Consolidated Financial Statements for the First Nine Months of Fiscal Year ending March 31, 201930/Jan/2019
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

https://www.nesic.co.jp/english/index.html
1. Consolidated Results for the First Nine Months (April 1, 2018 to December 31, 2019)of Fiscal Year ending March 31, 2019

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

9 months/FY Mar2019
9 months / FY Mar2018Net sales(¥ million)

Year-on-yearchange (%)

OperatingincomeYear-on-yearchange (%)

Ordinary
incomeYear-on-yearchange (%)

190,986

3.3

6,283

41.4

6,521

45.9

184,926

3.1

4,443

28.6

4,471

24.4

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

Net income
per share(diluted) (¥)

9 months/FY Mar
4,296
43.2
86.56
—
2019
9 months/ FY Mar
3,001
40.7
60.46
—
2018
c.f. Comprehensive income: 9 Months/FY Mar 2019: ¥4,821 million (32.0%); 9 Months/FY Mar 2018: ¥3,652 million (56.0%)(2) Financial Position
Owner'sNet assets
equity ratio
per share (¥)(%)
31/Dec/2018
198,516
103,04650.6
2,023.14
31/Mar/2018
207,643
101,73247.9
2,004.04
c.f. Owner's equity: 31/Dec/2018: ¥100,419 million; 31/Mar/2018: ¥99,473 million
Total assets(¥ million)

Net assets(¥ million)

2. Dividends

FY ending Mar.
2019
FY ended Mar. 20181stquarter

Dividends per share (¥)
3rd
InterimYear-endquarter

Full year

—

38.00

—

38.00 ※

76.00 ※

—

37.00

—

37.00

74.00

※ ForecastsNote: Revisions to projected dividends for the quarter under review: no3. Financial Forecasts for Fiscal Year ending March 31, 2019 (April 1, 2018 to March 31, 2019)(¥ 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)(%)(¥)

280,000

4.5

120,000

Net sales
FY ending Mar. 20198.5

12,000

9.5

7,500

1.9

151.10Note: Revisions to projected results for the quarter under review: yes
Cautionary 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, 2019

During the first Nine Months of the fiscal year ending March 31, 2019 (the period from April 1,
2018, to December 31, 2018), the Japanese economy continued a moderate recovery, supported
by policy effects accompanied by improvements observed in employment and income conditions,despite worrying trends in areas such as trade and associated fluctuations in financial and capital
markets.
Under those economic conditions, disparities were observed in different segments of theinformation and communication technology (ICT) market, the business domain where NEC
Networks & System Integration Corporation (hereinafter “the Company”) operates.
In the enterprises market, companies maintained a high level of investment in management
improvements, such as work-style innovation and strengthening their competitiveness, andrevived capital expenditure in response to rising inbound tourism. In addition, interest in cuttingedge technologies, including DX (digital transformation) such as artificial intelligence (AI), theInternet of things (IoT), and data analysis, has been rising. In the telecommunications carrierbusiness, investment in network infrastructure centering on mobile base stations showed arecovery. In the central and local government and public interest-related markets, investment inimproving urban infrastructure such as broadcasting and CATV remained active. On the otherhand, effects have been observed from investments in firefighting commander systems, whichhave entered a transitional period. Overseas markets showed signs of recovery, including an
increase in demand for telecommunication facilities in ASEAN regions in response toimprovements in urban infrastructure, as well as the resumption of capital expenditure which hadbeen postponed in some regions due to the impact of factors such as crude oil prices.

In this market environment, the Company and its consolidated subsidiaries (hereinafter the “Group”)
continued to step up their initiatives in businesses related to work-style innovation, including“EmpoweredOffice (*),” in response to a growing trend to change work styles. At the same time, theGroup has proactively proceeded with growth investment such as R&D and verification of new solutions,including a verification test for the DX technology field, as well as investment in venture enterprises
through the CVC fund established in January 2018. We also responded actively to demand for
improvements in network infrastructure in step with to hotel construction, which has been more active inrecent years. In addition, the Group bolstered its systems to expand businesses for telecommunications
carriers whose capital spending is expected to recover, which included the establishment of a newcompany jointly with KDDI Corporation and the rebuilding of a base station construction system. TheGroup also stepped up initiatives to expand operations including an effort, jointly with Sony Network
Communications Inc. and ORIX Corporation, to launch a business for a new standard of low-power widearea (LPWA) networks. The LPWA is expected to expand rapidly in the future with their application to theIoT.

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

Net sales¥190,986 million

3.3% increase year on year

Operating income¥6,283 million

41.4% increase year on year

Ordinary income¥6,521 million

45.9% increase year on year

Net income attributable¥4,296 million

43.2% increase year on year

¥207,452 million

2.9% increase year on year

to owners of the parent＜Reference＞
Orders received

Net sales increased 3.3% year on year, to ¥190,986 million. The result reflected a growth insales achieved in the Enterprise Networks business and the Carrier Networks business centeredon fields related to work-style innovation and the development of networks for hotels and otherservice providers. Orders received grew 2.9% year on year, to ¥207,452 million, reflecting strong
results posted for hotel and other service providers and ordinary enterprises centered on financecompanies, despite negative effects associated with developments such as a fall in reaction toorders for large projects received in the previous fiscal year and the cancellation of orders for
projects linked with the construction and maintenance of mega solar power plants.
Looking at profits, operating income rose 41.4% year on year, to ¥6,283 million, ordinary
income grew 45.9% year on year, to ¥6,521 million, and net income attributable to owners of theparent expanded 43.2% year on year, to ¥4,296 million, respectively. These results reflected anincrease in the ratio of projects with high added value to net sales and improved cost effectivenessin the Enterprise Networks business, together with a substantial improvement in the cost of sales
ratio due mainly to cost cutting effects in the Social Infrastructures business, although proactive
investment in growth was made.
Operating results by business segment were as follows:（Million yen）

Net sales by business segment
EnterpriseCarrierSocialNetworksNetworksInfrastructures

9M Fiscal 2019.3

85,717

48,673

9M Fiscal 2018.3

78,960

Increase or (decrease)
Ratio ofincrease/(decrease) (%)

Other

Total

52,092

4,502

190,986

45,86455,4504,650

184,926

6,756

2,809

(3,358)

(147)

6,059

8.6

6.1

(6.1)

(3.2)

3.3

（Million yen）

Reference: Orders received by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

9M Fiscal 2019.3

87,53554,280

9M Fiscal 2018.3

84,879

Increase or (decrease)
Ratio ofincrease/(decrease) (%)

Other

Total

59,686

5,950

207,452

46,52865,466

4,790201,665

2,656

7,751

1,160

5,787

3.1

16.7(5,780)

24.2

2.9(8.8)

1. Enterprise Networks businessNet sales for the business grew 8.6% year on year, to ¥85,717 million backed by sustained
firm investment in ICT related to work-style reforms, growth posted by EmpoweredOffice, awork-style innovation solution, and contributions made by consolidated subsidiaries.
2. Carrier Networks businessNet sales for the business rose 6.1% year on year, to ¥48,673 million, reflecting the growthin business for telecommunications carriers and non-carrier businesses such as network
development for service industries.
3. Social Infrastructures businessNet sales for the business decreased 6.1% year on year, to ¥52,092 million, as areactionary fall in civil engineering for development in large projects for constructing mega
solar power plants and decreased sales in businesses for overseas markets offset growth in
the broadcasting and CATV segment.
*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT
and facility installation to enable more intellectual and creative styles of work throughprocess 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
marketEnterprise Networks

Total office solutions based on ICT with securities or environmental
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
operations and monitoring.
Carrier Networks

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 ofnetwork equipment and other equipment.
Service integration of ICT infrastructure for governments and publicutilities (broadcasters, electric power companies, etc.), such asSocial Infrastructure

systems integration, installation, operation, and monitoring, andoperations in markets other than the Tokyo, Nagoya, and Osaka
areas. Overseas subsidiaries

OthersSales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2019
The Japanese economy is expected to show a moderate recovery, reflecting factors such as theeffects of central government measures and improvements in employment and income conditions.
However, the domestic economy continues to face downward pressure owing to factors such asconcerns over a downturn in overseas economies under the effects of trade issues and otherconditions.
As noted above, macroeconomic conditions remain uncertain. However, the ratio of projects withhigh added values to net sales is rising and an improvement in the cost of sales ratio mainlyreflecting enhanced cost efficiency is advancing faster than anticipated in the Enterprise Networks
business. Taking those factors into consideration, the Group is revising its consolidated business
forecasts for the fiscal year ending March 31, 2019 to operating income of ¥12 billion and ordinary
income of ¥12 billion, increasing the figures by ¥500 million, respectively. The Group keeps its
forecasts for net sales and net income attributable to owners of the parent unchanged from its
previous forecasts.
Net sales¥280 billion

4.5% increase year on year

Operating income¥12.0 billion

8.5% increase year on year

Ordinary income¥12.0 billion

9.5% increase year on year

Net income attributable¥7.5 billion

1.9% increase year on year

to owners of the parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2018
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Electronically recorded monetary claims
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
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Electronically recorded obligations
Short-term bank loans
Current installments of long-term debt
Accrued inncome 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, 201857,281103,911
494
2,379
5,858
5,414
(121)
175,218

54,251
84,877744
6,975
11,575
6,452(77)
164,798

10,093

10,246

1,394
3,990
5,384

1,208
5,125
6,333

12,714
4,270(37)
16,94732,425
207,643

12,5354,667(64)
17,13833,718
198,516

39,574
728
4,086
3,171
3,768
102
116
557
20,76872,87433,273
857
2,792
3,231
494
27
106
1,369
20,13562,288842
30,428
1,765
33,037
105,911954
30,4721,753
33,181
95,46913,122
16,65574,357(276)
103,858

13,122
16,65974,930(278)
104,434

42(374)(4,053)(4,385)
2,258
101,732
207,6438(430)(3,592)(4,014)
2,626
103,046
198,516(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
(9 months ended Dec. 2017)

FY/Mar 2019 1Q-3Q(9 months ended Dec. 2018)

Net sales

184,926

190,986

Cost of sales

155,782

159,256

Gross profit

29,14331,729Selling, general and administrative expenses

24,70025,446

Operating income

4,443

6,283

FY Mar/2018 1Q-3Q

Non-operating income
Interest income

2430

Insurance income

197

193

Other

148

223

Total non-operating income

370

447

Interest expenses

87

77

Other

254

131

Total non-operating expenses

342

208

4,471

6,521

Gain on sale of non-current assets

283－

Gain on sale of investment in affiliates

38－

Non-operating expenses

Ordinary income
Extraordinary income

Total extraordinary income

322－

Income before income taxes

4,793

6,521

Income taxes

1,662

2,052

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

3,130
129

4,469
172

3,001

4,296
(Millions of yen)

Net income

FY Mar/2018 1Q-3Q

FY/Mar 2019 1Q-3Q(9 months ended Dec. 2017)(9 months ended Dec. 2018)

3,130

4,469

22(34)

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

49(72)

Adjustments for retirement benefit

450460－(1)

522

352

3,652

4,821

3,480
172

4,666
154

Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash Flows(Millions of yen)
FY/Mar 2019 1Q-3Q

FY Mar/2018 1Q-3Q
Cash flows from operating activities
Net income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables(Increase) decrease in asset for retirement benefit
Increase (decrease) in liability for retirement benefits(9 months ended Dec. 2017)(9 months ended Dec. 2018)

4,793
1,906190
1228
743

6,521
1,977
185
(16)
190
549

(49)
(7)

(74)
(9)

(116)
(32)
87
8,747
(3,229)(4,363)
(228)
730
9,400
32
(85)
(3,682)
5,665

812
(46)
77
18,718(10,316)(6,135)(968)
431
11,89546(74)(5,465)
6,402(1,115)384(1,195)11(25)(1)2(36)(1,974)(1,514)4(2,300)
17(148)－
1(438)(4,379)

(125)
(128)
－
(3)
(3,615)
(17)
－
(332)
(4,222)(1,296)
(128)
300
(2)
(3,712)
(27)
245
(351)
(4,973)10(520)59,648
59,127(79)(3,030)57,281
54,251

Increase (decrease) in accrued bonuses to directors andcorporate 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
Loans receivable madeCollection of loans receivable
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
Proceeds from long-term deptNet (increase) decrease in treasury shares
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Proceeds from share issuance to non-controlling shareholders
Other, netNet cash provided by used in financing activities
Effect of exchange rate changes on cash and cashequivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

(4) Segment Information
Business Segment Information
1Q-3Q of fiscal March 2019 (9 months ended December 2018)
Enterprise
NetworksSales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)(Millions of yen)

CarrierNetworks

85,71785,717
8,298

48,673
48,6733,070

SocialInfrastructures
52,09252,092
1,202

Others

4,502
4,502
220

Adjustments(6,508)

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)

78,96078,960
6,897

Total

190,986
190,986
6,283(Millions of yen)

Carrier Networks

SocialInfrastructures

45,86445,8642,912

55,45055,450640

Others

4,650
4,650
204

Adjustments(6,212)

Total

184,926
184,926
4,443