FY 2018 Non-consolidated Financial Results

Year ended December 31, 2018

February 8, 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 to auditing standards in the U.S.)

Listed company name:

Original Engineering
Consultants Co., Ltd.
4642

Code number:

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

Representative:
Contact person:

Title President & Representative Director Name:
Title Director & General Manager of
Name:
Financial Affairs Division
Planned Annual General Meeting of Shareholders: March 26, 2019
Planned filing of a financial report: March 26, 2019
Date of scheduled payment of dividends: March 27, 2019
Earnings supplementary explanatory documents: None
Earnings presentation: None

Nobuhiko Suga
Kaoru Kira

Tel: (03) 6757-8800(Amounts less than ¥1 million are truncated)

1. NON-CONSOLIDATED FINANCIAL RESULTS FOR FY 2018 (January 1, 2018 to December 31, 2018)(Percentages represent year-on-year change)(1) Non-consolidated Operating Results
Net sales

Operating income

Ordinary income

ProfitMillion yen%

Million yen%

Million yen%

Million yen

%

6,257

0.0

1,003

-0.9

936

-8.0

593

-39.0

6,256

12.0

1,012

77.8

1,017

73.8

973

135.6

FY 2018 ended
December 31, 2018
FY 2017 ended
December 31, 2017

FY 2018 ended
December 31, 2018
FY 2017 ended
December 31, 2017

Ordinary income
to total assets%

Profitper share-basic
Yen

Profitper share-diluted
Yen

88.26

87.83

10.2

12.8

16.0

145.50145.16

19.0

15.6

16.2

(Reference) Gain (loss) on investment by equity method: FY 2018: ¥- million

Return on equity%

Operatingmargin%FY 2017: ¥- million(2) Non-consolidated Financial Position
Total assets

Net assets

Million yen

Million yen

%

Yen

7,675

6,098

79.5

900.82

5,584

79.7

834.66

As of December 31, 2018
As of December 31, 2017

7,006

(Reference) Shareholders’ equity:

As of December 31, 2018: ¥6,094 million

Shareholders’ equity ratio

Net assets per share

As of December 31, 2017: ¥5,583 million(3) Non-consolidated Cash Flows
Cash flows fromoperating activities
Million yen

Cash flows frominvesting activities
Million yen

Cash flows fromfinancing activities
Million yen

1,459

-440

-81

3,736

434

133

-75

2,798

FY 2018 ended
December 31, 2018
FY 2017 ended
December 31, 2017

Cash and cash equivalents
at the end of the period
Million yen

2. DIVIDENDS(Record date)
FY 2017 ended
December 31, 2017
FY 2018 ended
December 31, 2018
FY 2019 ending
December 31, 2019 (Forecast)End of firstquarter
Yen

Dividends per share
End of third Fiscal
Interimquarter year-end
Yen
Yen
Yen

Full
year
Yen

Total dividend
amountPayout ratio(Full year)

Ratio ofdividends to
net assets

Million yen

%

%

-

0.00

-

12.00

12.00

81

8.2

1.4

-

0.00

-

14.00

14.00

95

15.9

1.6

-

0.00

-

16.00

16.00

27.8

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)
Operating income
Ordinary income
ProfitProfit per share

Net sales
Full year

Million yen%

Million yen%

Million yen%

Million yen

%

Yen

6,300

0.7

650

-35.2

600

-35.9

340

-42.7

57.61

*NOTES(1) Changes in accounting policies, changes in accounting estimates and retrospective restatements:(i) Changes in accounting policies in accordance with revision of accounting standards: Yes(ii) Changes in accounting policies other than (i) above: None(iii) Changes in accounting estimates: None(iv) Retrospective restatements: None

(2) Number of outstanding shares (Common stock)(i) Number of shares outstanding at end of period, including treasury stock
As of December 31, 2018: 7,796,800 shares
As of December 31, 2017: 7,796,800 shares(ii) Number of shares of treasury stock at end of period
As of December 31, 2018: 1,026,965 shares
As of December 31, 2017: 1,107,735 shares(iii) Average number of shares outstanding for each period
As of December 31, 2018: 6,721,703 shares
As of December 31, 2017: 6,688,330 shares* The summary of financial results is not subject to audit by certified public accountants or audit corporations.
Note regarding forecasts and forward-looking statements
The business results forecasts presented are based on information available to the Company at the present time and are subject topotential risks and uncertainty. Accordingly, actual results may differ significantly from any expressed future performance herein due
to various factors.
For matters relating to results forecasts, please refer to “1. SUMMARY OF BUSINESS RESULTS,” “(4) Future Outlook” on page 5 of the
Attachment.

Index of the Attachment
1.
(1)
(2)
(3)
(4)

SUMMARY OF BUSINESS RESULTS ................................................................................................................2
Summary of Business Results for Current Period ..................................................................................................... 2
Summary of Financial Position for Current Period ................................................................................................... 4
Summary of Cash Flows for Current Period ............................................................................................................. 4
Future Outlook .......................................................................................................................................................... 5

2.

BASIC POLICY FOR THE SELECTION OF ACCOUNTING STANDARDS................................................ 5

3.
(1)
(2)
(3)
(4)
(5)

FINANCIAL STATEMENTS AND KEY NOTES
Non-consolidated Balance Sheets ............................................................................................................................. 6
Non-consolidated Statements of Operations ............................................................................................................. 8
Non-consolidated Statements of Changes in Net Assets ........................................................................................... 9
Non-consolidated Statements of Cash Flows ............................................................................................................ 11
Notes regarding the Non-consolidated Financial Statements .................................................................................... 13(Matters Affecting the Assumption of a Going Concern) ...................................................................................... 13(Changes in Presentation) ...................................................................................................................................... 13(Additional Information) ....................................................................................................................................... 13(Segment Information)........................................................................................................................................... 15(Profit and Loss under Equity Method) ................................................................................................................. 15(Per Share Information) ......................................................................................................................................... 15(Significant Subsequent Events) ............................................................................................................................ 16

1

1. SUMMARY OF BUSINESS RESULTS(1) Summary of Business Results for Current Period
According to the Bank of Japan’s Tankan survey in December 2018, the diffusion index (DI) for major
manufacturing firms was unchanged from the September 2018 survey of 19 percentage points, and that for major
non-manufacturing firms, it advanced two percentage points from the previous survey to 24 percentage points. The
DI for small and medium-sized manufacturers remained the same level as in the previous survey of 14 percentage
points, and that of non-manufacturers advanced one percentage point to 12 percentage points. The forecast DI for the
next three months dropped four percentage points for major manufacturers and is down four percentage points for
major non-manufacturers, which indicates that many companies are concerned about increases in labor shortages
and are 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 a budget for fiscal 2018. The
totals earmarked for “disaster prevention and safety subsidies” and “general social infrastructure development
subsidies” are on the same levels as in fiscal 2017. The total amount of the sewerage works expenses budget ofordinance-designated cities across Japan and Tokyo’s special wards increased 1.3% from fiscal 2017.
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 kilometersacross Japan. However, the national average annual rate of renewing water pipes is as low as 0.76%, which meansthat it will take almost 130 years to renew all of these pipes. The statutory useful life of water pipes is 40 years, butthey are expected to deteriorate further due to the slow progress in renewing the water pipes infrastructure, much ofwhich was built during the high-growth period. Therefore, renewing aged water pipes has become an important issue
for stable supplies of safe water.
Meanwhile, 90.9% of the population of Japan has access to sewage treatment facilities (as of the end of
FY2017), 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 decreasing, a great number of water and sewage facilities that were rapidly built during the high-growth
period are reaching the end 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 thus in demand. In
addition, there is growth in new needs 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, and measures 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 of the 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 pursues orders in line with theseven major themes set by the Sewerage and Wastewater Management Department of MLIT: Strengthening
earthquake recovery and reconstruction 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 and operations; strengthening sewerage management; promoting measures to achieve a lowcarbon, recycling-oriented society; and, promoting international water businesses through globalization and privatepublic 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, in accordance with the Local Public Enterprise Act, as well as operations including
sewerage operations management strategy formulation operations. In overseas markets, the Company has beenworking to win orders by tapping into projects in emerging 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 anorganization 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 by department; 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 the next generation; redressing the issue of long working hours and promoting 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, the non-consolidated orders received during the fiscal year under review amounted to ¥5,382
million, a decrease of 17.8% compared with the previous fiscal year. The main causes for the decrease in orders
received are considered as follows. Services related to large-scale implementation of local-public enterprise-based
accounting which takes long work periods decreased although it had been increasing in recent years. Orderplacement of scheduled projects was put off due to natural disasters including the West Japan Flood, which2happened in July. On the other hand, net sales amounted to ¥6,257 million, a 0.0% increase from the previous fiscal
year. Operating income amounted to ¥1,003 million, a decrease of 0.9% compared with the previous fiscal year, andordinary income decreased 8.0% to ¥936 million mainly because of a loss on valuation of available-for-salesecurities due to a drop in stock market prices and a loss on sales of IPO stock of a leading telecommunications
company, which the Company had acquired as solicited by the industry’s largest securities company. Profit
amounted to ¥593 million, a decrease of 39.0% compared with the previous fiscal year.
Results by operating division were as follows.
[Engineering Consultant Department]
The Engineering Consultant Department received orders totaling ¥5,056 million during the fiscal year underreview, a decrease of 17.9% compared with the previous fiscal year. Sales by the department decreased 0.1%, to¥5,871 million.
[Information Processing Department]
In the Information Processing Department, orders received decreased 16.9% compared with the previous fiscal
year, to ¥325 million. Sales by the department increased 1.9%, to ¥385 million.

3(2) Summary of Financial Position for Current Period
Cash and cash equivalents stood at ¥3,736 million at the end of the fiscal year under review. Significant factors
contributing to this change included the posting of profit before income taxes, and decreases in notes and accounts
receivable.
Main factors contributing to changes in cash flows during the fiscal year under review were as follows.
(Cash flows from operating activities)
Net cash provided in operating activities amounted to ¥1,459 million.
The main factor contributing to this change was the posting of profit before income taxes and a decrease inaccounts receivable.
(Cash flows from investing activities)
Net cash used in investing activities totaled ¥440 million.
This is mainly due to ¥501 million spent for the acquisition of investment securities.
(Cash flows from financing activities)
Net cash used in financing activities amounted to ¥81 million.
The main item was cash dividends paid amounting to ¥81 million.

(3) Summary of Cash Flows for Current Period
FY 2017

FY 2018

Shareholders’ equity ratio (%)

79.7

79.5

Shareholders’ equity ratio on a market value basis (%)

66.1

80.2

Interest-bearing debt to cash flow ratio (years)

0.16

0.04

224.54758.75Interest coverage ratio (times)

Ratio formula:
Shareholders’ equity ratio: Shareholders’ equity / total assets
Shareholders’ equity ratio on a market value basis: Market capitalization / total assets
Interest-bearing debts to cash flow ratio (years): Interest-bearing liabilities / cash flows from operating activities
Interest coverage ratio: Cash flows from operating activities / interest payments
Notes:
1. Market capitalization is calculated by multiplying the share price at end of period by the number of shares
outstanding at end of period (excluding treasury stock).
2. Cash flows in these indicators refer to net cash from operating activities as stated in the Non-consolidated
Statements of Cash Flows. Interest-bearing liabilities are all liabilities presented on the Non-consolidated Balance
Sheets that are subject to interest expenses. Interest payments are those stated in the Non-consolidated Statementsof Cash Flows.

4(4) Future Outlook
The national budget for disaster prevention and safety subsidies allocated to operating expenses of local
governments and social infrastructure improvement subsidies is expected to remain at the same level. In light of suchexternal environmental business factors affecting orders, the Company’s target project budget is likely to be guaranteed.
However, the majority of orders are placed through price competitive auction, which leads to an increase in competition
among firms, fluctuation of bidding prices, and an increase in sales cost since orders are customization-oriented. Hence,
the Company anticipates a continuing harsh environment for achieving sales order and profit targets.
The Company, meanwhile, has achieved a year-on-year increase in productivity both on an individual employee
level and on an organizational level through company-wide awareness reforms aimed at achieving the objectives ofevery employee working with a sense of management and establishing an organization with an open culture which havebeen consistently pursued under the present management structure, and the provision of pleasant working conditions
and a good in-house system. In response to the aging of technical resources, it is important to pass on their techniquesand secure the next generation of human resources. Accordingly, under the leadership of the top management, theCompany will work to solve management issues by implementing a new graduate recruitment program in collaboration
with younger employees, and actively recruiting mid-career workers. Furthermore, the Company will aim to obtainsustainable orders and increase revenue by offering high-quality services meeting customer needs and thereby making acontribution to the development of water and sewage infrastructure business, which is vital for increasing customer
satisfaction and indispensable for social life.
Water supply and sewerage budgets, the Company’s main business target, are expected to place emphasis on, forexample, building water supply and sewerage facilities in areas without them; measures related to earthquakes, floods,
and disaster prevention; programs to address an aging infrastructure; support services to reinforce operating
foundations; and enhancing the vitality of local communities. Hence, the Company will aggressively carry out sales
programs to meet such needs and strengthen its production system. At the same time, the Company will, in
consideration of profitability, engage in the overseas water-related business, mainly in emerging Asian countries, where
economic development is remarkable and demand for water supply and sewerage infrastructure is expected to grow.
In the fiscal year ending December 31, 2019, the Company forecasts orders to increase 11.5%, to ¥6,000 million,
and net sales to increase 0.7%, to ¥6,300 million. Operating income is forecast to decrease 35.2%, to ¥650 million, andordinary income to decrease 35.9%, to ¥600 million. Profit is forecast to decrease 42.7%, to ¥340 million.

2. BASIC POLICY FOR THE SELECTION OF ACCOUNTING STANDARDSThe Company’s stakeholders are mostly domestic shareholders, creditors and business partners, and hence theCompany does not have much necessity to procure funds from overseas. Considering these, the Company applies theJapanese accounting standards.

5

3. FINANCIAL STATEMENTS AND KEY NOTES(1) Non-consolidated Balance Sheets

Category

FY 2017(as of December 31, 2017)
Amount(thousand yen)

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

AssetsCurrent assets
Cash and deposits

3,514,747

4,452,537

Accounts receivable—completed operation

2,106,765

1,685,356

-

1,320

Prepaid expenses

29,06032,616

Deferred tax assets

161,649

31,141

Costs on uncompleted services

Advances receivable from group affiliates

214

216

Other

44,89355,586

Allowance for doubtful accounts-19,000-31,6635,838,330

6,227,111

Buildings, net

160,732

194,788

Structures, net

00Tools, furniture and fixtures, net

15,09027,681

Land

150,015150,015

Lease assets, net

61,537

51,138

Total property, plant and equipment

387,376

423,624

Leasehold right

3,321

3,321

Software

98,485

116,788

Lease assets

6,996

4,685

Telephone subscription right

3,711

3,711

112,514

128,506

Investment securities

312,253

531,807

Shares of subsidiaries and associates

52,31350,000Long-term loans receivable from employees

8,287

10,948Insurance funds

60,97364,529

Guarantee deposits

135,393

147,133

589

2,132

Deferred tax assets

71,937

63,231

Other

28,76928,769Allowance for doubtful accounts-2,200-2,200Total investments and other assets

668,319896,353

1,168,210

1,448,484

7,006,540

7,675,596

Total current assets
Noncurrent assets
Property, plant and equipment

Intangible assets

Total intangible assets
Investments and other assets

Long-term prepaid expenses

Total noncurrent assets
Total assets

6Category

FY 2017(as of December 31, 2017)
Amount(thousand yen)

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

Liabilities
Current liabilities
Accounts payable—operating

263,748

192,854

Lease obligations

24,15022,954

Accounts payable - other55,94788,352

Accrued expenses

144,805

151,718

Income taxes payable

135,729

131,450

Accrued consumption taxes

33,352

39,799Advances received on uncompleted contracts

295,722535,610

Deposits received

90,876

102,940

Provision for bonuses

36,12038,912

Provision for loss on order received

17,315

12,593-

5,107

1,097,767

1,322,294

Asset retirement obligations
Total current liabilities
Noncurrent liabilities
Lease obligations

45,58534,204

Provision for share benefit

25,252

24,695

Provision for retirement benefits

197,051

138,302

Long-term accounts payable - other

8,400

8,400

Asset retirement obligations

48,097

48,836

Total noncurrent liabilities

324,386

254,439

1,422,154

1,576,733

1,093,000

1,093,000

Legal capital surplus

2,171,308

2,171,308

Other capital surplus

715,307703,995

Total capital surpluses

2,886,615

2,875,303

2,214,757

2,726,952

Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus

Retained earnings
Other retained earnings
Retained earnings brought forward

2,214,757

2,726,952

Treasury stock

Total retained earnings-669,783-623,560

Total shareholders’ equity

5,524,589

6,071,695

58,50926,733

Total valuation and translation adjustments

58,50926,733

Subscription rights to shares

1,287

433

Total net assets

5,584,386

6,098,862

Total liabilities and net assets

7,006,540

7,675,596

Valuation and translation adjustments
Valuation difference on available-for-salesecurities7(2) Non-consolidated Statements of Operations

Category

FY 2017(from January 1, 2017 to
December 31, 2017)
Amount(thousand yen)

FY 2018(from January 1, 2018 to
December 31, 2018)
Amount(thousand yen)Contracts completed

6,256,438

6,257,188

Cost of completed work

3,986,812

3,953,174

Gross profit

2,269,625

2,304,013

Selling, general and administrative expenses

1,257,380

1,300,381

Operating income

1,012,245

1,003,632

Interest income

260

4,397

Dividend income

6,384

7,190

Contribution received for operations performed bydispatched employees

3,210

-

Insurance income

3,000

1,000

Commission fee

2,430

2,430

Other

6,514

3,681

Total non-operating income

21,79918,699Interest expenses

1,934

1,923

Expenses for securities transactions

11,65024,337

Loss on sales of available-for-sale securities-

20,886

Loss on valuation of available-for-sale securities-

35,735

891

2,692

Other

2,191

524

Total non-operating expenses

16,668

86,1001,017,376

936,231

Loss on retirement of noncurrent assets

30

1,038

Total extraordinary loss

30

1,038

Profit before income taxes

1,017,345

935,192

Income taxes current

164,360

189,722

Income taxes-deferred-120,190

152,188

Total income taxes

44,169341,910

Profit973,175

593,281Non-operating income

Non-operating expenses

Foreign exchange losses

Ordinary income
Extraordinary loss8

(3) Non-consolidated Statements of Changes in Net Assets
FY 2017 (from January 1, 2017 to December 31, 2017)(Thousand yen)
Shareholders’ equity
Capital surplus

Retained earnings

Capital stock

Legal capitalsurplus

Other capitalsurplus

Total capitalsurpluses

Other retained
earnings
Retained earnings
brought forward

Total retained
earnings

1,093,000

2,171,308

715,3072,886,615

1,295,639

1,295,639

Dividends of surplus-54,057-54,057

Profit973,175

973,175

Balance at the beginning ofcurrent period
Changes of items during theperiodPurchase of treasury stock
Disposal of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at the end of current
period----919,118

919,118

1,093,000

2,171,308

715,3072,886,615

2,214,757

2,214,757

Subscription
rights to shares

Total net assets

1,287

4,652,717

Valuation and translation
adjustments

Shareholders’ equity

Balance at the beginning ofcurrent period
Changes of items during theperiodTreasury stock

Total
shareholders’equityValuationdifference on
available-forsale securities

Total valuationand translation
adjustments-670,434

4,604,820

46,61046,610

Dividends of surplus-54,057-54,057

Profit973,175

973,175

Purchase of treasury stock

-33

-33

-33

Disposal of treasury stock

684

684

684

Net changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at the end of current
period11,89911,89911,899651

919,769

11,89911,899-931,668-669,783

5,524,589

58,50958,5091,287

5,584,386

9

FY 2018 (from January 1, 2018 to December 31, 2018)(Thousand yen)
Shareholders’ equity
Capital surplus

Retained earnings

Capital stock

Legal capitalsurplus

Other capitalsurplus

Total capitalsurpluses

Other retained
earnings
Retained earnings
brought forward

Total retained
earnings

1,093,000

2,171,308

715,3072,886,615

2,214,757

2,214,757

Dividends of surplus-81,085-81,085

Profit593,281593,281

Balance at the beginning ofcurrent period
Changes of items during theperiodPurchase of treasury stock
Disposal of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at the end of current
period-11,312---11,312-11,312512,195

512,195

1,093,000

2,171,308

703,995

2,875,303

2,726,952

2,726,952

Subscription
rights to shares

Total net assets

1,287

5,584,386

Valuation and translation
adjustments

Shareholders’ equity

Balance at the beginning ofcurrent period
Changes of items during theperiod-11,312

Treasury stock

Total
shareholders’equityValuationdifference on
available-forsale securities

Total valuationand translation
adjustments-669,783

5,524,589

58,50958,509Dividends of surplus-81,085-81,085

Profit593,281593,281-29

Purchase of treasury stock

-29

-29

Disposal of treasury stock46,252

34,940Net changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at the end of current
period-853-31,776-31,776

34,086-31,776

46,222547,105-31,776-31,776-853

514,475-623,560

6,071,695

26,733

26,733433

6,098,86210

(4) Non-consolidated Statements of Cash FlowsFY 2017(from January 1, 2017 to
December 31, 2017)
Amount(thousand yen)

FY 2018(from January 1, 2018 to
December 31, 2018)
Amount(thousand yen)

1,017,345

935,192

Depreciation and amortization

74,716

84,245

Increase /decrease in allowance for doubtful accounts

19,00012,663

Interest and dividends income-6,644-11,588

Interest expenses

1,934

1,923

Loss on retirement of property, plant and equipment

30

1,038

Loss (gain) on sales of investment securities-

20,886

Loss (gain) on valuation of investment securities-

35,735-535,184

421,408

Increase/decrease in costs on uncompleted services

12,622-1,320

Increase/decrease in notes and accounts payable trade40,438-70,893

Increase/decrease in advances received on uncompleted services

80,416

239,888

991

2,792

Increase/decrease in provision for loss on order received-3,212-4,721

Increase /decrease in provision for share benefit

7,233

-556

Increase/decrease in provision for retirement benefits-53,203-58,749

Other-119,534

27,693

Subtotal

536,950

1,635,638

Interest and dividends income received

6,644

11,589Interest expenses paid

-1,934-1,923Compensation income receivable

10,000-

Proceeds from insurance income

-

1,000

Income taxes paid

-117,231-186,952

Net cash provided by (used in) operating activities

434,429

1,459,351

Category
Cash flows from operating activities
Profit before income taxes

Increase/decrease in notes and accounts receivable

trade

Increase/decrease in provision for bonuses

11

FY 2017(from January 1, 2017 to
December 31, 2017)
Amount(thousand yen)

FY 2018(from January 1, 2018 to
December 31, 2018)
Amount(thousand yen)

Purchase of property, plant and equipment-39,248-47,170

Purchase of intangible assets-28,002-54,057

Purchase of investment securities--501,040

Proceeds from sales of investment securities-

180,113

Proceeds from redemption of investment securities

200,000-

Payments for lease and guarantee deposits-2,004-13,347

Proceeds from collection of lease and guarantee deposits

1,654

1,078

719

-5,730133,119-440,154-21,605-26,011

-33

-29

-

26,040Cash dividends paid

-54,057-81,085

Net cash used in financing activities-75,697-81,087-20-380

491,831

937,729

Balance of cash and cash equivalents at beginning of the year

2,306,994

2,798,825

Balance of cash and cash equivalents at end of the year

2,798,825

3,736,554

Category
Cash flows from investing activities

Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Repayments of lease obligations
Purchase of treasury stock
Proceeds from exercise of share options

Effect of exchange rate change on cash and cash equivalents
Net increase/decrease in cash and cash equivalents12(5) Notes regarding the Non-consolidated Financial Statements(Matters Affecting the Assumption of a Going Concern)
No applicable items.
(Changes in Accounting Policies)(Application of “Practical Solution on Transactions Granting Employees and Others Stock Acquisition Rights,
which Involve Considerations, with Vesting Conditions”)
The Company adopted the “Practical Solution on Transactions Granting Employees and Others Stock
Acquisition Rights, which Involve Considerations, with Vesting Conditions” (ASBJ PITF No. 36, January 12,
2018; “PITF No.36”) effective from April 1, 2018, and now accounts for transactions granting employees andothers stock acquisition rights with vesting conditions in accordance with the “Accounting Standard for ShareBased Payment and its Implementation Guidance” (ASBJ Statement No. 8, December 27, 2005).
However, in compliance with transitional arrangements as set forth in (3) of Paragraph 10 of the PITF No. 36,
transactions granting employees and others stock acquisition rights that were made before the date of adoption of
PITF No. 36 are recorded using the previous accounting method.
(Changes in Presentation)(Changes related to the presentation of profit and loss statement)
In the previous fiscal year, “Interest income” was included in the “Interest and dividend income” item under“non-operating income.” However, since the amount of interest income exceeds 10/100 of total non-operating
income, “interest income” is shown as a separate line item in the current fiscal year. In order to reflect suchchanges in presentation, the reclassification of accounts has been made to the financial statements for the previous
fiscal year.
As a result, 6,644,000 yen, which was recorded in the “Interest and dividend income” item under “nonoperating income” in the profit and loss statement for the previous fiscal year, has been reclassified into 260,000
yen under “Interest income” and 6,384,000 yen under “Dividend income.”(Additional Information)(Application of “Practical Solution on Transactions Granting Employees and Others Stock Acquisition Rights,
which Involve Considerations, with Vesting Conditions”)
Transactions granting employees and others stock acquisition rights made before the date of adoption of the“Practical Solution on Transactions Granting Employees and Others Stock Acquisition Rights, which Involve
Considerations, with Vesting Conditions” (ASBJ PITF No. 36, January 12, 2018; “PITF No. 36”) are accounted
for using the previous accounting method in accordance with (3) of Paragraph 10 of the PITF No. 36.
1. Overview of stock acquisition rights with vesting conditions(1) Details of stock acquisition rights with vesting conditions
Resolution of Board of Directors meeting on March 13,
2015
Status and number of eligible persons
Director of the Company: 6
Executive Officer of the Company: 5
Number of stock options by class of shares
Common stock 93,500 shares(Note) 1
Date of grant
March 31, 2015
Vesting conditions(Note) 2
Requisite service period
From July 1, 2014 to June 30, 2016
Exercise period
From April 7, 2015 to March 31, 2020
(Note)
1. The number of stock options is translated into the number of shares.
2. Conditions for exercising stock acquisition rights
1) A holder of stock acquisition rights may exercise his/her stock acquisition rights only when ordinary income
for FY2017 is ¥550 million or more. To determine ordinary income, the figures stated in the consolidated
statements of operations (or statements of operations if the consolidated statements of operations are notprepared) included in the securities report of the Company shall be used. If any significant change is made to
the ordinary income to be referenced as a result of applying International Financial Reporting Standards(IFRS), etc., separate information/data to be referenced shall be reasonably determined by the Board of
Directors.
2) In the event that the closing price (including the indicative price) of ordinary transactions of shares of common
stock of the Company at the Financial Instruments Exchange where shares of the Company are listed falls
below 30% of the exercise price even momentarily between the date of the allotment of stock acquisition rights
13(“allotment date”) and the end of the exercise period, a holder of stock acquisition rights must exercise all of
his/her remaining stock acquisition rights by the end of the exercise period at the price calculated bymultiplying the exercise price by 0.9; provided, however, that the following cases shall be excluded:(a) Where material misstatements are found in information disclosed by the Company;(b) Where it is found that the Company does not properly disclose important facts that it should in compliancewith laws and regulations, or the rules of the Financial Instruments Exchange where the shares of theCompany are listed;(c) Where the Company is delisted, goes bankrupt, or any other significant changes are made to its goingconcern status as of the allotment date; or(d) Where there are other acts/activities in which the Company can be considered objectively to harm the trustof the holders of stock acquisition rights.
3) The stock acquisition rights may not be exercised if exercise would create an excess in the total number ofissued and outstanding shares of the Company over the total number of shares authorized at the time.
4) A single stock acquisition right may not be exercised in part.
5) A holder of stock acquisition rights must maintain his/her position as a director, corporate auditor, or employeeof the Company or its subsidiaries when he/she exercises his/her rights, unless he/she resigns as a director or
corporate auditor when his/her term of office expires, or an employee retires after reaching mandatory
retirement age, or there are any other justifiable reasons acknowledged by the Board of Directors of theCompany.
6) Stock acquisition rights may not be inherited.
7) In the event that a holder of stock acquisition rights causes serious damage to the Company and if the Board of
Directors of the Company decides to deny the exercise of stock acquisition rights by the holder of stockacquisition rights in whole or in part, such stock acquisition rights may not be exercised.
8) Other conditions on exercise shall be as stipulated in an agreement on the allotment of stock acquisition rights
to be entered between the Company and a holder of stock acquisition rights, in accordance with a resolution ofa Board of Directors meeting.
(2) Size of stock acquisition rights with vesting conditions and its changes
The target shares of stock acquisition rights are stock options that existed during the fiscal year under review,and the number of stock options is translated into the number of shares.
(i) Number of stock options
FY2015 stock options
Before vested (shares)
As of end of previous fiscal year
GrantedExpired
VestedUnvested outstanding
After vested (shares)
As of end of previous fiscal year
VestedExercised
Expired
Unexercised outstanding

93,50093,50093,50062,00031,500(ii) Unit price information
FY2015 stock options
Strike price (yen)Average share price at exercise (yen)

420
872

2. Summary of accounting methods used
When stock acquisition rights are issued, the amount paid in for such issuance is recorded as stock acquisitionrights under net assets.
When stock acquisition rights are exercised and new shares are issued, the amount paid in for the issuance of thestock acquisition rights and the amount paid in for the exercise of the stock acquisition rights are reclassified ascapital stock and legal capital surplus. When stock acquisition rights expire, an amount equivalent to the expired
stock acquisition rights is included in income for the period when such expiration is final.
14

(Segment Information)
Segment Information
Previous fiscal year (January 1 to December 31, 2017) and fiscal year under review (January 1 to December
31, 2018)
Since the Company’s business operations comprising engineering consulting and related services are
conducted within a single business segment, segment information is omitted.
(Profit and Loss under Equity Method)
All group affiliates owned by the Company are deemed insignificant group companies by earnings andsurplus standards, and therefore their figures are not shown.
(Per Share Information)

Net assets per share
Profit per share
Diluted profit per shareNote:

FY 2017(from January 1, 2017 to
December 31, 2017)¥834.66¥145.50¥145.11

FY 2018(from January 1, 2018 to
December 31, 2018)¥900.82¥88.26¥87.83

1. The basis for calculating profit per share and diluted profit per share is as follows:
FY 2017(from January 1, 2017
to December 31, 2017)

FY 2018(from January 1, 2018 to
December 31, 2018)

973,175

593,281--

973,175

593,2816,688,330

6,721,703--

18,19832,95018,19832,950--FY 2017(from January 1, 2017
to December 31, 2017)
5,584,386

FY 2018(from January 1, 2018 to
December 31, 2018)
6,098,862

1,287

433

(1,287)(433)

5,583,099

6,098,428

6,689,065

6,769,835

Profit per share
Profit for the period (thousand yen)Amount not attributed to common shareholders(thousand yen)
Profit attributable to owners of parent attributed tocommon stock (thousand yen)
Average number of common stock outstanding for theperiod (shares)
Diluted profit per share
Profit adjustment (thousand yen)
Increase in number of common stock (shares)(of which the amount of subscription rights toshares)(shares)
Overview of dilutive shares not included in the calculationof diluted profit per share because of their anti-dilutive
effectNote:

2. The basis for calculation of net assets per share is as follows:

Net assets for the period (thousand yen)
Deduction amount from total net assets (thousand yen)(of which the amount of subscription rights toshares)(thousand yen)
Net assets attributed to common stock (thousand yen)
Closing number of common stock used in the calculation of
net asset per share (shares)

The Company’s shares held in trust that are recognized as treasury stock within shareholders’ equity are included in
the treasury stock deducted from the calculation of the average number of shares outstanding during the period, used
for calculating profit per share (68,848 shares as of December 31, 2017; 67,005 shares as of December 31, 2018).
The Company’s shares held in trust that are recognized as treasury stock within shareholders’ equity are included in
the treasury stock deducted from the number of shares outstanding at end of the period, used for calculating “net assets
per share” (68,100 shares as of December 31, 2017; 49,300 shares as of December 31, 2018).

15

(Significant Subsequent Events)(Stock repurchase through a tender offer)
At the board of directors meeting of the Company held on November 5, 2018, the Company resolved to
implement a stock repurchase in accordance with the provisions of Article 156, Paragraph 1 of the Companies Act(Law No. 86, 2005 as amended) that is applied mutatis mutandis pursuant to the provisions of Article 165,
Paragraph 3 of the same act and the provisions of articles of incorporation of the Company, and the Company
further decided a tender offer as the specific method of the stock repurchase as below.
1. Purpose of the tender offer
The Company, in light of the recent trend of its strong business performance, considers that shareholder
returns will continue to be one of the top priority management issues of the Company as well as further
improvement of capital efficiency. For this reason, the Company decided to implement a shareholder returns byfurther repurchasing its stock.
If a market purchase were to be chosen as the way of the stock repurchase, the volume of stock that theCompany could acquire at one time at market price would be limited given the current trading volume of theCompany’s shares at the Second Section of the Tokyo Stock Exchange. For this reason, the Company has
determined that a tender offer is the most suitable as the specific method for the stock repurchase because theCompany is expected to achieve a sizable volume of stock repurchase by setting the tender offer price by adding
premiums to the market price of the Company’s stock. The Company also took into consideration matters
including equality among the shareholders of the Company, transparency in transactions, and the current status ofmarket transactions.
This way the Company believes to contribute to improvement of earnings per share (EPS) and the return on
equity (ROE) of the Company, which should lead to returning the Company’s profits to the shareholders.
For more details, please refer to the following documents: “Announcement of a stock repurchase through atender offer” released on November 5, 2018, “(Revision) Partial revision of the announcement of a stock
repurchase through a tender offer” on December 5, 2018 and “Announcement of the result of the stock repurchasethrough a tender offer and the end of the tender offer period” on January 25, 2019.
2. Details of the board of directors’ resolution(1) Class of shares to be acquired(2) Total number of shares to be acquired(3) Total acquisition cost(4) Acquisition period

Common stock
Up to 1,000,100 shares
Up to 1,000,100,000 yen
Starting on December 6, 2018 andending on February 28, 2019

3. Outline of the tender offer(1) Tender offer period(2) Tender offer price(3) Number of shares to be offered(4) Announcement date of tender offer commencement(5) Commencement date of settlement

Starting on December 6, 2018 andending on January 24, 2019 (30 business
days)
1,000 yen per share
1,000,000 shares
December 6, 2018
February 18, 2019

4. The Company’s shares scheduled to be acquired(1) Class of shares to be acquired
Common stock(2) Total number of shares to be acquired
1,000,000 shares(3) Total acquisition cost
1,000,000,000 yen
Note: The amount in the above does not include the TOB agent fees and other expenses.
(4) Scheduled acquisition date:February 18, 201916