Year ending December 31, 2019

Second Quarter of FY2019 Non-Consolidated Financial Results
August 7, 2019
(All financial information herein has been prepared in accordance with accounting principles generally accepted in Japan.
This document is an English translation from the original Japanese-language document. This translation is not subject toauditing standards in the U.S.)
Listed company name:
Code number:

Original Engineering
Consultants Co., Ltd.
4642

Stock listing:Tokyo Stock Exchange, Second Section(URL https://www.oec-solution.co.jp)

Representative:
Contact person:

Title President & Representative Director
Name:
Title Director & General Manager of
Name:
Financial Affairs Division
Planned date of submitting quarterly earnings report: August 9, 2019
Date of scheduled payment of dividends: –Quarterly earnings supplementary explanatory documents: None
Quarterly earnings presentation: None

Nobuhiko Suga
Kaoru Kira

Tel: (03) 6757-8800(Amounts less than ¥1 million are truncated)
1. NON-CONSOLIDATED FINANCIAL RESULTS FOR THE SECOND QUARTER OF FY 2019
(January 1, 2019 to June 30, 2019)(1) Non-Consolidated Operating Results (accumulated)(Percentages represent year-on-year changes)
Net sales
Operating income
Ordinary income
ProfitMillionMillion yen%
Million yen%
Million yen%%
yen
Six-month period
ended June 30,
3,745
2.4
865
-5.9
852
-6.7
562
-5.9
2019
Six-month period
ended June 30,
3,656
11.9
919
40.3
913
39.8
598
9.9
2018
Profit per share for the Profit per share-diluted
quarter
for the quarter
Yen
Yen
Six-month period
ended June 30, 2019
Six-month period
ended June 30, 2018

93.28

93.03

89.31

88.71

(2) Non-Consolidated Financial Position
Total assets

Net assets

Million yen

Million yen

As of June 30, 2019
7,548
5,560
As of December 31,
7,675
6,098
2018
(Reference)Shareholders’ equity: As of June 30, 2019: ¥5,560 million

Shareholders’ equity
ratio
%
73.7
79.5
As of December 31, 2018: ¥6,098 million

2. DIVIDENDSDividends per share
End ofFiscal(Record date)
Interimthird quarter year-end
Yen
Yen
Yen
FY 2018
0.00
–
14.00
FY 2019
0.00
FY 2019 (Forecast)–
16.00(Note) Revision to the recently announced forecast of dividends: None
End offirst quarter
Yen––

Full year
Yen
14.00
16.00

3. FORECAST OF NON-CONSOLIDATED RESULTS FOR FY 2019 (January 1, 2019 to December 31, 2019)(Percentages represent changes from the same period of the previous fiscal year)
Net sales
Operating income
Ordinary income
ProfitProfit per share
MillionMillionMillionMillion
%
%
%
%
Yen
yen
yen
yen
yen
Full
-35.9
6,300
0.7
650 -35.2
600
340
-42.7
57.61
year
(Note) Revision to the recently announced forecast of results: None
*NOTES(1) Application of accounting treatment unique to preparation of quarterly non-consolidated financial statements:
None(2) Changes in accounting policies, changes in accounting estimates and retrospective restatements:(i) Changes in accounting policies in accordance with revision of accounting standards: None(ii) Changes in accounting policies other than (i) above: None(iii) Changes in accounting estimates: None(iv) Retrospective restatements: None
(3) Number of outstanding shares (Common stock)(i) Number of shares outstanding at end of period, including treasury stock
As of June 30, 2019: 7,796,800 shares
As of December 31, 2018: 7,796,800 shares(ii) Number of shares of treasury stock at end of period
As of June 30, 2019: 2,026,265 shares
As of December 31, 2018: 1,026,965 shares(iii) Average number of shares outstanding for each period (cumulative second quarter)
As of June 30, 2019: 6,035,291 shares
As of June 30, 2018: 6,699,483 shares* The summary of quarterly financial results is not subject to quarterly reviews by certified public accountants or
audit corporations.
Note regarding forecasts and forward-looking statements
The Company has not modified its forecast of the results for fiscal 2019, which it announced on February 8, 2019.
The forecasts presented above are based on information available to the Company at the present time, and,accordingly, actual results may differ from any expressed future performance herein due to various factors.
For matters relating to results forecasts, please refer to “(3) Explanation Regarding Future Forecasts such as Forecastsof Results” on page 6.

Index of the Attachment
1.

QUALITATIVE INFORMATION REGARDING SECOND QUARTER FINANCIAL RESULTS .............. 4(1) Explanation Regarding Business Results.......................................................................................................... 4(2) Explanation Regarding Financial Position........................................................................................................ 5(3) Explanation Regarding Future Forecasts such as Forecasts of Results ............................................................ 6

2.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES ........................................................... 7(1) Quarterly Balance Sheets .................................................................................................................................. 7(2) Quarterly Statements of Operations .................................................................................................................. 9
Cumulative Second Quarter ..............................................................................................................................9(3) Quarterly Statements of Cash Flows................................................................................................................. 10(4) Notes Regarding the Quarterly Financial Statements ....................................................................................... 12(Matters Affecting the Assumption of a Going Concern) .................................................................................12(Notes Regarding Significant Changes in Shareholders’ Equity) .....................................................................12(Additional information) ...................................................................................................................................12(Segment Information)......................................................................................................................................123

1. QUALITATIVE INFORMATION REGARDING SECOND QUARTER FINANCIAL
RESULTS(1) Explanation Regarding Business Results
According to the Bank of Japan’s Tankan survey in June 2019, the diffusion index (DI) for major
manufacturing firms dropped five percentage points from the March 2019 survey to seven percentage points, and thatfor major non-manufacturing firms, it advanced two percentage points from the previous survey to 23 percentage points.
The DI for small and medium-sized manufacturers dropped seven percentage point from the previous survey to minus
one percentage point, and that of non-manufacturers dropped two percentage points to 10 percentage points. The
forecast DI for the next three months is unchanged for major manufacturers and is down six percentage points for major
non-manufacturers, which indicates that many companies are concerned about uncertainties in overseas economies andare cautious about the business outlook.
Under the above-mentioned economic conditions, the Ministry of Land, Infrastructure, Transport and Tourism(MLIT), with which the Company has a close business relationship, has drawn up the budget for fiscal 2019. The totals
earmarked for “disaster prevention and safety subsidies” and “general social infrastructure development subsidies” arealmost at the same levels as in fiscal 2018. The total amount of the sewerage works expenses budget of ordinancedesignated cities across Japan and Tokyo’s special wards also was almost at the same level as in fiscal 2018, although
the amount increased or decreased depending on the city. In addition, a total of ¥340 billion is appropriated for thesewerage works as emergency response measures based on the “Three-year emergency response plan for disasterprevention, disaster mitigation, and building national resilience” for critical infrastructure over the three-year period
from the second supplementary budget for fiscal 2018 to fiscal 2020.
According to a provisional calculation of the Cabinet Office, Japan’s water and sewerage infrastructure assets
amount to approximately ¥130 trillion, which indicates that the water and sewerage infrastructure stock is the second
largest infrastructure stock in the country by sector after the road infrastructure stock. Among these, most of the
population has access to water supplies, with the total length of water pipes reaching around 660,000 kilometers acrossJapan. However, the national average annual rate of renewing water pipes is as low as 0.75%, which means that it willtake almost 130 years to renew all of these pipes. The statutory useful life of water pipes is 40 years, but they are
expected to deteriorate further due to the slow progress of renewing the water pipes infrastructure, much of which wasbuilt during the high-growth period. Therefore, renewing aged water pipes has become an important issue for stablesupplies of safe water.
Meanwhile, 90.9% of the population of Japan has access to sewage treatment facilities (as of the end of 2017),
but only 78.8% has access to sewers, which means nearly 12 million people still live without access to sewage
treatment facilities; promoting sewage services needs to be accelerated. While the need to construct new facilities is on
the decrease, a great number of water and sewage facilities that were rapidly built during the high-growth period arereaching the ends of their useful lives every year; maintenance and renewal of these infrastructure assets, which are
indispensable for ensuring a safe, secure, and culturally strong living environment, are in demand. In addition, newneeds are growing for flood control measures to protect human lives and assets from localized torrential rainfalls,
which have occurred frequently in recent years, anti-seismic measures such as quake-resistant toilet facilities, andmeasures for reinforcing water and sewerage systems to make them tsunami resistant.
The Company, in this operating environment, worked aggressively to win orders mainly in the water supply
field, particularly for services related to asset management in line with the Water Supply Division, Ministry of Health,Labour and Welfare’s new water supply vision that focuses on the key words of “safety, strength, sustainability,
collaboration and challenge”. In the sewerage field, the Company pursued orders in line with the seven major themes
set by the Sewerage and Wastewater Management Department of MLIT: Strengthening earthquake recovery andreconstruction support and implementing national measures for safety and peace of mind; early reduction of areas
lacking sewerage infrastructure; promoting water environmental management; improving facilities management andoperations; strengthening sewerage management; promoting measures to achieve a low-carbon, recycling-oriented
society; and, promoting international water businesses through globalization and private-public initiatives. We also
make efforts to obtain orders for services related to support by the Ministry of Internal Affairs and Communications for
introducing local public enterprise-based accounting into small-scale water supply and sewerage operations, inaccordance with the Local Public Enterprise Act, as well as sewerage operations management strategy formulation4

operations and others. In overseas markets, the Company works aggressively to win orders by tapping into projects inemerging nations through public-private partnerships.
With regard to its internal structures, the Company has made efforts to distribute profits to employees andincrease revenue, by boosting productivity and reducing costs through the following measures: creating an organization
focused on the “Era of Maintenance and Management;” facilitating communication and information sharing between
different levels; correcting management issues promptly by occasionally checking management benchmarks bydepartment; conducting appropriate budget management, process control, and outsourcing management for orders
received for projects; upgrading in-house engineers’ skills; securing and fostering young employees who will lead thenext generation; redressing the issue of long working hours and promoting a suitable management with the aim of
becoming a “pioneer company in working-style reforms;” introducing internal programs and office environment where
each employee can work dynamically and flexibly according to his/her own circumstances; and, expanding external
networks.
As a result, orders received during the cumulative second quarter under review amounted to ¥1,995 million, adecrease of 6.0% compared with the same quarter of the previous fiscal year, and net sales increased 2.4%, to ¥3,745
million. Operating income amounted to ¥865 million, a decrease of 5.9% compared with the same quarter of theprevious fiscal year, and ordinary income decreased 6.7%, to ¥852 million. Profit amounted to ¥562 million, a decreaseof 5.9% compared with the same quarter of the previous fiscal year.
Results by operating division were as follows.
[Engineering Consultant Department]
The Engineering Consultant Department received orders totaling ¥1,767 million during the quarter underreview, a decrease of 7.2% compared with the same quarter of the previous fiscal year. Sales by the department
increased 0.2%, to ¥3,437 million.
[Information Processing Department]
In the Information Processing Department, orders received increased 4.1% compared with the same quarter ofthe previous fiscal year, to ¥227 million. Sales by the department increased 37.2%, to ¥308 million.

(2) Explanation Regarding Financial Position
1) Status of Assets, Liabilities and Net Assets(Current assets)
Current assets for the first six months under review amounted to ¥5,979 million (down 4.0% from the end of
the previous fiscal year). The main factors contributing to this change included an increase in cash and deposits due toreceipt of payment for operations and a decrease in accounts receivable-completed operation.
(Noncurrent assets)
Noncurrent assets for the first six months under review stood at ¥1,569 million (up 6.1% from the end of theprevious fiscal year). The main factors contributing to this change included an increase in investments and other assets
as a result of acquiring investment securities.
(Current liabilities)
Current liabilities for the first six months under review stood at ¥1,759 million (up 33.1% from the end of theprevious fiscal year). The main factors contributing to this change included increases in income taxes payable,
advances received on uncompleted contracts due to the receipt of payment for operations, and other due to the postingof accrued expenses for summer bonuses.
(Noncurrent liabilities)
Noncurrent liabilities for the first six months under review stood at ¥227 million (down 10.5% from the end of
the previous fiscal year). The main factors contributing to this change included a decrease in provision for retirement
benefits.
(Net assets)
Net assets for the first six months under review amounted to ¥5,560 million (down 8.8% from the end of theprevious fiscal year). The main factors contributing to this change included an increase in treasury stock due topurchase through a tender offer, despite an increase in retained earnings.
52) Status of Cash Flows
Cash and cash equivalents stood at ¥4,753 million at the end of the first six months under review. Significant
factors contributing to this change included the posting of profit before income taxes for the quarter, decreases in notes
and accounts receivable—trade, and purchase of treasury stock through a tender offer.
The main factors contributing to changes in cash flows during the first six months under review were as
follows:(Cash flows from operating activities)
Net cash provided in operating activities amounted to ¥2,249 million (decreased 25.3% compared with thesame quarter of the previous fiscal year). The main factor contributing to this change was the posting of profit before
income taxes for the quarter and a decrease in accounts receivable trade.
(Cash flows from investing activities)
Net cash used by investing activities amounted to ¥123 million (decreased 52.0% compared with the samequarter of the previous fiscal year). This is mainly due to the acquisition of investment securities.
(Cash flows from financing activities)
Net cash used in financing activities amounted to ¥1,107 million (increased 1,378.0% compared with the samequarter of the previous fiscal year). Significant factors contributing to this change included the purchase of treasury
stock through a tender offer and the payment of cash dividends.

(3) Explanation Regarding Future Forecasts such as Forecasts of Results
The Company has not changed its financial results forecast, which was announced on February 8, 2019, butwill promptly release a revised forecast when any correction is needed after examining various factors.

6

2. QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES(1) Quarterly Balance Sheets

Category

FY 2018(as of December 31, 2018)
Amount(thousand yen)

2Q under review(as of June 30, 2019)
Amount(thousand yen)

AssetsCurrent assets
Cash and deposits

4,452,537

5,469,747

Accounts receivable—completed
operation

1,685,356

430,507

58,07678,747

6,195,970

5,979,002

Property, plant and equipment

423,624

406,850

Intangible assets

128,506

129,548

Investments and other assets

927,495

1,032,903

1,479,626

1,569,302

7,675,596

7,548,304

Other
Total current assets
Noncurrent assets

Total noncurrent assets
Total assets

7

Category

FY 2018(as of December 31, 2018)
Amount(thousand yen)

2Q under review(as of June 30, 2019)
Amount(thousand yen)Accounts payable—operating

192,854

77,640

Lease obligations

22,954

22,620

Income taxes payable

131,450

322,756

Advances received on uncompleted contracts

535,610655,680

Provision for bonuses

38,912

59,204

Provision for loss on order received

12,593

5,772

Other

387,918

616,185

1,322,294

1,759,859

Provision for retirement benefits

138,302

117,959

Provision for share benefit

24,69524,396

Lease obligations

34,20429,534

Asset retirement obligations

48,83649,151

Other

8,400

6,720

254,439

227,761

1,576,733

1,987,621

Capital stock

1,093,000

1,093,000

Capital surplus

2,875,303

2,875,303

Retained earnings

2,726,952

3,194,438

Treasury stock-623,560-1,623,260

Total shareholders’ equity

6,071,695

5,539,480

Valuation difference on available-for-sale securities

26,733

20,768

Total valuation and translation adjustments

26,733

20,768433

433

6,098,862

5,560,682

7,675,596

7,548,304

Liabilities
Current liabilities

Total current liabilities
Noncurrent liabilities

Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity

Valuation and translation adjustments

Subscription rights to shares
Total net assets
Total liabilities and net assets8(2) Quarterly Statements of Operations
Cumulative Second Quarter
Previous cumulative second Cumulative second quarter
quarterunder review(from January 1, 2018 to(from January 1, 2019 toJune 30, 2018)
June 30, 2019)
AmountAmount(thousand yen)(thousand yen)

Category
Contracts completed

3,656,618

3,745,229

Cost of completed work

2,096,150

2,229,345

Gross profit

1,560,468

1,515,883

Selling, general and administrative expenses

641,216

650,648

Operating income

919,252

865,234

128

144

Interest on securities

1,369

3,325

Dividend income

3,463

3,893

–

7,988

Insurance income

1,000

–

Commission fee

1,215

1,215

Other

1,966

2,024

Total non-operating income

9,141

18,591

Interest expenses

1,048

1,250

Expenses for securities transactions

5,988

29,542

Loss on valuation of investment securities

3,991

–

Foreign exchange losses

3,514

614

246

356

14,78831,764

913,604

852,061

Loss on retirement of noncurrent assets

–

1,121

Total extraordinary loss

–

1,121

Profit before income taxes for the quarter

913,604

850,940

Income taxes current

181,696

293,038

Income taxes deferred

133,612-5,051

Total income taxes

315,309287,987

Profit for the quarter

598,295

562,953

Non-operating income
Interest income

Gain on valuation of investment securities

Non-operating expenses

Other
Total non-operating expenses
Ordinary income
Extraordinary loss

9

(3) Quarterly Statements of Cash Flows
Previous cumulative
second quarter(from January 1, 2018 toJune 30, 2018)
Amount(thousand yen)

Cumulative second
quarter under review(from January 1, 2019 toJune 30, 2019)
Amount(thousand yen)

Profit before income taxes for the quarter

913,604

850,940

Depreciation and amortization

40,41240,875

Increase/decrease in provision for bonuses

18,037

20,292

Increase/decrease in provision for loss on order
received-7,116-6,820

Increase/decrease in provision for share benefit

-599

-299

Increase/decrease in provision for retirement benefits-28,531-20,343

Interest and dividends income-4,960-7,363

Interest expenses

1,048

1,250

1,577,987

1,254,849-48-7,848-162,335-115,214

554,975

120,069

Other

210,510219,674

Subtotal

3,112,984

2,350,061

Interest and dividends income received

4,959

7,367

Interest expenses paid

-1,048-1,250

Income taxes paid

-106,148-107,080

Net cash provided by (used in) operating activities

3,010,747

2,249,098

Category
Cash flows from operating activities

Increase/decrease in notes and accounts
receivable trade
Increase/decrease in costs on uncompleted services
Increase/decrease in notes and accounts
payable trade
Increase/decrease in advances received on
uncompleted contracts10Previous cumulative
second quarter(from January 1, 2018 toJune 30, 2018)
Amount(thousand yen)

Cumulative second
quarter under review(from January 1, 2019 toJune 30, 2019)
Amount(thousand yen)

Purchase of property, plant and equipment-27,037-690

Purchase of intangible assets-24,927-23,687

Payments for lease and guarantee deposits-4,674-1,136102686-200,000-100,333

Other payments-3,585-3,338Other proceeds

2,038

4,650

-258,083-123,849-29-1,000,000

Repayments of lease obligations-12,750-12,529

Proceeds from exercise of share options

18,900–Cash dividends paid

-81,085-95,467

Net cash used in financing activities-74,966-1,107,997

-126

-71

2,677,571

1,017,179

2,798,825

3,736,554

5,476,396

4,753,734

Category
Cash flows from investing activities

Proceeds from collection of lease and guarantee
deposits
Purchase of investment securities

Net cash provided by (used in) investing activities
Cash flows from financing activities
Purchase of treasury stock

Effect of exchange rate change on cash and cash
equivalents
Net increase/decrease in cash and cash equivalents
Balance of cash and cash equivalents at beginning of theyear
Balance of cash and cash equivalents at the end of thequarter11(3) Notes Regarding the Quarterly Financial Statements(Matters Affecting the Assumption of a Going Concern)
No applicable items.
(Notes Regarding Significant Changes in Shareholders’ Equity)
The Company, based on the resolution of the Board of Directors meeting held on November 5, 2018, purchased
treasury stock. As a result, the total amount of treasury stock held by the Company increased by ¥1,000,000,000 during
the first six months under review to ¥1,623,260,000 at the end of the first six months under review.
(Segment Information)[Segment Information]
Previous cumulative second quarter (from January 1, 2018 to June 30 2018) and cumulative second quarter
under review (from January 1, 2019 to June 30 2019)
Since the Company’s business operations comprising engineering consulting and related services are conductedwithin a single business segment, segment information is omitted.
(Additional Information)(Application of Partial Amendments to the Accounting Standard for Tax Effect Accounting)
The Company has applied the “Partial Amendments to the Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, February 16, 2018) from the beginning of the first quarter of the period under review.
Accordingly, deferred tax assets are presented under investments and other assets and deferred tax liabilities arepresented under noncurrent liabilities.

12