Consolidated Financial Statements for the First Nine Months of Fiscal Year ending March 31, 2018

30/Jan/2018
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

http://www.nesic.co.jp/english/index.html

1. Consolidated Results for the First Nine Months (April 1, 2017 to December 31, 2017)of Fiscal Year ending March 31, 2018

(Rounded down to the nearest million yen.)(1) Net Sales and Income

9 months/FY Mar2018
9 months / FY Mar2017

Net sales(¥ million)

Year-on-yearchange (%)

OperatingincomeYear-on-yearchange (%)

Ordinary
incomeYear-on-yearchange (%)

184,926

3.1

4,443

28.6

4,471

24.4

179,314-7.6

3,456-47.9

3,594-46.9

Net income
attributable
Net income
Year-on-year
to owners ofper sharechange (%)
the parent(¥)(¥ million)

Net income
per share(diluted) (¥)

9 months/FY Mar
3,001
40.7
60.46
—
2018
9 months/ FY Mar
2,132-46.8
42.96
—
2017
c.f. Comprehensive income: 9 Months/FY Mar 2018: ¥3,652 million (56.0%); 9 Months/FY Mar 2017: ¥2,341 million (-50.4%)(2) Financial Position
Owner'sNet assets
equity ratio
per share (¥)(%)
31/Dec/2017
191,427
96,67549.3
1,903.18
31/Mar/2017
197,469
96,67447.9
1,906.03
c.f. Owner's equity: 31/Dec/2017: ¥94,467 million; 31/Mar/2017: ¥94,611 million
Total assets(¥ million)

Net assets(¥ million)

2. Dividends

FY ending Mar.
2018
FY ended Mar. 2017

1stquarter

Dividends per share (¥)
3rd
InterimYear-endquarter

Full year

—

37.00

—

37.00 ※

74.00 ※

—

36.00

—

36.00

72.00

※ ForecastsNote: Revisions to projected dividends for the quarter under review: no3. Financial Forecasts for Fiscal Year ending March 31, 2018 (April 1, 2017 to March 31, 2018)(¥ million)(%)(Percentages represent change compared to the previous corresponding period.)
Net income attributable to Net income
Operating income
Ordinary income
owners of the parentper share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

270,000

4.7

10,500Net sales
FY ending Mar. 2018

5.3

10,500

5.3

6,700

2.3

134.98

Note: Revisions to projected results for the quarter under review: noCautionary Statement
Forecasts of results mentioned in this document are future estimates and are thus inclusive of risks and uncertain factors since they are not based on
definite facts. Please be aware that a variety of factors could cause actual results to differ significantly from those projected. The major factors affecting
actual results include the economic climate and social trends surrounding the business of this Company’s group, consumer trends vis-a-vis systems
and services provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the First Nine Months for the Fiscal Year Ending March 31, 2018
During the first Nine Months for the fiscal year ending March 31, 2018 (the period from April
1, 2017 to December 31, 2017), the Japanese economy continued to experience a moderate
recovery, supported by the effects of various political measures and a moderate increase incapital spending, together with improvements in corporate earnings and employment.
In the fields of information and communication technology (ICT), in which NEC Networks &System Integration Corporation (“the Company”) operates, differences were observed in eachfield under these economic conditions.
First, in the corporate market, while corporate managers continued to hold critical views on
the effects of investment, there was healthy investment for enhancing business management
and competitiveness, including investment in work style innovation.
In the telecom carrier business, restraints on capital spending for network infrastructure havebottomed out and a slight recovery has appeared.
In the central and local governments as well as the public interest market, investment inimprovements in safety and security and other urban infrastructure remained strong; however,the competitive environment remained harsh in part, showing weakness.
Following the revision of the Feed-In Tariff (FIT) Act, demand for the construction of solar
power generation plants has become brisk. In the overseas market, while demand for thedevelopment of infrastructure for mobile communications and other businesses grew,particularly in Asia, market weakness was also evident, for instance in postponed projects inother regions.

In this market environment, the Group stepped up its initiatives for businesses related to thework style innovation, including EmpoweredOffice, and new technologies and themes such as
robotics and AI in response to the growing momentum of work style reforms. The needs forteleworking, in particular, have been growing recently, and in July 2017, the Company
introduced teleworking throughout the organization based on the results of an internal field trialthat had been underway since 2015. At the same time, the Company implemented active
promotion for sales expansion such as the renewal of “EmpoweredOffice Center,”theshowroom at the head office, by incorporating the cutting-edge technologies and services ofJapan and other countries. In addition, the Group bolstered its overseas business, in particularoffering both the know-how it has developed through its extensive track record with domestic
telecom carriers and its high quality construction to overseas telecom carriers. Meanwhile, inprojects for the construction of large mega-solar power generation plants, orders for whichwere received during the previous fiscal year, construction proceeded steadily under thecompany-wide project management system.

As a result, the Group posted the following consolidated results for the First Nine Months
under review:

Net sales¥184,926 million

3.1% increase year on year

Operating income¥4,443 million

28.6%

increase year on year

Ordinary income¥4,471 million

24.4%

increase year on year

Net income attributable¥3,001 million

40.7%

increase year on year

¥201,665 million

0.2%

decrease year on year

to owners of the parent＜Reference＞
Orders received

Net sales increased 3.1% year on year, to ¥184,926 million. This result reflected growthin sales of services for telecom carriers in the Carrier Networks business, the contribution tosales of projects for the construction of large mega-solar power generation plants, orders forwhich were received in the previous fiscal year, and an increase in sales in the key areas underthe medium-term business strategy (announced in May 2016), including the area related to thework style innovation. Orders received remained on a par with the result for the same periodof the previous fiscal year, 201,665 million yen, due mainly to the new order received for theconstruction of large mega-solar power generation plants and growth in orders for central andlocal governments, including disaster prevention systems as well as a large project acquisitionin the social infrastructures segment , offsetting the absence of the large projects in theprevious fiscal year.
On the profit front, operating income increased 28.6% year on year, to ¥4,443 million,ordinary income grew 24.4% year on year, to ¥4,471 million yen, and net income attributableto owners of the parent rose 40.7% year on year, to ¥3,001 million. This was a result primarilyof an improved project mix and continuous cost structural reforms in the Enterprise Networks
business and Carrier Networks business, which offset a decline in the Social Infrastructures
segment due to a higher cost of sales ratio and an increase in selling, general andadministrative expenses.

Operating results by business segment were as follows:（Million yen）

Sales by business segment
Enterprises

CarrierSocialNetworks

Networks

Infrastructures

OtherTotal

9M Fiscal 2018.3

78,96045,86455,4504,650

184,926

9M Fiscal 2017.3

77,40442,64654,311

4,951

179,314

Increase/(decrease)1,556

3,217

1,138(301)

5,612

2.0

7.5

2.1

(6.1)

3.1

Ratio of increase/(decrease)(%)（Million yen）

Reference: Orders received by business segment
EnterpriseCarrierSocialNetworks

Networks

Infrastructures

OtherTotal

9M Fiscal 2018.3

84,87946,52865,466

4,790

201,665

9M Fiscal 2017.3

85,35450,05462,3594,359

202,127

Increase/(decrease)(475)(3,526)

3,107

430

5.0

9.9(462)

Ratio of increase/(decrease)
(%)

(0.6)

(7.0)

(0.2)

1. Enterprise Networks business
ICT investment in work style reform remained active and EmpoweredOffice, an officeinnovation solution business, achieved growth. In addition, the electric facilities in theproject received in the previous fiscal year for construction of large mega-solar power
generation plants contributed to the sales. As a result, sales increased 2.0% year on year
to 78,960 million yen.
2. Carrier Networks business
Sales rose 7.5 % year on year, to ¥45,864 million thanks to the expansion of businesses
for telecom carriers.
3. Social Infrastructures business
Sales climbed 2.1% year on year, to ¥55,450 million, reflecting the contribution of civilengineering and development in the construction of large mega-solar power generation
plants, which were received in the previous fiscal year, offsetting a decrease in sales in theoverseas businesses.
*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT andfacility installation to enable more intellectual and creative styles of work through process

reforms. It also proposes new methods and places of work that enable customers to fulfill
their social responsibilities, such as the strengthening of security and environmental
responsiveness.

<Outline of Business Segments>
Business Segment

Descriptions of Main Businesses
Service integration of ICT solutions, mainly for the enterprises market
Total office solutions based on ICT with securities or environmental

Enterprise Networks

solutionsand related operation/monitoring services, as well as outsourcing
services using our own contact centers and data centers
Service integration mainly for telecom carriers’ ICT platforms (frommobile communications base stations to core networks), including
systems integration, installation, and related services such as

Carrier Networks

operations and monitoring.
Systems integration of large-scale, wide-area, carrier-grade ICT
platforms and data centers and related operations, monitoring services
Development, manufacturing, sales and systems integration of network
equipment and other equipment.
Service integration of ICT infrastructure for governments and publicutilities (broadcasters, electric power companies, etc.), such as systems

Social Infrastructure

integration, installation, operation, and monitoring, and operations inmarkets other than the Tokyo, Nagoya, and Osaka areas. Overseas
subsidiaries

OthersSales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2018
The Japanese economy is expected to show a moderate recovery, reflecting the effect ofgovernment measures and improvements in employment and income conditions. However, thedomestic economy continues to face downward pressure due to such factors as the sharp
appreciation of the yen and concerns over a downturn in overseas economies.
In this economic environment, the consolidated forecast for the fiscal year ending March 31,2018 remains unchanged from the plans on a company-wide basis, without any change from theinitial forecast.

Net sales¥270 billion

4.7% increase year on year

Operating income¥10.5 billion

5.3% increase year on year

Ordinary income¥10.5 billion

5.3% increase year on year

Net income attributable¥6.7 billion

2.3% increase year on year

to owners of the parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2017
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Purchased goods,materials and supplies
Work in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Short-term bank loans
Current installments of long-term debt
Accruedncome taxes
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As ofDecember 31, 2017

59,64891,152
2,679
5,815
9,796(92)168,999

59,12782,511
2,652
9,079
10,022(98)163,296

10,71910,090

1,689
2,871
4,561

1,456
3,510
4,966

13,240(51)
13,18828,469197,469

13,124(49)
13,07428,131
191,427

36,474
4,069
171
2,964
67
123
645
18,981
63,49832,235
4,016
171
1,017
18
116
530
19,40957,515

4,014
31,206
2,075
37,296
100,795

3,885
31,477
1,873
37,236
94,752

13,122
16,652
70,622(272)
100,124

13,122
16,65570,000(275)
99,50235(394)(5,154)(5,513)
2,062
96,674
197,46957(388)(4,704)(5,034)
2,207
96,675
191,427

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
(9 months ended Dec. 2016)

FY/Mar 2018 1Q-3Q(9 months ended Dec. 2017)

Net sales

179,314

184,926

Cost of sales

151,381

155,782

Gross profit

27,932

29,143

Selling, general and administrative expenses

24,476

24,700Operating income

3,456

4,443

FY Mar/2017 1Q-3Q

Non-operating income
Interest income

3124

Insurance income

190

197

Other219

148

Total non-operating income

441

370

Interest expenses

6587

Other237

254

Total non-operating expenses303

342

3,594

4,471

Gain on sale of non-current assets－

283

Gain on sale of investment in affiliates－

38

Total extraordinary income

－322

87

－

Non-operating expenses

Ordinary income
Extraordinary income

Extraordinary losses
Closing of affiliates cost
Total extraordinary losses

87－

Income before income taxes

3,507

4,793

Income taxes

1,233

1,662

Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

2,273
141

3,130
129

2,132

3,001
(Millions of yen)

Net income

FY Mar/2017 1Q-3Q

FY/Mar 2018 1Q-3Q(9 months ended Dec. 2016)(9 months ended Dec. 2017)

2,273

3,130

1122

Other comprehensive income
Net unrealized holding loss on other securities
Foreign currency translation adjustments

(417)

49

Adjustments for retirement benefit

473

450

Total other comprehensive income

67522

2,341

3,652

2,315

3,480

26172

Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash FlowsFY Mar/2017 1Q-3Q
Cash flows from operating activities
Net income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in asset for retirement benefit
Increase (decrease) in liability for retirement benefits
Increase (decrease) in accrued bonuses to directors and corporate auditors
Increase (decrease) in accurued warranty on products
Increase (decrease) in accurued losses on sales contracts
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Proceeds from sale of intangibles
Purchase of investment securities
Proceeds from sale of investment securities
Loans receivable madeCollection of loans receivable
Proceeds from sales of investments in affiliates
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Other, netNet cash provided by used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(9 months ended Dec. 2016)(Millions of yen)
FY/Mar 2018 1Q-3Q(9 months ended Dec. 2017)

3,507
2,164191
(70)
534
(80)
(63)
(55)
(40)
6526,870(3,004)(8,749)(861)
1,990
22,39640(62)(4,060)18,314

4,793
1,906
190
228
743
(49)
(7)
(116)
(32)
87
8,747
(3,229)(4,363)
(228)
732
9,400
32
(85)
(3,682)
5,665(1,340)
0
(550)
－
(7)
3(1)
4
－
(124)
(2,017)(1,115)384(1,195)
11
(25)
4(1)
2
74(115)(1,974)551(120)(3,514)(14)(383)(3,482)(104)
12,70943,88956,599(125)(128)(3,615)(17)(335)(4,222)10(520)59,64859,127

(4) Segment Information
Business Segment Information
1Q-3Q of fiscal March 2018 (9 months ended December 2017)
Enterprise
Networks
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)(Millions of yen)

Carrier
Networks

78,96078,9606,897

45,86445,864
2,912

SocialInfrastructures
55,45055,450640

Others

4,650
4,650
204

Adjustments(6,212)

1Q-3Q of fiscal March 2017 (9 months ended December 2016)
Enterprise
Networks
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)

77,404
77,404
5,416

Total

184,926
184,926
4,443(Millions of yen)

Carrier Networks

SocialInfrastructures

42,64642,646
1,663

54,311
54,311
2,793

Others

4,951
4,951
178

Adjustments(6,596)

Total

179,314
179,3143,456