as follows:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Service cost	¥	631,832		¥	604,045		¥	590,253		$	5,265
Interest cost	103,721			92,957			90,884			864
Expected return on plan assets	(160,578		)	(143,967		)	(124,615		)	(1,338		)
Recognized actuarial loss	34,823			167,463			264,415			291
Net periodic benefit costs	¥	609,798		¥	720,498		¥	820,937		$	5,082

Assumptions used for the years ended March 31, 2015, 2014 and 2013, are set forth as follows:

	2015	2014	2013
Discount rate	From 0.7% to 1.1%	From 0.7% to 1.1%	From 0.7% to 1.1%
Expected rate of return on plan assets	2.0%	2.0%	2.0%
Recognition period of actuarial gain/loss	From 5 to 12 years	From 5 to 12 years	From 5 to 12 years

6.    EQUITY

The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

a. Dividends

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. If companies meet certain criteria such as (1) having a Board of Directors, (2) having independent auditors, and (3) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets the above criteria.

The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements.

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3,000 thousand.

b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

c. Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also allows for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights, which were previously presented as a liability, are now presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

Class shares subject to call option included a call option which allowed the Company, at its option, to exchange all of the class shares subject to call option for new common shares at an exchange ratio of 20,000 class shares to 1 new common share. On November 1, 2007, the Company exercised its call options and exchanged all of its issued class shares for new shares of common stock. Class A shares are the shares without the right for the distribution of residual property.

7.    INCOME TAXES

The tax effects of temporary differences which resulted in deferred tax assets at March 31, 2015 and 2014, are as follows:

	Thousands of Yen				Thousands of U.S. Dollars
	2015		2014		2015
Current:
Deferred tax assets:
Accrued bonuses to employees	¥	1,181,173	¥	1,404,943	$	9,843
Accrued enterprise taxes	57,225		111,312		477
Accrued social insurance contributions by employer	211,699		248,779		1,764
Accrued business office taxes	17,944		15,881		150
Accrued rent	19,918		26,336		166
Tax loss carry forward	8,614		17,345		72
Other	45,495		42,612		379
Total	1,542,068		1,867,208		12,851
Net deferred tax assets	¥	1,542,068	¥	1,867,208	$	12,851

Non‑current:
Deferred tax assets:
Employees’ retirement benefits	¥	420,498		¥	628,643		$	3,504
Retirement benefits for directors and corporate auditors	20,551			21,682			171
Impairment loss on investment securities	27,150			39,462			226
Impairment loss on golf membership	6,537			11,110			54
Impairment loss on long‑lived assets	78,191			87,940			652
Allowance for doubtful accounts	2,586			20,061			22
Asset retirement obligations	30,540			29,096			255
Tax loss carry forward	12,007			10,706			100
Other	6,448			31,781			54
Less valuation allowance	(79,534		)	(95,902		)	(663		)
Total	524,974			784,579			4,375
Deferred tax liabilities-net unrealized gain on available‑for‑sale securities	159,065			92,725			1,326
Total	159,065			92,725			1,326
Net deferred tax assets	¥	365,909		¥	691,854		$	3,049

A reconciliation between the normal statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statements of income for the years ended March 31, 2015, 2014 and 2013, is as follows:

	2015		2014		2013
Normal statutory tax rate	35	%	38	%	38	%
Expenses not deductible for income tax purposes	1		1		1
Non-deductible per capita levy of local taxes	6		6		6
Non-deductible amortization of goodwill	2		1		2
Effect of amendments to the Japanese tax regulations	4		2		—
Other-net	—		2		1
Actual effective tax rate	48	%	50	%	48	%

As discussed in Note 2.p, as a result of amendment of the Japanese tax regulations on March 20, 2014 and March 31, 2015, the tax rate applied to the Company was reduced approximately from 38% to 35% effective from the year beginning April 1, 2014, and it was further reduced to 32.5% effective from the fiscal year beginning April 1, 2015 with a further reduction to 31.7% effective from the year beginning April 1, 2016. The effect of adjustments to deferred assets and liabilities resulting from the reduction in the tax rate was an increase in income taxes of ¥184,960 thousand ($1,541 thousand) and ¥122,349 thousand for

the year ended March 31, 2015 and 2014, respectively and have been reflected in income taxes in the consolidated statement of income.

8.    LEASES

The Group leases certain machinery, dining support service related equipment, office space and other assets.

Rent expenses for operating leases for the years ended March 31, 2015, 2014 and 2013 amounted to ¥1,319,772 thousand ($10,998 thousand), ¥1,321,303 thousand and ¥1,295,970 thousand, respectively.

Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows:

	Thousands of Yen				Thousands of U.S. Dollars
	2015				2015
	Finance Leases		Operating Leases		Finance Leases		Operating Leases
Due within one year	¥	374,928	¥	127,610	$	3,125	$	1,063
Due after one year	605,297		232,135		5,044		1,935
Total	¥	980,225	¥	359,745	$	8,169	$	2,998

	Thousands of Yen
	2014
	Finance Leases		Operating Leases
Due within one year	¥	368,746	¥	97,643
Due after one year	699,597		186,259
Total	¥	1,068,343	¥	283,902

As discussed in Note 2.m, the Company accounts for leases which existed at the transition date of the new accounting standards on April 1, 2008 and do not transfer ownership of the leased property to the lessee as operating lease transactions.

As of March 31, 2013, such leases no longer existed due to expiration or cancellation. Lease payments under such leases for the year ended March 31, 2013 were ¥30,952 thousand and there was no lease payment for the year ended March 31, 2014.

Depreciation expense and interest expense as if capitalized:

	Thousands of Yen
	2013
Depreciation expense	¥	28,981
Interest expense	360
Total	¥	29,341

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements of income, are computed by the straight-line method and the interest method, respectively.

9.    ASSET RETIREMENT OBLIGATIONS

The Company recognizes asset retirement obligations for its headquarters and some regional offices on the basis of lease agreements. To estimate asset retirement obligations, the Company uses the estimated useful lives for periods ranging from 5 to 27 years and discount rates ranging from 0.232% to 2.130%.

The following represent the changes in asset retirement obligations for the years ended March 31, 2015 and 2014:

	Thousands of Yen				Thousands of U.S. Dollars
	2015		2014		2015
Asset retirement obligations at beginning of year	¥	157,549	¥	145,823	$	1,313
Additions to asset retirement obligations	6,314		9,366		53
Accretion of discount	2,438		2,360		20
Asset retirement obligations at end of year	¥	166,301	¥	157,549	$	1,386

10. FINANCIAL INSTRUMENTS

(1) Financial Instruments

The Company obtains operating funds through loans from financial institutions such as banks, and excess funds are invested only in short-term deposits with banks and deposited with subsidiaries of shareholders. Interest rates for the loans are determined based on discussion with the financial institutions considering the current short-term money market.

Credit risks for notes receivable and accounts receivable are managed based on internal risk management policy.

The Company’s investment securities mainly consist of equity securities. For listed shares, the Company reviews their fair value on a quarterly basis.

(2) Fair Value of Financial Instruments

The carrying amounts of financial instruments recorded in the Company’s consolidated balance sheets and their estimated fair values as of March 31, 2015 and 2014, are as follows:

	Thousands of Yen												Thousands of U.S. Dollars
	2015						2014						2015
	Carrying Amount (*)			Fair Value (*)			Carrying Amount (*)			Fair Value (*)			Carrying Amount (*)		Fair Value (*)
Cash and cash equivalents	¥	6,698,926		¥	6,698,926		¥	7,090,200		¥	7,090,200		$	55,824	$	55,824
Notes receivable and accounts receivable	15,649,490			15,649,490			14,436,429			14,436,429			130,412		130,412
Deposit	4,500,000			4,500,000			5,250,000			5,250,000			37,500		37,500
Bank deposit with maturity term over three months	100,000			100,000			100,000			100,000			833		833
Investment securities- Available-for-sale marketable equity securities	760,983			760,983			518,106			518,106			6,342		6,342
Notes payable and accounts payable	(8,769,405		)	(8,769,405		)	(8,589,078		)	(8,589,078		)	73,078		73,078

(*) ( ) indicates liability account.

In accordance with the requirement of ASBJ Statement No. 10, “Accounting Standard for Financial Instruments,” the Company has provided the above fair value estimates and the following information about valuation methodologies.

Cash and cash equivalents

Due to the nature of cash and cash equivalents, the fair value approximates the carrying value.

Notes receivable and accounts receivable

As these are settled in a short-term period, the fair value approximates the carrying value.

Deposit

As these are settled in a short-term period, the fair value approximates the carrying value.

Bank deposit with maturity term over three months

As these are settled in a short-term period, the fair value approximates the carrying value.

Investment securities

Equity securities are valued using quoted market prices.

Notes payable and accounts payable

As these are settled in a short-term period, the fair value approximates the carrying value.

Because unlisted shares do not have a market price and future cash flows are not estimable, it was determined that obtaining fair value information for non-marketable equity securities was not practicable. Thus, unlisted shares, whose carrying amount as of March 31, 2015 and 2014 were ¥1,413,532 thousand ($11,779 thousand) and ¥1,324,942 thousand, respectively, are not included in “Investment securities-Available-for-sale marketable equity securities” in the list above.

11.    SEGMENT INFORMATION

Information about industry segments of the Group for the years ended March 31, 2015, 2014 and 2013, is set forth below.

Industry Segments

a. Sales and Operating Income

	Thousands of Yen
	2015
	Food Business		Office Coffee and Tea Services		Other Services		Total		Eliminations/ Corporate			Consolidated
Sales to customers	¥	152,828,499	¥	6,778,709	¥	282,477	¥	159,889,685	¥	—		¥	159,889,685
Intersegment sales	2,171,743		1,511,230		291,860		3,974,833		(3,974,833		)	—
Total sales	155,000,242		8,289,939		574,337		163,864,518		(3,974,833		)	159,889,685
Operating expenses	145,574,067		8,164,242		549,895		154,288,204		719,507			155,007,711
Operating income	¥	9,426,175	¥	125,697	¥	24,442	¥	9,576,314	¥	(4,694,340	)	¥	4,881,974

b. Total Assets, Depreciation, Capital Expenditures and Information about Goodwill

	Thousands of Yen
	2015
	Food Business		Office Coffee and Tea Services		Other Services		Total		Eliminations/ Corporate		Consolidated
Total assets	¥	30,620,712	¥	2,699,450	¥	55,237	¥	33,375,399	¥	5,461,084	¥	38,836,483
Depreciation and other	380,702		301,104		182		681,988		249,269		931,257
Capital expenditures (*)	290,675		331,150		—		621,825		328,075		949,900
Goodwill:
Unamortized balance	417,787		198,570		—		616,357		—		616,357
Amortization	119,368		198,570		—		317,938		—		317,938

a. Sales and Operating Income

	Thousands of U.S. Dollars
	2015
	Food Business		Office Coffee and Tea Services		Other Services		Total		Eliminations/ Corporate			Consolidated
Sales to customers	$	1,273,571	$	56,489	$	2,354	$	1,332,414	$	—		$	1,332,414
Intersegment sales	18,098		12,594		2,432		33,124		(33,124		)	—
Total sales	1,291,669		69,083		4,786		1,365,538		(33,124		)	1,332,414
Operating expenses	1,213,117		68,036		4,582		1,285,735		5,996			1,291,731
Operating income	$	78,552	$	1,047	$	204	$	79,803	$	(39,120	)	$	40,683

b. Total Assets, Depreciation, Capital Expenditures and Information about Goodwill

	Thousands of U.S. Dollars
	2015
	Food Business		Office Coffee and Tea Services		Other Services		Total		Eliminations/ Corporate		Consolidated
Total assets	$	255,173	$	22,495	$	460	$	278,128	$	45,508	$	323,636
Depreciation and other	3,173		2,509		1		5,683		2,077		7,760
Capital expenditures (*)	2,422		2,760		—		5,182		2,734		7,916
Goodwill:
Unamortized balance	3,481		1,655		—		5,136		—		5,136
Amortization	994		1,655		—		2,649		—		2,649

a. Sales and Operating Income

	Thousands of Yen
	2014
	Food Business		Office Coffee and Tea Services		Other Services			Total		Eliminations/ Corporate			Consolidated
Sales to customers	¥	148,902,884	¥	6,760,543	¥	337,663		¥	156,001,090	¥	—		¥	156,001,090
Intersegment sales	2,110,695		1,411,913		284,252			3,806,860		(3,806,860		)	—
Total sales	151,013,579		8,172,456		621,915			159,807,950		(3,806,860		)	156,001,090
Operating expenses	143,222,817		7,988,166		656,373			151,867,356		(1,204,228		)	150,663,128
Operating income (loss)	¥	7,790,762	¥	184,290	¥	(34,458	)	¥	7,940,594	¥	(2,602,632	)	¥	5,337,962

b. Total Assets, Depreciation, Capital Expenditures and Information about Goodwill

	Thousands of Yen
	2014
	Food Business		Office Coffee and Tea Services		Other Services		Total		Eliminations/ Corporate		Consolidated
Total assets	¥	28,488,355	¥	2,874,588	¥	38,543	¥	31,401,486	¥	8,035,221	¥	39,436,707
Depreciation and other	424,333		245,826		448		670,607		242,980		913,587
Capital expenditures (*)	352,851		336,558		—		689,409		191,387		880,796
Goodwill:
Unamortized balance	537,154		397,141		—		934,295		—		934,295
Amortization	119,368		198,570		—		317,938		—		317,938

a. Sales and Operating Income

	Thousands of Yen
	2013
	Food Business		Office Coffee and Tea Services		Other Services			Total		Eliminations/ Corporate			Consolidated
Sales to customers	¥	144,335,546	¥	6,503,205	¥	286,826		¥	151,125,577	¥	—		¥	151,125,577
Intersegment sales	2,032,169		1,356,948		272,106			3,661,223		(3,661,223		)	—
Total sales	146,367,715		7,860,153		558,932			154,786,800		(3,661,223		)	151,125,577
Operating expenses	138,497,390		7,736,571		621,821			146,855,782		(1,187,042		)	145,668,740
Operating income (loss)	¥	7,870,325	¥	123,582	¥	(62,889	)	¥	7,931,018	¥	(2,474,181	)	¥	5,456,837

b. Total Assets, Depreciation, Capital Expenditures and Information about Goodwill

	Thousands of Yen
	2013
	Food Business		Office Coffee and Tea Services		Other Services		Total		Eliminations/ Corporate		Consolidated
Total assets	¥	28,308,623	¥	2,930,439	¥	38,242	¥	31,277,304	¥	6,445,212	¥	37,722,516
Depreciation and other	412,729		207,923		448		621,100		195,740		816,840
Capital expenditures (*)	657,684		285,038		—		942,722		345,938		1,288,660
Goodwill:
Unamortized balance	656,522		595,711		—		1,252,233		—		1,252,233
Amortization	119,368		198,570		—		317,938		—		317,938

(*) Capital expenditures include the amounts of lease assets acquired during the period.

The Company has no branch offices or subsidiaries in foreign countries, therefore geographic segment information has not been disclosed. Also, sales to foreign customers have not been presented because neither the Company nor its subsidiaries recorded foreign sales for the years ended March 31, 2015, 2014 and 2013.

12.    RELATED PARTY TRANSACTIONS

Transactions between the Company and subsidiaries of shareholders and other related parties for the years ended March 31, 2015, 2014 and 2013, were as follows:

	Thousands of Yen						Thousands of U.S. Dollars
	2015		2014		2013		2015
Tax accountant fee to corporate auditors	¥	2,514	¥	2,588	¥	2,357	$	21
Purchase transactions with subsidiaries of shareholders during the year	7,291,459		12,038,768		11,366,274		60,762
Deposit made to a subsidiary of a shareholder during the year (*)	6,214,657		4,617,808		5,679,641		51,789

(*) Deposit made to subsidiaries of shareholders generally has terms of less than one month. The amounts in the table represent the average balances of the deposits during the year.

The balances due to or from these subsidiaries of shareholders at March 31, 2015 and 2014, were as follows:

	Thousands of Yen				Thousands of U.S. Dollars
	2015		2014		2015
Deposits to subsidiaries of shareholders	¥	4,500,000	¥	5,250,000	$	37,500
Accounts payable to subsidiaries of shareholders	1,113,160		2,008,091		9,276

13. CONTINGENT LIABILITIES

The Company, through its subsidiary, entered into a three-year distribution contract with a logistics company in April 2014 to enhance efficiency of the Group's delivery of raw materials and merchandise to its customers' sites. Following the inception of the contract, various disputes arose relating to unexpected fees charged and inefficient delivery of goods by the logistics company. The subsidiary attempted to resolve these issues through negotiations with the logistics company, however, no agreement was reached and the subsidiary notified the logistics company of the early termination of the contract in March 2015. The logistics company subsequently made a claim for compensation for the early termination of the contract.

The subsidiary has been negotiating with the logistics company but is currently unable to estimate the amount or the range of possible losses arising from the compensation claim, if any, because the negotation is at an early stage and still ongoing. Consequently, the Company has not provided any accruals for the compensation claim in the consolidated financial statements.

14.    SUBSEQUENT EVENT

On June 27 , 2015, the shareholders of the Company approved payments of cash dividends to the shareholders of record on March 31, 2015 of ¥1,080 thousand ($9 thousand) per share or a total of ¥598,320 thousand ($4,986 thousand) at the Company’s ordinary general meeting of shareholders.

15.    RECONCILIATION TO U.S. GAAP

The consolidated financial statements of the Group are prepared in accordance with Japanese GAAP, which varies in certain respects from U.S. GAAP. The following are reconciliations of equity and net income of the Group in accordance with Japanese GAAP to equity and net income in accordance with U.S. GAAP.

The Group's equity as of March 31, 2015 and 2014, is reconciled as follows:

	Thousands of Yen						Thousands of U.S. Dollars
	2015			2014			2015
Equity in accordance with Japanese GAAP	¥	11,328,705		¥	13,599,281		$	94,405
Differences arising from different account for:
a. Goodwill, intangible assets and other business combination related adjustments	6,806,324			6,902,307			56,719
b. Accrued vacation	(2,625,360		)	(2,482,973		)	(21,876		)
c. Employee's retirement benefits	—			(720,006		)	—
d. Capital leases	(3,425		)	(12,207		)	(29		)
e. Tax effect of adjustments	(338,049		)	(175,267		)	(2,817		)
Total	3,839,490			3,511,854			31,997
Equity in accordance with U.S. GAAP	¥	15,168,195		¥	17,111,135		$	126,402

The Group’s net income for the years ended March 31, 2015, 2014 and 2013, is reconciled as follows:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Net income in accordance with Japanese GAAP	¥	2,643,366		¥	2,787,098		¥	2,893,556		$	22,028
Differences arising from different accounting for:
a. Goodwill, intangible assets and other business combination related adjustments	(95,983		)	(95,983		)	(289,983		)	(800		)
b. Accrued vacation	(142,380		)	(83,147		)	(88,027		)	(1,186		)
c. Employees’ retirement benefits	25,340			144,681			99,262			211
d. Capital leases	8,634			538			3,707			72
e. Tax effect of adjustments	230,739			67,703			143,326			1,923
Total	26,350			33,792			(131,715		)	220
Net income in accordance with U.S. GAAP	¥	2,669,716		¥	2,820,890		¥	2,761,841		$	22,248

ASC 220, “Comprehensive Income,” establishes rules for the reporting of comprehensive income and its components. The following table summarizes the components of comprehensive income under U.S. GAAP for the years ended March 31, 2015, 2014 and 2013:

	Thousands of Yen							Thousands of U.S. Dollars
	2015							2015
	Gain (loss) before income tax expense		Income tax (expense) benefit			Gain (loss) after income tax expense		Gain (loss) before income tax expense		Income tax (expense)  benefit			Gain (loss) after income tax expense
Net income	¥	—	¥	—		¥	2,669,716	$	—	$	—		$	22,248
Other comprehensive income:
Unrealized gain on available-for-sale securities	233,459		(66,087		)	167,372		1,945		(551		)	1,394
Total	233,459		(66,087		)	167,372		1,945		(551		)	1,394
Gain associated with employees’ retirement benefits	1,005,753		(487,372		)	518,381		8,382		(4,062		)	4,320
Reclassification adjustments for gain included in net income	18,942		(6,707		)	12,235		158		(56		)	102
Total	1,024,695		(494,079		)	530,616		8,540		(4,118		)	4,422
Other comprehensive income	1,258,154		(560,166		)	697,988		10,485		(4,669		)	5,816
Comprehensive income						¥	3,367,704						$	28,064

	Thousands of Yen
	2014
	Gain (loss) before income tax expense			Income tax (expense) benefit			Gain (loss) after income tax expense
Net income	¥	—		¥	—		¥	2,820,890
Other comprehensive income:
Unrealized gain on available-for-sale securities	80,586			(28,351		)	52,235
Total	80,586			(28,351		)	52,235
Loss associated with employees’ retirement benefits	(251,644		)	89,863			(161,781		)
Reclassification adjustments for gain included in net income	6,420			(2,274		)	4,146
Total	(245,224		)	87,589			(157,635		)
Other comprehensive loss	(164,638		)	59,238			(105,400		)
Comprehensive income							¥	2,715,490

	Thousands of Yen
	2013
	Gain (loss) before income tax expense		Income tax (expense) benefit			Gain (loss) after income tax expense
Net income	¥	—	¥	—		¥	2,761,841
Other comprehensive income:
Unrealized gain on available-for-sale securities	102,240		(33,376		)	68,864
Total	102,240		(33,376		)	68,864
Gain associated with employees’ retirement benefits	644,294		(228,389		)	415,905
Reclassification adjustments for gain included in net income	71,957		(25,458		)	46,499
Total	716,251		(253,847		)	462,404
Other comprehensive income	818,491		(287,223		)	531,268
Comprehensive income						¥	3,293,109

The analysis of changes in equity under U.S. GAAP is as follows:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Equity at beginning of year	¥	17,111,135		¥	15,779,536		¥	17,953,299		$	142,593
Total comprehensive income (net of tax)	3,367,704			2,715,490			3,293,109			28,064
Cash dividends	(5,310,644		)	(1,383,891		)	(5,466,872		)	(44,255		)
Equity at end of year	¥	15,168,195		¥	17,111,135		¥	15,779,536		$	126,402

The following is a summary of the significant adjustments made to equity and net income to reconcile the Japanese GAAP results with U.S. GAAP. The paragraphs below refer to the corresponding items set forth above.

a. Business Combinations

Under Japanese GAAP, the Business Accounting Council issued a Statement of Opinion, “Accounting for Business Combinations” in October 2003 which was effective for fiscal years beginning on or after April 1, 2006. Before this statement, there was no specific accounting standard addressing accounting for business combinations; therefore, companies followed common business practices dictated by the Commercial Code of Japan (the “Code”), currently the Code of the Companies Act.

Under the purchase method, which is generally applied by Japanese companies, goodwill is measured as the excess of purchase price over the carrying values of the individual assets acquired and liabilities assumed at the acquisition date. Subsequently, the goodwill is amortized on a straight-line basis over a number of years that may vary, depending on the nature of the acquired business.

Under U.S. GAAP, all business combinations (excluding combinations of entities under common control) are accounted for using the acquisition method as defined in ASC 805, “Business Combinations.” ASC 805 requires that the net assets, tangible and identifiable intangible assets less liabilities of the acquired company be recorded at fair value, with the excess of the cost of an acquired company over the fair value of the acquired net assets recorded as goodwill. Also, after the adoption of ASC 350, “Intangibles-Goodwill and Other,” goodwill and recognized indefinite-lived intangible assets in a business combination are not amortized, but are tested for impairment at least annually, as well as on an interim basis if events or changes in circumstances indicate that the goodwill or indefinite-lived intangible assets might be impaired. Separate intangible assets that are not deemed to have an indefinite life are amortized over their expected economic life and also tested for impairment.

In 2000, the Company purchased 100% of the outstanding common stock of KK Kizembo (“Kizembo”). In December 2005, the Company purchased 100% of the common stock of Yamato Corporation (“Yamato”). In July 2002, the Company purchased 100% of the common stock of Atlas Co. (“Atlas”) which owned 52.8% of the common stock of Mefos Co. (“Mefos”); subsequently, Atlas acquired the remaining 47.2% of common stock of Mefos in a series of step acquisitions that concluded in December 2005.

In March 2006, the Company and Atlas merged, with the Company as the surviving entity. As a result of the merger, the Company directly held 100% of the common stock of Mefos. Under Japanese GAAP, and in line with the Code, the Company consolidated the net carrying amount of the assets and liabilities of Mefos and wrote off the unamortized amount of goodwill related to the previous acquisition of Atlas and its subsidiary, Mefos.

Under U.S. GAAP, the March 2006 merger between the Company and Atlas was accounted for as a transfer of net assets or equity interests between entities under common control. Such transfer is accounted for by the receiving entity (the Company) at the carrying amounts, including goodwill in the accounts of the transferring entity (Atlas) at the date of the transfer. Consequently, the one-time accelerated goodwill amortization charge is reversed for U.S. GAAP reporting purposes.

On November 1, 2007, the Company completed its merger with Yamato, a wholly owned subsidiary. On April 1, 2008, the Company also completed its merger with its wholly owned subsidiaries, Kizembo and AIM Dining Support Co., Ltd. All assets and liabilities of these entities were transferred to the Company at the appropriate carrying amount and there is no impact on the Company’s consolidated financial statements or the reconciliation to U.S. GAAP.

Goodwill:

The following table presents the carrying amount of goodwill under Japanese GAAP and U.S. GAAP as of March 31, 2015 and 2014:

	Thousands of Yen											Thousands of U.S. Dollars
	2015											2015
	Japanese GAAP							U.S. GAAP				Japanese GAAP							U.S. GAAP
Acquired Company	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Carrying Amount, Net of Impairment		Goodwill Related Reconciliation Item		Carrying Amount		Accumulated Amortization			Net Carrying Amount		Carrying Amount, Net of Impairment		Goodwill Related Reconciliation Item
Kizembo	¥	482,935	¥	(482,935	)	¥	—	¥	332,018	¥	332,018	$	4,024	$	(4,024	)	$	—	$	2,767	$	2,767
Mefos	6,175,740		(5,757,955		)	417,785		1,875,532		1,457,747		51,465		(47,983		)	3,482		15,629		12,147
Yamato	2,982,465		(2,783,893		)	198,572		1,918,419		1,719,847		24,854		(23,200		)	1,654		15,987		14,333
Total	¥	9,641,140	¥	(9,024,783	)	¥	616,357	¥	4,125,969	¥	3,509,612	$	80,343	$	(75,207	)	$	5,136	$	34,383	$	29,247

	Thousands of Yen
	2014
	Japanese GAAP							U.S. GAAP
Acquired Company	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Carrying Amount, Net of Impairment		Goodwill Related Reconciliation Item
Kizembo	¥	482,935	¥	(482,935	)	¥	—	¥	332,018	¥	332,018
Mefos	6,175,740		(5,638,587		)	537,153		1,875,532		1,338,379
Yamato	2,982,465		(2,585,323		)	397,142		1,918,419		1,521,277
Total	¥	9,641,140	¥	(8,706,845	)	¥	934,295	¥	4,125,969	¥	3,191,674

Under Japanese GAAP, goodwill is amortized on a straight-line basis over a period from 10 to 13 years as described in note 2.a., including an accelerated amortization for Atlas in the year ended March 31, 2006, which was reversed under U.S. GAAP.

For U.S. GAAP reporting purposes, the Company recognized goodwill impairment loss of ¥194,000 thousand for the year ended March 31, 2013 in connection with goodwill of Yamato, which represents the office coffee and tea services (the “OCS”) business reporting unit. Goodwill was impaired primarily due to reduced profitability of the OCS business reporting unit resulting from macro and micro economic factors surrounding the OCS business reporting unit.

The amount of the impairment was determined based on the estimated fair value of the OCS business reporting unit using a discounted cash flow model as compared to the carrying amount of the OCS business reporting unit, including goodwill.

For the years ended March 31, 2015, 2014 and 2013, the net income reconciliation item related to goodwill represents the reversal of the goodwill amortization charge amounting to ¥317,938 thousand ($2,649 thousand), ¥317,938 thousand and ¥317,938 thousand, respectively, recorded under Japanese GAAP and the recognition of goodwill impairment loss under U.S.GAAP as referred to above.

Under Japanese GAAP, the estimated aggregate amortization expense for goodwill for the next five years is as follows:

Year Ending March 31	Thousands of Yen		Thousands of U.S. Dollars
2016	¥	317,938	$	2,649
2017	119,368		995
2018	119,368		995
2019	59,683		497

Adjustment to intangible assets:

Under Japanese GAAP, the Company did not recognize identifiable intangible assets, other than goodwill, as part of purchase price allocation in a business combination.

In connection with the above-mentioned acquisitions, under U.S. GAAP, the Company recognized identifiable intangible assets and is amortizing those over the expected economic life of each intangible asset.     The table below presents the gross carrying amount, accumulated amortization and net carrying amount, in total and by major class of intangible assets acquired in the above-mentioned business combinations as of March 31, 2015 and 2014:

	Thousands of Yen														Thousands of U.S. Dollars
	2015							2014							2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer contracts	¥	7,366,836	¥	(4,407,424	)	¥	2,959,412	¥	7,366,836	¥	(3,993,503	)	¥	3,373,333	$	61,390	$	(36,729	)	$	24,661
Trademarks	361,723		—			361,723		361,723		—			361,723		3,015		—			3,015
Total	¥	7,728,559	¥	(4,407,424	)	¥	3,321,135	¥	7,728,559	¥	(3,993,503	)	¥	3,735,056	$	64,405	$	(36,729	)	$	27,676

For the years ended March 31, 2015, 2014, and 2013, the net income reconciliation item related to intangible assets represents the intangible assets amortization charge recognized under U.S. GAAP amounting to ¥413,921 thousand ($3,449 thousand), ¥413,921 thousand and ¥413,921 thousand, respectively.

Customer contracts are being amortized on a straight-line basis over periods of 14 to 20 years. Trademarks are not amortized but are tested for impairment at least annually, as well as on an interim basis if events or changes in the circumstances indicate that the trademarks might be impaired.

Under U.S. GAAP, the estimated aggregate amortization expense for intangible assets acquired for the next five years is as follows:

Year Ending March 31	Thousands of Yen		Thousands of U.S. Dollars
2016	¥	413,921	$	3,449
2017	413,921		3,449
2018	413,921		3,449
2019	413,921		3,449
2020	413,921		3,449

Other adjustment in connection with business combinations:

The following table represents an other adjustment in connection with the Yamato business combination as described above as of March 31, 2015 and 2014:

	Thousands of Yen						Thousands of U.S. Dollars
	As of March 31, 2015			As of March 31, 2014			As of  March 31, 2015
Land	¥	(24,423	)	¥	(24,423	)	$	(204	)

Business combinations adjustments summary:

The following table summarizes the U.S. GAAP adjustments related to the above-mentioned business combinations:

	Thousands of Yen																		Thousands of U.S. Dollars
	2015						2014						2013						2015
	As of March 31, 2015			Year Ended March 31, 2015			As of March 31, 2014			Year Ended March 31, 2014			As of March 31, 2013			Year Ended March 31, 2013			As of March 31, 2015			Year Ended March 31, 2015
Goodwill	¥	3,509,612		¥	317,938		¥	3,191,674		¥	317,938		¥	2,873,736		¥	123,938		$	29,247		$	2,649
Intangible assets	3,321,135			(413,921		)	3,735,056			(413,921		)	4,148,977			(413,921		)	27,676			(3,449		)
Land	(24,423		)	—			(24,423		)	—			(24,423		)	—			(204		)	—
Total	¥	6,806,324		¥	(95,983	)	¥	6,902,307		¥	(95,983	)	¥	6,998,290		¥	(289,983	)	$	56,719		$	(800	)

b. Accrued Vacation

Japanese GAAP does not specifically require a company to accrue liabilities for future compensated absences (short-term employee benefits). Under U.S. GAAP, in accordance with ASC 710, “Compensation-General,” absences such as vacations are accrued when earned by employees.

c. Employees’ Retirement Benefits

As described in note 2.1, certain revisions were made in the accounting standard for retirement benefits under Japanese GAAP and the Company changed the method of attributing expected benefits to years of service and the calculation method of discount rate accordingly from the beginning of year ended March 31, 2015 in order to align with those methods under U.S. GAAP, resulting in no GAAP difference in the liability for employees' retirement benefits as of March 31, 2015.

However, there are still several differences in the detailed application of these principles. The following represent the most material differences between Japanese GAAP and U.S. GAAP in connection with assumptions used to calculate the pension liability:

(1)Unlike U.S. GAAP, there is no corridor approach and actuarial gain or loss is always amortized under Japanese GAAP.

(2)Under Japanese GAAP, the prior service costs or credits which were recognized as a result of amendments of the pension plans were charged to profit and loss at the date of the amendment. Under U.S. GAAP, the prior service costs or credit were recognized as a charge to other comprehensive income at the date of amendment and amortized as a component of net periodic pension cost over the average remaining service period.

(3)Under Japanese GAAP, it is acceptable to use the same discount rate used in prior year unless there would be a material difference between the projected benefit obligations estimated using the discount rate as of the balance sheet date and the one estimated using the prior year’s discount rate. However, there is no such exception under U.S. GAAP.

The liability for employees’ retirement benefits at March 31, 2015 and 2014, under U.S. GAAP consisted of the following:

	Thousands of Yen						Thousands of U.S. Dollars
	2015			2014			2015
Projected benefit obligation	¥	(10,505,162	)	¥	(10,442,450	)	$	(87,543	)
Fair value of plan assets	9,266,391			8,028,910			77,220
Net liability under U.S. GAAP	(1,238,771		)	(2,413,540		)	(10,323		)
Net liability under Japanese GAAP:
Employees’ retirement benefits	(1,238,771		)	(1,784,428		)	(10,323		)
Prepaid pension costs	—			90,894			—
Total	(1,238,771		)	(1,693,534		)	(10,323		)
Equity reconciliation item	¥	—		¥	(720,006	)	$	—

Under U.S. GAAP, the components of net periodic benefit costs for the years ended March 31, 2015, 2014 and 2013, are as follows:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Service cost	¥	620,352		¥	609,354		¥	676,744		$	5,170
Interest cost	105,742			104,010			101,071			881
Amortization of prior service credit	(25,984		)	(27,356		)	(26,442		)	(217		)
Expected return on plan assets	(160,578		)	(143,967		)	(128,097		)	(1,338		)
Recognized actuarial loss	44,926			33,776			98,399			375
Net periodic benefit costs under U.S. GAAP	584,458			575,817			721,675			4,871
Net periodic benefit costs under Japanese GAAP	609,798			720,498			820,937			5,082
Net income reconciliation item	¥	(25,340	)	¥	(144,681	)	¥	(99,262	)	$	(211	)

The U.S. GAAP assumptions used for the years ended March 31, 2015, 2014 and 2013, are set forth below:

	2015	2014	2013
Discount rate	From 0.7% to 1.1%	From 0.8% to 1.10%	1.10%
Expected rate of return on plan assets	2.0%	2.0%	2.0%
Amortization period of prior service credit relating to the plan amendment	From 8 to 12 years	From 8 to 12 years	From 8 to 12 years
Recognition period of actuarial gain/loss	From 11 to 12 years	From 11 to 12 years	From 8 to 12 years

d. Capital Leases

Previously, Japanese GAAP permitted finance leases that did not transfer ownership of the leased property to a lessee to be accounted for as operating lease transactions if certain “as if capitalized” information was disclosed in the notes to the lessee’s financial statements. However, as explained in Note 2.m, the new accounting standard for lease required the Company to capitalize finance leases on its consolidated balance sheet.

Finance leases that do not transfer ownership and whose commencement date falls prior to the first year of implementation of this accounting standard may continue to be accounted for as an operating lease with required pro forma disclosure in the notes in accordance with an exception rule in the new accounting standard. Refer to Notes 2.m and 8.

U.S. GAAP requires the application of ASC 840, “Leases,” in order to determine whether a lease should be classified as an operating or capital lease. The Group analyzed its leases in accordance with the criteria specified in ASC 840 and determined that certain of its leases should be capitalized.

The following table presents a summary of the differences between Japanese GAAP and U.S. GAAP for lease-related assets and liabilities as of March 31, 2015, 2014 and 2013, and income statement related information for the years ended March 31, 2015, 2014 and 2013:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Machinery and equipment	¥	6,735		¥	98,066		¥	69,451		$	56
Furniture and fixtures	520,301			530,366			533,333			4,336
Other assets	8,492			10,751			18,713			70
Accumulated depreciation	(336,654		)	(315,712		)	(285,510		)	(2,805		)
Lease obligation	(202,299		)	(335,678		)	(348,732		)	(1,686		)
Net impact on equity	¥	(3,425	)	¥	(12,207	)	¥	(12,745	)	$	(29	)
Reversal of operating lease expense	¥	112,435		¥	138,049		¥	170,842		$	937
Lease asset depreciation under U.S. GAAP	(100,398		)	(129,782		)	(158,839		)	(837		)
Lease related interest expense under U.S. GAAP	(3,403		)	(7,729		)	(8,296		)	(28		)
Lease related impact on net income before income tax	¥	8,634		¥	538		¥	3,707		$	72

e.    Tax Effect of Adjustments

Accounting for income taxes in accordance with Japanese GAAP is substantially similar to accounting for income taxes in accordance with ASC 740, “Income Taxes.” Other than the deferred tax impact related to the U.S. GAAP reconciliation items, there is no material difference in connection with accounting for income taxes resulting from the application of U.S. GAAP.

The following table illustrates the impact on the Japanese GAAP deferred tax assets and liabilities in the Group’s consolidated balance sheets as a result of the U.S. GAAP adjustments as of March 31, 2015 and 2014:

	Thousands of Yen								Thousands of U.S. Dollars
	2015								2015
	Japanese GAAP Balances		ASC 740 Applied to U.S. GAAP Adjustments			U.S. GAAP Balances			Japanese GAAP Balances		ASC 740 Applied to U.S. GAAP Adjustments			U.S. GAAP Balances
Balance sheet:
Current deferred tax assets	¥	1,542,068	¥	853,133		¥	2,395,201		$	12,851	$	7,109		$	19,960
Non-current deferred tax assets	365,909		84,764			450,673			3,049		707			3,756
Non-current deferred tax liabilities	—		(1,275,946		)	(1,275,946		)	—		(10,633		)	(10,633		)
Net deferred tax assets	¥	1,907,977	¥	(338,049	)	¥	1,569,928		$	15,900	$	(2,817	)	$	13,083

	Thousands of Yen
	2014
	Japanese GAAP Balances		ASC 740 Applied to U.S. GAAP Adjustments			U.S. GAAP Balances
Balance sheet:
Current deferred tax assets	¥	1,867,208	¥	879,391		¥	2,746,599
Non-current deferred tax assets	691,854		22,708			714,562
Non-current deferred tax liabilities	—		(1,077,366		)	(1,077,366		)
Net deferred tax assets	¥	2,559,062	¥	(175,267	)	¥	2,383,795

Tax effects arising from U.S. GAAP adjustments for the years ended March 31, 2015, 2014 and 2013, were charged or credited to the following items:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Income taxes	¥	230,739		¥	67,703		¥	143,326		$	1,923
Other comprehensive income: Employees’ retirement benefits	(246,916		)	(192,488		)	(253,847		)	(2,058		)
Reversal of adjustment in retained earnings at the beginning of the year under Japanese GAAP	(146,605		)							(1,222		)
Total tax effects	¥	(162,782	)	¥	(124,785	)	¥	(110,521	)	$	(1,357	)

Reversal of adjustment in retained earnings is related to the new requirements in the revised accounting standard for retirement benefits under Japanese GAAP, where cumulative effects of the requirements were accounted for as an adjustment to retained earnings at the beginning of the year ended March 31, 2015 as described in note 2.1

U.S. GAAP adjustments related to the reversal of goodwill amortization charges recorded under Japanese GAAP have no tax effect since they are not deductible for tax purposes under Japanese Tax Laws and Regulations.

f. Cash and Cash Equivalents

The adjustment in the statements of cash flows to U.S. GAAP from Japanese GAAP mainly consisted of certain lease transactions which are only accounted for as capital leases under U.S. GAAP. Lease payments related to such are presented in financing activities under U.S. GAAP rather than operating activities under Japanese GAAP.

The following table represents the Group’s condensed consolidated information related to the statements of cash flows under U.S. GAAP for the years ended March 31, 2015, 2014 and 2013:

	Thousands of Yen									Thousands of U.S. Dollars
	2015			2014			2013			2015
Net cash provided by operating activities	¥	5,279,076		¥	3,588,766		¥	3,896,823		$	43,993
Net cash provided by (used in) investing activities	152,536			(2,263,186		)	1,916,363			1,270
Net cash used in financing activities	(5,822,886		)	(1,944,589		)	(5,929,428		)	(48,524		)
Net decrease in cash and cash equivalents	(391,274		)	(619,009		)	(116,242		)	(3,261		)
Cash and cash equivalents at beginning of year	7,090,200			7,709,209			7,825,451			59,085
Cash and cash equivalents at end of year	¥	6,698,926		¥	7,090,200		¥	7,709,209		$	55,824

g. Recent Accounting Pronouncements to Be Adopted in Future Periods

U.S. GAAP

In April 2014, the FASB issued Accounting Standards Update No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 380): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” Under the new guidance, only disposals representing a strategic shift in operations that has, or will have, a major effect on the entity’s operations and financial results should be presented as discontinued operations. Additionally, the revised guidance requires additional disclosures for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The effect of this guidance will depend on the nature and significance of transactions after the adoption date.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new accounting guidance addresses revenue recognition which will supersede the current revenue recognition requirements, including most industry-specific guidance. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The effect of this guidance, as well as the transition method, is being evaluated and will depend upon the method of transition as well as the nature and significance of transactions upon adoption.

Japanese GAAP

In September 2013, the ASBJ issued Accounting Standard--ASBJ Statement No. 21, "Revised Accounting Standard for Business Combinations" and ASBJ Guidance No. 10, "Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures." The new accounting standard revised the treatment of change of non-controlling interest in a subsidiary, the treatment of transaction costs and the recognition of measurement-period adjustments to the provisional amounts. These amendments will be applied from fiscal years beginning after April 1, 2015 and early adoption is permitted. The Company is currently evaluating the potential impact from adopting the standard and guidance on its financial position and results of operations.