ANNUAL REPORT 2016
Year ended March 31, 2016

In response to changing customer needs,
SECOM is working to realize its vision for
the future—the Social System Industry—by providing comprehensive, integrated
services and systems that make life moresecure, convenient and comfortable.

Profile

SECOM CO., LTD.,

Since its establishment in 1962,
Japan’s first security services company, has sought to develop andencourage broad acceptance of pioneering services and systems that deliver safety, peace of mind, comfort and convenience, in linewith its belief in the importance of contributing to society through its business activities.

Beginning with Japan’s first on-line security system for commercial use, SECOM has continued
to grow its businesses by developing and advancing a wide range of services and systems
over the years that reflect evolving social imperatives. These include an on-line home security
system and COCO-SECOM, a mobile personal security system for outdoor use.
The overarching mission of SECOM, which comprises the parent company and the companies of the SECOM Group, is to provide safety and peace of mind, as well as make life moreconvenient and comfortable, whenever and wherever necessary. Accordingly, we are pushing
forward with efforts to realize our vision for the future, the Social System Industry, which
describes a framework of distinctive, integrated services and systems. To this end, we are leveraging our extensive business portfolio—which has expanded to encompass security services,
fire protection services, medical services, insurance services, geographic information services,
information and communication related services, and real estate and other services—to createa solid foundation for future expansion, working not only to enhance individual businesses but
also to integrate services, thereby yielding synergies that will drive growth.
Today, we are maximizing these synergies to expand the scope of our operations by promoting the “ALL SECOM” concept, which focuses on rallying Group strengths, to broaden our

2

SECOM Annual Report 2016selection of services and systems, to enhance safety, peace of mind, comfort and convenience,with the aim of alleviating problems and resolving concerns. Through these efforts, we strive
to make SECOM an ever-present part of customers’ lives.
We have also expanded our focus beyond Japan. Currently active in 21 countries and territories, where we offer distinctive security services, fire protection services, medical services andgeographic information services, we continue to strengthen and grow our overseas operations.

Contents
2 Financial Highlights
4 A Message to Shareholders
8 SECOM’s Vision
9 Special Feature:
Accelerating the Commercialization of
New Services that Deliver Safety, Peaceof Mind, Comfort and Convenience
14 SECOM Today
30 SECOM’s CSR
32 Close-up: Support for Competitive Sports
33 Financial Review

37 Audited Financial Statements
70 Other Financial Data
75 Consolidated Financial Data
(Based on Japanese GAAP) [Reference]

79 Nonconsolidated Financial Data
(Based on Japanese GAAP) [Reference]

83 Corporate Information
87 SECOM’s Basic Business Areas
89 Directors, Audit and Supervisory Board
Members and Executive Officers

SECOM Annual Report 2016

1

Financial Highlights

Pursuant to the applicable Japanese law, SECOM is required to publish results in line with accounting principles generally accepted in Japan(Japanese GAAP). Key financial highlights calculated using Japanese GAAP are shown below for reference.

U.S. GAAP

Japanese GAAPSECOM CO., LTD. and Subsidiaries

In millions of yen

In thousands of U.S. dollars

SECOM CO., LTD. and Subsidiaries

In millions of yen

In thousands of U.S. dollars

For the years ended/as of March 31

Years ended March 31

Year ended March 31

For the years ended/as of March 31

Years ended March 31

Year ended March 31

2014

2016

2014

2016

921,146
120,078
73,9791,440,705
753,099$ 8,702,903
1,052,257
744,000
14,879,044
7,657,326

In yenIn U.S. dollars

822,228
120,018
126,677
69,876
1,328,226
830,369$ 7,796,708
1,137,894
1,193,150
681,761
13,876,566
8,346,407

In yenIn U.S. dollars

338.94105.003,450.36$ 3.41
1.15
35.08

320.14105.003,345.06$ 3.12
1.15
33.79

2015

2016

Net sales and operating revenue
Operating income
Net income attributable to SECOM CO., LTD.
Total assets
Total SECOM CO., LTD. shareholders’ equity¥ 983,428
118,905
84,072
1,681,332
865,278

Per share of common stock:
Net income attributable to SECOM CO., LTD.
Cash dividends
SECOM CO., LTD. shareholders’ equity¥ 385.19
130.003,964.40¥

945,238
122,007
80,184
1,525,863
825,969¥

367.37175.003,784.27¥¥

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the approximate rate of ¥113=US$1, the rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2016.
2. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number of shares outstanding during each period,
less treasury stock.
3. SECOM CO., LTD. shareholders’ equity per share of common stock is based on the number of shares outstanding at the end of each period, lesstreasury stock.
4. Cash dividends per share of common stock are based on dividends approved and paid in each fiscal year. At the general shareholders’ meeting heldon June 25, 2014, shareholders approved a proposal to pay an annual dividend of ¥115.00 per share for fiscal year 2014. Subsequently at the Boardof Directors’ meeting held on November 10, 2014, directors approved a proposal to pay an interim dividend of ¥60.00 per share for the first half ofthe year ended March 31, 2015. Because the interim dividend, the record date for which is September 30, was newly adopted in the year ended
March 31, 2015, the actual amount of dividends paid to shareholders for the year ended March 31, 2015, is the aggregate of the two. The actual
amount of dividends paid to shareholders for the year ended March 31, 2016, is the aggregate of a year-end dividend of ¥65.00 approved at thegeneral shareholders’ meeting on held June 25, 2015, and an interim dividend of ¥65.00 approved at the Board of Directors’ meeting held on
November 9, 2015. At the general shareholders’ meeting held on June 24, 2016, approval was granted for a proposal to pay a year-end dividendof ¥70.00 for the year ended March 31, 2016. (For further information, please see Note 18 of the accompanying Notes to Consolidated Financial
Statements.)

Net income attributable to
SECOM CO., LTD. (U.S. GAAP)

Revenue
Operating profit
Ordinary profit
Net income attributable to owners of the parent
Total assets
Total net assets¥

Per share of common stock:
Net income
Cash dividends
Net assets

881,028
128,582
134,826
77,0391,568,052
943,144¥352.97130.003,817.82¥

840,722
123,615
136,688
75,392
1,410,715
907,341¥345.42175.003,667.33¥¥

Note: Cash dividends per share of common stock are based on dividends approved and paid in each fiscal year. At the general shareholders’ meeting held on
June 25, 2014, shareholders approved a proposal to pay an annual dividend of ¥115.00 per share for fiscal year 2014. Subsequently at the Board of
Directors’ meeting held on November 10, 2014, directors approved a proposal to pay an interim dividend of ¥60.00 per share for the first half of theyear ended March 31, 2015. Because the interim dividend, the record date for which is September 30, was newly adopted in the year ended March 31,
2015, the actual amount of dividends paid to shareholders for the year ended March 31, 2015, is the aggregate of the two. The actual amount ofdividends paid to shareholders for the year ended March 31, 2016, is the aggregate of a year-end dividend of ¥65.00 approved at the general shareholders’ meeting held on June 25, 2015, and an interim dividend of ¥65.00 approved at the Board of Directors’ meeting held on November 9, 2015.
At the general shareholders’ meeting held on June 24, 2016, approval was granted for a proposal to pay a year-end dividend of ¥70.00 for the year
ended March 31, 2016.

Net income attributable toowners of the parent (Japanese GAAP)(In billions of yen)

(In billions of yen)

100

100
80.2

80

70.6

84.1
80

74.0

62.7

75.4

77.0

2015

2016

69.9
63.7

60.8

60

60
41.2

40

40

20

20

0

2015

2016

2011

2012

2013

2014

2015

2016

0

35.5

2011

2012

2013

2014

Note: In the fiscal year ended March 31, 2016, net income attributable to SECOM CO., LTD., rose ¥3.9 billion, to ¥84.1 billion. Contributing factors included
increases in operating income in the security systems segment—underpinned by an upsurge in revenue from on-line security systems—the medical
services segment and the fire protection services segment, as well as reduced income taxes, which reflected a decline in the statutory tax rate.
In the year ended March 31, 2015, net income attributable to SECOM CO., LTD., advanced ¥6.2 billion, to ¥80.2 billion. This result was attributable toan increase in operating income in the insurance services segment, which reflected a decline in losses due to damage caused by natural disasters, as wellas to an increase in operating income in the security services segment, owing mainly to higher segment net sales and operating revenue. Another contributing factor was a decrease in income taxes, a consequence of tax reform in Japan, which lowered the statutory tax rate.
In the year ended March 31, 2014, net income attributable to SECOM CO., LTD., rose ¥3.4 billion, to ¥74.0 billion. Factors behind this result include anincrease in operating income in the fire protection services segment, owing to robust segment net sales and operating revenue and the reduction of costof sales; a full year of contributions from information and communication related services segment subsidiary At Tokyo Corporation, consolidated in theprevious period; and an increase in operating income in the security services segment, attributable to higher segment net sales and operating revenue.

2

SECOM Annual Report 2016

SECOM Annual Report 2016

3

A Message to Shareholders

The Management

We are endeavoring to ensure sustainable growth bybuilding on the ALL SECOM concept to alleviate problems andresolve concerns and responding to ever-changing customer needs.

Consolidated Operating Results
In the fiscal year ended March 31, 2016, the Japanese economy continued to recover gradually, buoyed by improvements
in corporate earnings, as well as in employment levels and personal income. Nonetheless, the outlook remained uncertain,
owing to concerns prompted by a slowdown in growth in key
overseas economies, including the People’s Republic of China(PRC) and languishing corporate and consumer confidence.
In this environment, we continued working toward the realization of our vision, the Social System Industry, in line with ourgoal of providing safety and peace of mind, as well as comfort
and convenience, whenever and wherever necessary. We continued to respond to the needs of customers through the provision of high-grade services and systems in our security
services segment, as well as in our other segments: fire protection services, medical services, insurance services, geographic
information services, information and communication related
services, and real estate and other services. We also sought toaddress evolving social imperatives, pressing forward withefforts to apply the ALL SECOM concept to reinforce collaboration among our various independent businesses with a view tomaximizing synergies, developing innovative services and systems and expanding the scope of our operations.
Consolidated net sales and operating revenue rose 4.0%,
or ¥38.2 billion, to ¥983.4 billion. Principal factors behind
this result included higher net sales and operating revenue inthe security services segment—underpinned by an upsurge
in revenue from on-line security systems and an increase in
the number of consolidated subsidiaries—as well as in thefire protection services and medical services segments, theformer due to higher orders and the latter to elevated sales ofpharmaceuticals and rising patient numbers at hospitals.

4

SECOM Annual Report 2016

Despite gains in the security services, medical services and fire
protection services segments, operating income slipped 2.5%,
or ¥3.1 billion, to ¥118.9 billion, with contributing factors
including an increase in impairment losses on long-lived assets.
Nonetheless, net income attributable to SECOM CO., LTD., wasup 4.8%, or ¥3.9 billion, to ¥84.1 billion, owing to, among
others, a decrease in income taxes resulting from a decline in
the statutory tax rate, a consequence of tax reform in Japan.

Enhancing Returns to Shareholders
We recognize the provision of a fair return to shareholders
as a crucial management task. In line with our basic policy of
ensuring a consistent and stable distribution of profits, we
determine our consolidated dividend payout ratio and levelof internal reserves based on an overall assessment of efforts
to expand our operations and of trends in our consolidated
operating performance. At the Ordinary General Meeting of
Shareholders, held on June 24, 2016, management proposedand shareholders approved the payment of a year-end dividend of ¥70.00 per share. Together with an interim dividendof ¥65.00, dividends for the full term amounted to ¥135.00
per share, up ¥10.00 from the previous fiscal year.

New Management TeamAt the meeting of the Board of Directors held on May 11,
2016, Yasuo Nakayama was newly appointed president andrepresentative director. Guided by our corporate philosophy,
which emphasizes contributing to society through our business activities, the new management team will clarify the way
forward and ensure strong leadership for the entire SECOM
Group as we work to further enhance corporate value and at
the same time ensure sustainable growth.

Makoto Iida

Yasuo Nakayama

FounderPresident and Representative Director

Understanding and Responding to Change
Needs for safety, peace of mind, comfort and convenience are
evolving and becoming increasingly varied and sophisticated.
To respond swiftly to such needs, we are capitalizing on thethree elements of our operating foundation, namely, ourtechnologies, our people and our operational and control
structure, to promote the timely development and provisionof systems and services that help customers address key
challenges.
In our core commercial security services business, we
stepped up sales of high-value-added offerings, including
SECOM AX, a remote imaging on-line security system thatfeatures advanced image recognition technologies; SECOM
LX, which combines on-line security and access control functions to allow efficient personnel management, thus reducing
costs; and SECOM FX, an on-line security and facility control
system. For subscribers with factories or other large premises,
we began providing the SECOM Drone, a small flying robot
for the private sector that autonomously takes off and flies
toward unauthorized individuals or vehicles, capturing sharp,
clear images, which it transmits to SECOM. For even larger
areas, we proceeded with efforts to commercialize systems
employing pioneering technologies, including the SECOM
Airship, a dirigible that provides monitoring over wide areas.
We also sought to reinforce our operating foundation byacquiring all shares in Asahi Security Co., Ltd., thereby
enhancing our armored car services.
In the area of home security services, we continued torespond to growing needs for systems that enhance safety,
peace of mind, comfort and convenience, including SECOM
Home Security G-Custom, an on-line residential security

system that includes a variety of other useful features. In addition, we acquired a 100% stake in Kumalift Co., Ltd., Japan’s
top manufacturer of small freight elevators in terms of market
share, with which we have begun developing new offerings
combining security systems and elevators.
Overseas, we sought to expand sales of SECOM-stylesecurity services, a term we use to describe comprehensive
on-line security systems that encompass everything from theinstallation of security equipment at the subscriber’s premises
to the prompt dispatch of emergency response personnel.
These efforts focused on the rapidly growing economies ofSoutheast Asia and the PRC. We also began promoting theidea of more robust security to Japanese companies for theiroverseas operations.
In fire protection services, subsidiaries Nohmi Bosai Ltd.
and Nittan Co., Ltd., two of Japan’s leading names in the areaof fire protection services, continued to provide high-grade
automatic fire alarm systems and fire extinguishing systems
for office buildings, plants, tunnels, structures designatedas cultural properties, ships and homes. In the period underreview, assertive sales efforts that leverage the respective product development capabilities and other strengths of the twocompanies led to major orders for systems for, among others,
electric power generating facilities and tunnels.
Efforts in our medical services business continued toconcentrate on Home Medical Services, which comprise homenursing and pharmaceutical dispensing services, as well as on
the operation of residences for seniors, the provision of electronic medical reporting systems, sales of medical equipment
and pharmaceuticals, personal care services and support for
associated hospitals.

SECOM Annual Report 2016

5

A Message to Shareholders

The Management

In our insurance services business, sales of our distinctive
non-life insurance policies expanded favorably. These include
SECOM Anshin My Home, a comprehensive fire insurance
policy for homes, and the Security Discount Fire Policy, a fire
insurance policy for commercial premises, both of which
extend discounts to subscribers who have installed on-line
security systems, recognizing the risk-mitigating factors ofsuch systems; MEDCOM, an unrestricted cancer treatment
policy that covers all treatment costs; and SECOM Anshin
My Car, a comprehensive automobile insurance policy that
includes access to on-site support services provided by our
emergency response personnel in the event of an accident.
Our geographic information services business centers on
the collection of geographic data from commercial satellite
images, aerial photography and vehicle/ground surveying,
which we integrate, process and analyze to provide geospatial
information services to public sector entities—including
national and local governments—and private-sector customers
in Japan. We also offer these services to government agencies
abroad, including those in developing countries. In the period
under review, we sought to extend services that respond toincreasingly diverse and sophisticated domestic and overseas
needs for geospatial information associated with, among others, the construction and maintenance of critical infrastructure
and the prevention and mitigation of risks and disasters.
We are also known for our broad range of information andcommunication related services, which focus on data center
services and encompass business continuity planning (BCP)
support services, information security services and cloud-based
services. In advance of the implementation of Japan’s My
Number social security and tax number system, under which

every resident has been assigned a personal ID number, webegan providing the SECOM Anshin My Number Service,
which enables companies to collect, manage and, whennecessary, use the ID numbers of their employees in a securemanner. Sales of the service were brisk, bolstered by efforts to
attract new customers.
Our real estate and other services business continued
to emphasize the development and sale of condominiums
equipped with distinctive security and disaster-preparedness
features. Other services include real estate leasing, construction
and installation.

ALL SECOM: Driving Sustainable Growth
We remain committed to pushing ahead with the development of innovative services and systems that anticipate socialchange in line with three key themes—security, a super-agedsociety and disaster preparedness/BCP/environmental preservation. Guided by the ALL SECOM concept, we are also reinforcing collaboration among SECOM Group companies with theaim of further strengthening the Group’s collective capabilities
and ensuring sustainable growth.
In recent years, companies have come under increasingpressure to help address social imperatives. In line with ourphilosophy of contributing to society through our businessactivities, we continue to develop and extend services andsystems that deliver safety, peace of mind, comfort andconvenience. In response to the increasing risks facing society,for example, we are responding to increasingly sophisticatedneeds by developing systems designed to ensure security overlarge areas. These include the SECOM Airship, a dirigible thatdelivers a bird’s-eye view. In May 2016, we contributed to thesafe staging of the G7 Ise-Shima Summit by providing security
planning based on high-precision 3D maps, as well as overhead
images captured by the SECOM Airship.
We also pledge to further enhance safety, peace of mind,
comfort and convenience for our home security customers. To
this end, we are capitalizing on the robust operating foundation we have established in the security services business todevelop new services that alleviate problems and resolve concerns. Such efforts will enable us to expand our service menu,
which centers on SECOM Home Security G-Custom, and also
includes such offerings as SECOM Home Service, an optional
suite of lifestyle support services available to SECOM Home
Security subscribers, and SECOM My Doctor Plus, an emergency
medical alert system for seniors.
In addition, we are developing and extending new services
in the area of information security, as evidenced by such newadditions to our lineup as the SECOM Anshin My Number
Service and SECOM Premium Net, which protects against
online banking scams. To help address the concerns of Japan’s
seniors, we also continue to expand our range of services tailored to the needs of a super-aged society. For example, we
recently launched the SECOM My-home Concierge Service, aregion-specific membership-based service designed to support
seniors who wish to remain in their own homes. In overseas
markets, we will also continue to expand our overseas operations by leveraging the high-grade systems and services weoffer in Japan to provide services customized to reflect local
needs and sensibilities.
In line with our corporate message—“Providing reliable
peace of mind”—we will continue to rally the capabilities of
the SECOM Group, guided by the ALL SECOM concept tooffer indispensable services that make SECOM an ever-present
part of our customers’ lives. Through such efforts, we will
endeavor to accelerate the realization of our Social System
Industry vision.
We also recognize that employee satisfaction is a criticalfactor behind our ability to further enhance the quality of ourservices and systems and, in turn, to bolster customer satisfaction. Accordingly, we strive to ensure an upbeat, unfetteredcorporate culture and to create working environments thatencourage employees to have lofty ideals and derive a senseof achievement from meeting the expectations of society andour customers. Looking ahead, we will continue working toachieve sustainable growth and enhance corporate value by
providing services and systems that are worthy of customer
satisfaction. In these and all our endeavors, we look forward
to the ongoing support of shareholders.
June 24, 2016

Makoto Iida
Founder

6

SECOM Annual Report 2016

Yasuo Nakayama
President and Representative Director

SECOM Annual Report 2016

7

SECOM’s Vision

System Indust
l
a
i
ry
c
So

Security
services
Real estateand other services

Fire protection
services

Information andcommunication
related services
Geographic
information
services

Medicalservices

Insuranceservices

Our Social System Industry vision describes a framework of innovative and integrated services and systems
that deliver safety, peace of mind, comfort and convenience. We have worked steadily to make this vision a
reality by building a broad business portfolio that today encompasses seven segments and by combining thevarious services and systems in these segments into distinctive packages.
We continue to apply our corporate philosophy to hasten realization of the Social System Industry, whichemphasizes a refusal to be content with the status quo, as well as a commitment to doing what is appropriate. The former means seeking constantly to extend novel services and systems by challenging accepted
norms, while the latter means judging the legitimacy of our actions by examining whether they are just, fairand beneficial, not only to SECOM but to society as a whole. This philosophy remains a major driving force
behind our growth and evolution.
Increasingly broad acceptance of SECOM services and systems has served to heighten the expectations of
our customers, and of society as a whole. Guided by our corporate philosophy, we will continue seeking to
respond accurately to evolving needs, ensuring our ability to offer services and systems that deliver safety,
peace of mind, comfort and convenience.

8

SECOM Annual Report 2016

Special FeatureSpecial Feature

Accelerating the Commercialization of New Services that
Deliver Safety, Peace of Mind, Comfort and Convenience

Guided by the ALL SECOM concept, we are working tohelp resolve concerns that threaten society by developing services in line with three key themes: security,a super-aged society and disaster preparedness/BCP/
environmental preservation

Addressing challenges in three areas under the ALL SECOM banner and operational structure

Super-aged society
Shortage of doctors
and nurses
Need for nursing
and other care services InsuranceLifestyle support
Population decline
Health care

SECOM Medical Support Center
Facility
management

Burglaries

Realizingial System Indu
Soc
str
e
y
th
SECO

L
AL

M

Data Center
Safety, peace of mind,
comfort and convenience

Information leaks

Security

SECOM Control Centers

Disaster preparedness/BCP/
environmental preservation
Typhoons
Energyconservation

Earthquakes

TsunamiEnergy shortages
Fires

Livingenvironments

SECOM Anshin Information Center
Missing children

Sudden illness
Theft

Guided by the ALL SECOM concept, we are working to make life more comfortable andconvenient and to deliver safety and peace of mind by responding to social imperatives andhelping to resolve everyday concerns.

SECOM Annual Report 20169

Accelerating the Commercialization of New Services that Deliver Safety,
Peace of Mind, Comfort and Convenience

competitivenessWe acknowledge the three core components of our operating foundation as
the principal sources of our competitiveness, namely, our technologies, ourpeople and our operational and control
structure.
Having recognized that technological prowess is crucial to maintaining acompetitive edge in the security services
market, we keep abreast of evolvingsocial imperatives, technical trends andchanging patterns of criminal behavior,
while at the same time advancing thedevelopment and provision of systems
incorporating innovative technologies.
Research is spearheaded by the SECOM
Intelligent Systems Laboratory, which
conducts research aimed at developing
core technologies crucial to the realization of our Social System Industry vision.
The SECOM Development Center uses
these core technologies to promote theswift development of distinctive, reliable
systems that respond to the requirements of customers.
To foster the capabilities of ourhuman resources, we provide training
for employees, who include emergency
response personnel, sales staff andadministrative staff, at four training
centers across Japan. This enables us
to equip employees with the advanced
knowledge and technological skills theyneed, as well as to ensure that they
understand our corporate philosophy
and observe a code of conduct befitting
security professionals. These qualities
facilitate the provision of high-grade
services that deliver safety, peace ofmind, comfort and convenience.

The operational and control structureof our security services business in Japan
centers on SECOM control centers. Our
security systems use sensors and otherequipment installed at subscribers’premises, which are linked to a SECOM
control center via telecommunications
circuits to provide around-the-clockmonitoring. Should an irregularity be
detected, emergency response personnel are dispatched from one of our morethan 2,800 emergency depots.

Services designed to respond toneeds engendered by a super-agedsociety are overseen by the SECOM
Medical Support Center, the expert staff
of which provide a variety of services,
including consultations regarding healthcare, medical services, nursing care andpersonal care, among others. Under thetheme of disaster preparedness/BCP/
environmental preservation, the SECOM
Anshin Information Center provides avariety of critical services. In the event of

500–
900km

©DLR

1,000–
2,000m500–
1,000m100–
250m

a disaster, the facility analyzes Big Data,
including public evacuation information
and Internet-derived information and its
own proprietary information, allowing
the swift provision of accurate and beneficial information to subscribers. Basedon Big Data accumulated by our data
center facilities, SECOM control centers,
the SECOM Medical Support Center andthe SECOM Anshin Information Centercollaborate to spearhead the provisionof services and systems to customers
that respond to needs arising as a resultof evolving social imperatives.
In recent years, security needs havebecome increasingly sophisticated,owing to the emergence of numerous
risks that threaten society. With theheightened risk of acts of terrorism at
major public events, there is a risingneed for measures that provide security
over wide areas for events held at large
venues. Our focus is thus on surveillanceboth from the ground and the air.
g Enhancing airborne security

services
In Japan, installations of fixed surveillance cameras that capture images of
suspicious vehicles and individuals outdoors are on the rise. However, if thesecameras are positioned too far away

SECOM Annual Report 2016

prompted safety concerns. In particular,
people are worried about drones crashing and causing injury or falling into thewrong hands. In response to such fears,
we have begun offering the SECOM
Drone Detection System, which automatically detects an approaching drone,
tracks it using a camera and transmits
captured images to a monitoring console. The service uses radar to automatically detect any drones that come within
a 100-meter radius, a 3D directional
microphone to pick up sound anda high-speed infrared pan-tilt zoom
­camera which automatically tracks the© Tokyo Marathon
Foundation© Tokyo Marathon
Foundation

3–50m

Groundlevel© Tokyo Marathon Foundation

SECOM Drone

10

from the subject, images of license
plates or faces may be indistinct. One
way in which we have addressed thisissue is by developing the SECOM Drone,
an autonomous flying surveillance robotthat reinforces external security.
Capitalizing on our advanced­technological expertise in image­processing and sensing, as well as insecurity and flying robots, along withour considerable proprietary know-how,
we developed the SECOM Drone, anautonomous flying surveillance robot forthe private sector that is based on auniquely SECOM concept. If Laser
Sensor units installed at the subscriber’s
premises detect an irregularity, a signal
and location details are sent via the online security system to a control centerand the robot, which is mounted with
LED lights and a security camera. The
robot launches and flies toward theunauthorized vehicle or individual tocapture clear close-range images of thelicense plate number, model name andcolor of the vehicle or the face andclothing of the individual, which it transmits to a SECOM control center in realtime, hastening efforts to track down
and capture trespassers.
The use of drones at events that
attract large crowds of people hasSpecial Featureg Principal sources of

SECOM Airship (tethered)© Tokyo Marathon Foundation

SECOM Drone Detection System
Upper left: Radar
Upper right: High-speed infrared
pan-tilt zoom ­camera
Lower right: 3D directional
microphone

SECOM Annual Report 201611

Accelerating the Commercialization of New Services that Deliver Safety,
Peace of Mind, Comfort and Convenienceg Providing uniquely SECOM

security systems for the
Tokyo Marathon 2016
In February 2016, we provided pioneering security systems for the Tokyo
Marathon 2016, serving as an official
partner for this annual event.
During the race, high-definition cameras mounted in a tethered SECOM
Airship, soon to be commercialized for
private-sector security use, captured
images over a wide area around the­finish line from an altitude of 70 meters,
which were monitored on the ground.
In addition, the SECOM Drone Detection
System was installed in the same area topromptly detect and assist in the interception of any suspicious drones thatmight appear. To prevent impersonationand other illegal activity, a facial recognition system at the entrance scanned thefaces and registered number cards ofapproximately 900 race participants andchecked the resulting images against
photographs submitted in advance toverify their identity.
For the first time ever, SECOM ­security
guards on the ground were equippedwith wearable cameras, allowing staff at
security headquarters to check images
from patrolling guards in real time. In
addition, a security camera system wasinstalled temporarily at points along therace route, with network cameras facilitating the concentrated monitoring of
key points by security headquarters.
These uniquely SECOM security systems
enabled us to provide safety and peaceof mind to the approximately 37,000
participants in the Tokyo Marathon
2016, thereby contributing greatly tothe successful staging of the event.
Looking ahead, we will continue to
use our experience in providing and

SECOM My Number Service
Physical support
Extensive expertiseand a broad lineup of
security services createa safe physicalenvironment for thehandling of My
Number information.

Company

managing innovative security systems
and services for such events to create
uniquely SECOM security systems thatleverage our proprietary technologicaland development capabilities.
g Broadening use of the SECOM

My Number Service
The use of My Number social security
and tax number system information
for social security, taxation and disaster
relief purposes began in January 2016,as a result of which private companies inJapan are now obliged to collect, store
and manage the individual numbers of
their employees. Rigorous procedures
are necessary to guarantee the safe
storage and handling of information
designated as confidential, which
includes My Number information. For
many companies, this is a difficult task.
In response, we introduced the SECOM
My Number Service, which capitalizes on
our extensive expertise in both physicaland information security to provide
comprehensive support for the handlingof My Number information, includingcollection, storage, use, managementand disposal. To fortify physical security,
the service encompasses everything fromthe construction of a controlled use area
to entry and exit management, image

SECOM Annual Report 2016

The potential for My Number information to be leaked due to inadequate
computer security or viruses is a major
concern for many people. We recently
launched SECOM Premium Net Plus, asystem whereby customers use a dedicated USB flash drive that permits accessonly to secure websites. There has also
been an increase in the number offinancial institutions being approachedby customers for assistance in ensuring
robust My Number information storage.
We have entered into business allianceswith a number of such institutions toassist in these efforts.
Going forward, we will continue
to capitalize on our ability to provide
innovative services that integrate
physical and information security, a key
competitive advantage, to help create
safe environments for the handling of
My Number information.
g Expanding services for a

Technological support
A dedicated site andindustry-leading data
center facilities enable
companies to entrust
data to SECOM forsafe storage.

­super-aged society

Organizational and human support
Consulting services
help companies
formulate safe storage
policies and measures
to ensure the securityof confidential
personal information.
SECOM Lifestyle Partner Kugayama

12

recording and document storage. We
also offer a technological solution in theform of the SECOM Anshin My Number
Service, which enables companies to
entrust their employees’ My Number
information to us for storage at oneof our data center facilities. On theorganizational and human front, we
provide broad-based consulting services
designed to, among others, help companies formulate safe storage policies andmeasures to ensure information security.

With the aim of ensuring a solid understanding of the concerns of seniors andfurther enhancing customer satisfaction,in April 2015 we established SECOM
Lifestyle Partner Kugayama, a facility thatprovides a variety of support services toseniors in Tokyo’s Kugayama area.

Special Featuredevice. Live camera images appear on amonitoring console, making it possible
to swiftly and precisely pinpoint thedrone’s location. This service is expected
to enhance our efforts to provide effective security for essential facilities, aswell as for arenas and stadiums hostinglarge-scale events.
We are also proceeding with preparations to commercialize the SECOM
Airship, a dirigible designed for surveillance, as well as to provide support following disasters, from the assessment ofdamage through to evacuation guidance, over wide areas. The autonomous
SECOM Airship is equipped with multiple high-definition cameras, thermal
imaging cameras, directional loudspeakers, parabolic microphones and search
lights, allowing for monitoring over apredetermined area. Images and sounddata from the dirigible, together withinformation from SECOM Drone units aswell as ­sensors and security cameras on
the ground, are transmitted to a SECOM
control center, ensuring effective monitoring of the target area and realizing
an unprecedented level of security. The
SECOM Airship can also collect and­convey aerial images of, for example,
people and traffic congestion, and ofdisaster damage, over large areas in realtime. Accordingly, its use in tandem with
the SECOM Anshin Information Center,
which analyzes information in the eventof a major disaster to provide a varietyof critical services, will expedite theassessment of damage.

In response to views expressed byseniors, we recently introduced SECOM
My-home Concierge Service, a regionspecific membership-based service
designed to support seniors who wish
to remain in their own homes. SECOM
Lifestyle Partner Kugayama provides a
consultation desk that enables seniors
and their families to seek advice fromstaff regarding issues of concern ineveryday life with a view to finding
a viable solution. Thus, the staff at
SECOM Lifestyle Partner Kugayama
not only works with us, but also withother companies and local authorities,
to help arrange services that enhancesafety, peace of mind, comfort andconvenience.
We will continue working to build
a distinctive business model based on
the concept of providing services thatcitizens truly need, with the aim ofhelping prepare for the future of Japan’s
super-aged society.
g Helping to address risks andresolve concerns
Guided by the ALL SECOM concept,
we remain committed to expanding
and evolving our businesses by rallying
Group synergies to accelerate the creation of services and systems that deliversafety, peace of mind, comfort andconvenience. This concept will also continue to underpin efforts to help addressrisks and resolve concerns by developing
services that reflect a solid grasp ofsocial imperatives. Through such efforts,
implemented in line with the three
key themes of security, a super-agedsociety and disaster preparedness/
BCP/environmental protection, we willcontinue working to make SECOM anever-present part of our customers’ lives.

SECOM Annual Report 201613

Commercial Security Services

SECOM Today

We are expanding our lineup of innovative services
and systems that respond to companies’ increasingly
sophisticated security needs.
4Competitive advantages inthe security services business

SECOM emergency response personnel

On-Line Security Systems
Flashing light

SECOM sticker

Subscribers display the SECOM
security sticker, thesign ofwell-protected
premises.

Light flashes if the system
detects an irregularity to warn
people in the vicinity and to
guide SECOM
emergency
response personnel
dispatched to thesubscriber’s premises.

PoliceDept.

SECOM
3 Dispatch
emergency responseusing
1 Alerttelecommunications

personnel

circuits

Fire
Dept.
Gas
Company

Alert emergency
services as necessary

SECOM
Emergency
Depot

14

SECOM Annual Report 2016

2

Alert SECOM
emergency
response personnel

SECOM
Control Center

Our principal competitive advantage in the
security services business derives from ourintegrated services framework, whereby wetake responsibility for everything from R&D
to the production, marketing, security planning and installation of sensors and otherequipment, around-the-clock monitoring,
emergency response services and maintenance. This framework, which ensures the
exceptional safety and reliability of our on-line
security systems, and our team of highly
trained security professionals, guarantee thequality of our services.
We have also created a unique R&D configuration centered on the SECOM Intelligent
Systems Laboratory and the SECOM Development Center, facilitating the prompt andaccurate development of systems that
respond to the requirements of customers.
The effectiveness of our around-the-clockmonitoring and emergency response services
is attributable to our ability to combine theprecision of security equipment, which monitors the subscriber’s premises for intruders
and fires with the ­analytical skills and prompt
decision-making capabilities of people. Our
swift, quality emergency response services arealso underpinned by a nationwide network of
emergency depots, the largest of any security
services company in Japan.
Our rental format, which minimizes initialcosts for subscribers, is another key strength.
This format also means that we look after
maintenance and upkeep, guaranteeing boththe quality and stability of our services.
Our comprehensive approach to security
services enjoys the trust of customers acrossa wide range of industries. Accordingly, it is afundamental factor behind the power of the
SECOM brand.

SECOM Today

4Expanding sales of on-line security
systems continue to support thebusiness activities of subscribers
We are committed to providing on-line
security systems that address needs engendered by evolving social imperatives and toleveraging our innovative technologies tocreate added value. SECOM AX, a remoteimaging on-line security system, transmits
images of the subscriber’s premises to SECOM
control center staff should an irregularity be
detected, facilitating prompt assessment bycontrol center staff and a swift and accurate
response. Control center staff can alsobroadcast a warning to intruders using onpremises speakers, thereby helping to prevent
crimes from occurring. We continue to apply
our proprietary technologies to enhance theperformance of SECOM AX. For example, wehave enhanced the precision of the system’s
image sensors, which employ exclusive image
recognition technology, enabling the system
to detect the presence of an intruder even in
darkness.
In recent years, we have seen an increasein the popularity of high-value-added systems
that not only provide excellent security but
also assist subscribers’ efforts to reduce costs
and lower energy consumption. SECOM LX
combines security with access control functions. Because subscribers can use existing
IC cards, such as employee ID cards, andbecause recorded entry and exit data can beused for other purposes, SECOM LX reduces
the amount of work involved in managing
attendance and calculating payroll, helping to improve the efficiency of personnel
management.
SECOM FX is a system that integrates
monitoring for intruders and fires with facility
control. The system’s facility control function

SECOM control center

SECOM On-Line Security Systems

R&D
Emergency
response services
Emergency response
personnel

SECOM Intelligent Systems Laboratory
SECOM Development Center

Production andassembly of systems
Secom Industries Co., Ltd.

Providing reliable peace of mind

Around-the-clockmonitoring

Security planning

SECOM control center

Marketing teamInstallation
Technicians

SECOM Annual Report 201615

Commercial Security Services

can be set to turn lights, air conditioners,
signage illumination and security cameras
on and off automatically at the subscriber’s
discretion. In unattended facilities, the systemthus facilitates the opening and closing ofentrances, while in offices it can be set tocontrol lights and air conditioners as appropriate when employees arrive in the morning, go
for lunch and leave for the day, thus helping
to minimize heating and lighting bills andreduce energy consumption.
Looking ahead, we will continue to capitalize on our accumulated technological prowess and know-how to develop and provide
high-grade, high-value-added on-line security
systems that anticipate social imperatives andsubscriber needs.

High-resolution outdoor
NVR camera

SECOM Image Archive Service (secure remote image
storage service)

16

SECOM Annual Report 2016

4Strengthening internal controls:
SECOM NVR System andSECOM Image Archive Service
In Japan, the need for systems that help
strengthen internal monitoring continues torise, owing in part to incidents involving personal information leaks and product contamination at food processing facilities, whichhave fueled a steady increase in the numberof companies installing security cameras. We
responded to such needs by introducing the
SECOM NVR System and SECOM Image
Archive Service, an option available to SECOM
NVR subscribers, making it suitable for­installation in a broad range of facilities.
The SECOM NVR System offers enhanced
security features, including the ability todetect attempts made to interrupt operation by, for example, covering the camera,changing its direction or cutting wires.
The SECOM NVR lineup also includes a
dustproof and waterproof high-resolution
outdoor NVR camera with built-in infrared
LEDs that allow it to capture clear video
even in complete darkness.
The SECOM Image Archive Service lets
subscribers store SECOM NVR camera images
at a SECOM secure data facility. A subscription to the SECOM NVR System with the
SECOM Image Archive Service option p­ rovides
comprehensive support, from image recording
and storage to monitoring for irregularities.
As a result, subscribers do not need a­recording device, eliminating c­ oncerns oversuch devices potentially being destroyed orstolen by intruders. We will continue working
to respond to diverse demands for security
camera systems that deliver safety and peaceof mind.

SECOM Today

4SESAMO IDf biometric authentication system facilitates rigorous
access control
Needs for systems that reinforce managementof confidential information are increasing
among companies and data centers. With
the launch of Japan’s My Number social­security and tax number system, we are alsoseeing greater demand for controlled accessareas to ensure strict physical security for My
Number information. In response, we­capitalized on our advanced biometric­authentication technologies and extensive
know-how to launch SESAMO IDf, a finger
vein authentication-­based access control­system that facilitates rigorous access control.
In addition to being more compact than conventional biometric authentication systems,
SESAMO IDf is waterproof and thus suitablefor use both indoors and outdoors. SESAMO
IDf also has a built-in card reader, enabling
both card key and finger vein authenticationfor entry and exit. The system can be linked to
a company’s security system and the SECOM
Anshin Attendance Management Services,which use the Internet to record clock-in and­clock-out times and calculate work hours.

4Asahi Security joins the SECOM
Group, further reinforcing ouroperating foundation
We have long provided armored car services,
including cash collection and deposit, for­automated teller machines (ATMs) operated byfinancial institutions. In the period under review,
we acquired all shares in Asahi Security, which
has built a strong business foundation as a provider of cash collection and delivery services—
including the collection of proceeds from sales,delivery and deposit to banks, and the preparation and delivery of change—for companies inareas other than financial ­services particularly

SESAMO IDf finger vein authentication-based access control system

retailers and restaurants. Asahi Security also
has its own customers, ­network and aroundthe-clock cash collection and delivery centers.
The purpose of this acquisition was to allow­collaboration between the two companies toenable the provision of even higher levels ofsafety, peace of mind, comfort and convenience.
We look forward to working with Asahi Security
to leverage complementary strengths with thegoal of further enhancing the SECOM Group’s
armored car services ­business by expanding ourcustomer base and reinforcing service quality.

Contracts for
On-LineSecurity Systems(As of March 31, 2016)

Home

Commercial

Financial services

8.0%

Service industries

7.5%

Retailing/wholesaling

4.1%

Manufacturing

3.6%

Government agencies

3.6%

Other

17.3%

Residences (excluding
condominiums andapartments)
34.9%
Condominiums andapartments

21.0%

Asahi Security cash collection and delivery services

SECOM Annual Report 201617

SECOM Today

Home Security Services
SECOM Home Security and its increasing lineup of
optional services accommodate the diverse security needs ofhouseholds.
4Expanding service menu continues
to boost market acceptance ofSECOM Home Security
SECOM Home Security is an on-line security
system that provides around-the-clock monitoring for intruders, fires and gas leaks, emergency alerts and medical emergency calls. If
the sensors installed detect an irregularity,
the system automatically alerts a SECOM
control center, where staff members assess
the situation, dispatch emergency response
personnel from the nearest emergency depot
and, if necessary, notify the police and/or thefire department.
One of the most highly rated servicesc­ urrently offered under the SECOM Home
Security label is SECOM Home Security
G-Custom, which combines home security
with a variety of features designed toenhance everyday comfort and convenience.
These include a data storage system, whichenables subscribers to store important­documents—including driver’s licenses,­passports, health insurance cards and prescriptions for medications—at a SECOM data
center facility; an ALL SECOM function, whichallows subscribers to request other SECOM
services and products; and My Page, which
gives subscribers access to information fromselected collaborating companies, enablingthem to make online purchases; and a datasharing service that lets family members
exchange photographs and messages.
SECOM Home Security subscribers also
enjoy access to a diverse menu of optional
services that further enhance customer satisfaction. These include the Healthcare Hotline,
a telephone-based health consultation
service; SECOM Home Service, an optional
suite of lifestyle support services; and SECOM

18

SECOM Annual Report 2016

SECOM Today

My Doctor Plus, an emergency medical alert
system for seniors.
Until recently, SECOM Home Security systems were primarily used in detached houses
and condominiums. However, owing togreater awareness of security, we are seeing
a steady increase in installations in apartmentcomplexes. Customer diversity is also increasing, with SECOM Home Security subscribers
today ranging from young people to seniors.
With the increasing prevalence of nuclear
families and the advance of Japan’s superaged society pushing up demand for home
security services, we will continue working tobolster acceptance of SECOM Home Security
as a service that provides safety and peaceof mind and makes life more convenient andcomfortable.

4SECOM My Doctor Plus services
begin in collaboration with a leading
adult day service provider
Offered as an option to SECOM Home
Security subscribers, SECOM My Doctor
Plus is an emergency medical alert system
for seniors, which also provides access to­personal care services. The system features
an exclusive portable device incorporating acellular phone, GPS locator and emergency
alert functions. Regardless of time or place,
if the device is activated a signal is sent to a
SECOM control center indicating that medical
assistance is required. Control center staff
assess the subscriber’s situation by telephone
and, if required, dispatch emergency response
personnel who are specially trained in assisting people who have fallen. If the subscriber
wishes to speak with a nurse, the system alsooffers consultation with staff at the SECOM
Medical Support Center. Additionally, if the

SECOM Home Security G-Custom

subscriber requests an ambulance, a control
center staff will notify the fire department
and send his or her emergency information,
which is stored at a SECOM data center facility, to the portable device, thus ensuring suchinformation is immediately available to ambulance attendants and hospital staff. Individuals
who have contracted care from a service provider in advance can request that we arrange
for the dispatch of a home-care helper should
they require specialized personal care.

ALL SECOM function enables
subscribers to request other SECOM
services and products

SECOM emergency response personnel are dispatchedpromptly if an irregularity is detected

SECOM Annual Report 2016

19

Home Security Services

SECOM emergency response personnel are trained to provide support when needed

SECOM My Doctor Plus emergency
medical alert service

20

SECOM Annual Report 2016

SECOM My Doctor Plus was launched in2013 in collaboration with one of Japan’s
leading day services firms as an option­available with SECOM Home Security andsince then has earned high marks from bothseniors and their families. Expanding this relationship, we recently began offering SECOMMy Doctor Plus to individuals who are usersof our partner company’s services, as a new
independent service for seniors living alone,
combining access to adult day services andhome-based personal care services withSECOM emergency medical alert services,which are available day and night. Users
can take advantage of home-based s­ ervices­during the day, including day services, aswell as an emergency medical alert service,
which is also available at night, ensuring uninterrupted around-the-clock monitoring, making it easier for seniors to remain in their own
homes. SECOM My Doctor Plus continues toattract considerable attention as an attractive
choice for seniors that ­combines home-based
personal care services and security.

Kumalift stair lift

4Through collaboration with Kumalift,
we are accelerating efforts to address
issues under the themes of “superaged society” and “security”
New SECOM Group member Kumalift has
capitalized on its accumulated technologies
and know-how in the manufacture of industrial elevators to market stair lifts, wheelchair
lifts and other products that meet the needsof a super-aged society. The acquisition of
Kumalift has positioned us to provide stair
lifts, home elevators and other such forwardlooking products.
We are excited to work with Kumalift
to capitalize on considerable synergies todevelop new services that combine home
security with, for example, stair lifts, positioning us to better address the needs of seniors
in the years ahead. We will continue to­promote the integration of SECOM Group
companies to facilitate the developmentof products and services that respond tosocial imperatives.

Other Security Services

4COCO-SECOM: Responding toevolving needs for safety andpeace of mind
The COCO-SECOM mobile security system
uses signals from GPS satellites and cellular
phone base stations to pinpoint the locationof dedicated portable transmitters carried
by individuals or attached to objects. If acustomer wants to know where the transmitter is, he or she can trace it via a dedicated
COCO-SECOM website or contact theCOCO-SECOM Operations Center and ask
an operator to search for it. If the operations
center receives a search request, an operator
dispatches emergency response personnel
and, if necessary, notifies the police and/or the fire department. The COCO-SECOM
transmitter is also equipped with an alert
button, which if pressed will instantly notify
the COCO-SECOM Operations Center of an
emergency.
Introduced originally as a way to foil childabductions and the theft of cars and motorcycles, COCO-SECOM has since attracted attention for such diverse applications as keeping
track of personal belongings, managing taxi
and bus fleets and preventing the theft ofconstruction equipment, ATMs and safes. In
recent years, increasing awareness of crime
prevention has encouraged its use as a way
to discourage crimes against women, manage
employee safety and prevent wandering byseniors suffering from dementia.

SECOM Today

In addition to broadening the scope of the COCO-SECOM
mobile security system, we introduced an AED with bilingual
voice guidance, in line with our belief in the importance ofensuring usability by as many people as possible.
4Expanding our AED lineup with thebilingual AED3100
An automated external defibrillator (AED) is aportable device that treats cardiac arrhythmia
by administering an electrical pulse to theheart to reestablish a normal rhythm. We
currently offer SECOM AED Package Service,a full-service AED rental package, which has
contributed to the expanded installation of
AEDs in a variety of public- and private-sector
facilities in Japan. In response to a sharp
increase in the number of non-Japanesespeakers in Japan in recent years, we recently
augmented our AED Package Service lineup
with a new model, AED3100, a bilingual unitthat offers voice guidance in English as wellas Japanese. Going forward, we will actively
promote the installation of this particular unit,
in line with our belief that ensuring availability
and usability to as many people as possible isessential to saving lives.

COCO-SECOM
mobile security system

COCO-SECOM Operations Center

Bilingual AED

COCO-SECOM Mobile Security System(Location and Emergency Response)

GPS satellite

Request forsearch(telephone/Internet)

Subscriber

Positioning
information

COCO-SECOM
Operations
CenterNotification of police(if warranted)

SECOM
Emergency
Depot

Policedepartment,
emergency
services

Cellular phonebase station
COCO-SECOM Transmitter Device(vehicle-mounted)
COCO-SECOM
Transmitter Device(portable)

Dispatchemergency
response
personnel(if requested)

SECOM Annual Report 201621

SECOM Today

Overseas Security Services

Synonymous with high-grade services, the SECOM brandcontinues to earn high marks from customers overseas,
resulting in growing market acceptance.

Emergency response personnel(Thai Secom Security Co., Ltd.,
Thailand)Control center(Myanmar Secom Co., Ltd.)

4High-grade SECOM-style services areoffered in 12 countries and territories
overseas
The distinguishing feature of our overseas
security services is that we offer SECOM-styleon-line security systems, which include emergency response services, customized to reflect
local needs and sensibilities. We made ouroverseas debut in 1978, when we establisheda presence in Taiwan. Today, our overseas
security services business encompasses
operations in 12 countries and territories. As
in Japan, we take full responsibility for ouroperations in these markets, positioning us
to deliver high-grade SECOM-brand services.
This continues to earn praise from overseas
customers, as a result of which the use of ourservices continues to expand steadily.

4Actively promoting on-line security
systems in Southeast Asia

Emergency response personnel(Secom Vietnam Security Service
Joint Stock Company)

22

SECOM Annual Report 2016

Steady economic growth continues todrive robust demand for security services inSoutheast Asia from both Japanese and local
companies. We are working to respond tosuch demand by actively promoting SECOMstyle on-line security systems.

In Thailand, the efforts of Thai Secom
Security Co., Ltd., to provide high-grade online security services have bolstered awarenessof “SECOM-style” services, underpinning
steady growth in contracts for the provision of
on-line security systems to corporations andnational and local government agencies. The
company also continues to supply a variety of­merchandise to health-care facilities.
Secom (Malaysia) Sdn. Bhd. provides customized security systems—comprising on-line
security systems and static guard services—tocustomers across Malaysia. Underscoring
the high marks accorded to the company’s
proposal-based services, which are tailored tomarket needs, major drugstore chains andleading financial institutions have installed
SECOM security systems.
In Singapore, Secom (Singapore) Pte. Ltd.
boasts a diverse menu of services. These
include the provision of on-line security
systems and fire protection systems, as well as
the leasing of safety deposit boxes.
PT. Secom Indonesia provides on-line security systems and static guard services to subscribers, focusing on the capital of Jakarta andthe country’s second-largest city, Surabaya,
with operations in both cities expanding
steadily. Secom Indonesia also offers highly
rated consulting services designed to help
customers prevent insider crimes.
In Vietnam, Secom Vietnam Security Service
Joint Stock Company and SECOM Trading Co.,
Ltd., are working to augment their operations
by responding to the advanced security needsof Japanese and other companies in the country, as well as by promoting market acceptanceof on-line security systems.
Myanmar Secom Co., Ltd., Myanmar’s only
provider of on-line security systems, serves
subscribers in the capital city of Yangon,
the country’s largest market. The company
continues to expand its operations in this

SECOM Today

Countries andterritories outside
Japan in which
the SECOM Grouphas operations

promising market, which is benefitting from
economic growth, by providing on-line security systems to offshore (including Japanese)and local financial institutions.

4Scope of operations broadens in
key overseas markets
Taiwan Secom Co., Ltd., a publicly listed firm
and the leading provider of security services
in Taiwan, offers a wide array of security
services, centered on on-line security systems.
In line with our goal of supporting safety andpeace of mind, the company provides wirelessalarm systems for residential and small-scalecommercial applications and has collaborated
with Taiwan’s National Center for Research on
Earthquake Engineering to develop and begin
offering an earthquake alert system.
In the Republic of Korea (ROK), S1
Corporation, which is also publicly listed, provides on-line security systems, as well as anextensive selection of other services that makelife more convenient and comfortable and provide safety and peace of mind. S1 has also
reinforced the foundation of its building solutions business and is promoting the development of fire protection systems that make useof video analysis, enabling it to help enhancecommunity safety and security.
We currently provide our distinctive on-line
security systems to subscribers in the PRC
through a network of security service bases in
20 cities. With demand growing in all ofthese locations, we are accelerating efforts tosecure contracts, particularly in the area of
security services for large-scale commercial
complexes. Looking ahead, we will continue
to expand our operations by providing highgrade security services that accurately address
local needs.
For many years, Secom Australia Pty.
Ltd. has provided security services to major
financial institutions and government

agencies, earning positive reviews across theboard. The company has also provided security systems for a number of key Australian
defence ­facilities and government-affiliatedservice institutions. Secom Australia ­continues
working to expand its operating foundation
and recently secured contracts to provide
security services for, among others, a major
media firm, and the Australian branches ofan ­international apparel retailer.
In New Zealand, Secom Guardall NZ
Ltd. continues to provide service packages
combining monitoring using on-line security
systems and maintenance to major global
financial institutions.
Secom plc, in the United Kingdom,
is renowned as a provider of high-grade
security services, as a result of which it has
risen to the number three position in the U.K.
security services market. Testament to thehigh marks given for the quality of the­company’s services, Secom plc currently provides its on-line security system to financial
institutions for use at branches and ATMs.
The company also continues to secure newcontracts from major British corporations.
We recognize that the desire for comfort
and convenience, as well as for safety andpeace of mind, is something shared by people
the world over. Accordingly, we will continue
to encourage acceptance of our services andsystems, as well as to cultivate promising new
overseas markets.

Secom plc (United Kingdom)

Emergency response personnel(SECOM Australia Pty. Ltd.)SECOM Annual Report 201623

SECOM Today

Fire Protection Services

We continue to offer high-grade fire protection systems that
respond to the needs of customers in Japan and overseas.
4Our principal competitive strength is ourability to provide integrated services

Test of a high-expansion foam fire
extinguishing system (Nohmi Bosai)

Our fire protection services business is­spearheaded by subsidiaries Nohmi Bosaiand Nittan, two leading players in Japan’s fire
protection industry. As integrated service providers, the two companies take responsibility
for R&D, planning, design, production, installation and maintenance of high-grade fire
protection systems, and boast an extensive
portfolio of automatic fire alarm and fire
extinguishing systems.

4Sales of systems for tunnels and otherlarge-scale facilities continue to increase
Nohmi Bosai provides high-grade fire protection systems for a range of applications, including office buildings, plants, tunnels, structuresdesignated as cultural properties, ships andhomes. Building on its extensive record of
installations and on a reputation for reliability,
the company is actively expanding proposaloriented marketing, which has boosted salesof systems for new tunnels and buildings
under renovation.
UL standard-compliant SPERA
fire alarm system (Nittan)

4Debut of PROTECVIEW LT and Splash a
Nohmi Bosai recently launched PROTECVIEW
LT, a smoke detector designed for small-scale
electrical and server rooms that is up to 100
times more sensitive than conventional detectors, helping to minimize damage. Anothernew addition to the company’s lineup is
Splash a, an automatic fire extinguishing­system that delivers an atomized spray ofextinguishing agents. Developed for hospitals
and clinics with beds, which are required byrevised fire regulations to install sprinkler­systems, Splash a features a cylinder containing the extinguishing agents, eliminating theneed to install a water tank or pump. We are
actively marketing this device to existing hospitals and clinics by emphasizing its usability
and ease of installation.

24

SECOM Annual Report 2016

4Participating in a next-generation­disaster mitigation project
Nittan is currently taking part in a project
being promoted by Japan’s Ministry of Internal
Affairs and Communications aimed at building geospatial information-based disaster­mitigation systems. Project participants areworking to develop a system that will facilitate the Big Data analysis of geospatial information in real time and use of smartphones
and other such devices to communicate evacuation instructions, as well as an advanced
firefighting and rescue support system.
Through such efforts, Nittan continues working to help realize a safe and secure society.

4A new expiration date management
systemAs part of its menu of disaster mitigation solutions, Nittan recently began offering a ­systemthat assists customers in keeping track of expiration dates for emergency supplies by sending
an email notification beforehand. In Japan, acountry subject to frequent natural disasters,
local authorities and companies stockpile­supplies to ensure that they are prepared in
the event of a massive earthquake or any
other disaster. Nittan’s new system will thus
enhance its ability to address diverse needs.

4Results in Southeast Asia remain brisk
Nittan provides highly reliable fire protection
systems, which comply with Underwriters
Laboratories Inc. (UL) and European Norm (EN)standards, to government facilities, banks, highrise buildings, hotels, and aircraft and passenger
liners around the world. In the period underreview, the company developed a new UL­standard-compliant fire alarm system, marketed
under the SPERA name, which continues toenjoy brisk sales, particularly in Southeast Asia.
Going forward, Nittan will work to further­reinforce its overseas sales configurationand to promote broader acceptance of fire
­protection systems throughout the region.

Medical Services

4The SECOM Wellness Service isintroduced
In a super-aged society, preventative healthcare services, which seek to help individuals
remain physically and mentally healthy over
one’s entire life, a theme frequently referred toas “healthy life expectancy,” are expected toplay a significant role in the years ahead. In
the period under review, we began offering
the SECOM Wellness Service, a membershipbased preventative care and healthcare service,through SECOM CAREA Chitose-Karasuyama,
a multipurpose residential and service complex
for seniors in Setagaya-ku, Tokyo.
The SECOM Wellness Service is a uniqueprogram of services for seniors that is designed
to be both enjoyable and to help forestall theneed for nursing care. These services, which
are outside the scope of government-run longterm care insurance, are organized into three
categories—hobbies, exercise and lifelong
learning—and are developed in collaboration
with local businesses. Examples include ahometown railroad diorama building class,offered jointly with a major toymaker; flower
arrangement classes organized together withthe local merchants’ association; and yoga andballet classes taught by instructors from a local
university of physical education. Plans are alsoin place for health-related seminars provided
by SECOM Pharmacy and the local SECOMassociated hospital. Looking ahead, we willcontinue to explore the possibility of introducing the SECOM Wellness Service in other areas
and to consider synergies with the SECOM
My-home Concierge Service.

4Expanding cloud-based services
We currently provide the SECOM Ubiquitous
Electronic Medical Report (EMR) system,­developed to meet the needs of small andmedium-sized hospitals, which has been
adopted by numerous such facilities acrossJapan. Capitalizing on experience gained

through the provision and operation of this­system, we recently developed SECOM OWEL
(On-demand Web Link), a cloud-based EMR system designed to assist smaller facilities, notably
general home healthcare and clinics. SECOMOWEL also incorporates an accounting systemdesigned to improve clinic operating efficiency.
Its ease of use is ensured by a video-based user
manual and an on-line help function.
We continue to develop a wide range ofcloud-based services. These include a service
that provides the secure storage of EMR dataat one of our data centers, sharing such datawith the local community if the necessity
arises. Because SECOM OWEL allows for thecentralized management of patient EMRs,
doctors can view EMR data even when they
are out, ensuring a swift, accurate response,even in the event of an emergency. The ability
to share EMR data among healthcare professionals will contribute to coordinated community-based healthcare. By combining SECOMOWEL with other cloud-based services, wewill also seek to facilitate the integrated management of medical information currently
held independently by institutions, with thegoal of supporting patient-centered community-based healthcare and enhancing thequality of care available.

SECOM Today

We capitalize on our accumulated know-how in home medical andpersonal care services to offer high-value-added medical services.

SECOM CAREA Chitose-Karasuyama

SECOM provides a wide range ofhigh-grade home medical services

Home Medical Services
Medical Care
Institution

Prescription

Physician’s guidelines
Nurse’s report

Coordination
Home Nursing
Services

Pharmaceutical
Dispensing andHome Delivery Service(SECOM Visiting
Nurse Station)(SECOM Pharmacy)

Consultation
Prescription
Pharmaceutical delivery

Patient

Nurse visit
Outpatient care

SECOM Annual Report 2016

25

SECOM Today

Insurance Services

Our distinctive fire, medical and automobile insurance policies
leverage the comprehensive capabilities of the SECOM Group.
4Contracts for SECOM Anshin My
Home continue to increase steadily,bolstered by enhanced coverage

Headquarters of Secom General
Insurance Co., Ltd.

Call center(Secom General Insurance)

SECOM Anshin My Car
on-site support

Our diversification into non-life insurance
came about as a result of our convictionthat augmenting security services, which arepreventative by nature, with insurance, whichlooks after people should misfortune strike,
was a way to further enhance safety andpeace of mind.
SECOM Anshin My Home is a comprehensive policy for residential customers that offers
a discount on regular premiums to subscribers
who have installed on-line security systems,
taking into account the fact that such systems
mitigate the risk of theft and fire, as well as
for houses that have exclusively electricalappliances, recognizing that this also lowers
the risk of fire.
Recent changes to SECOM Anshin My
Home include introducing a discount for
subscribers with homes less than 10 years old
based on the home’s actual age and adding
an option that provides for up to 100%coverage in the event of a fire caused by anearthquake or other natural disaster. We also
increased the limit of coverage provided for
security upgrade costs for the purchase of fire
detectors and fire extinguishers in the eventof a fire or theft to a maximum of ¥500,000.
Thanks to enhanced coverage, contracts
for SECOM Anshin My Home continue toincrease steadily. We will continue working
to expand sales of this attractive product. We
are also taking steps to increase sales of the
Security Discount Fire Policy, a similar policy
for commercial customers.

4MEDCOM, an unrestricted cancer
treatment policy, enables patients tofocus on treatment without concerns
over economic burden
MEDCOM is an unrestricted cancer treatment policy that provides full coverage for

26

SECOM Annual Report 2016all hospitalization and medical treatment
costs, both those covered under Japan’s
National Health Insurance (NHI) scheme andthose for which the patient usually bears theburden. MEDCOM coverage also extends to
outpatient treatment, which continues to risein importance, providing up to ¥10 million
per five-year period. In addition, policyholders
are entitled to a one-time lump sum paymentof ¥1 million if they are diagnosed withcancer. Subscribers are thus able to focus ontreatment without having to worry about theeconomic burden.
Policies that pay a per diem amount for
medical expenses based on the number ofdays hospitalized are the most common typeof cancer treatment insurance available. As
a non-life insurance provider, we were able
to develop a product that provides coveragesimilar in nature to unlimited personal injury
protection, an extension of automobile insurance. We will continue working to develop
attractive cancer insurance policies that
respond to the evolving needs of patients.

4SECOM Anshin My Car: Backed byaround-the-clock support provided
by our emergency response
personnel
Another attractive SECOM non-life insurance product is SECOM Anshin My Car, anautomotive insurance policy that includes
around-the-clock access to on-site support by
SECOM emergency response personnel in theevent of an accident.
In addition to conventional approaches,
we also market our various non-life insurance
policies through banks and over the Internet.
We will continue seeking to propose andexpand sales of this and other attractive
non-life insurance products in a manner thatreflects the perspectives of our customers.

Geographic Information Services

SECOM Today

We capitalize on our distinctive geospatial information services tocontribute to secure societies and actively cultivate new businesses.
4Leveraging 3D mapping technologies to technologies (ICT) with the goal of increasing theadvance the use of digital relief maps
Subsidiary Pasco Corporation collects geographic
data from satellite images, aerial photography,
and vehicle/ground and shipborne surveying,
which it integrates, processes and analyzes toprovide geospatial information services. In recent
years, advances in surveying, measuring andimage processing technologies have spurred anincrease in the use of digital relief maps. In thewake of the April 2016 Kumamoto Earthquake,measurements taken by Pasco using aircraftmounted lasers to create a digital relief map of
the affected area made it possible to quantify
damage by, among others, estimating sediment
outflow. This played a key role in facilitating theprompt development of an effective relief plan bymaking it possible to accurately determine where
equipment and human resources were needed.
Pasco is also the first private-sector firm inJapan to employ airborne laser bathymetry (ALB)
to survey sea, lake and river beds and is promoting the data thus derived in such areas as environmental protection and safety management.
Recently, Pasco ALB data was used in the field ofnautical archaeology, helping to create 3D topographical maps above and below water, ensuring an accurate grasp of an entire explorationsite and contributing to preservation. In April
2016, ALB was certified as a technique for use
in public surveying. Accordingly, Pasco will takesteps to further strengthen its ALB business.

productivity of skilled workers by 50%. This will
involve the use of drones for 3D measuring, withthe resulting data to be used in formulatingplans for engineering and execution, and forconstruction equipment mounted with ICT, toreduce labor requirements in construction andinspection. Pasco will use its proprietary surveying and measuring technologies, as well as its
advanced 3D mapping technologies, to help
improve productivity in key areas of construction.
3D mapping technologies are used to createhigh-precision basic road data crucial to the­realization of autonomous cars. Pasco uses highly
accurate 3D geospatial information collectedusing its Mobile Mapping System (MMS) to­create data on running lines and other elements
essential to autonomous driving. Efforts tocreate such basic road data have advanced fromresearch related to its practical application toreviewing plans for its implementation.

Aerial laser surveying facilitates
seamless 3D topographicalmeasurements above andbelow water

4Responding to diverse global needs
for geospatial information

Pasco’s proprietary technologies and extensive
global network position it well to respond toheightened and increasingly diverse needs forgeospatial information in global markets.
Pasco’s geospatial information technologies
are used in aerial photography and the creationof basic national land maps for the management of land assets. These technologies also
assist efforts to protect marine environments
4Decisive efforts help foster new businesses and ensure safe navigation for ships, maintainroads, ascertain damage and plan relief andPasco continues to apply geospatial information
recovery measures following earthquakes,
technologies to address varied needs, from contributing to increased productivity on construction manage waterways and respond in the wakesites to helping realize autonomous cars, and pro- of landslides, and calculate building risks.
Pasco will continue to foster demand formotes research aimed at prototype development,
its
servicesin new markets around the world,
verification and commercialization.
taking into account local conditions andIn the period under review, Japan’s Ministry
potential business risks, with the aim of conof Land, Infrastructure, Transport and Tourism
tributing to safety and peace of mind andlaunched the i-Construction program, an initiaresponding to social imperatives.
tive aimed at creating a construction system
incorporating information and communications

3D terrain model created using datacollected by drones (i-Construction
project)

High-precision basic road maps,
crucial to the realization ofautonomous vehicles

SECOM Annual Report 201627

SECOM Today

Information and Communication Related Services

Our know-how in the field of information security has
positioned us well to address needs for safety and protection
in an increasingly networked society.

4SECOM Anshin My Number Service isintroduced

Rigorous procedures under the
SECOM Anshin My Number service
include operation at a dedicatedsecure site

In May 2015, we began providing the SECOM
Anshin My Number Service, a comprehensive
support service that enables companies tocollect, manage and, when necessary, use
their employees’ My Number information. A
key channel for marketing this service isthrough banks, which match us with clients
approaching them for advice regarding ways
to ensure the security of My Number information. This has led to a significant number oforders since the service’s launch.

4Expanding the SECOM Premium Net
lineupSECOM Premium Net Plus unit
(foreground)

My Number information is stored at
a Secure Data Center facility

28

SECOM Annual Report 2016

In response to the proliferation of online banking scams involving illegal transfers of funds,
we offer two versions of SECOM Premium Net,a system that guarantees the security of onlinetransactions, for commercial customers andfor consumers. SECOM Premium Net centers
on a proprietary dedicated USB flash drive thatconnects the user’s computer to the financial
institution’s online banking site, ensuring asecure communications channel. The commercial ­version of the system has earned highmarks for its effectiveness, as a result of which
orders from financial institutions continue torise. Applications for the consumer version
have been expanded to include online stock
trading transactions.
We recently expanded the SECOM
Premium Net lineup with the launch of
SECOM Premium Net Plus, which is designed
to block leaks of My Number information.
Use of this service in tandem with the SECOM
Anshin My Number Service is an effective
way for companies to create an environmentthat doubly secures management of My
Number information.

4Digital certificates and tailoredsupport for d­ igitizing documents
Since launching a Root Certificate Authority(CA)—the highest level of CA—in 2004 incompliance with recognized global standards,
we have steadily expanded our digital authentication services business. Digital certificatesfacilitate the secure exchange of encrypted
information between browsers and servers andare used to authenticate documentation registered by, among others, judicial scriveners.
These certificates are also used in the digitization of contracts and other official documentation. In addition to providing technologies for
digitization, we offer tailored support for,among others, the reconfiguration of business­processes and confirmation of legal validity.

4Unveiling the SECOM Anshin Stress
Check Service
In line with revisions to Japan’s Industrial
Health and Safety Act obliging employers to
conduct stress checks, we unveiled the
SECOM Anshin Stress Check Service. The act
now requires that all workplaces with morethan 50 employees conduct an annual stresscheck for all employees and, if requested byan employee, arranges for visits to a doctor
and counseling. The SECOM Anshin Stress
Check Service provides assistance to companies, employees and in-house medical staff,
ensuring that stress checks are conducted incompliance with the Ministry of Health,Labour and Welfare’s stress check system.

4Highly rated services for coping withmajor disasters
A series of earthquakes, localized torrential
rainfall and other natural disasters in the past
few years have encouraged an increasing
number of companies in Japan to formulatewhereby the SECOM Anshin Information
Center collects and scrutinizes disaster-related
information, enabling us to support the subscriber’s decision-making process and help
ensure business continuity.

SECOM Today

BCPs. We provide a number of services thatassist such efforts. The SECOM Safety
Confirmation Service, which helps subscribers
ascertain the safety of employees and theirfamilies in the aftermath of a disaster, hasearned high marks from users, and is currently recognized as one of Japan’s leadingcrisis management support services. In tandem with this system, we also offer the
SECOM Emergency Call Out Service, whichfacilitates the swift deployment of personnel
critical to business continuity and the prompt
resumption of operations. We also offer the
Real-Time Disaster Information Service,

SECOM Anshin Information Center

Real Estate and Other Services
We develop and sell high-grade condominiums offering exceptional security anddisaster-preparedness features, ensuring safety and peace of mind for occupants.
4Uniquely SECOM: Glorio-brandcondominiums
In line with our goal of providing living spacesthat deliver safety, peace of mind, comfort andconvenience, we develop and provide highgrade uniquely SECOM condominiums under
the Glorio brand. We recently commenced salesof units in Glorio Tokyo Sumiyoshi and othercomplexes in the Tokyo metropolitan area.
Glorio Tokyo Sumiyoshi boasts a seismic grade
2 rating under Japan’s three-grade system ofranking earthquake resistance. Each unit in thecomplex is equipped with MS-4, an on-line
security system for condominiums; Tomahawk
Jet α, which instantaneously extinguishes cooking stove fires; and a Pythagoras Wall Safe,
while common areas are protected by the
SECOM IX remote imaging security system.
We also commenced sales of units in The
Park House Chitose-Karasuyama Glorio, acomplex in Tokyo under development in collaboration with a major real estate developer.
Park House Chitose-Karasuyama Glorio
features several units designed in line withthe concept of universal planning, thereby

enabling us to satisfy a more diverse range ofoccupant needs and preferences.

4Strengthening the SECOM
Home Service lineup
SECOM Home Service is an optional suite oflifestyle support services available to SECOM
Home Security subscribers. Featuring a broadmenu of services—including the Housework
Support Service, which delivers safety, peaceof mind, comfort and convenience by providing help with housekeeping and small jobs
around the house, and the Anshin Support
Service, whereby we assist subscribers by, forexample, patrolling around their homes when
they are out—SECOM Home Service lets us
tailor responses to subscribers’ needs. In
recent years, we have also seen an increasein contracts for SECOM Home Service Pack,
which allows subscribers to group services inindividualized one-year packages. In light ofincreasing needs engendered by Japan’s
super-aged society, we continue to promote
acceptance of SECOM Home Service.

Glorio Tokyo Sumiyoshi

SECOM Home Service(lifestyle support services)

SECOM Annual Report 201629

Corporate
SECOM’s CSR
SocialResponsibility
4Basic policies

4Strategic CSR: Addressing

4Basic CSR: Earning the

Our strategic CSR initiatives emphasize
capitalizing on the principal sourcesof our competitiveness, namely, ourtechnologies, human resources, andoperational and control structure, andon our ability to make effective use of
Big Data, made possible by our networkof data center facilities, which underpins
our business infrastructure. Guided by
the ALL SECOM concept, which focuses
on rallying Group strengths, we continue to allocate management resourcesin line with three key themes—security,a super-aged society and disaster
preparedness/BCP/environmental
preservation.

As a company that seeks to provide
safety and peace of mind, we recognize
the importance of ensuring that both
our corporate philosophy and our business conduct are correctly understoodand positively evaluated by society,thereby assuring that our stakeholders
continue to see us as a trusted partner.
To this end, we have always adhered tostringent internal standards for compliance and risk management that exceed
those mandated by laws and regulationsin Japan.

evolving social imperatives

Having always acknowledged theimportance of ensuring sustainability forourselves and for society, we actively
seek to promote CSR in all aspects of
our operations, allowing us to• contribute to society through ourbusiness activities;• identify and cultivate businesses
that enable us to fulfill our
responsibility to contribute tosociety; and• drive ongoing innovation.
We promote a variety of CSR
initiatives, which we classify as either“strategic” or “basic.”

trust of stakeholders

Guided by the ALL SECOM concept, we are working to provide safety and peace of mind
and to make life more comfortable and convenient by
responding to social imperatives and helping to resolve everyday concerns
Strategic CSR: Addressing evolving social imperatives
Super-aged society
Data Center

Disaster preparedness/BCP/
environmental preservation

Security

Basic CSR: Supporting SECOM businesses and earning the trust of society
Consumer issues

Human rights and labor practices
Community involvement and development

Environment

Fair operating practices

Organizational governanceCommunication with stakeholders
Shareholders andinstitutional
investors

30

Customers

SECOM Annual Report 2016

Employees

Suppliers

Communities

Media

Local
governments

Nonprofit andnongovernmentalorganizations

We have aligned our basic CSR initiatives with ISO 26000, the international
standard for social responsibility. Taking
into account the key areas of focus outlined in ISO 26000, we have identified
and continue to emphasize efforts in thefollowing categories.
Consumer issues
To ensure the quality of our services
is consistently worthy of the SECOM
name, we have established a frameworkin our security services business that
ensures exceptional safety and reliability
across all processes, from R&D throughto maintenance, and conduct practicaltraining for employees that aims toenhance their know-how and skill levels.
We work to further enhance service
quality by paying heed to feedback
received by SECOM customer s­ ervice
centers, as well as by speaking directly
to customers.

aspect of corporate management andprovide training aimed at enhancing
employees’ understanding thereof.
We also place a priority on ensuringsafety and a favorable work-life balancefor our employees. Accordingly, we
have put in place generous health­management and leave programs.
Environment
In the belief that protecting the environment is essential for our ability to provide security and support comfortable
lifestyles, we continue to promoteawareness of our environmental philosophy, which is to incorporate consideration for the environment into allareas of our operations, and our basic
environmental policy among all employees. We are also implementing measures
aimed at addressing such key issues as
global warming and resource depletionand ensuring our operations conformwith pertinent laws and regulations.

Training for employees to enhance know-how
and skill levels

Fuel-efficient SECOM service vehicle

Human rights and labor practices
In line with our belief that creating
working environments conducive to job
satisfaction and helping employees fulfill
their potential are key to driving growthfor SECOM, we have established avariety of unique employee training programs designed to maximize individual
talents and hone skills. We recognize
respect for human rights as an essential

Community involvement anddevelopment
We recognize contributions to the community through the provision of safety
and peace of mind, as well as throughthe creation of employment opportunities and support for local development,
as an important responsibility. To thisend, we promote a variety of efforts
designed to contribute to communities.

Corporate Social Responsibility

4Basic CSR initiatives
These include offering programs for­children, women and seniors designed
to raise crime prevention awareness.

Safety class for children

Fair operating practices
Efforts to strengthen our cooperation
with suppliers, as well as to promotemutual understanding and compliancewith laws and regulations, have enabled
us to create a solid framework for providing high-grade services and systems.
We also work to promote awarenessof key components of CSR, including thesafeguarding of human rights, ensuringindustrial safety and employee wellbeing, and protecting the environment,
across our entire value chain.
Organizational governanceTo increase the efficiency and transparency of management practices, thereby
allowing us to consistently increase ourcorporate value, we have taken steps toenhance our corporate governance system, including the appointing of independent outside directors. We are also
promoting decisive management-led
efforts to strengthen our complianceframework and improve disclosure.

SECOM Annual Report 201631

Close-up

Support for Competitive Sports

We will continue to bolster our corporate value by contributing to the promotion of sports.

4Helping ensure the safety and security oflong-distance ­running events

4Official Partner of the Japan women’s and men’snational rugby teams

As a corporate sponsor for the 92nd edition of the Hakone
Ekiden, Japan’s premier university long-distance road relay
race, in January 2016, we were responsible for, among others,
providing security services and AEDs. The following month, weonce again provided uniquely SECOM security services as an
official partner of the Tokyo Marathon 2016.
We will also be the official provider of security for the 34th
Niigata City Marathon, to be held in October 2016, and the 2nd
SAITAMA INTERNATIONAL MARATHON, which is scheduled for
November 2016. Going forward, we will provide support with theaim of ensuring smooth and secure races and contributing to thegrowth and success of these and other sporting events in Japan.

We also identify strongly with the c­ ompetitive spirit of rugby
players to do whatever it takes, a trait that echoes our determination to keep moving forward. We are currently an Official
Partner of Japan women’s and men’s sevens and fifteen-a-side
national rugby teams, having signed an agreement with theJapan Rugby Football Union (JRFU), the ­governing body forrugby in Japan.

Japan women’ssevens national rugby team
© JRFUAs an official provider of
security for
the SAITAMAINTERNATIONALMARATHON,
we helped ensure an
incident-free event

SECOM helped ensure the safety
and security of runners at
the Tokyo Marathon 2016
© Tokyo Marathon Foundation

SECOM recently also became a sponsor ofJapan men’s national rugby teams© JRFUSECOM becomes an Official Partner of the Tokyo 2020 Olympic and Paralympic GamesWe recently became an Official Partner(Security Services and Planning category)for the Tokyo 2020 Olympic andParalympic Games. Our history with theOlympic Games stretches back five
decades. In 1964, we provided security
services for the first Tokyo Olympic
Games, earning high marks and the32

SECOM Annual Report 2016

trust of organizers, an achievementthat ­contributed to our subsequent
growth.
We look forward to helping ensure
the safety and security of the Tokyo
2020 Games and are committed tocreating innovative, valuable services
that will help us achieve this goal.

Financial Review
Operating Results

Net Sales and Operating Revenue
Net sales and operating revenue rose
4.0%, or ¥38.2 billion, to ¥983.4 billion.
The security services, fire protection services, medical services, insurance services
and information and communication
related services segments reported
increases, while the geographic information services and real estate and otherservices segments posted declines. (Forfurther details, please see Segment
Information below.)
Costs and Expenses
Total costs and expenses rose 5.0%,
or ¥41.3 billion, to ¥864.5 billion. Costof sales, at ¥674.5 billion, was up 4.7%,
or ¥30.3 billion, and was equivalent to68.6% of net sales and operating revenue,compared with 68.2% in the previous
fiscal year, owing largely to an increasein the cost of sales ratio in the geographic
information services segment.

Selling, general and administrative(SG&A) expenses rose 4.6%, or ¥7.7
billion, to ¥176.3 billion. SG&A expenses
were equivalent to 17.9% of net sales andoperating revenue, compared with 17.8%
in the previous fiscal year.
Impairment loss on long-lived assets
increased ¥5.2 billion, to ¥11.8 billion,
as the Company recognized impairment
losses on certain business assets in theinformation and communication related
services segment and on certain real estate
assets, the use of which it had reconsidered. Loss on sales and disposal of fixed
assets, net, decreased ¥660 million, to¥1.9 billion. Despite impairment loss on
goodwill of ¥1.3 billion in the previous
fiscal year, the Company did not reportsuch a loss in the period under review.
Operating Income
Operating income slipped 2.5%, or ¥3.1
billion, to ¥118.9 billion, equivalent to12.1% of net sales and operating revenue,
down from 12.9% in the previous fiscal
year. The Company’s segments, in order ofsize of contribution to operating income,were security services, fire protection services, insurance services, real estate andother services, medical services, andinformation and communication related
services. (For further details, please see
Segment Information below.)
Other Income and Expenses
Other income declined ¥1.6 billion, to¥7.7 billion, while other expenses rose
¥680 million, to ¥4.1 billion, resulting in
net other income of ¥3.6 billion, down
¥2.3 billion from the previous fiscal year.
Principal factors behind this result include
a decrease of ¥2.3 billion in gain on private equity investments, to ¥1.7 billion.
Income from Continuing Operations
before Income Taxes and Equity in Net
Income of Affiliated Companies
Income from continuing operations before
income taxes and equity in net income ofaffiliated companies, at ¥122.5 billion,
was down 4.2%, or ¥5.4 billion, owing
to declines in operating income and net
other income.

result was due mainly to a decline in thestatutory tax rate, a consequence of tax
reform in Japan.

Financial Review

Overview
In the year ended March 31, 2016,
SECOM CO., LTD. and its subsidiaries(collectively, “the Company”) sought toprovide high-quality products and services
that respond to the needs of customers in
its core security services segment, as wellas in its fire protection services, medical
services, insurance services, geographic
information services, information andcommunication related services, and realestate and other services segments.
Consolidated net sales and operating
revenue rose 4.0%, or ¥38.2 billion, to¥983.4 billion. Principal factors behind thisresult included higher net sales and operating revenue in the security services
segment—underpinned by an upsurge inrevenue from on-line security systems andan increase in the number of consolidated
subsidiaries—as well as in the fire protection services and medical services segments, the former due to higher orders
and the latter to elevated sales of pharmaceuticals and rising patient numbers at
hospitals. Despite gains in the security
services, medical services and fire protection services segments, operating income
slipped 2.5%, or ¥3.1 billion, to ¥118.9
billion, with contributing factors including
an increase in impairment losses on longlived assets. Nonetheless, net income
attributable to SECOM CO., LTD., was up
4.8%, or ¥3.9 billion, to ¥84.1 billion,
owing to, among others, a decrease inincome taxes resulting from a decline in
the statutory tax rate, a consequence oftax reform in Japan.

Equity in Net Income of AffiliatedCompanies
Equity in net income of affiliated companies rose ¥1.4 billion, to ¥7.2 billion.
This result primarily reflected increases
in equity in the net income of certain
overseas affiliates.
Net Income Attributable to
Noncontrolling Interests
Net Income attributable to noncontrollinginterests amounted to ¥5.2 billion, down
¥3.0 billion from the previous fiscal year.
Net Income Attributable to SECOM
CO., LTD.
Net income attributable to SECOM CO.,LTD., rose 4.8%, or ¥3.9 billion, to ¥84.1
billion, equivalent to 8.5% of net sales
and operating revenue. Net income attributable to SECOM CO., LTD. per share was¥385.19, up from ¥367.37 in the previous
fiscal year. At the Ordinary General
Meeting of Shareholders held on June 24,
2016, a proposal to pay a year-end cash
dividend of ¥70.00 was approved. As aconsequence, cash dividends for the year,
which also included an interim dividend—inaugurated in the previous fiscal year—of¥65.00, increased ¥10.00, to ¥135.00 per
share. However, because both the ¥65.00
per share year-end dividend for the year
ended March 31, 2015, approved at theOrdinary General Meeting of Shareholders
held on June 25, 2015, and the ¥65.00
per share interim dividend for the previous
fiscal year, determined by the Board of
Directors and paid to shareholders ofrecord as of September 30, 2015, were
paid during the period, cash dividends
paid to shareholders in the period underreview—the figure that appears in thefinancial statements—amounted to¥130.00 per share.

Income Taxes
Income taxes amounted to ¥40.3 billion, adecrease of ¥5.7 billion from the previous
fiscal year, and were equivalent to 32.9%
of income from continuing operations
before income taxes and equity in net
income of affiliated companies, comparedwith 36.0% in the previous fiscal year. This

SECOM Annual Report 201633

Financial Review
Segment Information(For further information, please see Note 27 of
the accompanying Notes to the Consolidated
Financial Statements.)

Security Services
The security services segment comprises
electronic security services, which centeron on-line security systems; other security
services; and merchandise and other. In
the period under review, net sales andoperating revenue in this segment
advanced 3.7%, or ¥18.1 billion, to¥508.1 billion. Excluding intersegment
transactions, net sales and operating revenue in this segment amounted to ¥505.1
billion, equivalent to 51.4% of overall net
sales and operating revenue, comparedwith 51.5% in the previous fiscal year.
In addition to on-line commercial andhome security systems, electronic security
services include large-scale proprietary
security systems, which center on surveillance services for the subscriber’s premises.
On-line commercial and home security
systems use sensors, controllers and otherequipment installed at the subscriber’s
premises to detect events, including intrusions, fires and equipment malfunctions.
Equipment is linked to a SECOM control
center via telecommunications circuits tofacilitate around-the-clock remote monitoring. Should an irregularity be detected,
relevant information is relayed to thecontrol center, where staff dispatch emergency response personnel to take appropriate measures. Control center staff also
notify the police or fire department, if necessary. The Company has established an
integrated approach, whereby it takes full
responsibility for all aspects of its on-line
commercial and home security systems,
from R&D through to equipment manufacturing, sales, security planning, installation,
monitoring, emergency response services
and equipment maintenance. Net sales
and operating revenue from electronic
security services rose 1.4%, or ¥4.5 billion,to ¥330.8 billion, primarily reflecting an
expanded lineup of value-added services
that respond to diverse security needs.
Other security services include static
guard services and armored car services.
Static guard services, which are provided
by highly trained professional security
guards for situations requiring humanjudgment and flexible responsiveness,
generated net sales and operating revenueof ¥55.9 billion, up 3.9%, or ¥2.1 billion.
Armored car services, which involve thetransport of cash, securities and othervaluables using specially fitted armoredcars and security professionals, reported
net sales and operating revenue of ¥33.0
billion, up 57.0%, or ¥12.0 billion, owing

34

SECOM Annual Report 2016

principally to the inclusion of results for
Asahi Security, newly consolidated on
December 1, 2015.
The merchandise and other category
encompasses sales of a wide range of
security products, including security camera systems, access control systems, automated fire extinguishing systems andexternal monitoring systems, which can be
freestanding or linked to on-line security
systems. Net sales and operating revenue
in this category edged down 0.8%, or¥647 million, to ¥85.3 billion, owing to
the absence of leases of large-scale security systems, which pushed up sales in theprevious fiscal year, although this was partially offset by an increase in sales of security camera systems and the inclusion of
results for Kumalift, newly consolidated on
August 31, 2015.
Operating income in the security services segment rose 3.6%, or ¥3.8 billion,to ¥110.9 billion. The operating margin
was 21.8%, compared with 21.9% in
the previous fiscal year. This increase wasattributable to higher net sales and operating revenue for on-line security systems
in Japan.
Fire Protection Services
The fire protection services segment
focuses on high-grade, tailored, automatic
fire alarm systems, fire extinguishing systems and other fire protection systems fora wide range of applications, including
office buildings, plants, tunnels, culturalproperties, ships and residences. In the
period under review, Nohmi Bosai andNittan, two of Japan’s leading domestic
fire protection services providers, sought toleverage their respective business foundations and product development capabilities
to secure orders for fire protection
systems.
Net sales and operating revenue in thissegment increased 7.3%, or ¥9.2 billion,to ¥135.5 billion, bolstered by a numberof major orders. Operating income was up
9.1%, or ¥1.1 billion, to ¥13.7 billion, andthe operating margin improved to 10.1%,
from 9.9%, a consequence largely of theincrease in net sales and operating revenue
and efforts to constrain SG&A expenses.
Medical Services
The medical services segment encompasses home medical services, which center on home nursing and pharmaceuticaldispensing services, as well as the operation of residences for seniors, electronic
medical report systems, sales of medical
equipment, personal care services, andsupport for the management of hospitals
and health care-related institutions. The
segment also includes the operations ofvariable interest entities of which theCompany is the primary beneficiary, which
manage hospitals and health care-related
institutions.
Segment net sales and operating revenue rose 4.9%, or ¥7.7 billion, to ¥163.7
billion. The principal factors behind thisresult were an increase in sales of pharmaceuticals, among others, and a rise inpatient numbers accompanying the
expansion and modification of hospitals
operated by the aforementioned variableinterest entities. Operating income climbed
92.0%, or ¥1.4 billion, to ¥2.9 billion,
while the operating margin improved to
1.8%, from 1.0%, owing mainly to therecognition of an impairment loss on
goodwill of certain variable interest
entities in the previous fiscal year.
Insurance Services
The insurance services segment offers anextensive lineup that includes the Security
Discount Fire Policy, a commercial fire
insurance policy, and SECOM Anshin My
Home, a comprehensive fire insurance
policy for homes—both of which offer
discounts on premiums to customers who
have installed on-line security systems,
recognizing this as a risk-mitigating
factor—and SECOM Anshin My Car, acomprehensive automobile insurance
policy that offers onsite support services
provided by SECOM emergency response
personnel should the policyholders be
involved in an accident. Other offerings
include MEDCOM, an unrestricted cancer
treatment policy that covers the entire costof medical treatment for cancer.
Net sales and operating revenue in thissegment advanced 5.1%, or ¥2.1 billion,to ¥43.6 billion, spurred by higher insurance premiums due to expanded sales offire insurance policies and the MEDCOM
unrestricted cancer treatment policy.
Operating income was down 14.9%, or¥1.2 billion, to ¥6.8 billion, while theoperating margin declined to 15.7%, from
19.4% in the previous fiscal year, owing toan increase in losses incurred as a result of
damage caused by natural disasters.
Geographic Information Services
The geographic information services
segment includes the collection of geographic data from satellite images, aerial
photography, and vehicle/ground andother types of surveying, which it integrates, processes and analyzes to provide
a variety of geospatial information services
to public sector entities, including national
and local governments, and private sector
customers in Japan. The Company also
extends geospatial information services togovernment agencies overseas, including

Information and Communication
Related Services
The information and communication
related services segment focuses on data
center services, as well as uniquely SECOM
BCP support services, information security
services and cloud-based services.
Net sales and operating revenue in thissegment advanced 3.5%, or ¥1.9 billion,to ¥55.8 billion, bolstered by the launchof the SECOM Anshin My Number service,among others. Operating income fell
65.5%, or ¥586 million, to ¥308 million,
and the operating margin declined to
0.6%, from 1.7% in the previous fiscal
year, with the recognition of impairment
losses on certain business assets among
factors behind these results.

Real Estate and Other Services
The real estate and other services segment
encompasses the development and salesof condominiums equipped with sophisticated security and disaster-preparedness
features, as well as real estate leasing,construction, and installation and otherservices.
Segment net sales and operating
revenue slipped 1.9%, or ¥849 million,to ¥44.1 billion, as results in the real estatedevelopment and sales business flagged.
Operating income, at ¥4.9 billion, wasdown 3.5%, or ¥180 million. The operating margin edged down to 11.1%, from
11.3% in the previous fiscal year.

in work in process and other factors. Duefrom subscribers was up ¥5.8 billion, to¥43.7 billion, owing to the consolidationof Asahi Security. Short-term investments
rose ¥6.4 billion, to ¥31.4 billion, as bonds
due within one year formerly included ininvestment securities were reclassified tothis category. The current ratio was 1.8
times, compared with 2.1 times at theprevious fiscal year-end.
Investments and long-term receivables
declined ¥21.2 billion, to ¥336.4 billion,
equivalent to 20.0% of total assets.
Investment securities, at ¥212.5 billion,
were down ¥18.2 billion, a consequenceof a downturn in the fair value of investment securities and the reclassification ofbonds in current assets.
Property, plant and equipment, lessaccumulated depreciation, rose ¥17.5

billion, to ¥414.2 billion, and represented
24.6% of total assets. Machinery, equipment and automobiles rose ¥41.7 billion,to ¥154.8 billion owing primarily to theconsolidation of Asahi Security. An
increase in the number of consolidated
subsidiaries and the expansion andmodification of hospitals managed byvariable interest entities were among
factors that led to an increase in buildings
and improvements up ¥15.8 billion, to¥316.6 billion.
Other assets totaled ¥225.2 billion, up¥69.7 billion, and accounted for 13.4% of
total assets. This was largely attributable
to increases of ¥58.6 billion in goodwill,to ¥90.3 billion, and ¥13.7 billion in otherintangible assets, to ¥53.9 billion, arisingfrom the consolidation of Asahi Security.

Financial Review

in emerging economies and developing
countries.
Segment net sales and operating
revenue edged down 0.4%, or ¥201 million, to ¥52.7 billion, despite an increasein net sales and operating revenue fromservices for overseas customers, as thatfrom services for the public and private
sectors in Japan declined. The segment
reported an operating loss of ¥268 million,
compared with operating income of¥2.4 billion in the previous fiscal year,
reflecting a higher cost ratio for services
for the public sector and a provision
against anticipated future losses, as wellas the recognition of impairment losses
on software and other assets.

Financial Position
Total assets as of March 31, 2016,
amounted to ¥1,681.3 billion, ¥155.5
billion higher than at the end of theprevious fiscal year. Total current assets,
at ¥705.5 billion, were up ¥89.5 billion,
and accounted for 42.0% of total assets.
Cash and cash equivalents totaled ¥229.0
billion, a decline of ¥19.6 billion, owing
to the fact that net cash used in investing
and financing activities exceeded net cash
provided by operating activities. (For further details, please see Cash Flows, which
follows this section.) Notes and accounts
receivable, trade, advanced ¥8.6 billion,to ¥136.6 billion. The consolidation of
Asahi Security was the principal cause of
an increase in cash deposits for armoredcar services of ¥77.9 billion, to ¥128.3
billion. Inventories, at ¥63.8 billion, were
¥3.2 billion higher, reflecting an increase

Percentage of Consolidated
Net Sales and Operating Revenue*

SECOM CO., LTD.
Shareholders’ Equity per ShareTotal Assets(Year ended March 31, 2016)(In yen)(In billions of yen)

4,000

2,000

3,200

1,600

2,400

1,200

1,600

800

800

400

4.9%

4.2%

5.4%
4.1%

16.6%

51.4%

13.4%

Security Services
Medical Services
Geographic Information Services
Real Estate and Other Services

Fire Protection Services
Insurance Services
Information andCommunication
Related Services00

12 13 14 15 16

12 13 14 15 16* Pie chart shows percentage of consolidated net sales andoperating revenue (excluding intersegment transactions)

SECOM Annual Report 201635

Financial Review
Total liabilities as of March 31, 2016,
amounted to ¥704.7 billion, an increaseof ¥118.0 billion, and represented 41.9%
of total liabilities and equity. Total current
liabilities, at ¥387.8 billion, were up¥101.2 billion, accounting for 23.1%
of total liabilities and equity. Deposits
received climbed ¥84.1 billion, to ¥105.0
billion, owing primarily to the consolidation of Asahi Security, which resulted in an
increase in deposits received for armoredcar services. Bank loans increased ¥11.7
billion, to ¥55.7 billion.

Total long-term liabilities rose ¥16.8
billion, to ¥317.0 billion, and represented
18.9% of total liabilities and equity.
Unearned premiums and other insurance
liabilities rose ¥6.0 billion, to ¥105.6
billion. Long-term debt, at ¥61.6 billion,
was up ¥7.8 billion, a consequence of theconsolidation of Asahi Security, which led
to an increase in lease liabilities.
Total SECOM CO., LTD. shareholders’equity advanced ¥39.3 billion, to¥865.3 billion. Net income attributable
to SECOM CO., LTD., less the paymentof cash dividends, resulted in a ¥55.6
billion increase in retained earnings,
to ¥772.1 billion. Accumulated othercomprehensive income was ¥16.9 billion,
down ¥16.0 billion, as unrealized gains on
securities declined ¥7.4 billion, to ¥18.2
billion, and pension liability adjustments
yielded a loss of ¥7.9 billion, comparedwith ¥2.1 billion. As a result, the equity
ratio was 51.5%, compared with 54.1%
as of March 31, 2015.

increase in inventories and increases in
accrued income taxes, and unearned
premiums and other insurance liabilities.
Net cash used in investing activities
amounted to ¥132.7 billion. This result
was due principally to acquisitions, net ofcash acquired, of ¥73.5 billion, owing to
the acquisition of Asahi Security, and payments for purchase of property, plant andequipment of ¥59.5 billion, reflecting outlays for security equipment and control
stations—attributable to an increase in thenumber of security services subscribers—
and for the expansion and modificationof hospitals managed by variable interest
entities, as well as to payments for purchases of investment securities of ¥49.4
billion, primarily in the insurance services
business and through private equity investments in the United States. These werepartially offset by proceeds from sales andredemptions of investment securities of¥55.0 billion. Net cash used in investing
activities was ¥63.4 billion higher thanin the previous fiscal year, owing mainly
to an increase in acquisitions, net ofcash acquired.

Net cash used in financing activities
amounted to ¥29.0 billion. This result
reflected dividends paid to SECOM CO.,LTD. shareholders of ¥28.4 billion andrepayments of long-term debt of ¥15.2
billion, which were partially offset by proceeds from long-term debt of ¥9.4 billion
and an increase in bank loans, net, of ¥8.7
billion. Net cash used in financing activitieswas ¥20.1 billion lower than in the previous fiscal year. Factors contributing to thisresult include an increase in bank loans
and a decline in dividends paid to SECOM
CO., LTD. shareholders, which had
increased in the previous year with thepayment of a newly inaugurated interim
dividend, as well as a year-end dividend.
The Company’s operating, investing
and financing activities in the period underreview yielded net cash and cash equivalents at end of year of ¥229.0 billion,
down ¥19.6 billion from net cash and cash
equivalents at beginning of year, whichwere ¥248.6 billion.

Cash Flows
The Company is committed to maintaining
sufficient liquidity to allow flexibility in its
operations and ensure a solid financial
foundation. To the best of its ability, theCompany is also firmly committed tofinancing strategic investments with cash
generated by its operating activities.
In the period under review, net cash
provided by operating activities amounted
to ¥142.9 billion. Factors behind this result
included net income of ¥89.3 billion anddepreciation and amortization, including
amortization of deferred charges of ¥72.5
billion, a non-cash item, which were partially offset by an increase in deferredcharges of ¥15.5 billion. Deferred charges
consisted primarily of costs related to theinstallation of equipment for on-line security systems. For further details, please see
Note 2 (12) of the accompanying Notes
to Consolidated Financial Statements.
Net cash provided by operating activitieswas ¥7.9 billion higher than in the previous fiscal year, despite a decrease inaccrued consumption tax, which had
increased in the previous period as aconsequence of a consumption tax rate
hike, owing to such factors as a smaller

Purchases of Property,
Plant and Equipment
and Intangible Assets

Cash Flows(In billions of yen)

(In billions of yen)

(In billions of yen)

80

80

150

60

60

Depreciation andAmortization

100
50
40

40

20

20

0
–50
–100

0

–150

0

12 13 14 15 16

12 13 14 15 16

14

15

16

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

36

SECOM Annual Report 2016

AUDITED FINANCIAL STATEMENTS

Contents
Consolidated Financial Statements ............................................ 38
Consolidated Balance Sheets ................................................. 38
Consolidated Statements of Income ...................................... 40
Consolidated Statements of Comprehensive Income.............. 40
Consolidated Statements of Changes in Equity ...................... 41
Consolidated Statements of Cash Flows ............................... 42
Notes to Consolidated Financial Statements........................... 43
Independent Auditors’ Report .................................................... 69

SECOM Annual Report 201637

Consolidated Financial Statements
Consolidated Balance Sheets
SECOM CO., LTD. and Subsidiaries
March 31, 2016 and 2015

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2015

2016

Current assets:
Cash and Cash equivalents (Notes 5 and 22) .............................................................. ¥ 228,982 ¥ 248,627
Time deposits (Note 13)..............................................................................................
9,764
9,550
Cash deposits for armored car services (Note 6) ..........................................................
128,267
50,395
Short-term investments (Notes 7 and 22)....................................................................
31,41225,002
Notes and accounts receivable, trade..........................................................................
136,619
127,992
Due from subscribers..................................................................................................
43,74837,927
Inventories (Note 8) ....................................................................................................
63,78060,621
Short-term receivables (Notes 9, 13, 20 and 21) .........................................................
30,03525,461
Allowance for doubtful accounts (Note 9) ..................................................................
(1,782)(1,867)
Deferred insurance acquisition costs (Note 14)............................................................
6,766
5,953
Deferred income taxes (Note 17) ................................................................................
12,082
12,929Other current assets ...................................................................................................
15,862
13,451$ 2,026,389
86,407
1,135,106
277,982
1,209,018
387,150
564,425
265,796(15,770)
59,876
106,920
140,373

ASSETS

Total current assets .............................................................................................

705,535

616,041

6,243,672

Investments and long-term receivables:
Investment securities (Notes 2 (7), 7, 13 and 22).........................................................
Investments in affiliated companies (Note 10) .............................................................
Long-term receivables (Notes 9, 13, 20 and 21) ..........................................................
Lease deposits ............................................................................................................
Other investments ......................................................................................................
Allowance for doubtful accounts (Note 9) ..................................................................

212,485
56,69940,851
15,753
15,234(4,625)

230,728
56,20948,954
14,06914,822(7,201)

1,880,398
501,761
361,513
139,407
134,814(40,929)

336,397

357,5812,976,964

Property, plant and equipment (Notes 11, 13, 19 and 20):
Land...........................................................................................................................
Buildings and improvements.......................................................................................
Security equipment and control stations .....................................................................
Machinery, equipment and automobiles .....................................................................
Construction in progress ............................................................................................

114,970
316,581
317,814
154,796
5,696

117,952
300,769
302,659
113,1143,827

1,017,434
2,801,602
2,812,513
1,369,876
50,407

Accumulated depreciation ..........................................................................................

909,857(495,705)

838,321(441,652)

8,051,832(4,386,770)

414,152

396,669

3,665,062

43,14790,282
53,92430,797
7,098

43,64831,70140,17535,011
5,037

381,832
798,956
477,204
272,540
62,814225,248

155,572

1,993,346

Total assets ......................................................................................................... ¥1,681,332 ¥1,525,863$14,879,044

Other assets:
Deferred charges (Note 2 (12)) ...................................................................................
Goodwill (Note 12) .....................................................................................................
Other intangible assets (Notes 12, 13, 19 and 20) ......................................................
Prepaid pension and severance costs (Note 15) ...........................................................
Deferred income taxes (Note 17) ................................................................................

See accompanying notes to consolidated financial statements.

38

2016

SECOM Annual Report 2016

Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2015

2016

2016

Current liabilities:
Bank loans (Notes 6 and 13) ....................................................................................... ¥ 55,659 ¥Current portion of long-term debt (Notes 13, 19 and 21) ...........................................
17,926
Notes and accounts payable, trade .............................................................................
42,905
Other payables ...........................................................................................................
39,635
Deposits received (Note 6) ..........................................................................................
104,996
Deferred revenue .......................................................................................................
39,737
Accrued income taxes ................................................................................................
22,410Accrued payroll ..........................................................................................................
31,506
Other current liabilities (Note 17) ................................................................................
32,991

43,924
13,36844,30034,95820,92939,737
21,102
29,05839,180$Financial Section

LIABILITIES AND EQUITY

In millions of yen

492,558
158,637
379,690
350,752
929,168
351,655
198,319
278,814
291,956

Total current liabilities .........................................................................................

387,765

286,556

3,431,549

Long-term liabilities:
Long-term debt (Notes 13, 19 and 21) .......................................................................
Guarantee deposits received ......................................................................................
Accrued pension and severance costs (Note 15)..........................................................
Long-term deferred revenue .......................................................................................
Unearned premiums and other insurance liabilities (Note 14) ......................................
Investment deposits by policyholders (Notes 14 and 21) .............................................
Deferred income taxes (Note 17) ................................................................................
Other long-term liabilities (Notes 21, 22 and 23) ........................................................

61,64033,63730,06816,350105,569
29,802
25,982
13,92253,80334,64225,648
16,591
99,58430,272
28,402
11,198545,487
297,673
266,088
144,690934,239
263,735
229,929
123,204

Total long-term liabilities .....................................................................................

316,970

300,140

2,805,045

Total liabilities .....................................................................................................

704,735

586,696

6,236,594

66,37873,118
10,526772,061

66,37873,442
10,401
716,487

587,416
647,062
93,1506,832,398

18,152—(7,891)
6,652

25,564
5(2,140)9,533

160,637—(69,832)
58,867

16,91332,962

149,672

Commitments and contingent liabilities (Note 24)
Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
Authorized—900,000,000 sharesissued 233,288,717 shares in 2016 and 2015 .......................................................
Additional paid-in capital............................................................................................
Legal reserve ..............................................................................................................
Retained earnings.......................................................................................................
Accumulated other comprehensive income (loss):
Unrealized gains on securities (Note 7) ....................................................................
Unrealized gains on derivative instruments (Note 23) ..............................................
Pension liability adjustments (Note 15) ....................................................................
Foreign currency translation adjustments ................................................................
Common stock in treasury, at cost:
15,026,824 shares in 2016 and 15,024,812 shares in 2015 .....................................

(73,718)(73,701)(652,372)

Total SECOM CO., LTD. shareholders’ equity .......................................................

865,278825,969

7,657,326

Noncontrolling interests .................................................................................................

111,319

113,198

985,124

Total equity .........................................................................................................

976,597

939,167

8,642,450

Total liabilities and equity .................................................................................... ¥1,681,332 ¥1,525,863$14,879,044

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201639

Consolidated Statements of Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2016

Net sales and operating revenue (Notes 14 ,18 and 22)
Costs and expenses:
Cost of sales (Note 8) .........................................................................................................
Selling, general and administrative expenses (Notes 2 (17), 2 (18), 2 (19) and 4).................
Impairment loss on long-lived assets (Note 11) ...................................................................
Impairment loss on goodwill (Note 12) ...............................................................................
Loss on sales and disposal of fixed assets, net ....................................................................
Operating income..................................................................................................
Other income:Interest and dividends ........................................................................................................
Gain on sales of securities, net (Notes 7 and 18) ................................................................
Gain on private equity investments (Note 22) .....................................................................
Other (Notes 16, 18 and 23) ..............................................................................................
Other expenses:
Interest .............................................................................................................................
Loss on other-than-temporary impairment of investment securities (Notes 18 and 22) ........
Other (Note 16) ................................................................................................................
Income from continuing operations before income taxes and equity
in net income of affiliated companies ..................................................................
Income taxes (Note 17):
Current .............................................................................................................................
Deferred ............................................................................................................................
Income from continuing operations before equity in net income ofaffiliated companies.............................................................................................
Equity in net income of affiliated companies (Note 18) ..................................................
Income from continuing operations .......................................................................
Income (loss) from discontinued operations, net of tax (Note 25) .................................
Net income............................................................................................................
Less: Net income attributable to noncontrolling interests .............................................
Net income attributable to SECOM CO., LTD. .......................................................

Per share data (Note 2 (21)):
Income from continuing operations attributable to SECOM CO., LTD. ...............................
Income (loss) from discontinued operations attributable to SECOM CO., LTD. ...................
Net income attributable to SECOM CO., LTD. ....................................................................
Cash dividends per share (Note 18) ...................................................................................

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2016

2015

2014

2016

¥983,428¥945,238¥921,146$8,702,903

674,533
176,269
11,814—
1,907
864,523
118,905

644,196
168,563
6,591
1,314
2,567
823,231122,007628,916
166,018
2,789
151
3,194
801,068
120,078

5,969,318
1,559,903
104,549—
16,8767,650,646
1,052,257

1,440
1,480
1,718
3,041
7,679

1,412
56
4,062
3,763
9,293

1,310
935
5,564
3,849
11,65812,74313,097
15,204
26,912
67,956

1,388
402
2,333
4,123

1,394
154
1,895
3,443

1,433
78
1,484
2,995

12,283
3,558
20,64636,487

122,461

127,857

128,741

1,083,726

39,135
1,177
40,312

46,837(865)
45,97247,5442,151
49,695346,328
10,416
356,744

82,14981,88579,046
7,162
5,759
4,017
89,31187,644
83,063—814(132)
89,31188,45882,931(5,239)(8,274)(8,952)¥ 84,072 ¥ 80,184 ¥ 73,979

726,982
63,381
790,363—
790,363(46,363)$ 744,000

In yenTranslation into
U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2016

2015

2014

2016

¥385.19—385.19¥130.00¥363.643.73
367.37¥175.00¥339.55(0.61)
338.94¥105.00

$3.41
—
3.41
$1.15

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

Consolidated Statements of Comprehensive Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2016

Comprehensive income:Net income ........................................................................................................................
Other comprehensive income (loss), net of tax:
Unrealized gains on securities ........................................................................................
Unrealized gains on derivative instruments .....................................................................
Pension liability adjustments ..........................................................................................
Foreign currency translation adjustments .......................................................................
Total comprehensive income ..............................................................................................
Less: Comprehensive income attributable to noncontrolling interests ..........................
Comprehensive income attributable to SECOM CO., LTD. ......................................................
See accompanying notes to consolidated financial statements.

40

SECOM Annual Report 2016

2016

2015

2014

2016

¥89,311¥ 88,458¥ 82,931$790,363(7,823)
13,588
1,120
(9)
(8)
2
(6,402)
7,194
5,543(3,234)
12,17918,092
71,843
121,411
107,688(3,820)(9,986)(10,802)¥68,023 ¥111,425 ¥ 96,886(69,230)(80)(56,655)(28,619)635,779(33,806)$601,973

Consolidated Statements of Changes in Equity
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2016
Financial Section

In millions of yen

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Balance, March 31, 2013 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Note 18) ..............................................................................
—
Gains on disposal of treasury stock .........................................
—Net changes in treasury stock..................................................
—¥66,378¥73,809¥10,241¥623,599(¥21,186)———

73,979——73,9798,952

82,931

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

1,000
1
5,090
16,816

—
—
—
—

—
—
—

—
—
—

—
—
75

(22,918)
—
(75)

—
—
—

—
—
—

1,000
1
5,090
16,81696,886(22,918)
—
—

120
1
453
1,276
10,802—(4,175)
—

1,120
2
5,543
18,092
107,688(22,918)(4,175)
—

—
—
—

(28)
0
—

—
—
—

—
—
—

—
—
—

—
—
(17)

(28)
0
(17)

191
—
—

163
0
(17)

Balance, March 31, 2014 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Note 18) ..............................................................................
—
Gains on disposal of treasury stock .........................................
—Net changes in treasury stock..................................................
—

66,37873,781

10,316

674,585

1,721(73,682)753,099

107,257

860,356———

80,184——80,1848,274

88,458

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

13,004(4)
6,814
11,427

—
—
—
—

—
—
—

—
—
—

—
—
85

(38,197)
—
(85)

—
—
—

—
—
—

13,004(4)
6,814
11,427
111,425(38,197)
—
—

584
(4)
380
752
9,986
—
(3,763)—

13,588(8)
7,194
12,179121,411(38,197)(3,763)
—

—
—
—

(339)
0
—

—
—
—

—
—
—

—
—
—

—
—
(19)

(339)
0
(19)

(282)
—
—

(621)
0
(19)

Balance, March 31, 2015 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other—(Note 18) ..............................................................................
Gains on disposal of treasury stock .........................................
—Net changes in treasury stock..................................................
—

66,37873,442

10,401

716,487

32,962(73,701)

825,969

113,198

939,167———

84,072——

84,072

5,239

89,311

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(7,411)(5)(5,752)(2,881)

—
—
—
—

—
—
—

—
—
—

—
—
125

(28,373)
—
(125)

—
—
—

—
—
—

(7,411)(5)(5,752)(2,881)
68,023(28,373)
—
—

(412)
(4)
(650)
(353)
3,820
—
(2,943)—(7,823)(9)(6,402)(3,234)
71,843(28,373)(2,943)
—

—
—
—

(324)
0
—

—
—
—

—
—
—

—
—
—

—
—
(17)

(324)
0
(17)

(2,756)——(3,080)0(17)Balance, March 31, 2016 ..................................................... 233,288,717¥66,378¥73,118¥10,526¥772,061¥16,913(¥73,718)¥865,278¥111,319¥976,597

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock intreasury,
at costNumber ofsharesissuedCommonstock intreasury,
at cost(¥73,665)¥679,176¥100,439¥779,615

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterests

Total

Translation into thousands of U.S. dollars (Note 3)

Commonstock

Additional
paid-in
capitalLegalreserve

Balance, March 31, 2015
$587,416 $649,929
Comprehensive income:Net income .............................................................................................
——
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities ............................................................
——
Unrealized gains on derivative instruments .........................................
——
Pension liability adjustments ..............................................................
——
Foreign currency translation adjustments ...........................................
——
Total comprehensive income ...................................................................
Cash dividends paid to SECOM CO., LTD. shareholders ................................
——Cash dividends paid to noncontrolling interests ............................................
——
Transfer to legal reserve ...............................................................................
——
Equity transactions with noncontrolling interests and other(Notes 18) ..................................................................................................
—(2,867)
Gains on disposal of treasury stock ..............................................................
—
0
Net changes in treasury stock.......................................................................
——$92,044 $6,340,593

Balance, March 31, 2016 ......................................................................... $587,416 $647,062$93,150 $6,832,398$291,699 ($652,221)

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterests

Total$7,309,460$1,001,752$8,311,212—

744,000——

744,000

46,363790,363

—
—
—
—

—
—
—
—

(65,584)(44)(50,903)(25,496)

—
—
—
—

—
—
1,106

(251,089)—(1,106)

—
—
—

—
—
—

(65,584)(44)(50,903)(25,496)
601,973(251,089)——(3,646)(36)(5,752)(3,123)33,806—(26,044)—(69,230)(80)(56,655)(28,619)635,779(251,089)(26,044)
—

—
—
—

—
—
—

—
—
—

—
—
(151)

(2,867)0(151)(24,390)——(27,257)
0(151)$149,672 ($652,372)$7,657,326$ 985,124$8,642,450

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201641

Consolidated Statements of Cash Flows
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2016

2016

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2015

2014

Cash flows from operating activities:
Net income .......................................................................................................................... ¥ 89,311 ¥ 88,458 ¥ 82,931
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization, including amortization of deferred charges(Notes 2 (11), 2 (12) and 12) ...........................................................................................
72,481
68,864
66,661
Accrual for pension and severance costs, less payments ....................................................
(2,246)(4,495)(2,907)
Deferred income taxes, including discontinued operations ................................................
1,177
2,505
1,832
Loss on sales and disposal of fixed assets, net, including discontinued operations .............
1,815
958
3,182
Impairment loss on long-lived assets, including discontinued operations (Note 11) ............
11,8146,591
2,821
Write-down on real estate inventories (Note 8) .................................................................
1,463
1,565
1,122
Gain on private equity investments (Note 22) ....................................................................
(1,718)(4,062)(5,564)
Impairment loss on goodwill (Note 12)..............................................................................
—
1,314
151
Gain on sales of securities, net (Notes 7 and 14) ...............................................................
(2,101)(243)(2,177)
Loss on other-than-temporary impairment of investment securities (Notes 14 and 22) .......
549
172
100
Equity in net income of affiliated companies .....................................................................
(7,162)(5,759)(4,017)
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits for armored car services .........................................
3,642
8,202
(2,508)(Increase) decrease in receivables and due from subscribers, net of allowances..............
(9,741)
1,731(10,188)(Increase) decrease in inventories ..................................................................................
(2,445) (11,120)
10,367
Increase in deferred charges ......................................................................................... (15,501) (17,248) (16,375)
Increase (decrease) in notes and accounts payable ........................................................
646(3,900)3,306
Increase (decrease) in deposits received .........................................................................
2,985(1,601)(7,752)
Decrease in deferred revenue ........................................................................................
(515)
(251)
(595)
Increase (decrease) in accrued income taxes ..................................................................
959(6,862)(3,028)
Increase (decrease) in guarantee deposits received ........................................................
(1,070)(147)
275
Increase in unearned premiums and other insurance liabilities .......................................
5,984
865
8,277
Increase (decrease) in accrued consumption tax ............................................................
(7,003)
8,891(206)
Other, net .....................................................................................................................
(473)
479
(2,498)Net cash provided by operating activities .................................................................. 142,851 134,907 123,210
Cash flows from investing activities:(Increase) decrease in time deposits.......................................................................................
(517)
538
(164)
Proceeds from sales of property, plant and equipment ..........................................................
3,030
3,580
1,114
Payments for purchases of property, plant and equipment .................................................... (59,454) (56,303) (56,274)
Payments for purchases of intangible assets ..........................................................................
(8,409)(8,409)(7,113)
Proceeds from sales and redemptions of investment securities (Note 7) .................................
55,03638,23743,782
Payments for purchases of investment securities ................................................................... (49,361) (51,573) (76,342)(Increase) decrease in short-term investments ........................................................................
(241)
2,039
(1,611)
Acquisitions, net of cash acquired (Note 4)............................................................................ (73,540)(58)(1,249)(Increase) decrease in short-term receivables, net ..................................................................
(7)
20
56
Payments for long-term receivables .......................................................................................
(639)(1,076)(2,921)
Proceeds from long-term receivables .....................................................................................
1,218
3,164
3,314
Other, net .............................................................................................................................
190
553
2,114
Net cash used in investing activities .......................................................................... (132,694) (69,288) (95,294)
Cash flows from financing activities:
Proceeds from long-term debt ..............................................................................................
9,357
17,47010,595
Repayments of long-term debt.............................................................................................. (15,197) (16,029) (18,419)
Increase (decrease) in bank loans, net ...................................................................................
8,691(8,636)
13,483
Increase (decrease) in investment deposits by policyholders ...................................................
(469)
740
48
Dividends paid to SECOM CO., LTD. shareholders ................................................................. (28,373) (38,197) (22,918)
Dividends paid to noncontrolling interests .............................................................................
(2,208)(3,763)(4,175)
Payments for acquisition of shares of consolidated subsidiaries from noncontrollinginterest holders ...................................................................................................................
(846)
(735)
(618)
Increase in treasury stock, net ...............................................................................................
(16)
(19)
(18)
Other, net .............................................................................................................................
65
24
131
Net cash used in financing activities .......................................................................... (28,996) (49,145) (21,891)
(806)
1,401
2,031
Effect of exchange rate changes on cash and cash equivalents .......................................
Net increase in cash and cash equivalents .......................................................................... (19,645)
17,875
8,056
Cash and cash equivalents at beginning of year ................................................................ 248,627 230,752 222,696
Cash and cash equivalents at end of year .......................................................................... ¥228,982 ¥248,627 ¥230,752
See accompanying notes to consolidated financial statements.

42

SECOM Annual Report 20162016

$ 790,363
641,425(19,876)
10,416
16,062
104,549
12,947(15,204)—(18,593)
4,858(63,381)
32,230(86,204)(21,637)(137,177)
5,717
26,416(4,558)
8,487(9,469)52,956(61,973)(4,186)
1,264,168(4,575)
26,814(526,142)(74,416)
487,044(436,823)(2,133)(650,796)(62)(5,655)
10,7791,682(1,174,283)
82,805(134,487)
76,912(4,150)(251,088)(19,540)(7,487)(142)574(256,603)(7,132)(173,850)
2,200,239$2,026,389

Notes to Consolidated Financial Statements
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2016

2. Significant Accounting Policies
The parent company and its Japanese subsidiaries maintain theirrecords and prepare their statutory financial statements in accordance with accounting principles generally accepted in Japan(“Japanese GAAP”). Certain adjustments and reclassifications havebeen incorporated in the accompanying financial statements toconform with U.S. generally accepted accounting principles (“U.S.
GAAP”). These adjustments were not recorded in the statutory
books of account.
Significant accounting policies used in the preparation of theaccompanying consolidated financial statements are summarized
below:(1) Basis of Consolidation and Investments in AffiliatedCompanies
The consolidated financial statements include the accounts of theparent company and those of its majority-owned subsidiaries. All
significant intercompany transactions and balances have been
eliminated in consolidation.
Investments in companies in which the ability to exercise significant influence exists (generally 20 to 50 percent owned companies),
are accounted for under the equity method. Consolidated income
includes the Company’s current equity in the net income ofaffiliated companies, after elimination of intercompany profits.
(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variableinterest entities (“VIEs”) of which the Company is the primary
beneficiary.
The Accounting Standards Codification (“ASC”) 810,
“Consolidation,” issued by the Financial Accounting Standards
Board (“FASB”) requires the reporting entity to consolidate avariable interest entity (“VIE”) as its primary beneficiary when it isdeemed to have a controlling financial interest in a VIE, meeting
both of the following characteristics:

Financial Section

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the businesses of security services,
fire protection services, medical services, insurance services,
geographic information services, information and communication
related services, and real estate and other services. With these
services combined, the Company is focusing on the establishmentof a Social System Industry, a network of integrated services andsystems, targeted at the needs of people and business.
The Company’s principal business activities are security services,
including on-line security systems for commercial and residential
premises, static guard services, armored car services for cash collection and deposit and sales of security merchandise. The Company
has also been diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishingsystems; medical services, including home and other medical services and the operations of variable interest entities of which theCompany is the primary beneficiary through managing hospitals
and health care-related institutions; non-life insurance services;
geographic information services using geographic information
systems (GIS) and surveying and measuring technology; informationand communication related services, which center on data center
services and also include business continuity plan support, information security services and cloud-based services; real estate and otherservices, including the development and sale of condominiums
equipped with security and contingency planning features, lease ofreal estate, construction and installation services and other services.

• The power to direct activities of a VIE that most significantly
impact the VIE’s economic performance.
• The obligation to absorb losses of the VIE that could potentiallybe significant to the VIE or the right to receive benefits fromthe VIE that could potentially be significant to the VIE.
The Company provides investments, loans and guarantees toorganizations managing hospitals and health care-related institutions, to a company holding real estate, and to a PFI (Private FinanceInitiative) organization which was established to build, maintain andoperate correctional facilities. Certain of these organizations are
considered VIEs under ASC 810.
Total assets and liabilities held by VIEs of which the Company is
the primary beneficiary were ¥75,847 million ($671,212 thousand)and ¥84,809 million ($750,522 thousand), respectively, at March
31, 2016, and ¥70,658 million and ¥77,868 million, respectively, atMarch 31, 2015. The creditors of VIEs do not have recourse to theCompany’s general credit with the exception of debts guaranteedby the Company. Total assets and liabilities held by VIEs of which
the Company holds significant variable interests but is not the primary beneficiary were ¥30,315 million ($268,274 thousand) and¥29,631 million ($262,221 thousand), respectively, at March 31,
2016, and ¥31,328 million and ¥31,021 million, respectively, atMarch 31, 2015. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2016 and 2015 were ¥5,558 million ($49,186
thousand) and ¥5,154 million, respectively.
(3) Revenue Recognition
The Company generates revenue principally through the sales ofmerchandise and services in the areas of security services, fire protection services, medical services, insurance services, geographic
information services, information and communication related services, and real estate and other services under separate contractual
arrangements. The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred or services
have been rendered, title and risk of loss have been transferredto the customer, the sales price is fixed or determinable, andcollectibility is probable.
Revenue from term service contracts including security services isrecognized over the contractual period or, in the case of specificservices, when such services are rendered. Subscribers are generally
requested to prepay a portion of service charges, especially forsecurity services, which are credited to deferred revenue and recognized in income ratably over the covered service period. Revenue
from the installation of security equipment used to provide on-line
centralized security services is deferred and recognized over thecontractual period of security services after completion of the installation. The related installation costs are also deferred and amortizedover the contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment, installation and security services. The Company allocates revenue to eachelement based on its relative fair value if such element meets criteria for treatment as a separate unit of accounting as prescribed in
ASC 605, “Revenue Recognition.” Otherwise, revenue is deferred
until the undelivered elements are fulfilled as a single unit ofaccounting.
Revenue from sales of merchandise and software is recognizedwhen the merchandise and software are received by the customer
and, in the case of installations, when such installations arecompleted.
Revenue from construction contracts is principally recognizedwhen construction is completed.

SECOM Annual Report 201643

Revenue from long-term contracts for fire protection services andgeographic information services is principally recognized under thepercentage-of-completion method.
Property and casualty insurance premiums are earned ratably over
the terms of the related insurance contracts. Unearned premiums
are earned ratably over the terms of the unexpired portion ofpremiums written.
Revenue from sales of real estate is recognized when the title of
the real estate is transferred to the customer.
Revenue from sales of equipment under sales-type leases isrecognized at the inception of the lease. Unearned income onsales-type leases and direct-financing leases is recognized over thelife of each respective lease using the interest method. Leases not
qualifying as sales-type leases or direct-financing leases areaccounted for as operating leases and the related revenue isrecognized over the lease term.
Taxes collected from customers and remitted to governmental
authorities on revenue-producing transactions are accounted for on
a net basis and therefore are excluded from net sales and operating
revenue in the consolidated statements of income.
(4) Foreign Currency Translation
All asset and liability accounts of foreign subsidiaries and affiliates
are translated into Japanese yen at the rates of exchange in effectat year-end and all income and expense accounts are translated ataverage rates of exchange during the year. The resulting translation
adjustments are accumulated and reported as part of othercomprehensive income (loss).
Foreign currency receivables and payables of the Company aretranslated into yen at the rate in effect at the balance sheet date
and the resulting translation gains and losses are credited or
charged to foreign currency income and expenses for the year.
(5) Cash Equivalents
For the purpose of the consolidated statements of cash flows, theCompany considers all highly liquid investments purchased withinitial maturities of three months or less to be cash equivalents.
(6) Investments in Debt and Equity Securities
The Company classifies investments in debt and equity securities
as “available-for-sale” or “held-to-maturity.” The Company has no
securities classified as “trading.” “Held-to-maturity” securities arethose securities in which the Company has the ability and intent tohold the security until maturity. All securities not included in“trading” or “held-to-maturity” are classified as “available-for-sale”
securities. Marketable debt and equity securities which are classified
as “available-for-sale” are recorded at fair value. Unrealized holding
gains and losses on securities classified as “available-for-sale” arereported as part of accumulated other comprehensive income (loss),
net of tax. Debt securities classified as “held-to-maturity” arereported at amortized cost.
A decline in the fair value of any available-for-sale securities
below cost that is deemed to be other-than-temporary results in a
reduction in the carrying amount to fair value. The impairment ischarged to income and a new cost basis for the securities is established. To determine whether an impairment is other-thantemporary, the Company considers the length of time and extent towhich the market value of the security has been less than its original cost, the financial condition, other specific factors affecting themarket value, deterioration of the credit condition of the issuers,
and whether or not the Company is able to retain the investment
for a period of time sufficient to allow for the anticipated recovery
in market value.

44

SECOM Annual Report 2016

Other investments in non-public companies, except for private
equity investments, are recorded at cost as fair value is not readily
determinable. The Company periodically evaluates the values ofother investments in non-public companies for possible impairment
by taking into consideration the financial and operating conditionsof the issuer, the general market conditions in the issuer’s industry
and the period of the decline in the estimated fair value and otherrelevant factors. If the impairment is determined to be other-thantemporary, other investments in non-public companies are written
down to their impaired value through a charge to income.
Realized gains or losses on the sale of investments are based on
the moving-average cost method and are credited or charged toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies,”in which investments are accounted for at fair value based on the
Company’s assessment of each underlying investment. The investments, by their nature, have little or no price transparency.
Investments are initially carried at cost as an approximation of fairvalue. Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are also made, in
the absence of third-party transactions, if it is determined that the
expected realizable value of the investment has declined below thecarrying value.
The carrying value of private equity investments was ¥34,851
million ($308,416 thousand) and ¥25,682 million at March 31,
2016 and 2015, respectively.
Private equity investments are included in investment securities in
the consolidated balance sheets.
(8) Inventories
Inventories, consisting of security-related products, fire
protection-related products, real estate and other related products,
are stated at the lower of cost or market. Cost is determined, inthe case of real estate, based on the specific identification method
and, in the case of other inventories, primarily using the movingaverage method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade, short-term and long-term receivables, and otherreceivables are not overstated due to uncollectibility. Allowance for
doubtful accounts is maintained for all customers based on a variety
of factors, including the length of time receivables are past due,
macroeconomic conditions, significant one-time events and historical experience. An additional reserve for individual accounts isrecorded when the Company becomes aware of a customer’s
inability to meet its financial obligations, such as in the case ofbankruptcy filings or deterioration in the customer’s operating
results or financial position. If circumstances related to customers
change, estimates of the recoverability of receivables would befurther adjusted.
(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new
insurance policies are deferred and amortized principally over thepremium-paying period of the related insurance policies applying apercentage relationship of cost incurred to premiums from contracts
issued to applicable unearned premiums throughout the period of
the contract.

The estimated useful lives of depreciable assets are as follows:
Buildings
22 to 50 years
Security equipment and control stations
5 to 8 years
Machinery, equipment and automobiles
2 to 20 years
The Company recognizes asset retirement obligations if the fairvalue of the obligations can be reasonably estimated. Asset retirement obligations include those for which an entity has a legal obligation to perform an asset retirement activity, however, the timing
and/or method of settling the obligation are conditional on a future
event that may or may not be within the control of the entity.
Performance of a contractual asset retirement obligation isrequired for the building leased by a certain subsidiary when thelease matures and the Company returns the leased building to its
owner. However, the Company plans not to relocate from the building and to continue to use it until it will be demolished without restoration. As such, the execution of such obligation is not expected.
The Company evaluated all the available evidence as of March 31,
2016 and performed efforts to establish the best estimate. However,the scope and the amount of execution of the obligation cannot bereasonably estimated. Therefore, an asset retirement obligation forthat building lease is not recognized.
(12) Deferred Charges
Deferred charges primarily consist of costs related to installation
services of security equipment used to provide on-line security
systems. The installation costs are deferred and amortized using
the straight-line method over the contractual period of security
services after completion of the installation. Amortization expense
was ¥15,129 million ($133,885 thousand), ¥14,759 million and¥14,397 million for the years ended March 31, 2016, 2015 and2014, respectively.
(13) Impairment or Disposal of Long-Lived Assets
In accordance with ASC 360, “Property, Plant and Equipment,”
the Company reviews the carrying amount of its long-lived assets
held and used, other than goodwill and intangible assets withindefinite lives, and assets to be disposed of, whenever events orchanges in circumstances indicate that the carrying amount may
not be recoverable. Long-lived assets to be held and used arereviewed for impairment by comparing the carrying amount of theassets with their estimated future undiscounted cash flows. If it isdetermined that an impairment loss has occurred, the loss would berecognized during the period, and calculated as the difference
between the assets’ carrying amount and the fair value. Long-lived
assets that are to be disposed of other than by sale are considered
held and used until they are disposed of. Long-lived assets that are
to be disposed of by sale are reported at the lower of their carrying

Financial Section(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant leasehold
improvements, are carried at cost and depreciated at rates based on
the estimated useful lives of the assets. Depreciation is computed
using the straight-line method for assets other than security equipment and control stations. Security equipment and control stations
are depreciated using the declining-balance method. Assets leased
to others under operating leases are depreciated using the straightline method over the estimated useful lives. Depreciation expense
was ¥50,098 million ($443,345 thousand), ¥47,582 million and¥45,523 million for the years ended March 31, 2016, 2015 and2014, respectively. Maintenance, repairs and renewals are charged
to income as incurred.

amount or fair value less cost to sell. Reductions in the carrying
amount are recognized in the period in which the long-lived assets
are classified as held for sale.
(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair value of
assets of business acquired. Pursuant to ASC 350, “Intangibles—
Goodwill and Other,” goodwill and intangible assets acquired in apurchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment
at least annually. This accounting standard also requires that intangible assets with estimable useful lives be amortized over theirrespective estimated useful lives to their estimated residual values,
and reviewed for impairment in accordance with ASC 360. The
Company conducts its annual impairment test at the end of eachfiscal year.
(15) Unearned Premiums and Other Insurance Liabilities
Unearned premiums are related to unexpired periods of insurance
contracts and are earned on a pro-rata basis over the remaining
contract period. Other insurance liabilities consist principally of liabilities for unpaid claims and adjustment expenses, which are estimates of payments to be made on reported claims and incurred but
not reported claims, which are computed based on past experience
for unpaid losses.
(16) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities
and their respective tax bases, and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in whichthose temporary differences and carryforwards are expected to berealized or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are recorded toreduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized.
The Company recognizes in the consolidated financial statements
the impact of a tax position, if any, based on the technical meritsof the position, when that position is more likely than not to besustained upon examination. The benefit of the tax position ismeasured at the largest amount of benefit that has greater than
50 percent likelihood of being realized upon settlement with theappropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements of income.
(17) Research and Development
Research and development costs are charged to income
as incurred. Research and development expenses included in selling,
general and administrative expenses for the years ended March 31,
2016, 2015 and 2014 were ¥6,771 million ($59,920 thousand),¥7,354 million and ¥6,950 million, respectively.
(18) Advertising Costs
Advertising costs are charged to income as incurred, except forthe costs related to insurance policies. Advertising costs for acquiring new insurance policies are deferred and amortized as part of

SECOM Annual Report 201645

insurance acquisition costs. Advertising expenses included in selling,
general and administrative expenses for the years ended March 31,
2016, 2015 and 2014 were ¥4,388 million ($38,832 thousand),¥3,550 million and ¥3,823 million, respectively.
(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2016, 2015
and 2014 were ¥1,213 million ($10,735 thousand), ¥1,223 millionand ¥1,160 million, respectively.
(20) Derivative Financial Instruments
The Company accounts for derivative financial instruments inaccordance with ASC 815, “Derivatives and Hedging.”
The Company recognizes all derivative financial instruments inthe consolidated financial statements at fair value regardless of the
purpose or intent for holding them. Changes in the fair value ofderivative financial instruments are either recognized periodically inincome or in equity as a component of accumulated other comprehensive income (loss) depending on whether the derivative financial
instruments qualify for hedge accounting, and if so, whether
they qualify as a fair value hedge or a cash flow hedge. Changes
in the fair values of derivative financial instruments accounted
for as a fair value hedge are recorded in income along with theportion of the change in the fair value of the hedged item that
relates to the hedged risk. Changes in the fair value of derivative
financial instruments accounted for as a cash flow hedge, to theextent it is effective as a hedge, are recorded in accumulated othercomprehensive income (loss), net of tax. Changes in the fair valueof derivative financial instruments not qualifying as a hedge arereported in income.
The Company meets the documentation requirements necessaryfor effective hedges which include their risk management objective and strategy for undertaking various hedge transactions. In
addition, formal assessment is made at inception of the hedge andperiodically on an on-going basis, as to whether the derivatives
used in hedging activities are highly effective in offsetting changes
in fair values or cash flows of hedged items. Hedge accounting is
discontinued for ineffective hedges, if any. Changes in fair value of
discontinued hedges are recognized in income.
(21) Per Share Data
Basic Earnings per Share (“EPS”) is computed based on the average number of shares of common stock outstanding for the period.
The average number of shares of common stock outstanding forthe years ended March 31, 2016, 2015 and 2014 was 218,263
thousand shares, 218,265 thousand shares and 218,268 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2016, 2015 or 2014.
Cash dividends per share shown in the accompanying consolidated statements of income are computed based on dividends
approved and paid in each fiscal year.
(22) Use of Estimates
The preparation of the consolidated financial statements requires
management of the Company to make a number of estimates andassumptions relating to the reported amounts of assets andliabilities, the disclosures of contingent assets and liabilities at thedate of the consolidated financial statements and the reported
amounts of revenues and expenses during the period. Actual results
could differ from those estimates. Significant items subject to such
estimates and assumptions include the carrying amounts of inven-

46

SECOM Annual Report 2016

tories, deferred insurance acquisition costs, investment securities,
other investments, property, plant and equipment, goodwill, otherintangible assets, unearned premiums and other insurance liabilities, valuation of receivables, valuation allowances for deferredincome taxes, valuation of derivative instruments, assets andobligations related to employee benefits, asset retirement
obligations, income tax uncertainties, and other contingencies.
(23) Recent Pronouncements
In April 2014, the FASB issued ASU No. 2014-08, “Reporting
Discontinued Operations and Disclosures of Disposals of
Components of an Entity.” This accounting standard changes thecriteria for reporting discontinued operations in ASC205-20. A
disposal of a component of an entity or a group of components
of an entity is required to be reported in discontinued operations
if the disposal represents a strategic shift that has (or will have) a
major effect on an entity’s operations and financial results. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2014, and was adopted by the Company in thefiscal year beginning April 1, 2015. As this accounting standard
includes provisions for presentation only, the adoption did not havean impact on the Company’s consolidated results of operations or
financial position.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue fromContracts with Customers.” This accounting standard requires
an entity to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods orservices. This accounting standard also requires an entity to disclose
sufficient information to enable users of financial statements tounderstand the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. Both qualitative and quantitative information is required. This accounting standard was originally planned to be effective for fiscal years beginning
after December 15, 2016; however, in August 2015, the FASB
issued ASU No. 2015-14, which defers the effective date of ASU
No. 2014-09 for one year. Early adoption as of the original effective
date is permitted. This accounting standard may be applied retrospectively to each prior period presented or retrospectively with the
cumulative effect recognized at the date of initial application. The
Company is currently evaluating the transition method, the timingof its adoption and the effect of adopting this accounting standard
on its consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02“Amendments to the Consolidation Analysis.” This accounting
standard modifies the evaluation of whether reporting entities
should consolidate limited partnerships and similar legal entities,
and addresses whether fees paid to a decision maker or service
provider are variable interests in a VIE, and whether variable interests in a VIE held by related parties of the reporting entity require
the reporting entity to consolidate the VIE. A reporting entity may
choose a modified retrospective approach or a full retrospective
approach to applying the amendments. This accounting standard iseffective for fiscal years beginning after December 15, 2015, including interim periods within that reporting period and will be adopted
by the Company in the fiscal year beginning April 1, 2016. The
Company is currently evaluating the effect of adopting thisaccounting standard on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, “Simplifying
the Presentation of Debt Issuance Costs.” This accounting standard
requires that debt issuance costs related to a recognized debt
liability be presented in the balance sheets as a direct deduction

(24) Discontinued Operations
ASC 205-20, “Discontinued Operations,” requires the operating
results of any component of an entity with its own identifiable

Financial Section

from the carrying amount of that debt liability, consistent withdebt discounts. This accounting standard is effective for fiscal years
beginning after December 15, 2015, including interim periods
within that reporting period and will be adopted by the Company
in the fiscal year beginning April 1, 2016. The Company is currently
evaluating the effect of adopting this accounting standard on its
consolidated financial statements.
In May 2015, the FASB issued ASU No. 2015-09 “Disclosuresabout Short-Duration Contracts.” This accounting standard requires
an entity to disclose liability for unpaid claims, claim adjustment
expenses, significant changes in methodologies and assumptions
used to calculate the liability for unpaid claims and claim adjustment expenses, including reasons for the change and the effects on
the financial statements. This accounting standard is effective forfiscal years beginning after December 15, 2015, including interim
periods within that reporting period and will be adopted by theCompany in the fiscal year beginning April 1, 2016. The Company iscurrently evaluating the effect of adopting this accounting standard
on its consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16 “Business
Combinations: Simplifying the Accounting for Measurement-Period
Adjustments.” This accounting standard requires an acquirer in abusiness combination to recognize adjustments to provisionalamounts that are identified during the measurement period in thereporting period in which the adjustment amounts are determined.
This accounting standard is effective for fiscal years beginning after
December 15, 2015, including interim periods within that reporting
period and will be adopted by the Company in the fiscal year beginning April 1, 2016. The Company is currently evaluating the effectof adopting this accounting standard on its consolidated financial
statements.
In November 2015, the FASB issued ASU No. 2015-17 “Balance
Sheet Classification of Deferred Taxes.” This accounting standard
requires deferred tax assets and liabilities be classified as noncurrent
on the balance sheet. This accounting standard is effective for fiscal
years beginning after December 15, 2016, and will be adopted by
the Company in the fiscal year beginning April 1, 2016. The
Company is currently evaluating the effect of adopting thisaccounting standard on its consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01 “Recognition
and Measurement of Financial Assets and Financial Liabilities.” Thisaccounting standard significantly changes the income statement
impact of equity investments, and the recognition of changes in fairvalue of financial liabilities when the fair value is elected. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2017, including interim periods within that reporting
period and will be adopted by the Company in the fiscal year beginning April 1, 2018. The Company is currently evaluating the effectof adopting this accounting standard on its consolidated financial
statements.
In February 2016, the FASB issued ASU No. 2016-02 “Leases.”This accounting standard requires lessees to recognize almost alllease assets and lease liabilities on the balance sheet that arise fromlease contracts which are classified as operating leases. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2018, including interim periods within that reporting
period and will be adopted by the Company in the fiscal year
beginning April 1, 2019.

operations and cash flows which is disposed of or is classified asheld for sale, and with which the Company will not have significant
continuing involvement to be reported in discontinued operations.
The results of operations related to certain businesses classified
as discontinued operations in the years ended March 31, 2015
and 2014 were reclassified in the accompanying consolidated
financial statements.
(25) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2015 and 2014 havebeen reclassified to conform to the presentation used for the year
ended March 31, 2016.
3. U.S. Dollar Amounts
U.S. dollar amounts have been included in these financial statements solely for the convenience of the reader. The translations of
yen into U.S. dollars have been made at the rate of ¥113=US$1,
the approximate rate prevailing on the Tokyo Foreign Exchange
Market on March 31, 2016. These translations should not be
construed as representing that the yen amounts actually constitute,or have been or could be converted into U.S. dollars at that rate.
4. Acquisitions
Acquisition of Asahi Security Co., Ltd.
On December 1, 2015, the Company acquired 100% of commonshares outstanding of Asahi Security Co., Ltd. for ¥81,000 million($716,814 thousand) in cash. Asahi Security Co., Ltd. has built
diversified client networks, service infrastructure and operational
know-how through provision of cash collection and delivery services
for its clients, mainly retailers and restaurants etc. and operation of
24-hour centers for those services. The purpose of this acquisition
is to provide higher quality services for a wider range of clientsand enhance corporate value through collaboration utilizing thebusiness infrastructure of the SECOM Group.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.

Cash and cash equivalents .....................
Cash deposits for armored car services ...
Other current assets ...............................
Investments and long-term receivables ...
Property, plant and equipment ...............
Intangible assets, including goodwill ......
Total assets acquired ...........................
Current liabilities ....................................
Long-term liabilities................................
Total liabilities assumed .......................
Net assets acquired .............................

In millions of yen

In thousands of
U.S. dollars¥ 11,565
81,514
5,247
2,270
15,562
71,978188,136
92,764
14,372
107,136¥ 81,000$ 102,345
721,363
46,43420,088
137,717
636,973
1,664,920
820,920
127,186
948,106$ 716,814

Intangible assets of ¥13,922 million ($123,204 thousand) subject
to amortization include customer relationships of ¥13,214 million($116,938 thousand) with a 15-year useful life. The goodwill of¥58,056 million ($513,770 thousand) represents expected excess
earnings power based on the future business operations. It is notdeductible for tax purposes and has been assigned to the security
services segment.
The Company recorded acquisition costs of ¥296 million($2,619 thousand) related to this acquisition in selling, general andadministrative expenses for the year ended March 31, 2016.

SECOM Annual Report 201647

The following unaudited pro forma information shows theCompany’s consolidated results of operations for the years ended
March 31, 2016 and 2015 as if the newly consolidated subsidiaries
acquired in the year ended March 31, 2016, were consolidated on
April 1, 2014.

Unaudited

Pro forma net sales andoperating revenue.................
Pro forma net income
attributable to
SECOM Co., Ltd. ..................

Unaudited

Pro forma net income
attributable to
SECOM Co., Ltd. per share ...

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2016

¥1,017,642 ¥990,295$9,005,681

2016

respectively, at March 31, 2015. As part of its fee arrangement, theCompany is reimbursed for the interest cost of the related
overdrafts.
7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(noncurrent) include debt and equity securities. The related aggregate fair value, gross unrealized gains, gross unrealized losses andcosts pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2016 and 2015 are as follows:
In millions of yen
March 31, 2016
Gross unrealized

85,524

2016

81,635756,850

In yenIn U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2016

¥391.84 ¥374.02$3.47

The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually
have been reported if the transaction in fact had occurred on April
1, 2014, and is not necessarily representative of the Company’s
consolidated results of operations for any future period.

Cost

Short-term investments:
Available-for-sale:
Debt securities ............. ¥ 27,336
Held-to-maturity:
3,006
Debt securities .............
¥ 30,342
Investment securities:
Available-for-sale:
Equity securities ........... ¥ 31,333
Debt securities ............. 101,098
Held-to-maturity:
8,667
Debt securities .............
¥141,098

Gains

LossesFair value¥ 1,071¥3¥ 28,4042¥ 1,073

¥

—
3

3,008
¥ 31,412¥20,878
7,020

¥461
153

¥ 51,750
107,965

1,607¥29,505—¥614

10,274¥169,989
In millions of yen

5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2016 and 2015 comprisethe following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2016

¥213,752 ¥178,594
12,19451,018—15,5003,036
3,515¥228,982 ¥248,627$1,891,611
107,911—
26,867$2,026,389

2016

Cash ...........................................
Time deposits .............................
Call loan .....................................
Investment securities ...................

Investment securities include negotiable certificates of deposit
and money management funds. These agreements mature within
three months and their carrying values approximate fair value. The
Company has not experienced any losses through default of thefinancial institutions and does not anticipate default of any
outstanding agreements.
6. Cash Deposits for Armored Car Services
The Company operates cash collection and deposit services forfinancial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection anddelivery services for entities other than financial institutions. Cashdeposit for armored car services balances are segregated from cash
and cash equivalents and are restricted as to use by the Company.
The Company funds most of the cash for such operations throughbank overdrafts and deposits. Bank loans and deposits received,
which relate to these operations, were ¥26,923 million ($238,257
thousand) and ¥101,306 million ($896,513 thousand), respectively,
at March 31, 2016, and ¥29,417 million and ¥16,946 million,

48

SECOM Annual Report 2016

March 31, 2015
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
Debt securities ............. ¥ 24,433¥ 24,433
Investment securities:
Available-for-sale:
Equity securities ........... ¥ 33,870
Debt securities ............. 111,050
Held-to-maturity:
Debt securities ............. 12,292¥157,212

¥
¥

Gains

Losses

570
570

¥
¥

Fair value

1
1¥ 25,002¥ 25,002¥29,154
9,725

¥ 59
69

¥ 62,965
120,706

1,165¥40,044—¥128

13,457¥197,128

In thousands of U.S. dollars
March 31, 2016
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
Debt securities ......... $ 241,912 $Held-to-maturity:
26,602
Debt securities .........
$ 268,514 $Gains

LossesFair value

9,478 $

27

$ 251,363

17
9,495 $—
27

26,619$ 277,982

Investment securities:
Available-for-sale:
Equity securities ....... $ 277,283 $184,762 $4,079
Debt securities .........
894,673
62,123 1,353
Held-to-maturity:
76,70014,220—Debt securities .........
$1,248,656 $261,105 $5,432$ 457,966
955,443
90,920$1,504,329

In millions of yen
March 31, 2016

Available-for-sale:
Equity securities...........
Debt securities.............
Held-to-maturity:
Debt securities.............

Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses¥ 4,690
18,738¥23,428

¥443
156
¥599

¥—
—
¥—

¥—
—
¥—

¥

¥ —

¥—

¥—

—

In thousands of U.S. dollars
March 31, 2016

Available-for-sale:
Equity securities...........
Debt securities.............
Held-to-maturity:
Debt securities.............

Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses$ 41,504
165,823$207,327$3,9201,381$5,301

$—
—
$—

$—
—
$—

$

$

$—

$—

—

—

Based on the Company’s ability and intent to hold the investments
for a reasonable period of time sufficient for a recovery of fairvalue, the credit condition of the issuers and other relevant factors,
the Company does not consider these investments to be otherthan-temporarily impaired at March 31, 2016.
At March 31, 2016, debt securities principally consisted of shortterm investments in monetary trusts, Japanese government bonds,
corporate bonds, U.S. treasury securities and U.S. Government
Agency Bonds.
The cost and fair value of “available-for-sale” and ”held-tomaturity” debt securities by contractual maturity at March 31, 2016
are as follows:
In millions of yen

In thousands of U.S. dollars
March 31, 2016
Available-for-sale
Cost

Fair value

Due within 1 year ..... $ 241,912 $ 251,381
Due after 1 year
through 5 years ......
574,000
615,416
Due after 5 years
through 10 years ....
177,310
188,496
Due after 10 years ...
143,363
151,513$1,136,585 $1,206,806

Held-to-maturity
Cost

Due within 1 year .....
Due after 1 year
through 5 years ......
Due after 5 years
through 10 years ....
Due after 10 years ...

Held-to-maturity

Cost

Fair value

Cost

Fair value¥ 27,336¥ 28,406¥ 3,006¥ 3,009

64,862

69,542

1,510

1,592

20,036
16,200¥128,434

21,30017,121¥136,369—
7,157¥11,673—
8,681¥13,282

Fair value$ 26,602 $

26,62813,36314,088—63,337$103,302—
76,823$117,539

During the years ended March 31, 2016, 2015 and 2014, the net
unrealized gains and losses on “available-for-sale” securities
included as part of accumulated other comprehensive income (loss),
net of tax, decreased by ¥7,412 million ($65,593 thousand), andincreased by ¥13,004 million and ¥1,000 million, respectively.
Proceeds from the sale of “available-for-sale” securities for theyears ended March 31, 2016, 2015 and 2014 were ¥21,397 million($189,354 thousand), ¥13,800 million and ¥14,475 million, respectively. On those sales, the gross realized gains and gross realized
losses, using a moving-average cost basis, for the years ended
March 31, 2016, 2015 and 2014 are as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

2014

2016

Gross realized gains ........... ¥1,921
Gross realized losses ..........
110

¥269
1

¥1,694212$17,000
973

The Company maintains long-term investment securities, issued
by a number of non-public companies, included as investment securities in the consolidated balance sheets. The aggregate carrying
amount of the investments in non-public companies, at cost net ofother-than-temporary impairment, was ¥9,251 million ($81,867
thousand) and ¥9,083 million at March 31, 2016 and 2015,
respectively. The corresponding fair value at that date was notcomputed as such estimation was not practicable and no significant
events or changes that might have affected the fair value of theinvestments were observed.
8. Inventories
Inventories at March 31, 2016 and 2015 comprise the following:

March 31, 2016
Available-for-saleFinancial Section

Gross unrealized losses on, and fair value of, “available-for-sale”
and “held-to-maturity” securities, aggregated by investment
category and the length of time that individual securities have been
in a continuous unrealized loss position at March 31, 2016 are as
follows:

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2015

2016

Security-related products................... ¥ 8,888 ¥ 8,489
Fire protection-related products ........ 18,178
19,769Real estate ........................................ 26,552
24,122Other-related products ...................... 10,162
8,241¥63,780 ¥60,621$ 78,655
160,867
234,973
89,930$564,425

SECOM Annual Report 2016

49

Work in process for real estate inventories at March 31, 2016 and2015, amounting to ¥23,025 million ($203,761 thousand) and¥21,059 million, respectively, are included in real estate.
Costs on uncompleted construction contracts at March 31, 2016
and 2015, amounting to ¥9,083 million ($80,381 thousand) and¥9,793 million, respectively, are included in fire protection-related
products.
The amount of write-down on real estate inventories included incost of sales for the years ended March 31, 2016, 2015 and 2014
were ¥1,463 million ($12,947 thousand), ¥1,565 million and¥1,122 million, respectively.
9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
five categories: “lease receivables,” “loans receivable resulting frommedical services,” “loans receivable resulting from insurance services,” “other loans receivable” and “other.” Financing receivables
classified as “lease receivables” result from lease transactions of
security equipment and real estate for offices and medical institutions.
The Company continuously monitors overdue financing receivables which, the Company considers, have a risk of uncollectability.
For financing receivables with specific customer collection issues,
the Company individually evaluates their collectability in order todetermine the amount of allowance for doubtful accounts. For
other financing receivables, the Company categorizes these receivables into groups by their nature and characteristics. The Company
collectively evaluates the collectability of each group, using its historical experience of write-offs and determines the amount ofallowance for doubtful accounts.
Financing receivables and allowance for doubtful accounts at
March 31, 2016 and 2015 are as follows:
In millions of yen
Year ended March 31, 2016

Lease
receivables

Allowance for
doubtful accounts:
Balance at
beginning of year....... ¥Provision (Reversal) ..
Charge off...............
Other* ....................
Balance at endof year .......................
Individually
evaluated ..............
Collectively
evaluated .............. ¥Loansreceivable
resultingfrommedicalservices

Loans
receivable
resulting
from
Other
insuranceloans
services receivable

Other

Total

423
9
(64)
—

¥2,204
(0)
—
(209)

368

1,995

0

705

1,688

4,756

80

1,995

—

705

1,688

4,468

—

¥ 0 ¥

288

¥

¥ 0 ¥3,102 ¥1,618 ¥ 7,347
(0)
(33)
25
1
— (2,133)— (2,197)
—
(231)
45
(395)

— ¥

— ¥

288

Financing receivables:
Individually
evaluated .............. ¥96
Collectively
evaluated .............. 48,167¥6,0981,009

104¥48,263¥7,107¥104 ¥2,124 ¥4,050 ¥61,648¥ — ¥ 847 ¥3,898 ¥10,939
1,277

152

50,709* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

50

SECOM Annual Report 2016

In millions of yen
Year ended March 31, 2015

Lease
receivables

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Allowance for
doubtful accounts:
Balance at
beginning of year....... ¥ 417 ¥ 1,721
Provision (Reversal) ..
110
483
Charge off...............
(104)—
Other* ....................
——
Balance at endof year .......................
Individually
evaluated ..............
Collectively
evaluated .............. ¥

Other
loans
receivable

¥ 75
(10)
(65)
—

Other

Total

¥3,074 ¥ 841 ¥ 6,128
11
731
1,325
—
(28)
(197)
17
74
91

423

2,204

0

3,102

1,618

7,347

71

2,204

—

3,102

1,618

6,995

—

¥ 0

¥

Financing receivables:
Individually
evaluated .............. ¥88
Collectively
evaluated .............. 48,698¥10,008¥ —¥3,271 ¥4,968 ¥18,335

998

159

1,728

¥48,786¥11,006¥159¥4,999 ¥5,120 ¥70,070

352

¥

— ¥

— ¥

152

352

51,735* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.
In thousands of U.S. dollars
Year ended March 31, 2016
Loans
Loans
receivable receivable
resulting resulting
from
from
Lease
medical insurance
receivables
services
services

Allowance for
doubtful accounts:
Balance at
beginning of year....... $ 3,743 $19,505
Provision (Reversal) ..
80(0)Charge off...............
(566)—
Other* ....................
— (1,850)
Balance at endof year .......................
3,257 17,655
Individually
evaluated ..............
708 17,655
Collectively
evaluated .............. $ 2,549 $
—

Other
loans
receivable

Other

Total

$ 0 $27,451 $14,319 $ 65,018
(0)
(292)
221
9
— (18,876)— (19,442)— (2,044)
398 (3,496)
0

6,239

14,93842,089—6,239

14,93839,540$ 0 $— $— $ 2,549

Financing receivables:
Individually
evaluated .............. $850 $53,965
Collectively
evaluated .............. 426,257 8,929$ — $ 7,495 $34,496 $ 96,806$427,107 $62,894$920 $18,796 $35,841 $545,558

920

11,301

1,345 448,752* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

The Company considers receivables that are past due and thefinancial position of the debtor to be credit quality indicators andclassifies financing receivables into Overdue and Current. Financing
receivables determined to have no prospects for collecting contractual interest on the basis of being past due and other factors areplaced on nonaccrual status.

March 31, 2015
Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Other
loans
receivable¥88¥10,008¥—¥3,271 ¥4,968 ¥18,335

71

2,204

—

3,102

In millions of yen
March 31, 2016
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

Other

Total

Current ......................... ¥48,167 ¥7,068
Overdue........................
96
39¥104 ¥1,329 ¥1,154—795 2,896¥57,822
3,826

Total:
Financing receivables .. ¥48,263 ¥7,107¥104 ¥2,124 ¥4,050¥61,648

Financing receivables
on nonaccrual status ... ¥¥ — ¥ 847 ¥

¥

— ¥

7

—

Impaired receivables ......
Related allowance for
doubtful accounts .......

Other

Total

Current ......................... ¥48,698 ¥10,966
Overdue........................
88
40¥159 ¥1,807 ¥2,417— 3,192 2,703¥64,047
6,023

Total:
Financing receivables .. ¥48,786 ¥11,006¥159 ¥4,999 ¥5,120¥70,070

Financing receivables
on nonaccrual status ...

¥ — ¥3,271¥ 6,990

¥

—

Lease
receivables

Impaired receivables ......
Related allowance for
doubtful accounts .......

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

Other

Total

$920 $11,761 $10,212 $511,699— 7,035 25,629 33,859

Total:
Financing receivables .. $427,107 $62,894$920 $18,796 $35,841 $545,558

Financing receivables
on nonaccrual status ... $$ — $ 7,496 $— $ 7,558

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2016 and 2015 are as follows:
In millions of yen
March 31, 2016

Impaired receivables ......
Related allowance for
doubtful accounts .......

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Other
loans
receivable

Other¥6,098¥—¥847 ¥3,898 ¥10,939

80

1,995

—

705

1,688

4,468

Other

Total

708

—

6,239 14,938

17,65539,540

The average amounts of impaired receivables for the year ended
March 31, 2016 are as follows:
In millions of yen

Leasereceivables

Average amounts of
impaired receivables ....

¥92

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Other
loans
receivable¥8,053¥2,059 ¥4,433 ¥14,637

¥—

Other

Total

In thousands of U.S. dollars

Average amounts of
impaired receivables ....

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services$814 $71,265

Other
loans
receivable

Other

Total

$— $18,221 $39,230 $129,530

10. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principallyconsist of Taiwan Secom Co., Ltd., a 28.8 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a28.8 percent owned affiliate, which is listed on the Korea Exchange;
and Toyo Tech Co., Ltd., a 27.4 percent owned affiliate, which islisted on the Second Section of the Tokyo Securities Exchange.
Combined financial information for the affiliated companies
accounted for under the equity method is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

Total

¥96

Other
loans
receivable$7,495 $34,496 $96,806

Lease
receivables

Current ......................... $426,257 $62,549
Overdue........................
850
345

Lease
receivables

6,995

$—

March 31, 2016

62

1,618

Total

$850 $53,965

In thousands of U.S. dollars

— $

Other

In thousands of U.S. dollars

854

March 31, 2015
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable— ¥ 3,719

Lease
receivables

March 31, 2016

In millions of yen¥

Financial Section

In millions of yen

The aging analysis of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2016 and2015 are as follows:

2016

2015

2016

Current assets ................................ ¥ 94,933 ¥105,832
Noncurrent assets .......................... 194,312 205,514$ 840,115
1,719,575

Total assets................................. ¥289,244 ¥311,346$2,559,681

Current liabilities ............................ ¥ 74,725 ¥ 92,416
Long-term liabilities........................
35,674
38,831Equity ............................................ 178,846 180,099$ 661,283
315,699
1,582,708

Total liabilities and equity ........... ¥289,244 ¥311,346$2,559,681

SECOM Annual Report 2016

51

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2016

Net sales ....................... ¥289,131 ¥262,726 ¥198,890$2,558,681

Gross profit ................... ¥ 89,152 ¥ 82,753 ¥ 65,492$ 788,956

Net income
attributable toaffiliated companies .... ¥ 25,012 ¥ 17,825 ¥ 14,305$ 221,345

2016

2015

Dividends received from affiliated companies for the years ended
March 31, 2016, 2015 and 2014 were ¥3,614 million ($31,982
thousand), ¥3,160 million and ¥2,652 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥49,290 million($436,195 thousand) and ¥47,409 million at March 31, 2016 and2015, respectively, had a quoted market value of ¥130,157 million($1,151,832 thousand) and ¥133,559 million at March 31, 2016
and 2015, respectively.
The amounts of goodwill included in the carrying amount ofinvestments in affiliated companies were ¥4,763 million ($42,150
thousand) and ¥4,768 million at March 31, 2016 and 2015,
respectively.
A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 312016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

2016

Security services .................... ¥— ¥ 111 ¥ 296
Fire protection services ..........
——
21
Medical services ....................
329— 1,871
Insurance services .................
———
Geographic information
services ...............................
1,152
154
164
Information andcommunication related
services ...............................
5,637 4,796
40
Real estate andother services ......................
—
132—
Corporate items ....................
4,696 1,398
397

$

—
—
2,912
—
10,19549,885—41,558

2016

2015

2014

2016

Sales .............................

¥1,398¥1,774¥1,549$12,372

Purchases......................

¥5,527¥4,417¥5,982$48,912

In millions of yen

In thousands of
U.S. dollars

12. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill,at March 31, 2016 and 2015 are as follows:

March 31

March 31

In millions of yen

2015

2016

2016

Notes and accounts
receivable, trade ............................. ¥ 559¥ 544$ 4,947

Loans receivable................................ ¥ 737¥ 557$ 6,522

Notes and accounts payable.............. ¥2,245¥2,224$19,867

Guarantees for bank loans ................ ¥ 100¥1,039$The Company’s equity in undistributed income of affiliates at
March 31, 2016 and 2015 included in retained earnings was¥32,634 million ($288,796 thousand) and ¥27,872 million,
respectively.

52

11. Long-Lived Assets
The Company has assessed the potential impairment of its longlived assets. As a result of a significant decrease in revenue forecasts, the Company principally recognized impairment losses oncertain business assets of the information and communication
related services segment and certain real estate included as corporate items for the year ended March 31, 2016, on certain businessassets of the information and communication related services segment for the year ended March 31, 2015, and on certain real estateof the medical services segment for the year ended March 31,
2014. The fair value was determined based on the estimatedpresent value of future cash flows or appraisal value.
Impairment losses on long-lived assets by business segment for
the years ended March 31, 2016, 2015 and 2014 are as follows:

SECOM Annual Report 2016

885

Total .............................. ¥11,814 ¥6,591 ¥2,789$104,549

March 31, 2016
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥47,816
Other ............................................ 34,030¥81,846(¥26,321)(5,723)(¥32,044)¥21,495
28,307¥49,802

Unamortized intangible assets........... ¥ 4,122¥¥ 4,122—

In millions of yen
March 31, 2015
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥46,045
Other ............................................ 20,610¥66,655(¥25,539)(5,007)(¥30,546)¥20,506
15,603¥36,109

Unamortized intangible assets........... ¥ 4,066¥¥ 4,066—

In thousands of U.S. dollars

March 31, 2016
Gross
carrying
amountNet
carrying
amountAccumulated
amortization

Amortized intangible assets:
Software ....................................... $423,150
Other ............................................ 301,150$724,300($232,929) $190,221(50,646) 250,504($283,575) $440,725

Unamortized intangible assets........... $ 36,479$— $ 36,479

Aggregate amortization expense for the years ended March 31,
2016, 2015 and 2014 was ¥7,254 million ($64,195 thousand),¥6,522 million and ¥6,741 million, respectively. Amortized intangible assets are amortized using the straight-line method over theirestimated useful lives. The weighted average amortization period
for internal use software is approximately five years.
The estimated aggregate amortization expense for intangible
assets for the next five years is as follows:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥8,708
7,609
6,616
5,410
3,669

$77,062
67,33658,54947,87632,4692017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................

The changes in the carrying amount of goodwill by businesssegment for the years ended March 31, 2016 and 2015 are as
follows:
In millions of yen

Security
services

Fire
protection
services

Information
Geographic
andMedical information communication
services
services related services

Goodwill ............... ¥ 4,192 ¥1,953 ¥9,399 ¥4,530
Accumulated
impairment
losses .................. (1,723)— (4,036)(738)
March 31, 2014 .... 2,469
1,953 5,363
3,792
Goodwill acquired
during the year ...
———37
Disposal ................
—
(11)
—
—
Impairment
losses ..................
—— (1,314)—
Translation
adjustment .........
104
—
—
13
Goodwill ............... 4,296
1,942 9,399
4,580
Accumulated
impairment
losses .................. (1,723)— (5,350)(738)
March 31, 2015 .... 2,573
1,942 4,049
3,842
Goodwill acquired
during the year ... 58,646———
Disposal ................
————
Impairment
losses ..................
————
Translation
adjustment .........
(65)
—
—
—
Goodwill ............... 62,877
1,942 9,399
4,580
Accumulated
impairment
losses .................. (1,723)— (5,350)(738)
March 31, 2016 ... ¥61,154 ¥1,942 ¥4,049 ¥3,842

Real estateand otherservices

Total¥17,643¥1,962 ¥39,679(175)
17,468

(135)
1,827

(6,807)32,872

—
—

—
—

37
(11)

—

—

(1,314)—
17,643

—
1,962

117
39,822(175)
17,468

(135)
1,827

(8,121)
31,701————58,646
—

—

—

—

—
17,643

—
1,962

(65)
98,403Financial Section

In thousands of U.S. dollars

Security
services

Fire
protection
services

Information
Geographic
andMedical information communication
services
services related services

Real estateand otherservices

Total

Goodwill ............... $ 38,018 $17,186 $83,177 $40,531 $156,133 $17,363 $352,408
Accumulated
impairment
losses .................. (15,248)— (47,345) (6,531)(1,549) (1,195) (71,868)
March 31, 2015 .... 22,770 17,186 35,832 34,000 154,584 16,168 280,540
Goodwill acquired
during the year ... 518,991————— 518,991
Disposal ................
—
—
—
—
—
—
—
Impairment
losses ..................
—
—
—
—
—
—
—
Translation
adjustment .........
(575)
—
—
—
—
—
(575)
Goodwill ............... 556,434 17,186 83,177 40,531 156,133 17,363 870,824
Accumulated
impairment
losses .................. (15,248)— (47,345) (6,531)(1,549) (1,195) (71,868)
March 31, 2016 ... $541,186 $17,186 $35,832 $34,000 $154,584 $16,168 $798,956

Impairment losses on goodwill recognized in the above table aremainly due to decreases in the estimated fair value of reporting
units in each segment mainly caused by decreases in projected cash
flows. The fair value is determined based on the estimated present
value of future cash flows.
13. Bank Loans and Long-Term Debt
Bank loans of ¥55,659 million ($492,558 thousand) and ¥43,924
million at March 31, 2016 and 2015, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 0.84 percent and 1.09 percent at March 31, 2016 and2015, respectively. Substantially all of these loans are borrowed
from banks. The Company has entered into basic agreements withthese banks which state that, with respect to all present or futureloans with such banks, collateral (including sums on deposit withsuch banks) or guarantors shall be provided immediately uponrequest. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebtedness to suchbanks. The Company has not been requested to submit such
additional security.
At March 31, 2016, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($35,398 thousand). The line ofcredit expires in March 2021. Under the agreement, Nohmi Bosai
Ltd. is required to pay commitment fees, at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2016, the Company had overdraft agreements with 33 banks andits unused lines of credit amounted to ¥92,798 million ($821,227
thousand). The Company incurs no fee on the unused portion ofthese overdraft agreements. The overdraft agreements expire in
the period from April 2016 to March 2017. The Company has theability and intent to extend these overdraft agreements undersimilar terms and conditions.

(175)(135) (8,121)¥17,468 ¥1,827 ¥90,282

SECOM Annual Report 2016

53

Long-term debt at March 31, 2016 and 2015 comprises thefollowing:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2016

2016

Loans, principally from banks due
2015–2033 with interest rates
ranging from 0.21% to 14.00%:
Secured............................................ ¥21,123 ¥24,212
Unsecured........................................ 22,728 20,431
0.5% unsecured bonds due 2015 ........
—
100
0.81% unsecured bonds due 2016 ......
100
100
0.52% unsecured bonds due 2016 ......
40
104
0.43% unsecured bonds due 2018 ......
100
100
0.38% unsecured bonds due 2021 ......
500—
Unsecured bonds due 2015–2025
with floating interest rates basedon 6-month Japanese yen TIBOR ........ 10,094
9,424
Obligations under capital leases,
due 2015–2043 (Note 19).................. 24,881 12,700................................................ 79,566 67,171
Less: Portion due within one year ......... (17,926) (13,368)................................................ ¥61,640 ¥53,803$186,929
201,133
—
885
354
885
4,425
89,327220,186
704,124(158,637)$545,487

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2016 and 2015 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2015

2016

Time deposits ....................................... ¥ 1,592 ¥ 2,081
Short-term and long-term receivables ... 5,943 5,636
Investment securities ............................. 1,289 1,133
Property, plant and equipment .............. 53,854 51,734
Other intangible assets.......................... ¥ 818 ¥ 818$ 14,088
52,594
11,407476,584$ 7,239

The aggregate annual maturities on long-term debt at March 31,
2016 are as follows:
Years ending March 31

2017.....................................................
2018.....................................................
2019.....................................................
2020.....................................................
2021.....................................................
Thereafter .............................................
............................................................

In millions of yen

In thousands of
U.S. dollars¥17,926
16,986
14,191
10,122
6,695
13,646¥79,566$158,637
150,319
125,584
89,57559,248120,761$704,124

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”), a
subsidiary of the parent company, maintains accounting records as
noted in Note 2 in accordance with Japanese GAAP, which vary incertain respects from U.S. GAAP. Those differences are principally,(a) that insurance acquisition costs are charged to expense whenincurred under Japanese GAAP whereas under U.S. GAAP, thosecosts are deferred and amortized generally over the54

SECOM Annual Report 2016

premium-paying period of the insurance policies, (b) that liabilities
related to incurred but not reported claims are computed based onrelated regulations in Japan whereas under U.S. GAAP, those liabilities are computed based on past experience for unreported losses,and (c) that unearned premiums are calculated based on the documents authorized by the Supervisory Authorities in Japan whereas
under U.S. GAAP, unearned premiums are reflected based on thelapse and surrender over the contract period.
In addition, under certain property and casualty insurance contracts with a refund clause and long-term insurance policies thatprovide refunds at maturity, such as personal accident and fire, thepolicyholder receives a refund if premiums have been fully paid
unless a substantial settlement (as defined in the policy) has
occurred. The Company has provided for such refundable amounts
by classifying a portion of the net premiums written, together withinterest thereon, as investment deposits by policyholders. Contract
and policy terms are principally five years.
For purposes of preparing the consolidated financial statements,
appropriate adjustments have been made to reflect such items inaccordance with U.S. GAAP.
The net equity of Secom Insurance at March 31, 2016 and 2015was ¥67,193 million ($594,628 thousand) and ¥67,633 million,
respectively.
Net sales and operating revenue of Secom Insurance include net
realized investment gains and losses, including gains and losses onsales of securities, losses on other-than-temporary impairment ofinvestment securities and impairment losses on long-lived assets.
Net realized investment gains and losses, including losses on otherthan-temporary impairments, for the years ended March 31, 2016,2015 and 2014 were gains of ¥473 million ($4,186 thousand),¥194 million and ¥1,221 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2016, 2015 and 2014 were ¥147 million ($1,301
thousand), ¥18 million and ¥22 million, respectively.
15. Pension and Severance Costs
Employees of the parent company and its domestic subsidiaries
whose services are terminated are, under most circumstances,eligible for lump-sum benefits and/or eligible for pension benefits.
The parent company and certain domestic subsidiaries haveadopted a cash balance pension plan and a defined contribution
pension plan. Benefits under the cash balance pension plan arecalculated as a certain percentage of employees’ annual income
over their period of service, plus interest calculated as the 3-year
average yield for 10-year government bonds. The defined contribution pension plan was established in April 2003, by transferring a
portion equivalent to 20 percent of the cash balance pension plan,
including portions funded in prior periods. A specified percentageof employees’ annual income is contributed to the defined
contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accordingly, the ratioof the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution pension
plan changed to 70 percent and 30 percent, including portions
funded in prior periods.

2016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

Net periodic pension andseverance costs:
Service cost ......................... ¥7,739 ¥5,357 ¥6,181
Interest cost ........................
718
936 1,297
Expected return onplan assets ........................ (2,756) (2,533) (2,299)
Amortization of priorservice benefit ................... (1,504) (1,584) (1,601)
Recognized actuarial loss.....
714
989 1,581
Net periodic pension
and severance costs....... ¥4,911 ¥3,165 ¥5,159

2016$68,487
6,354(24,389)

The changes in benefit obligation, plan assets and funded status
are as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2016

2016

Change in benefit obligation:
Benefit obligation
at beginning of year ............... ¥101,161 ¥ 98,386
Service cost ..............................
7,739
5,357
Interest cost .............................
718
936
Actuarial (gain) loss ..................
5,176
1,073
Benefits paid ............................
(5,511)(4,591)
Acquisition ...............................
1,749—
Benefit obligation
at end of year ........................ 111,032
101,161
Change in plan assets:
Fair value of plan assets
at beginning of year ............... 110,524
92,161
Actual return on plan assets .....
(440)
15,342
Employer contribution ..............
5,553
6,214
Benefits paid ............................
(3,876)(3,193)
Fair value of plan assets
at end of year ........................ 111,761
110,524
Funded status
at the end of year ...................... ¥729 ¥ 9,363$895,230
68,4876,354
45,805(48,770)
15,478982,584

978,088(3,894)
49,142(34,301)
989,035$

6,451

Amounts recognized in the consolidated balance sheets at March
31, 2016 and 2015 consist of:
In millions of yen
March 31

Prepaid pension andseverance costs ............................
Accrued pension andseverance costs ............................
Net amount recognized ......

Other changes in plan assets and benefit obligations recognizedin other comprehensive income (loss) for the year ended March 31,
2016 are summarized as follows:

Current year actuarial gain ......................
Amortization of actuarial loss ..................
Amortization of prior service benefit .......

¥8,371(714)
1,504¥9,161

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2015

2016

Actuarial loss ..................................... ¥15,456
Prior service benefit............................ (1,045)
Net amount recognized .......... ¥14,411¥7,799(2,549)¥5,250$136,779(9,248)$127,531

The estimated prior service benefit and actuarial loss for thedefined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit
cost over the next year are ¥963 million ($8,522 thousand) and¥764 million ($6,761 thousand), respectively.
The accumulated benefit obligation for the pension plan was¥110,544 million ($978,265 thousand) and ¥100,995 million atMarch 31, 2016 and 2015, respectively.
The projected benefit obligation, accumulated benefit obligationand fair value of plan assets for the pension plans with accumulated
benefit obligation in excess of plan assets were ¥46,761 million($413,814 thousand), ¥46,450 million ($411,062 thousand) and¥23,971 million ($212,133 thousand), respectively, at March 31,
2016, and ¥42,389 million, ¥42,158 million and ¥28,838 million,
respectively, at March 31, 2015.
The Company uses March 31 as the measurement date for thedomestic pension plan.
Weighted-average assumptions used to determine the benefit
obligation at March 31, 2016 and 2015 are as follows:
March 31

Discount rate .............................................................
Rate of compensation increase...................................

2016¥30,797¥35,011$272,540(30,068) (25,648)¥ 729 ¥ 9,363(266,088)$ 6,452

2016

2015

0.3%
0.7%

0.8%
1.6%

Weighted-average assumptions used to determine net pension
and severance costs for the years ended March 31, 2016, 2015 and2014 are as follows:
Years ended March 31

March 312015

$74,080(6,319)13,310$81,071

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2016 and 2015 consist of:In thousands of
U.S. dollars

2016

In thousands of
U.S. dollars

In millions of yen(13,310)
6,319$43,461

Financial Section

Net periodic pension and severance costs for the years ended
March 31, 2016, 2015 and 2014 are as follows:

Discount rate .............................................
Expected return on plan assets ...................
Rate of compensation increase...................

2016

2015

2014

0.8%
3.0%
1.6%

1.1%
3.0%
2.7%

1.4%
3.0%
2.7%

The Company determines the expected long-term rate of return
based on the expected long-term return of the various asset categories in which it invests. The Company considers the current
expectations for future returns and the actual historical returns ofeach plan asset category.

SECOM Annual Report 2016

55

The Company’s investment policy is designed to ensure that sufficient plan assets are available to provide future payments of pension benefits to the eligible plan participants. The policy uses target
allocations for the individual asset categories. Plan assets areinvested primarily in equity and debt securities, and pooled fundswith the objective to minimize risk and achieve the expected rate of
return. The investment results are periodically checked and asset
allocation is adjusted as necessary.
The following table represents the fair value of the Company’s
pension plan assets at March 31, 2016 and 2015. The three levels of
inputs used to measure fair value are more fully described in Note 22.
In millions of yen
March 31, 2016
Level 1

Cash and cash
equivalents ...............
Equity securities
Japanesecompanies ............
Foreigncompanies ............
Debt securities
Government
bonds ...................
Non-government
bonds ...................
Pooled funds...............
Call loans ....................
Insurance contracts .....
Other ..........................

¥ 1,359

Level 2¥—

Level 3

¥

—

Total

¥

1,359

22,479424—

22,903

2,544

—

—

2,544

2,325

983

—

3,308

—
1,555
—
—
—
¥30,262

2,120
28,696
10,33011,351
381¥54,285—
26,749——465¥27,2142,120
57,00010,33011,351846¥111,761* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds include 100% foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 60% in equity securities, 30% in debt
securities and 10% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as Level 3.

In thousands of U.S. dollars
March 31, 2016
Level 1

Level 1

Cash and cash
equivalents ...............
Equity securities
Japanesecompanies ............
Debt securities
Government
bonds ...................
Non-government
bonds ...................
Pooled funds...............
Call loans ....................
Insurance contracts .....
Other ..........................

¥ 1,990
19,501

Level 2¥——

Level 3

¥

—
—

Total

¥

1,990
19,501

4,742

681

—

5,423

—
141
—
—
—
¥26,374—
34,331
10,83010,856
240¥56,938

613
26,276——323¥27,212613
60,748
10,83010,856563¥110,524* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds include 100% foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 50% in equity securities, 40% in debt
securities and 10% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as Level 3.

56

SECOM Annual Report 2016

Level 3

Total

Cash and cash
equivalents ............... $ 12,027 $— $—Equity securities
Japanesecompanies ............ 198,929
3,752—
Foreigncompanies ............
22,513——
Debt securities
Government
bonds ...................
20,575
8,699—
Non-government
bonds ...................
—
18,761—Pooled funds...............
13,761
253,947 236,717
Call loans ....................
—
91,416—
Insurance contracts .....
—
100,451—
Other ..........................
—
3,372
4,115
$267,805 $480,398 $240,832$ 12,027
202,681
22,51329,274
18,761
504,425
91,416
100,451
7,487$989,035* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds include 100% foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 60% in equity securities, 30% in debt
securities and 10% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as Level 3.

The following table represents the changes in Level 3 investments
for the years ended March 31, 2016 and 2015.
Level 3 investments, mainly in unquoted beneficial certificatesof security investment trust in the plan’s pooled funds, are at thediscretion of the administrator of the fund. Their fair values are estimated based on unobservable inputs provided by the administratorof the fund.
In millions of yen
Year ended March 31, 2016
Debt securities

In millions of yen
March 31, 2015

Level 2

Balance at
beginning of year...............
Actual return on plan assets:
Relating to assets soldduring the year ..............
Relating to assets heldat end of year ................
Purchases, sales andsettlements, net .................
Transfer to Level 3, net .........
Balance at end of year .........

Nongovernment
bonds

Pooled
funds

Other

Total

¥613

¥26,276¥323¥27,212

(508)

262

42

(204)

534

(1,038)

101

(403)

(639)
—
¥ —

1,207
42
¥26,749

(1)
567
—
42
¥465 ¥27,214

Debt securities
Nongovernment
bonds

Balance at
beginning of year...............
Actual return on plan assets:
Relating to assets soldduring the year ..............
Relating to assets heldat end of year ................
Purchases, sales andsettlements, net .................
Transfer to Level 3, net .........
Balance at end of year .........

¥729

Pooledfunds¥18,885

Other

¥760

—

71

38

109

(116)

3,188

12

3,084

—
—
¥613

4,023
109
¥26,276

(487)
3,536
—
109
¥323 ¥27,212

In thousands of U.S. dollars
Year ended March 31, 2016
Debt securities
Nongovernment
bonds

Balance at
beginning of year...............
Actual return on plan assets:
Relating to assets soldduring the year ..............
Relating to assets heldat end of year ................
Purchases, sales andsettlements, net .................
Transfer to Level 3, net .........
Balance at end of year .........

Pooled
funds

Other

Total

$5,425 $232,531 $2,858 $240,814(4,496)

2,319

372

(1,805)

4,726(9,186)894(3,566)(5,655)
10,681
(9)
5,017
—
372
—
372
$
— $236,717 $4,115 $240,832

The Company expects to contribute ¥2,157 million ($19,088
thousand) to its domestic defined benefit plans in the year ending
March 31, 2017.
The following benefit payments, which reflect future service, as
appropriate, are expected to be paid.
Years ending March 31

2017.....................................................
2018.....................................................
2019.....................................................
2020.....................................................
2021.....................................................
2022–2026 ...........................................

17. Income Taxes
Total income taxes for the years ended March 31, 2016, 2015
and 2014 are allocated as follows:

Total¥20,374

In millions of yen

In thousands of
U.S. dollars¥ 4,729
5,309
5,725
5,414
5,627
29,673$ 41,850
46,98250,66447,912
49,796
262,593

The parent company and certain subsidiaries have defined contribution pension plans. The contributions to the defined contribution
pension plans for the years ended March 31, 2016, 2015 and 2014
were ¥1,796 million ($15,894 thousand), ¥1,772 million and¥1,679 million, respectively.

Financial Section

In millions of yen
Year ended March 31, 2015

2016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

Consolidated income taxes
from continuing
operations .......................... ¥40,312 ¥45,972 ¥49,695
Consolidated income taxes
from discontinued
operations ..........................
—
651
(169)
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains
on securities .................... (3,447) 6,240
440
Unrealized gains
on derivative
instruments .....................
(5)
(5)
(0)
Pension liability
adjustments .................... (2,926) 3,771 3,183
Foreign currencytranslation
adjustments ....................
(783) 1,020
121..................................... ¥33,151 ¥57,649 ¥53,270

2016$356,744—(30,504)(44)(25,894)(6,929)$293,373

The parent company and its domestic subsidiaries are subject toa number of income taxes. As a result of revisions to domestic laws
during the third quarter ended December 31, 2011, and the fourth
quarters ended March 31, 2014 and 2015, the statutory income tax
rate in Japan, which was approximately 37.8 percent for the year
ended March 31, 2014, decreased to approximately 35.4 percent
and 32.9 percent for the years ended March 31, 2015 and 2016,
respectively.
Due to the enactment by the National Diet of Japan on March 29,
2016 of the “Act for Partial Amendment of the Income Tax Act,etc.” and “Partial Amendment of the Local Taxation Act, etc.,” thestatutory tax rate used to calculate the deferred tax assets and liabilities at March 31, 2016 changed mainly from 32.1 percent to 30.7
percent for those items scheduled for reversal during the period
from April 1, 2016 to March 31, 2018, and to 30.5 percent for
those items scheduled for reversal on or after April 1, 2018. Use ofoperating loss carryforwards for tax purposes will be limited to 60
percent of the current year’s taxable income before deducting operating loss carryforwards for tax purposes after the years beginningon or after April 1, 2016, and 55 percent after the years beginningon or after April 1, 2017. The years beginning on or after April 1,
2018, use of operating loss carryforwards for the tax purposes willcontinue to be limited to 50 percent. As a result, income taxes forthe year ended March 31, 2016 increased by ¥464 million ($4,106
thousand).

16. Exchange Gains and Losses
Other expenses for the year ended March 31, 2016 include net
exchange losses of ¥557 million ($4,929 thousand). Other income
for the years ended March 31, 2015 and 2014 includes net
exchange gains of ¥574 million and ¥408 million, respectively.

SECOM Annual Report 201657

Reconciliations of the differences between income taxes computed
at statutory tax rates and consolidated income taxes from continuing
operations are as follows:2016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

Income taxes computed
at statutory tax rate ............ ¥40,290 ¥45,261 ¥48,665
Increase (decrease)resulting from:
Reversal of valuation
allowance ....................... (3,697)(927) (1,234)
Provision of valuation
allowance ....................... 1,104
1,152
832
Per capita tax ....................
845
863
857
Net effect of changes incorporate tax rates ..........
464(648) 1,119
Other, net ......................... 1,306
271
(544)
Consolidated income
taxes from continuing
operations ................... ¥40,312 ¥45,972 ¥49,695

2016$356,549(32,717)
9,770
7,478
4,106
11,558$356,744

The valuation allowance principally relates to deferred tax assetsof subsidiaries with operating loss carryforwards, for tax purposes,that are not expected to be realized. The net change in the total
valuation allowance for the years ended March 31, 2016, 2015 and2014 was a decrease of ¥1,514 million ($13,398 thousand), ¥3,410
million and ¥255 million, respectively.
In assessing the realizability of deferred tax assets, the Company’s
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. The Company’s management considered the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies inmaking this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods
in which the deferred tax assets are deductible, the Company’s
management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of theexisting valuation allowance at March 31, 2016 and 2015.
Net deferred tax assets (liabilities) at March 31, 2016 and 2015
are reflected in the accompanying consolidated balance sheets
under the following captions:

The significant components of deferred tax assets and liabilities at
March 31, 2016 and 2015 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2016

2016

Deferred tax assets:
Property, plant and equipment ........ ¥ 9,027 ¥ 6,230$ 79,885
Accrued pension andseverance costs .............................
8,817
8,180
78,027
Loss carryforwards ..........................
8,274
8,715
73,221
Deferred revenue ............................
7,622
8,152
67,451
Adjustment of book value atthe date of acquisition—
Land and buildings ......................
6,195
6,871
54,823
Other assets ................................
242
263
2,142
Accrued bonus ................................
5,617
5,709
49,708Vacation accrual ..............................
3,231
3,186
28,593
Allowance for doubtful accounts.....
1,612
2,889
14,265Intangible assets..............................
1,563
1,674
13,832
Write-down on real estate
inventories ....................................
1,000
1,714
8,850
Investment securities .......................
—
1,268
—
Other .............................................. 10,058
9,749
89,009Gross deferred tax assets ............. 63,258 64,600
559,806
Less: Valuation allowance ............ (25,048) (26,562)(221,664)
Total deferred tax assets .............. 38,210 38,038
338,142
Deferred tax liabilities:
Adjustment of book value atthe date of acquisition—
Intangible assets .......................... (7,907) (4,421)(69,973)
Land and buildings ...................... (4,175) (4,616)(36,947)
Other assets ................................
(894) (1,157)(7,912)
Prepaid pension andseverance costs ............................. (9,413) (11,128)(83,301)
Unrealized gains on securities.......... (8,058) (11,588)(71,310)Investments in affiliated companies .. (5,856) (6,608)(51,823)
Deferred installation costs ............... (5,409) (5,710)(47,867)
Other .............................................. (4,958) (4,352)(43,877)
Gross deferred tax liabilities ......... (46,670) (49,580)(413,010)
Net deferred tax assets(liabilities) ............................. (¥ 8,460) (¥11,542) ($ 74,868)
58

SECOM Annual Report 2016

Deferred income taxes(Current assets) ..........................
Deferred income taxes(Other assets) .............................
Other current liabilities(Current liabilities) ......................
Deferred income taxes(Long-term liabilities)..................
Net deferred tax assets(liabilities) ..........................

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2015

2016

¥12,082¥12,929$106,920

7,098

5,037

62,814(1,658)(1,106)(14,673)(25,982)(28,402)(229,929)(¥ 8,460) (¥11,542)($ 74,868)

The Company has not recognized deferred tax liabilities of ¥450
million ($3,982 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥23,605 million ($208,894 thousand)at March 31, 2016 as they are not expected to be remitted in theforeseeable future.
At March 31, 2016, the operating loss carryforwards of domestic
subsidiaries amounted to ¥17,531 million ($155,142 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to nine years, as follows:
Expires in the years ending March 31

2017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................
2023......................................................
2024......................................................
2025......................................................
..............................................................

In millions of yen

¥

—
1,171
5,883
808
224
2,321
1,293
2,288
3,543
¥17,531

In thousands of
U.S. dollars$—
10,36352,062
7,150
1,982
20,54011,442
20,24831,355$155,142

The operating loss carryforwards of overseas subsidiaries at
March 31, 2016 amounted to ¥9,136 million ($80,850 thousand), apart of which will begin to expire in the year ending March 31, 2017.

18. Shareholders’ Equity(1) Additional Paid-In Capital
The change in additional paid-in capital includes the effect ofchanges in the Company’s ownership interest in its consolidated
subsidiaries.
The net income attributable to SECOM CO., LTD. and transfersfrom (to) noncontrolling interests for the years ended March 31,
2016, 2015 and 2014 are as follows:2016

Subsequent to March 31, 2016, the parent company’s Board of
Directors declared a year-end cash dividend of ¥70 ($0.62) per
share, totaling ¥15,278 million ($135,204 thousand), to shareholders of record on March 31, 2016. The dividend declared wasapproved at the general shareholders’ meeting held on June 24,
2016. Dividends are recorded in the year they are declared.
The Company has made it a basic policy to distribute dividends
twice a year, the interim dividend whose record date is September
30 each year and commenced from the year ended March 31,
2015, and the year-end dividend whose record date is March 31
each year. The interim dividend is determined by the Board of
Directors and the year-end dividend is determined by the General
Meeting of Shareholders.
Cash dividends per share are computed based on dividends paid
for the year. Cash dividends per share for the year ended March 31,
2015 include the year-end dividend of ¥115 whose record date is
March 31, 2014 and the interim dividend of ¥60 whose record dateis September 30, 2015.
(3) Common Stock in Treasury
The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act. There are certain restrictions on payment of dividends in connection with the treasury stock
repurchased.
(4) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the years
ended March 31, 2016, 2015 and 2014 are as follows:

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

Pre-tax
amount2016

For the year ended March 31, 2016:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. (¥ 9,756)
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................... (1,514)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
—
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(14)
Pension liability adjustments—
Unrealized gains or losses
arising during the period ............. (8,611)
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
(717)
Foreign currencytranslation adjustments ................... (4,017)
Other comprehensive
income (loss) ........................... (¥24,629)

2015

2014

Net income attributable
to SECOM CO., LTD. ............. ¥84,072 ¥80,184 ¥73,979
Net transfers from (to)noncontrolling interests ......
(324)
(339)
(28)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests ........ ¥83,748 ¥79,845 ¥73,951$744,000(2,867)$741,133(2) Retained Earnings
The Japanese Companies Act provides that an amount equal to
10 percent of surplus distributed by the parent company and its
Japanese subsidiaries be appropriated as a legal reserve until theaggregate amount of additional paid-in capital and legal reserve
equals 25 percent of the common stock account.
The amount available for dividends under the JapaneseCompanies Act is based on the amount recorded in the parent
company’s nonconsolidated statutory financial statements in accordance with Japanese GAAP. Such amount was ¥515,375 million($4,560,841 thousand) at March 31, 2016.

Financial Section

The total amount of unrecognized tax benefits for the years
ended March 31, 2016, 2015 and 2014 was insignificant. Also,
there were no significant movements in the gross amounts of unrealized tax benefits and the amounts of interest and penalties recognized due to the unrecognized tax benefits during the years ended
March 31, 2016, 2015 and 2014.
Although the Company believes its estimates of unrecognized tax
benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation
could affect the total amount of unrecognized tax benefits infuture periods. Based on the information available as of March 31,
2016, the Company does not expect significant changes to theunrecognized tax benefits within the next twelve months.
The Company files tax returns in Japan and various foreign jurisdictions. In Japan, the Company is no longer subject to regularincome tax examinations by the tax authorities for years before
2009. In other foreign tax jurisdictions, major subsidiaries are nolonger subject to income tax examinations by tax authorities foryears before 2015, with some exceptions.

In millions of yen
Tax(expense)or benefit

Net-of-tax
amount¥2,991 (¥ 6,765)

456(1,058)

—

—

5

(9)

2,551

(6,060)

375

(342)

783

(3,234)¥7,161 (¥17,468)

SECOM Annual Report 2016

59

In millions of yen
Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount

For the year ended March 31, 2015:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. ¥20,020 (¥ 6,295) ¥13,725
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(192)
55
(137)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
12(3)
9
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(25)
8
(17)
Pension liability adjustments—
Unrealized gains or losses
arising during the period ............. 11,461(3,620)7,841
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
(496)
(151)
(647)
Foreign currencytranslation adjustments ................... 13,199(1,020) 12,179
Other comprehensive
income (loss) ........................... ¥43,979 (¥11,026) ¥32,953
For the year ended March 31, 2014:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. ¥ 3,229
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(1,669)Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
19
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(17)
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
8,471
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
255
Foreign currencytranslation adjustments ................... 18,213
Other comprehensive
income (loss) ........................... ¥28,501(¥ 974) ¥ 2,255

534

In thousands of U.S. dollars
Pre-tax
amount

13

6

(11)

(3,153)

5,318

(30)

225

(121)

18,092(¥3,744) ¥24,757

Net-of-tax
amount

For the year ended March 31, 2016:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period .......... ($ 86,336) $26,469 ($ 59,867)
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................
(13,398)
4,035(9,363)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year..............
———
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................
(124)
44
(80)
Pension liability adjustments—
Unrealized gains or losses
arising during the period ..........
(76,203) 22,575 (53,628)
Less: Reclassification
adjustment for gains
or losses realized
in net income ...................
(6,346)
3,319(3,027)
Foreign currencytranslation adjustments ................
(35,548)
6,929 (28,619)
Other comprehensive
income (loss) ........................ ($217,955) $63,371 ($154,584)

Reclassification adjustments for gains or losses realized in net
income (pre-tax amount) included in the consolidated statements
of income for the years ended March 31, 2016, 2015 and 2014 are
as follows:(1,135)(6)

Tax(expense)or benefit

Unrealized gains on
securities—
Net sales andoperating revenue ...........
Gain on sales of
securities, net ..................
Loss on other-thantemporary impairment ofinvestment securities .......
Unrealized gains onderivative instruments—
Other income ....................
Pension liability
adjustments—
Net periodic pension
and severance costs(Note 15) ........................
Equity in net income ofaffiliated companies ............

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

2014

2016

(¥981)(¥306) (¥1,221)($8,681)

(929)

(33)

(483)

(8,221)

396

147

35

3,504

(14)

(25)

(17)

(124)

(790)

(595)

(20)

(6,991)

¥ 73

¥ 99

¥ 275

$ 645

19. Lessee
The Company leases certain office space, employee residential
facilities, equipment for armored car services and transportationequipment. Some leased buildings, and equipment for armored car
services and transportation equipment are held under capital leases.
Other leases are classified as operating leases.

60

SECOM Annual Report 2016

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

Buildings and improvements .............
Machinery, equipment
and automobiles .............................
Other intangible assets......................
Accumulated depreciation
and amortization ............................
.................................................

2015

2016

¥ 8,452 ¥ 8,348$ 74,796

41,795 10,234
310
46

369,867
2,743(30,040) (9,185)¥20,517 ¥ 9,443

Years ending March 31

2017........................................................
2018........................................................
2019........................................................
2020........................................................
2021........................................................
Thereafter ................................................
Total minimum lease payments ................
Less: Amount representing interest ..........
Present value of net minimum
lease payments (Note 13) .......................
Less: Current portion ...............................
Long-term capital leaseobligations .........................................

The future minimum lease payments required under operatingleases that have initial or remaining noncancelable lease terms inexcess of one year at March 31, 2016 are as follows:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥ 6,848
5,458
4,201
2,964
1,627
12,42433,522(8,642)$ 60,602
48,301
37,177
26,23014,398109,947
296,655(76,478)

24,880(6,241)

220,177(55,230)¥18,639$164,947

Rental expenses under operating leases for the years ended
March 31, 2016, 2015 and 2014 were ¥24,619 million ($217,867
thousand), ¥22,898 million and ¥21,774 million, respectively. A
significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, many ofwhich are renewed upon expiration.
On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The leaseterm is 20 years beginning December 8, 2000. For financial
reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, the annual lease payment for thesite is approximately ¥1,303 million ($11,531 thousand) over a
20-year period.

In millions of yen

In thousands of
U.S. dollars¥10,787
9,716
9,545
9,582
9,137
35,597$ 95,460
85,982
84,46984,79680,858315,019¥84,364$746,584

2017........................................................
2018........................................................
2019........................................................
2020........................................................
2021........................................................
Thereafter ................................................
Total future minimum lease
payments ...........................................

20. Lessor
The Company’s leasing operations consist principally of leasingof security merchandise, security systems and real estate for offices
and medical institutions. Most of the security merchandise andsecurity systems on lease are classified as sales-type leases or directfinancing leases. Other leases are classified as operating leases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2016 and 2015 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2016

¥56,952 ¥58,045(4,982) (5,035)(3,707) (4,224)
48,263 48,786(15,344) (14,823)¥32,919 ¥33,963$504,000(44,088)(32,806)
427,106(135,787)$291,319(265,841)$181,565

Depreciation and amortization expenses for assets under capitalleases for the years ended March 31, 2016, 2015 and 2014 were
¥3,495 million ($30,929 thousand), ¥2,746 million and ¥2,668
million, respectively.
The following is a schedule by year of future minimum lease
payments under capital leases and the present value of the net
minimum lease payments at March 31, 2016:

Financial Section

On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The lease term
is 30 years beginning May 1, 1996. On July 15, 2010, the Company
also entered into a long-term lease agreement for the adjoining
land and buildings. The lease term is also 30 years beginning July
15, 2010. For financial reporting purposes, the portion of theselease arrangements relating to the building has been classified asa capital lease; accordingly, an asset of approximately ¥7,209 million ($63,796 thousand) has been recorded in the buildings andimprovements account. The portion of the lease relating to the landhas been classified as an operating lease. The future minimum lease
payment for the site at March 31, 2016 was ¥5,054 million($44,726 thousand).
A summary of leased assets under capital leases at March 31,
2016 and 2015 is as follows:

2016

Total minimum lease payments
to be received .................................
Estimated executory cost...................
Unearned income .............................
Lease receivables, net........................
Less: Current portion ........................
Long-term lease receivables, net....

The following is a schedule by year of future minimum lease
payments to be received under sales-type leases and directfinancing leases at March 31, 2016:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥17,454
15,076
12,005
8,002
3,328
1,087

$154,460
133,416
106,239
70,81429,451
9,620¥56,952$504,0002017........................................................
2018........................................................
2019........................................................
2020........................................................
2021........................................................
Thereafter ................................................
Total future minimum lease
payments to be received ....................

A summary of investment in property under operating leases andproperty held for lease at March 31, 2016 and 2015 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 312016

Land .................................................
Buildings and improvements .............
Other intangible assets......................
Accumulated depreciation ................
.................................................

2015

2016

¥34,715 ¥34,892
32,293 32,150
662
662(11,751) (10,882)¥55,919 ¥56,822$307,212
285,779
5,858(103,991)$494,858

SECOM Annual Report 2016

61

The future minimum rentals under noncancelable operatingleases at March 31, 2016 are as follows:
Years ending March 31

2017........................................................
2018........................................................
2019........................................................
2020........................................................
2021........................................................
Thereafter ................................................
Total future minimum rentals ...............

In millions of yen

In thousands of
U.S. dollars¥2,130
166
162
162
162
3,072
¥5,854$18,850
1,469
1,434
1,434
1,434
27,184$51,805

21. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of financial instruments in cases for which it ispracticable. The three levels of inputs used to measure fair value
are more fully described in Note 22.
(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits
for armored car services; Notes and Accounts Receivable,
Trade; Due from Subscribers; Short-Term Receivables; Bank
Loans; Notes and Accounts Payable, Trade; Other Payables;
Deposits Received; Accrued Income Taxes; and Accrued Payroll
The carrying amounts approximate fair value because of theshort-term maturities of such instruments.
(2) Short-Term Investments; Investment Securities
The fair values of short-term investments and investment
securities are principally based on quoted market prices.
(3) Long-Term Receivables Including Current PortionLong-term receivables, including the current portion, areclassified as Level 2 and fair value is estimated based on the present
value of future cash flows through estimated maturity, discounted
using estimated market discount rates.
(4) Long-Term Debt Including Current PortionLong-term debt, including the current portion, is classified as
Level 2 and fair value is estimated based on the present valueof future cash flows of each instrument discounted using theCompany’s current incremental borrowing rates for similar liabilities.
(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders areclassified as Level 3 and estimated based on the present value of
future cash flows, discounted using the interest rates currently
being offered for similar contracts.
(6) Derivatives
The fair values of derivatives are estimated using current market
pricing models by obtaining quotes from financial institutions.

62

SECOM Annual Report 2016

The carrying amounts and estimated fair values of financial instruments, excluding, debt and equity securities, which are disclosed in
Notes 2 (7) and 7, at March 31, 2016 and 2015 are as follows:
In millions of yen
March 31
2016
Carrying
amountNon-derivatives:
Assets—Long-term receivables
including current
portion (Less allowancefor doubtful accounts) .... ¥54,040
Liabilities—
Long-term debt
including current
portion ........................... 79,566
Investment deposits
by policyholders ............. 29,802
Derivatives:
Liabilities—
Interest rate swaps(Other long-term
liabilities) ........................
97

Estimated
fair value

2015
Carrying
amountEstimated
fair value¥54,596 ¥58,743¥59,061

79,612

67,171

67,191

31,40230,272

31,709

97

118

118

In thousands of U.S. dollars
March 31, 2016
Carrying
amountNon-derivatives:
Assets—Long-term receivables including current
portion (Less allowance for doubtful
accounts) ...............................................
Liabilities—
Long-term debt including current
portion ...................................................
Investment deposits
by policyholders .....................................
Derivatives:
Liabilities—
Interest rate swaps (Other long-term
liabilities) ................................................

Estimated
fair value$478,230 $483,150
704,124 704,531
263,735 277,894

858

858

Limitation:
Fair value estimates are made at a specific point in time based on
relevant market information and information about financial
instruments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.

Level 1— Inputs are quoted prices in active markets for identicalassets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable, andinputs that are derived principally from or corroborated
by observable market data by correlation or othermeans.
Level 3— Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers areunobservable, which reflect the reporting entity’s own
assumptions about the assumptions that market
participants would use in establishing a price.
The following table represents the Company’s assets andliabilities that are measured at fair value on a recurring basis at
March 31, 2016 and 2015. Transfers between levels are recognizedat the end of the respective reporting periods.
In millions of yen
March 31, 2016
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents ..... ¥355
Short-term
investments andinvestment
securities ...............
157,309
Total assets ................. ¥157,664¥ 2,681¥

30,405¥33,086

35,259¥ 35,259

222,973¥226,009

Liabilities:
Derivatives(Other long-term
liabilities) ............... ¥Total liabilities ............. ¥

¥
¥

¥
¥

¥
¥

—
—

97
97

—

—
—

¥

3,036

97
97

In millions of yen
March 31, 2015
Level 1

Assets:Cash equivalents ..... ¥844
Short-term
investments andinvestment
securities ...............
171,162
Total assets ................. ¥172,006
Liabilities:
Derivatives(Other long-term
liabilities) ............... ¥Total liabilities ............. ¥——Level 2

Level 3

¥ 2,671¥

35,853¥38,524

27,340¥ 27,340

¥
¥

118
118

¥
¥

—

—
—

In thousands of U.S. dollars
March 31, 2016
Level 1

Level 2

Level 3

3,515

234,355¥237,870

¥
¥

118
118

Total

Assets:Cash equivalents ..... $3,141 $ 23,726 $— $ 26,867
Short-term
investments andinvestment
securities ............... 1,392,113 269,071 312,027
1,973,211
Total assets ................. $1,395,254 $292,797 $312,027 $2,000,078
Liabilities:
Derivatives(Other long-term
liabilities) ............... $Total liabilities ............. $

— $
— $

858 $
858 $

— $
— $

858
858

Cash Equivalents
All highly liquid investments with initial maturities of three months orless are considered to be cash equivalents, and principally valued
using quoted prices for identical assets in markets that are not active.
Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1 assets arevalued using unadjusted quoted market prices in active markets
with sufficient volume and frequency of transactions.
Level 2 assets comprise principally debt securities, which arevalued using quoted prices for similar assets in active markets,or quoted prices for identical or similar assets in markets that are
not active.
Non-marketable securities classified as Level 3 assets are valued
based on unobservable inputs as the market for the assets was not
active at the measurement date. The fair value is determined byusing a valuation technique, such as the discounted cash flow
model, which best reflects the nature, characteristics and risks ofeach asset. These significant unobservable inputs contain discountrates, exit timing and an EBITDA multiple. An increase (decrease) inthe discount rates, the later (earlier) exit and a decrease (increase)in the EBITDA multiple would result in a decrease (increase) in thefair value of non-marketable securities.
The Company’s Level 3 investment securities that are measured
at fair value on a recurring basis at March 31, 2016 and 2015,
amounting to ¥35,259 million ($312,027 thousand) and ¥27,340
million, respectively, are primarily private equity investments.
The valuation technique and significant unobservable inputs
are as follows:
March 31, 2016

Total

¥

Financial Section

22. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” defines fairvalue as the price that would be received to sell an asset or paid totransfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between
market participants at the measurement date. This accounting standard establishes a three-level fair value hierarchy that prioritizes the
inputs used to measure fair value as follows:

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2017–2020
5.0x–96.8x

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%
2016–2019
4.5x–10.7x

March 31, 2015

For the year ended March 31, 2014, ¥1,401 million of debt
securities were transferred from Level 1 to Level 2 because theobservable markets in which these instruments were tradedbecame inactive.

SECOM Annual Report 201663

Derivative Financial Investments
Derivative financial instruments comprise forward exchange
contracts, interest rate swaps and others. These derivative instruments are valued using observable market data and classified as
Level 2 liabilities.
The following table represents the changes in Level 3 assets
measured on a recurring basis for the years ended March 31, 2016
and 2015.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2016

Balance at beginning of year .............. ¥27,340 ¥34,980
Total gains or losses(realized and unrealized):
Included in earnings ...................
2,272 4,920
Included in othercomprehensive income .............
(161)
(38)
Purchases .......................................
6,950 3,619
Sales ..............................................
— (19,099)
Redemptions ..................................
(115)
(327)
Cancellation of contract .................
(1,010)—Foreign currency translation
adjustments .................................
(17) 3,285
Balance at end of year ....................... ¥35,259 ¥27,340

2016$241,947

Changes in unrealized gains
or losses relating to instruments
still held at end of year:
Included in earnings ................... ¥ 1,288 ¥ 1,065

20,107(1,425)61,504—(1,018)(8,938)(150)$312,027$ 11,398

Total gains or losses (realized or unrealized) related to short-term
investments and investment securities are primarily included in
net sales and operating revenue or gain/loss on private equity
investments, in the consolidated statements of income.
Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with a carrying amount of¥9,257 million ($81,920 thousand) were written down to their fairvalue of ¥9,251 million ($81,867 thousand), resulting in an otherthan-temporary impairment charge of ¥6 million ($53 thousand),
which was included in earnings for the year ended March 31, 2016.
For the year ended March 31, 2015, non-marketable equity
securities with a carrying amount of ¥9,104 million were written
down to their fair value of ¥9,083 million, resulting in an otherthan-temporary impairment charge of ¥21 million, which was
included in earnings. All impaired non-marketable equity securities
were classified as Level 3 assets as the Company uses unobservable
inputs such as future cash flows to value these investments.
Long-lived assets (Note 11) and goodwill (Note 12) are alsomeasured at fair value on a nonrecurring basis. All impaired longlived assets and goodwill were classified as Level 3 assets as theCompany uses unobservable inputs to value these assets. These
Level 3 assets are not significant.

64

SECOM Annual Report 201623. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations ininterest rates. The Company assesses interest rate risk by continuallymonitoring changes in the exposure and by evaluating hedging
opportunities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company is also
exposed to credit-related losses in the event of non-perfomance bycounterparties to derivative financial instruments, but it is notexpected that any counterparties will fail to meet their obligations,because most of the counterparties are internationally recognizedfinancial institutions and contracts are diversified amongst anumber of major financial institutions.
(2) Risk Management
The Company has exposure to the market risk of changes ininterest rates which relates primarily to its debt obligations. The
Company principally enters into interest rate swap agreements tomanage fluctuations in cash flows resulting from changes in interest
rates. Interest rate swaps are used to change floating rates on debt
obligations to fixed rates by entering into receive-floating, pay-fixedinterest rate swaps under which the Company receives floatinginterest rate proceeds and makes fixed interest rate payments,
thereby effectively creating fixed-rate debt.
(3) Cash Flow Hedges
The Company designates interest rate swap agreements as cash
flow hedges for variability of cash flows originating from floating
rate borrowings. The interest rate swap agreements matured atvarious dates through 2015. The effective portion of changes in fairvalues of derivative instruments designated as cash flow hedgesof these debt obligations are reported in other comprehensive
income (loss). These amounts are reclassified into current incomein the same period that hedged items affect current income. The
ineffective portion of changes in fair values are reported in income
immediately. The sum of the amount of hedge ineffectivenessand net gains or losses excluded from the assessment of hedge
effectiveness is not material for the years ended March 31, 2015
and 2014 as the critical terms of most of the interest rate swap
agreements match the terms of the hedged debt obligations. At
March 31, 2015, the notional principal amounts of interest rate
swap agreements designated as cash flow hedges was ¥726 million.
At March 31, 2016, the Company did not enter into any interest
rate swap agreements designated as cash flow hedges.
(4) Derivative Instruments Not Designated as Hedges
The Company enters into interest rate swap agreements to reduce
exposure to fluctuations in interest rates relating primarily to debt
obligations and other agreements. Changes in fair value of thesederivative financial instruments, which are not designated ashedges, are reported in current income.

Derivatives designated as hedging instruments

Liabilities:
Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

Location

2016

2015

2016

Other current
liabilities

¥—

¥5

$—

In millions of yen

In thousands of
U.S. dollars

Derivatives not designated as hedging instruments

Liabilities:
Interest rate swaps

March 31

March 31

Location

2016

2015

2016

Other long-term
liabilities

¥97

¥113

$858

Effects of derivative instruments on the consolidated statements
of income for the years ended March 31, 2016, 2015 and 2014 are
as follows:
Derivatives designated as cash flow hedging instruments
Gains recognized in accumulated other comprehensive income (loss)(effective portion)

Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

2014

2016

¥—

¥6

¥10

$—

Gains (losses) reclassified from accumulated other comprehensive
income (loss) into income (effective portion)

LocationInterest rate swaps Other income

Interest rate swaps Other income

25. Discontinued Operations
The Company accounted for the sale of certain businesses inaccordance with ASC 205-20, “Discontinued Operations.”
The Company sold certain businesses included in the real estateand other services segment, during the year ended March 31, 2015.
The Company reported the operating results related to these
operations as discontinued operations. Prior period figures havebeen restated.
Discontinued operations for the years ended March 31, 2015 and2014 are as follows:
In millions of yen
Years ended
March 31

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

Attributable to SECOM CO., LTD ...........................

2015

2014

2016

¥14

¥25

¥17

$124

Derivatives not designated as hedging instruments

Location

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2016
for the purchase of property, plant and equipment of approximately¥8,325 million ($73,673 thousand).
The Company provides guarantees to third parties mainly withrespect to bank loans extended to its affiliated companies and otherentities. Such guarantees are provided to enhance the credit standing of the affiliated companies and other entities. For each guarantee provided, the Company would have to perform under theguarantee if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
maximum amount of undiscounted payments the Company would
have to make in the event of default amounts to ¥2,033 million($17,991 thousand) at March 31, 2016. The carrying amounts of
the liabilities recognized as the Company’s obligations under theseguarantees at March 31, 2016 and 2015 were deemed insignificant.
It is not anticipated that damages, if any, resulting from legal
actions will have a material impact on the Company’s consolidated
financial statements.

Net sales and operating revenue ...........................
Income (loss) from discontinued operations
before income taxes............................................
Gain on sales of discontinued operations ..............
Income taxes.........................................................

2016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

2014

2016

¥16

¥23

¥33

$142

Financial Section

Fair values of derivative instruments reflected in the consolidatedbalance sheets as of March 31, 2016 and 2015 are as follows:

2015

2014

¥ 598

¥3,272

(149)
1,614
(651)

(301)
—
169

¥ 814

(¥ 132)

Income (loss) from discontinued operations, net of tax, by business segment for the years ended March 31, 2015 and 2014 is
as follows:
In millions of yen
Years ended
March 31

Real estate and other services ..............................
Income (loss) from discontinued operations,net of taxes........................................................

2015

2014

¥814

(¥132)¥814(¥132)

SECOM Annual Report 201665

26. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:2016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2016

2015

Cash paid during theyear for:
Interest ............................ ¥ 1,408 ¥ 1,403 ¥ 1,459 $ 12,460
Income taxes ...................
38,832 50,673 50,676
343,646
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases .......
2,543
2,318
4,503
22,504
Increase in land, buildings
and improvements byoffsetting long-term
receivables ....................
—
3,179
—
—
Significant acquisitions(Note 4)—
Assets acquired ............. 188,136—— 1,664,920
Liabilities assumed ........ (107,136)——(948,106)
Considerations forequity .........................
81,000——716,814
Cash and cash
equivalents on hand ... (11,565)——(102,345)
Total considerations ...... ¥ 69,435 ¥— ¥— $ 614,469

66

SECOM Annual Report 201627. Segment Information
The Company discloses financial and descriptive information
about the Company’s reportable operating segments. The operating
segments reported below are the segments of the Company forwhich separate financial information is available and for which operating profit/loss amounts are evaluated regularly by management indeciding how to allocate resources and assess performance.
The Company has seven reportable business segments: security
services, fire protection services, medical services, insurance services,
geographic information services, information and communication
related services, and real estate and other services.
The security services segment provides various types of security
services by utilizing the Company’s unique security systems andmanufacturing and selling security merchandise. The fire protection
services segment provides various types of fire protection equipment, such as automatic fire alarm and fire extinguishing and otherfire protection systems for office buildings, plants, tunnels, ships,
residences and cultural monuments. The medical services segmentprovides intravenous solutions to patients at home, home-based
nursing care services, medical data transmission services by utilizing
the Company’s network and leasing of real estate for medical institutions. In addition, the VIE, of which the Company is the primary
beneficiary manage hospitals and health care-related institutions.
The insurance services segment includes the non-life insurancerelated underwriting business in the Japanese market. The geographic information services segment includes surveying andmeasuring services and GIS services. The information and communication related services segment includes data center services,business continuity plan support, information security services andcloud services. The real estate and other services segment includes
development and sales of condominiums equipped with security
and contingency planning features, leasing of real estate,
construction and installation services and other services.
Corporate expenses consist principally of general and administrative expenses of the planning, personnel and administrative departments of the parent company and administrative departments ofthe foreign holding company.
Intersegment sales are priced on a basis intended to approximate
amounts charged to unaffiliated customers.
Identifiable assets are those assets used exclusively in the operations of each segment or which are allocated when used jointly.
Corporate assets, which are held by the parent company and theforeign holding company for general and administrative facilities,
consist principally of cash and cash equivalents, short-term investments, investment securities, land, buildings and improvements,
machinery, equipment and automobiles.

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2016

(1) Business Segment Information

2016

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2016

2015

Net sales andoperating revenue:
Security services—
External customers ...... ¥ 505,058 ¥487,063 ¥472,449
Intersegment ...............
3,028
2,963
2,811
................................
508,086
490,026 475,260
Fire protection services—
External customers ......
131,743
121,189 122,046
Intersegment ...............
3,764
5,127
5,111
................................
135,507
126,316 127,157
Medical services—
External customers ......
163,538
155,884 150,535
Intersegment ...............
178
153
150
................................
163,716
156,037 150,685
Insurance services—
40,654
38,25937,011
External customers ......
Intersegment ...............
2,945
3,226
2,936
................................
43,59941,48539,947
Geographic information
services—
External customers ......
52,55352,76054,697
Intersegment ...............
183
177
72
................................
52,73652,93754,769
Information andcommunication related
services—
External customers ......
48,29447,412
46,992
Intersegment ...............
7,550
6,527
6,381
................................
55,84453,93953,373
Real estate andother services—
External customers ......
41,58842,671
37,416
Intersegment ...............
2,479
2,245
2,249
................................
44,06744,916
39,665
Total............................... 1,003,555
965,656 940,856
Eliminations ...................
(20,127) (20,418) (19,710)
Total net sales andoperating revenue ..... ¥ 983,428 ¥945,238 ¥921,146$4,469,540
26,796
4,496,336
1,165,867
33,3101,199,177
1,447,239
1,575
1,448,814
359,770
26,062385,832

465,0711,619
466,690427,381
66,814494,195

368,035
21,938389,973
8,881,017(178,114)$8,702,903

2016

2015

Operating income (loss):
Security services ............ ¥110,919 ¥107,073 ¥104,089
Fire protection
services .......................
13,654
12,51010,467
Medical services ............
2,921
1,521
2,707
Insurance services..........
6,842
8,042
2,007
Geographic information
services .......................
(268)
2,442
3,723
Information andcommunication
related services............
308
894
6,373
Real estate andother services ..............
4,900
5,080
4,678
Total.............................. 139,276
137,562
134,044
Corporate expenses
and eliminations..........
(20,371)(15,555)(13,966)
Operating income ......... ¥118,905 ¥122,007 ¥120,078
Other income ................
7,679
9,293
11,658Other expenses .............
(4,123)(3,443)(2,995)
Income before income
taxes and equity in net
income of affiliatedcompanies ............... ¥122,461 ¥127,857 ¥128,741

Assets:Security services ............
Fire protection
services .......................
Medical services ............
Insurance services..........
Geographic information
services .......................
Information andcommunication related
services .......................
Real estate andother services ..............
Total..............................
Corporate items ............
Investments inaffiliated companies ....
Total assets....................

$ 981,584
120,832
25,85060,549(2,372)
2,726
43,363
1,232,532(180,275)$1,052,257
67,956(36,487)$1,083,726

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2016

¥ 659,526 ¥ 477,138$ 5,836,513

2016

Financial Section

Information by business and geographic segments for the years
ended and as of March 31, 2016, 2015 and 2014 is as follows:

141,981
186,068
219,635

135,381
178,721215,278

1,256,469
1,646,619
1,943,673

66,501

69,544

588,504

115,108

120,038

1,018,655

134,936
128,503
1,523,755 1,324,603
100,878
145,051

1,194,124
13,484,557
892,726

56,69956,209¥1,681,332 ¥1,525,863

501,761$14,879,044

SECOM Annual Report 2016

67

2016

Depreciation andamortization:
Security services ............ ¥ 50,007
Fire protection
services .......................
1,663
Medical services ............
8,293
Insurance services..........
1,319
Geographic information
services .......................
2,998
Information andcommunication related
services .......................
6,592
Real estate andother services ..............
951
Total..............................
71,823
Corporate items ............
658
Total depreciation
and amortization ...... ¥ 72,481
Capital expenditure:
Security services ............ ¥130,686
Fire protection
services .......................
5,026
Medical services ............
14,908Insurance services..........
2,307
Geographic information
services .......................
2,124
Information andcommunication related
services .......................
7,708
Real estate andother services ..............
229
Total.............................. 162,988
Corporate items ............
409
Total capital
expenditures ............ ¥163,397

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2016

2015

¥47,425¥45,679$ 442,540

1,694
7,209
1,140

1,667
6,658
1,280

14,71773,38911,673

3,022

2,511

26,531

6,746

7,373

58,336992
68,228636

1,004
66,172
489

8,416
635,602
5,823¥68,864¥66,661$ 641,425¥37,183¥36,833$1,156,513

3,608
20,372
1,897

1,635
10,843
1,554

44,478
131,929
20,416

3,318

4,743

4,160

The following table is a breakdown of security services revenue toexternal customers by service category. The security services business is managed as a single operating segment by the Company’s
management.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2016

¥330,843 ¥326,300 ¥318,116$2,927,814

2016

Electronic security
services .......................
Other security services:
Static guard
services ...................
Armored car
services ...................
Merchandise andother .........................
Total security
services ..................

2015

55,90753,78851,681

494,752

32,99021,01020,767

291,947

85,31885,96581,885755,027¥505,058 ¥487,063 ¥472,449$4,469,540(2) Geographic Segment Information
Net sales and operating revenue attributed to countries basedon the geographical location of customers for the years ended
2016, 2015 and 2014 and long-lived assets as of March 31, 2016
and 2015 were as follows:
In millions of yen

In thousands of
U.S. dollars

18,797

Years ended
March 31

Year ended
March 31

2014

2016

5,769

68,212

258
70,796
1,098

461
61,8381,397

2,027
1,442,372
3,619

Net sales andoperating revenue:
Japan ........................ ¥936,392 ¥901,079 ¥881,782
Other ........................
47,03644,15939,364
Total ...................... ¥983,428 ¥945,238 ¥921,146$8,286,655
416,248$8,702,903¥71,894¥63,235$1,445,991

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2016

¥611,331 ¥523,504
12,2807,559¥623,611 ¥531,063$5,410,009
108,673$5,518,682

2016

The capital expenditures in the above table represent theadditions to property, plant and equipment and intangible assets ofeach segment.
The Company has no single customer that accounts for morethan 10 percent of total revenues.

2015

2016

Long-lived assets:
Japan .......................
Other .......................
Total .....................

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
28. Subsequent Events
The Company has evaluated subsequent events through July 29,
2016, the date at which the financial statements were available tobe issued, and determined there is no item to disclose.

68

SECOM Annual Report 2016

Independent Auditors’ Report

Financial Section

The Board of Directors and Shareholders
SECOM CO., LTD.:

We have audited the accompanying consolidated financial statements of SECOM CO., LTD. and its subsidiaries, which comprise theconsolidated balance sheets as of March 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income,changes in equity, and cash flows for each of the years in the three-year period ended March 31, 2016, and the related notes to theconsolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SECOM CO., LTD. and its subsidiaries as of March 31, 2016 and 2015, and the results of their operations and their cash flows for eachof the years in the three-year period ended March 31, 2016, in accordance with U.S. generally accepted accounting principles.
Convenience Translations
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2016 arepresented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan
July 29, 2016

SECOM Annual Report 2016

69

OTHER FINANCIAL DATA

Contents
Summary of Selected Financial Data ........................................... 71
Common Stock Data.................................................................. 73

70

SECOM Annual Report 2016

Summary of Selected Financial Data
SECOM CO., LTD. and Subsidiaries
Years ended/as of March 31

2015

2014

2013

2012

2011

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue ........................................................ ¥983,428 ¥945,238 ¥921,146 ¥858,406 ¥769,609 ¥748,847
487,063
472,449443,231425,427
417,350
Security services: ............................................................................ 505,058
As a percentage of net sales and operating revenue ...........
51.4%
51.5%
51.3%
51.6%
55.3%
55.7%
Electronic security services .......................................................... 330,843
326,300
318,116
307,477
300,208
299,783
As a percentage of net sales and operating revenue ...........
33.6
34.5
34.5
35.8
39.0
40.0
Other Security services—
Static guard services ............................................................... 55,907
53,78851,68147,877
46,68946,372
As a percentage of net sales and operating revenue ...........
5.7
5.7
5.6
5.6
6.1
6.2
Armored car services............................................................... 32,990
21,01020,767
20,532
20,61020,129As a percentage of net sales and operating revenue ...........
3.4
2.2
2.3
2.4
2.7
2.7
Subtotal .......................................................................... 88,897
74,79872,44868,40967,29966,501
Merchandise and other .............................................................. 85,318
85,96581,88567,34557,92051,066
As a percentage of net sales and operating revenue ...........
8.7
9.1
8.9
7.8
7.5
6.8
Fire protection services ................................................................... 131,743
121,189
122,046
114,130
80,67875,176
As a percentage of net sales and operating revenue ...........
13.4
12.8
13.3
13.3
10.5
10.1
Medical services ............................................................................. 163,538
155,884
150,535
140,957
134,550
125,020
As a percentage of net sales and operating revenue ...........
16.6
16.5
16.3
16.4
17.4
16.7
Insurance services........................................................................... 40,654
38,25937,01135,86433,55833,133As a percentage of net sales and operating revenue ...........
4.1
4.1
4.0
4.2
4.4
4.4
Geographic information services .................................................... 52,553
52,76054,697
51,19450,17343,539As a percentage of net sales and operating revenue ...........
5.4
5.6
5.9
6.0
6.5
5.8
Information and communication related services ............................ 48,294
47,412
46,99229,541
17,735
16,662
As a percentage of net sales and operating revenue ...........
4.9
5.0
5.1
3.4
2.3
2.2
Real estate and other services ........................................................ 41,588
42,671
37,41643,48927,48837,967
As a percentage of net sales and operating revenue ...........
4.2
4.5
4.1
5.1
3.6
5.1
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD ..................................... ¥ 84,072
Cash dividends paid (2) ........................................................................ 28,373
SECOM CO., LTD. shareholders’ equity .............................................. 865,278
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
Bank loans .................................................................................
Current portion of long-term debt..............................................
Straight bonds ............................................................................
Other long-term debt .................................................................
Total debt ...............................................................................
SECOM CO., LTD. shareholders’ equity ..........................................
Total capitalization ..................................................................
Return on total assets (percentage) (a)..................................................
Return on equity (percentage) (b) .........................................................
Percentage of net sales and operating revenue absorbed by (c):Depreciation and amortization .......................................................
Rental expense under operating leases ...........................................
Ratio of accumulated depreciation to depreciable
assets (percentage) ..........................................................................
Net property turnover (times) (c)...........................................................
Before-tax interest coverage (times) (c) (d)...............................................

¥ 80,184
38,197
825,969¥ 73,979
22,918753,099¥ 70,580
19,645679,176¥ 41,237
19,623612,855¥ 62,665
18,533
593,495

5.6
1.8
0.8
5.3
13.5
86.5
100.0

4.7
1.4
0.9
4.9
11.9
88.1
100.0

6.0
1.8
0.9
4.6
13.3
86.7
100.0

5.0
2.2
1.1
5.1
13.4
86.6
100.0

5.7
3.1
1.4
3.8
14.0
86.0
100.0

6.8
1.7
2.0
5.5
16.0
84.0
100.0

5.0
9.7

5.3
9.7

5.1
9.8

5.3
10.4

3.5
6.7

5.4
10.6

7.4
2.5

7.3
2.4

7.2
2.4

7.0
2.1

7.5
2.1

7.6
2.2

62.8
2.38
89.2

61.6
2.38
93.8

60.8
2.34
90.4

60.0
2.24
78.8

63.4
2.49
51.8

62.5
2.49
65.1

Note: Installation revenue is included in the corresponding electronic security services.

SECOM Annual Report 2016

71

Financial Section

In millions of yen
2016

2016

2014

2013

2012

2011

Number of shares outstanding
Issued ....................................................................
Owned by the Company ........................................

233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
15,026,824 15,024,812 15,022,012 15,018,951 15,017,691 15,258,553

Balance ..................................................................

218,261,893 218,263,905 218,266,705 218,269,766 218,271,026 218,030,164

Per share information
Net income attributable to SECOM CO., LTD.
per share (in yen) (1) ..............................................
Cash dividends paid per share (in yen) (2) .................
SECOM CO., LTD. shareholders’ equity
per share (in yen) (3) ..............................................
Cash flow per share (in yen) (1) (e) ..............................
Price/Book value ratio.............................................
Price/Earnings ratio ................................................
Price/Cash flow ratio ..............................................
Stock price at year-end (in yen) ..............................

¥ 385.19
130.00¥ 367.37
175.00¥ 338.94
105.00¥ 323.36
90.00¥ 188.97
90.00¥ 287.41
85.00

3,964.40
565.70
2.11
21.72
14.79
8,366

3,784.27
557.88
2.12
21.84
14.38
8,025

3,450.36
529.35
1.72
17.54
11.23
5,946

3,111.64
496.34
1.56
15.00
9.77
4,850

2,807.77
365.28
1.44
21.43
11.09
4,050

2,722.08
458.62
1.42
13.45
8.43
3,865

Notes: (a) Net income attributable to SECOM CO., LTD. / Total assets(b) Net income attributable to SECOM CO., LTD. / SECOM CO., LTD.
shareholders’ equity(c) Including discontinued operations(d) (Income before income taxes and equity in net income of affiliatedcompanies + Interest expense)/Interest expense(e) (Net income attributable to SECOM CO., LTD. + Depreciation andamortization - Dividends approved) /Average number of shares outstanding
during each period

72

2015

SECOM Annual Report 2016

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2016, cash dividends of ¥15,278 million (¥70
per share) were approved at the general shareholders' meeting on June 24,2016 (see Note 18 of the accompanying notes to consolidated financial
statements).
(3) Per share amounts are based on the number of shares outstanding at theend of each period, less treasury stock.

Common Stock Data
SECOM CO., LTD.
As of March 31

Number of shareholders............................................
Common shares held by:
Japanese government and local public entities.......
Financial institutions ..............................................
Securities firms ......................................................
Other domestic corporations .................................
Foreign investors ...................................................
Individuals and others............................................
Treasury stock........................................................
Total ..................................................................

2016

2015

2014

2013

2012

2011

24,97524,852

27,054

27,62829,11830,338

—%
32.50
3.52
2.92
44.46
10.16
6.44
100.00%

—%
29.89
3.43
3.16
44.95
12.13
6.44
100.00%

—%
31.28
4.88
2.56
42.32
12.52
6.44
100.00%

—%
30.86
5.58
3.63
41.33
12.16
6.44
100.00%

—%
29.88
6.08
3.68
41.25
12.67
6.44
100.00%

0.08%
30.76
4.75
3.71
41.27
12.89
6.54
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2014

2015

2016

Financial Section

SHAREHOLDER INFORMATION

April–June...................................................................................
July–September...........................................................................
October–December .....................................................................
January–March ...........................................................................
April–June...................................................................................
July–September...........................................................................
October–December .....................................................................
January–March ...........................................................................

Price per share (in yen)

Nikkei Stock Average (in yen)

High

Low

High

Low

¥6,502
6,640
7,247
8,318
9,041
8,510
8,630
8,781

¥5,554
6,130
5,764
6,530
7,857
7,038
7,064
7,307

¥15,376.24
16,374.14
17,935.64
19,754.36
20,868.03
20,841.97
20,012.40
18,450.98¥13,910.16
14,778.37
14,532.51
16,795.96
19,034.84
16,930.84
17,722.42
14,952.61

SECOM Annual Report 201673

COMMON STOCK ISSUES

June
Dec.
May
May
Dec.
May
June
Dec.
Nov.
Dec.
Dec.
June
Dec.
Jan.
Nov.
Nov.
Nov.
Jan.
Nov.
Nov.
Jan.
Nov.
Nov.
Jan.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Nov.
Mar.
Mar.
Mar.
Mar.
Mar.

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

Share capital
after issue(In thousandsof yen)Allotment ratio
to shareholders

15, 1974
21, 1974
21, 1975
21, 1975
1, 1975
31, 1976
1, 1976
1, 197630, 1977
1, 1977
1, 1978
1, 1981
1, 198120, 1983
30, 1983
30, 1984
30, 1985
20, 1986
30, 1986
30, 1987
20, 1988
30, 1988
30, 1989
19, 1990
31, 1990
31, 1991
31, 1992
31, 1993
31, 1994
31, 1995
31, 1996
31, 1997
31, 1998
31, 1999
19, 1999
31, 2000
31, 2001
31, 2002
31, 2003
31, 2005

1,968
2,760
1,196
1,244
4,320
1,880
2,060
6,798
2,042
6,300
7,560
3,000
4,836
5,320
194
1,418
186
6,031
2,878
1,609
3,541
439
1,808
22,986
1,446
2,949
2,035
267
6,986
477
613
1,825
29
159
116,410
273
25
175
6
8

9,200
11,96013,156
14,40018,72020,60022,66029,45831,50037,80045,36048,36053,19658,51658,71060,12860,314
66,34569,22370,832
74,37374,812
76,62099,606
101,052
104,001
106,036
106,303113,289
113,766
114,379
116,204
116,233
116,392
232,802
233,075
233,100
233,275
233,281
233,289¥00,460,000
598,000
657,800
720,000
936,000
1,030,000
1,133,000
1,472,900
1,575,000
1,890,000
2,268,000
2,418,000
2,659,800
3,000,000
3,280,942
5,329,282
5,602,945
5,602,945
11,269,932
15,021,200
15,021,200
16,063,099
21,573,139
21,573,139
25,070,104
32,244,732
37,338,751
37,991,568
56,756,263
58,214,178
59,865,105
65,253,137
65,327,060
65,709,927
65,709,927
66,096,852
66,126,854
66,360,338
66,368,827
66,377,829—
3 for 10
1 for 10—
3 for 10—
1 for 10
3 for 10—
2 for 10
2 for 10—
1 for 10
1 for 10———
1 for 10——
0.5 for 10——
3 for 10
—
—
—
—
—
—
—
—
—
—
10 for 10*
—
—
—
—
—

Remarks

Issue at market price (¥900)
Stock split
Stock split
Issue at market price (¥1,134)
Stock split
Issue at market price (¥2,570)
Stock split
Stock split
Issue at market price (¥1,700)
Stock split
Stock split
Issue at market price (¥2,230)
Stock split
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds

Notes: 1. The above is a record of SECOM’s common stock issues since the common stock was listed on the Tokyo Stock Exchange in June 1974.
2. As of March 31, 2016, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

74

SECOM Annual Report 2016

CONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]

Contents
Condensed Consolidated Balance Sheets(Based on Japanese GAAP)....................................................... 76
Condensed Consolidated Statements of Income(Based on Japanese GAAP)....................................................... 78
Consolidated Statements of Comprehensive Income(Based on Japanese GAAP)....................................................... 78

SECOM Annual Report 201675

Condensed Consolidated Balance Sheets (Based on Japanese GAAP)SECOM CO., LTD. and Subsidiaries
As of March 31

In millions of yen

ASSETS

2016

2015

2014

2013

2012

2011

Current assets:
Cash on hand and in banks ............................................... ¥ 228,458 ¥ 232,221 ¥ 210,514 ¥ 175,427 ¥ 182,412 ¥ 172,958
Cash deposits for armored car services ..............................
128,267
50,39558,59756,08954,01156,546—
15,50020,50046,50028,00029,500Call loans ..........................................................................
Notes and accounts receivable, trade.................................
122,048
114,071
115,318
106,638
85,74473,956Due from subscribers.........................................................
31,812
26,31625,17424,05924,83022,75434,44828,517
12,955
14,723
19,936
7,313
Short-term investments .....................................................
Lease receivables and investments in leased assets .............
39,542
39,242
33,18827,56914,605
15,433Merchandise and products ................................................
13,09914,163
14,186
12,321
9,597
8,823
Real estate inventories .......................................................
3,527
3,063
33
12,944
9,082
11,481Work in process ................................................................
5,557
4,031
4,602
4,526
2,527
2,249
Costs on uncompleted construction contracts ...................
9,070
9,460
8,983
7,563
5,671
4,233
Work in process for real estate inventories .........................
23,024
21,05815,396
13,34833,27648,296
Raw materials and supplies................................................
8,579
7,913
7,573
6,430
5,950
5,750
Deferred income taxes.......................................................
12,72812,80813,254
14,384
11,383
12,216
Short-term loans receivable ...............................................
4,086
2,268
2,699
4,158
4,389
3,908
27,375
21,111
17,62318,453
13,48912,566
Other ..............................................................................
Allowance for doubtful accounts .......................................
(1,883)(1,997)(2,026)(2,302)(1,428)(1,704)
689,744
600,146558,574
542,836
503,479
486,284
Total current assets .................................................

Fixed assets:
Tangible assets:
Buildings and improvements, net ...................................
Security equipment and control stations, net .................
Land ..............................................................................
Other, net ......................................................................
Total tangible assets................................................

148,828
71,447
116,613
39,415376,305

148,375
70,478
119,604
23,702
362,161

153,278
68,759113,946
24,849360,833

155,839
67,200115,652
22,839361,532

97,95566,900104,426
21,464
290,747

102,855
63,49097,73018,638282,715

Intangible assets ................................................................

119,505

49,41153,59655,07925,04325,553

Investments and others:
Investment securities......................................................
264,400
284,322
246,233
189,042
177,655
188,001
39,40142,90445,70142,33846,19747,576Long-term loans receivable ............................................
Prepaid pension and severance costs..............................
———
19,572
19,13018,730Net defined benefit asset ...............................................
30,79635,01017,612
—
—
—
8,602
4,874
13,521
11,711
14,793
20,110
Deferred income taxes ...................................................
Other.............................................................................
54,97849,382
48,48643,70642,37643,422
Allowance for doubtful accounts ...................................
(15,698)(17,525)(16,352)(16,742)(17,584)(18,111)
382,482
398,969
355,203289,629
282,568
299,729
Total investments and others ..................................
878,293
810,541
769,633
706,241
598,359
607,998
Total fixed assets.....................................................
Deferred assets ..................................................................
14
26
17
32
45
117
Total assets ............................................................. ¥1,568,052 ¥1,410,715 ¥1,328,226 ¥1,249,110 ¥1,101,884 ¥1,094,400

76

SECOM Annual Report 2016

Financial Section

In millions of yen

LIABILITIES

2016

2015

2014

2013

2012

2011

Current liabilities:
Notes and accounts payable, trade ..................................... ¥ 41,794 ¥ 43,160 ¥ 49,409 ¥ 43,684 ¥ 30,731 ¥ 25,959
55,28344,96552,12042,35047,98547,426
Bank loans .........................................................................
Current portion of straight bonds .......................................
2,582
1,414
4,640
4,487
5,983
2,914
4,724
503
579
537
354
354
Lease obligations ................................................................
38,37633,84931,316
31,406
27,62722,857
Payables—other .................................................................
Accrued income taxes ........................................................
22,34121,06327,74429,282
14,68819,353
Accrued consumption taxes................................................
6,611
12,878
4,151
4,377
3,833
2,850
5,562
4,653
4,625
4,571
4,169
3,792
Accrued expenses...............................................................
Deposits received for armored car services ..........................
101,306
16,945
17,76524,862
21,92020,65831,38931,34831,02730,88030,83430,582
Deferred revenue ...............................................................
15,524
14,652
14,437
14,031
12,73911,925
Accrued bonuses ................................................................
Provision for loss on construction contracts ........................
1,397
1,612
1,981
1,714
834
530
20,73820,707
16,883
15,691
14,076
12,868Other .................................................................................
347,633
247,755
256,684
247,879
215,780
202,074
Total current liabilities ..............................................
Long-term liabilities:
Straight bonds....................................................................
Long-term loans .................................................................
Lease obligations ................................................................
Guarantee deposits received...............................................
Deferred income taxes........................................................
Accrued pension and severance costs .................................
Accrued retirement benefits for directors andaudit and supervisory board members ..............................
Net defined benefit liability.................................................
Investment deposits by policyholders, unearned
premiums and other insurance liabilities ...........................
Other .................................................................................
Total long-term liabilities ..........................................
Total liabilities ..........................................................

8,251
20,033
11,95435,002
14,026—

8,413
20,602
3,712
36,00013,554—

7,796
17,256
4,183
36,542
11,169—8,847
19,8283,438
36,125
13,40017,137

9,625
10,7002,884
38,235
8,415
12,585

14,091
21,586
3,080
38,091
8,909
13,097

1,387
22,816

1,415
18,504

1,635
18,569

2,443
—

2,509
—

2,433
—

159,636
4,166
277,274
624,907150,119
3,295
255,618
503,374

141,099
2,918
241,171497,856

133,627
2,242
237,091
484,970

127,812
1,817
214,586
430,366

135,498
1,481
238,270
440,344

NET ASSETS
Shareholders’ equity:
Common stock................................................................... ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377
80,32680,26583,054
83,054
83,054
83,054
Capital surplus ...................................................................
743,353694,688656,286
609,275
565,261549,747
Retained earnings ..............................................................
Common stock in treasury, at cost ......................................
(73,717)(73,701)(73,682)(73,664)(73,659)(74,923)
816,340
767,630
732,036
685,042
641,034
624,255
Total shareholders’ equity ........................................
Accumulated other comprehensive income:Unrealized gains on securities .............................................
Deferred losses on hedges ..................................................
Foreign currency translation adjustments ............................
Remeasurements of defined benefit plans, net of taxes ......
Total accumulated other comprehensive income ......

19,964(40)(2,196)(783)
16,94426,981
(34)
1,477
4,390
32,815

12,504(33)(10,885)(3,506)(1,921)

11,783(41)(27,760)—(16,018)

4,559
(28)
(37,556)—(33,026)

2,192
(35)
(34,166)—(32,010)

Noncontrolling interests ....................................................

109,859

106,895

100,253

95,11463,50961,810943,144907,341
830,369
764,139
671,517654,055
Total net assets ........................................................
Total liabilities and net assets ................................... ¥1,568,052 ¥1,410,715 ¥1,328,226 ¥1,249,110 ¥1,101,884 ¥1,094,400

SECOM Annual Report 2016

77

Condensed Consolidated Statements of Income (Based on Japanese GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31

In millions of yen
2016

2015

2014

2013

2012

2011

Revenue ...............................................................................
Percentage change from prior year .................................

¥881,028 ¥840,722 ¥822,228 ¥765,635 ¥679,173 ¥663,887
4.8%
2.2%
7.4%
12.7%
2.3%
1.4%

Costs of revenue ....................................................................
As a percentage of revenue ............................................

586,53966.6

557,884
66.4

542,94966.0

504,006
65.8

458,452
67.5

423,983
63.9

Gross profit ............................................................................
As a percentage of revenue ............................................

294,48833.4

282,83733.6

279,278
34.0

261,62934.2

220,72032.5

239,904
36.1

Selling, general and administrative expenses ..........................
As a percentage of revenue ............................................

165,906
18.8

159,22218.9

159,259
19.4

153,258
20.0

139,64220.6

140,762
21.2

Operating profit .....................................................................
As a percentage of revenue ............................................

128,582
14.6

123,61514.7

120,018
14.6

108,370
14.2

81,07811.9

99,141
14.9

Non-operating income ...........................................................
Non-operating expenses ........................................................

11,3805,136

18,366
5,293

13,1006,441

11,171
5,922

12,9706,209

17,4286,895

Ordinary profit .......................................................................
As a percentage of revenue ............................................

134,826
15.3

136,68816.3

126,677
15.4

113,618
14.8

87,83912.9

109,674
16.5

Extraordinary profit ................................................................
Extraordinary losses................................................................

1,584
15,003

1,962
11,384

2,025
3,876

984
2,623

287
11,558

1,717
5,749

Income before income taxes ..................................................
As a percentage of revenue ............................................

121,40813.8

127,265
15.1

124,82615.2

111,980
14.6

76,567
11.3

105,642
15.9

Income taxes—current ...........................................................
Income taxes—deferred .........................................................

39,150(526)

43,156(37)

48,485(2,110)43,211(252)

32,0234,600

37,303
1,383

Net income ............................................................................

82,784

84,14678,451

69,021

39,943

66,955

Net income attributable to noncontrolling interests ................

5,745

8,754

8,574

5,363

4,454

6,109

Net income attributable to owners of the parent ....................
As a percentage of revenue ............................................
Percentage change from prior year .................................

77,0398.7
2.2

75,3929.0
7.9

69,8768.5
9.8

63,6588.3
79.4

35,4895.2(41.7)

60,846
9.2
27.8

Consolidated Statements of Comprehensive Income (Based on Japanese GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31

78

In millions of yen
2016

2015

2014

2013

2012

2011

Net income ............................................................................
Other comprehensive income (loss):
Unrealized gains (losses) on securities .................................
Deferred gains on hedges...................................................
Foreign currency translation adjustments ............................
Remeasurements of defined benefit plans ..........................
Share of other comprehensive gains (losses) of affiliatedcompanies accounted for under the equity method ..........

¥ 82,784¥ 84,146¥78,451¥69,021¥39,943¥66,955(7,103)—(1,616)(6,163)

15,058
—
9,527
8,581

543
—
11,787
—

7,500
—
6,222
—

2,318
8
(2,262)—(2,970)16(5,191)—(2,743)

3,676

6,649

4,402

(1,281)(1,069)Total other comprehensive income (loss) .........................

(17,626)

36,843

18,98018,124(1,217)(9,214)Comprehensive income..........................................................

65,157

120,990

97,43187,14638,72657,740Comprehensive income attributable to:
Owners of the parent company ..........................................
Noncontrolling interests .....................................................

61,1683,989

110,128
10,861

87,4809,950

80,666
6,480

34,473
4,253

52,203
5,537

SECOM Annual Report 2016

NONCONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]

Contents
Condensed Nonconsolidated Balance Sheets(Based on Japanese GAAP)....................................................... 80
Condensed Nonconsolidated Statements of Income(Based on Japanese GAAP)....................................................... 82

SECOM Annual Report 2016

79

Condensed Nonconsolidated Balance Sheets (Based on Japanese GAAP)SECOM CO., LTD.
As of March 31

In millions of yen

ASSETS

2016

2015

2014

2013

2012

2011

Current assets:
Cash on hand and in banks .................................................
Cash deposits for armored car services ................................
Notes receivable ..................................................................
Due from subscribers...........................................................
Accounts receivable, trade...................................................
Receivables—other ..............................................................
Short-term investments .......................................................
Merchandise .......................................................................
Supplies ..............................................................................
Prepaid expenses .................................................................
Deferred income taxes.........................................................
Short-term loans receivable .................................................
Other ..................................................................................
Allowance for doubtful accounts .........................................
Total current assets ...................................................

¥ 45,433
40,877592
16,22910,996
4,454
3,444
6,453
1,676
2,172
3,736
22,255
1,698(152)
159,867¥ 93,569
48,396640
16,066
11,202
3,054
437
6,694
1,379
2,210
4,415
20,4231,772(216)
210,048¥ 80,908
56,818683
14,991
9,960
2,699
437
5,489
1,303
2,109
4,382
20,6532,031(221)
202,248¥ 54,136
53,551700
14,856
9,691
2,528
1,048
5,585
1,012
2,332
5,268
19,237
4,819(248)
174,521¥ 82,631
52,386720
14,324
10,039
2,159
456
5,152
1,470
2,253
4,269
15,574
1,632(268)
192,804¥ 74,680
54,641
221
11,563
6,074
2,385
456
4,279
1,167
2,051
4,938
4,356
1,818
(206)
168,428

Fixed assets:
Tangible assets:
Buildings and improvements, net .....................................
Automobiles, net .............................................................
Security equipment and control stations, net ...................
Machinery and equipment, net ........................................
Tools, furniture and fixtures, net ......................................
Land ................................................................................
Construction in progress ..................................................
Other, net ........................................................................
Total tangible assets..................................................

16,572795
67,624170
3,424
22,0151,564
18112,187

16,458824
67,715
192
3,326
28,303
1,714
12
118,548

17,466865
66,683232
2,922
29,5201,848
105
119,644

17,059521
65,329288
2,979
29,802
1,719
235
117,936

16,409231
65,341361
3,301
28,5551,710
374
116,286

22,310243
61,461565
3,151
28,3901,743
513
118,379

Intangible assets:
Goodwill..........................................................................
Software..........................................................................
Other...............................................................................
Total intangible assets ...............................................

—
5,794
574
6,369

—
4,644
730
5,375

2,607
3,910
1,768
8,286

2,978
4,269
2,061
9,308

3,350
5,487
1,586
10,424

—
6,751
815
7,566

20,58829,72523,78921,58323,906

20,969325,104

239,120

239,008

236,309

190,305

203,036

1,938
146,716
7,642
21,244
23,177
—
4,294
2,545
(5,551)
547,700
666,256¥826,124

1,938
150,955
7,526
22,126
21,530
—
4,294
2,534
(17,946)
461,806
585,730¥795,778

1,827
143,741
7,553
20,78016,962
—
3,988
2,777
(17,698)442,730
570,662¥772,910

1,827
155,813
7,747
21,594
16,263
—
3,991
2,728
(20,307)447,551574,796¥749,317

1,883
128,074
8,147
24,013
15,903
130
4,181
2,713
(19,326)
379,933
506,643¥699,448

1,874
118,276
8,047
25,872
14,321
13,865
4,181
2,831(12,995)
400,281526,227¥694,656

Investments and others:
Investment securities........................................................
Investment securities in subsidiaries andaffiliated companies.......................................................
Investments in subsidiaries andaffiliated companies.......................................................
Long-term loans receivable ..............................................
Lease deposits .................................................................
Long-term prepaid expenses ............................................
Prepaid pension and severance costs................................
Deferred income taxes .....................................................
Insurance funds ...............................................................
Other...............................................................................
Allowance for doubtful accounts .....................................
Total investments and others ....................................
Total fixed assets.......................................................
Total assets ...............................................................

80

SECOM Annual Report 2016

Financial Section

In millions of yen

LIABILITIESCurrent liabilities:
Accounts payable ...............................................................
Bank loans .........................................................................
Lease obligations ................................................................
Payables—other .................................................................
Payables—construction ......................................................
Accrued income taxes ........................................................
Accrued consumption taxes................................................
Accrued expenses...............................................................
Deposits received for armored car services ..........................
Deferred revenue ...............................................................
Accrued bonuses ................................................................
Other .................................................................................
Total current liabilities ..............................................
Long-term liabilities:
Lease obligations ................................................................
Guarantee deposits received...............................................
Deferred income taxes........................................................
Accrued pension and severance costs .................................
Accrued retirement benefits for directors andaudit and supervisory board members ..............................
Other .................................................................................
Total long-term liabilities ..........................................
Total liabilities ..........................................................

NET ASSETS
Shareholders’ equity:
Common stock...................................................................
Capital surplus:
Additional paid-in capital ................................................
Other capital surplus .......................................................
Total capital surplus .................................................
Retained earnings:
Legal reserve...................................................................
Other retained earnings:
Reserve for system developments ................................
General reserve ...........................................................
Accumulated earnings carried forward ........................
Total retained earnings ............................................
Common stock in treasury, at cost ......................................
Total shareholders’ equity ........................................
Valuation, translation adjustments and others:
Unrealized gains (losses) on securities .................................
Total valuation, translation adjustments
and others .............................................................
Total net assets ........................................................
Total liabilities and net assets ...................................

2016

¥

3,641
36,923
198
15,698
3,980
9,479
2,718
737
13,97520,923
6,246
4,177
118,699

2015

¥

3,172
29,416
185
15,675
4,480
10,826
7,088
800
15,124
21,2696,296
4,311
118,647

2014

¥

3,429
36,703
176
14,546
4,218
12,3661,478
802
16,17521,301
6,246
3,530
120,976

2013

¥

3,044
26,598121
15,042
4,333
19,5102,538
726
22,554
21,671
6,089
1,942
124,174

2012

¥

2,400
27,65980
13,756
4,343
3,938
2,062
716
20,453
22,3406,116
2,253
106,121

2011

¥

1,672
29,38671
10,824
3,719
12,4501,422
722
18,892
22,2295,468
3,577
110,4392,601
17,038
6,213
2,835

2,661
17,286
3,400
3,241

2,747
17,622
307
3,555

2,449
17,859
788
4,051

2,217
18,099
—
3,945

2,253
18,262
—
4,040

—
378
29,068
147,768—
408
26,998145,646—459
24,692
145,668857
25
26,031150,205

1,294
10
25,568
131,689

1,232
11
25,799136,238¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377

83,0540
83,054

83,0540
83,054

83,0540
83,054

83,054—
83,054

83,054—
83,054

83,054—
83,054

9,028

9,028

9,028

9,028

9,028

9,028

800
2,212
586,082
598,122(73,717)673,836800
2,212
556,013568,053(73,701)
643,784

800
2,212
536,978
549,018(73,682)
624,768800
2,212
508,398
520,439(73,664)596,206

800
2,212
478,914490,954(73,659)
566,727800
2,212
472,070
484,110(74,923)558,619

4,518

6,347

2,473

2,905

1,031

(201)

4,518
678,355¥826,124

6,347
650,132¥795,778

2,473
627,242¥772,910

2,905
599,112¥749,317

1,031
567,758¥699,448(201)
558,417¥694,656

SECOM Annual Report 201681

Condensed Nonconsolidated Statements of Income (Based on Japanese GAAP)SECOM CO., LTD.
Years ended March 31

In millions of yen
2016

82

2015

2014

2013

2012

2011

Revenue ...............................................................................
Percentage change from prior year .................................
Service charges...................................................................
Percentage change from prior year .................................
Sales of merchandise ..........................................................
Percentage change from prior year .................................

¥376,044 ¥370,663 ¥364,280 ¥355,393 ¥345,476 ¥329,297
1.5%
1.8%
2.5%
2.9%
4.9%
0.2%
317,764
314,068
309,499
305,300
299,523
290,252
1.2
1.5
1.4
1.9
3.2
(0.4)
58,28056,59454,78150,09245,952
39,045
3.0
3.3
9.4
9.0
17.7
4.3

Costs .....................................................................................
As a percentage of revenue ............................................
Costs of service ..................................................................
As a percentage of service charges .................................
Costs of sales .....................................................................
As a percentage of merchandise sales .............................

223,18959.4
181,59757.1
41,591
71.4

221,44159.7
180,850
57.6
40,59071.7

215,849
59.3
177,33957.3
38,50970.3

210,790
59.3
174,33157.1
36,45872.8

203,38658.9
169,92856.7
33,45872.8

191,28458.1
160,20355.2
31,081
79.6

Gross profit ............................................................................
As a percentage of revenue ............................................
Gross profit on service ........................................................
As a percentage of service charges .................................
Gross profit on sales ...........................................................
As a percentage of merchandise sales .............................

152,855
40.6
136,166
42.9
16,68828.6

149,22140.3
133,21742.4
16,00328.3

148,43140.7
132,159
42.7
16,272
29.7

144,60340.7
130,969
42.9
13,63427.2

142,08941.1
129,595
43.3
12,49427.2

138,01341.9
130,048
44.8
7,964
20.4

Selling, general and administrative expenses ..........................
As a percentage of revenue ............................................

77,191
20.5

76,04620.5

75,521
20.7

74,651
21.0

71,89320.8

69,324
21.0

Operating profit .....................................................................
As a percentage of revenue ............................................

75,66420.1

73,17419.8

72,90920.0

69,952
19.7

70,196
20.3

68,68820.9

Non-operating income ...........................................................
Non-operating expenses ........................................................

13,6392,691

11,714
3,316

10,2694,295

10,173
3,789

8,048
3,032

8,863
3,050

Ordinary profit .......................................................................
As a percentage of revenue ............................................

86,61223.0

81,57222.0

78,884
21.7

76,33621.5

75,21221.8

74,501
22.6

Extraordinary profit ................................................................
Extraordinary losses................................................................

3,064
6,733

1,670
2,805

491
1,604

1,219
1,052

23,001
40,695

106
2,637

Income before income taxes ..................................................
As a percentage of revenue ............................................

82,94322.1

80,43721.7

77,771
21.3

76,502
21.5

57,518
16.6

71,97021.9

Income taxes..........................................................................
Effective tax rate .............................................................

24,50029.5

22,94528.526,27333.8

27,37435.8

30,69953.4

26,94637.4

Net income ............................................................................
As a percentage of revenue ............................................
Percentage change from prior year .................................

58,44215.5
1.7

57,492
15.5
11.6

51,49714.1
4.8

49,128
13.8
83.2

26,8187.8(40.4)

45,02313.7(1.7)

SECOM Annual Report 2016

Corporate Information

Financial Section(As of June 30, 2016)

Headquarters:
Independent auditors:
Administrator of the registerof shareholders:

5-1, Jingumae 1-chome, Shibuya-ku, Tokyo 150-0001, Japan
KPMG AZSA LLC
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

MAJOR CONSOLIDATED SUBSIDIARIES

Domestic<Security services>
Secom Joshinetsu Co., Ltd.
Secom Hokuriku Co., Ltd.
Secom Yamanashi Co., Ltd.
Secom Mie Co., Ltd.
Secom Sanin Co., Ltd.
Secom Kochi Co., Ltd.
Secom Miyazaki Co., Ltd.
Secom Ryukyu Co., Ltd.
Secom Jastic Co., Ltd.
Secom Jastic Joshinetsu Co., Ltd.
Secom Jastic Hokuriku Co., Ltd.
Secom Jastic Yamanashi Co., Ltd.
Secom Jastic Sanin Co., Ltd.
Secom Jastic Kochi Co., Ltd.
Secom Jastic Miyazaki Co., Ltd.
Secom Static Hokkaido Co., Ltd.
Secom Static Tohoku Co., Ltd.
Secom Static Nishi-Nihon Co., Ltd.
Secom Static Kansai Co., Ltd.
Secom Static Ryukyu Co., Ltd.
Secom Sado Co., Ltd.
JK. Siress Co., Ltd.
Japan Safety Guard Co., Ltd.
Japan Nuclear Security System Co., Ltd.
Meian Co., Ltd.
Secom Tech Sanin Co., Ltd.
Secom Techno Joshinetsu Co., Ltd.
Secom Win Co., Ltd.
Secom Industries Co., Ltd.
Otec Electronics Co., Ltd.
Secom Alpha Co., Ltd.
Secom Mine Security Co., Ltd.
Social Rehabilitation Support Kitsuregawa Co., Ltd.
Secom Kitsuregawa Security Co., Ltd.
Home Life Kanri Co., Ltd.
Kumalift Co., Ltd.
Kumagai Industries Co., Ltd.
Okinawa Kumalift Co., Ltd.
Asahi Security Co., Ltd.

Issued capital(In millions of yen)

Percentageof equity/
voting rights¥3,530
201
15
50
290
50
30
76
210
40
10
10
10
10
10
50
50
50
50
10
24
10
100
200
60
23
30
15
499
200
271
30
10
50
40
100
25
10
516

(50.9)%
59.1
70.0
51.0
64.3
40.0
68.3
50.0
100.0
(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)
100.0
100.0
100.0
100.0
(100.0)(54.5)(100.0)
60.0
50.0
51.0
(100.0)(100.0)
66.7
100.0
82.0
100.0
100.0
51.7
100.0
(100.0)100.0(55.1)(70.0)
100.0

Lines of business(As of June 30, 2016)

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Installation of security equipment
Installation of security equipment
Installation of security equipment and facilities
Manufacturing of security equipment
Manufacturing and sales of security systems
Sales of security and water-treatment equipment
Security services
Operation of PFI correctional facilities
Security services
Condominium management
Manufacture, sales and maintenance of freight elevators
Sales of freight elevators
Sales of freight elevators
Security services

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

(Continued )SECOM Annual Report 2016

83

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)<Fire protection services>
Nohmi Bosai Ltd.
Ichibou Co., Ltd.
Kyushu Nohmi Co., Ltd.
Chiyoda Service Co., Ltd.
Nohmi Engineering Corp.
Nohmi System Co., Ltd.
Iwate Nohmi Co., Ltd.
Tohoku Nohmi Co., Ltd.
Aomori Nohmi Co., Ltd.
Nissin Bohsai Co., Ltd.
Chiba Nohmi Co., Ltd.
Shikoku Nohmi Co., Ltd.
Nohmi Techno Engineering Co., Ltd.
Akita Nohmi Co., Ltd.
Fukushima Nohmi Co., Ltd.
Niigata Nohmi Co., Ltd.
Hokkaido Nohmi Co., Ltd.
Yashima Bosai Setsubi Co., Ltd.
Nittan Co., Ltd.
Nittan Electronic Co., Ltd.
Nittan Denko Co., Ltd.
Nittan Hokkaido Service Center Co., Ltd.
Nittan Tohoku Service Center Co., Ltd.
Nittan Nagoya Service Center Co., Ltd.
Nittan Service Center Osaka Co., Ltd.
Nittan Hiroshima Service Center Co., Ltd.
Nittan Shikoku Service Center Co., Ltd.
Nittan Fukuoka Service Center Co., Ltd.
Sogo Denki Trading Co., Ltd.
Shell beach Co., Ltd.
<Medical services>
Secom Medical System Co., Ltd.
Mac Corp.
Yoshikikaku Co., Ltd.
Kensei Co., Ltd.
Secomfort Tama Co., Ltd.
Alive Medicare Co., Ltd.
Secomfort Co., Ltd.
Secomfort West Co., Ltd.
US Chemical Co., Ltd.
Secom Medipharma Co., Ltd.

¥13,302

Percentageof equity/
voting rights(50.4)%

Lines of business

28
30
20
40
20
30
32
20
50
10
20
40
20
20
20
20
20
2,303

(73.2)(100.0)(70.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(81.8)
100.0

60
10
10
10
10
10
10
10
10
10
10

(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)

Manufacturing and sales of fire protection equipment
and facilities
Installation of fire protection equipment
Installation and maintenance of fire protection equipment
Building management
Installation of fire protection equipment
Maintenance of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of environmental monitoring systems
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation, sale and maintenance of fire protection
equipment
Manufacturing of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment

6,650
95
20
100
210
50
100
100
3
10

100.0
(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)Home health/nursing care and other medical-related services
Sales of medical equipment
Operation of restaurants and shops at medical facilities
Management of pharmacies
Management of nursing homes
Management of nursing homes
Management of nursing homes
Management of nursing homes
Management of pharmacies
Wholesaling of pharmaceuticals

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

84

SECOM Annual Report 2016

(As of June 30, 2016)(Continued )Financial Section

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Percentageof equity/
voting rights¥ 225
16,809(100.0)%97.1

Non-life insurance agency
Non-life insurance<Geographic information services>
Pasco Corp.
Pasco Space Mapping Technology Co., Ltd.
GIS Hokkaido Co., Ltd.
GIS Tohoku Co., Ltd.
GIS Kanto Co., Ltd.
GIS Kansai Co., Ltd.
Mid Map Tokyo Corp.
RIIC Corp.
Higashi-Nihon Sogo Keikaku Co., Ltd.
Satellite Vision Corp.
Satellite Image Marketing Corp.

8,758
25
190
50
40
99
15
20
200
2
60

69.8
(100.0)(100.0)(84.6)(52.6)(100.0)(60.0)(100.0)(100.0)(100.0)(100.0)Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services<Information and communication related services>
Secom Trust Systems Co., Ltd.

1,469

100.0

At Tokyo Corp.

13,37950.9

Information, communication, information security
services and software development
Data center business<Real estate and other services>
Secom Home Life Co., Ltd.
Arai & Co., Ltd.
Arai Corporation, Inc.
Secom Credit Co., Ltd.
Secom Corp.
Secom Auto Service Co., Ltd.
Wonder Dream Co., Ltd.
Secom Staff Service Co., Ltd.
Secom Business Plus Co., Ltd.
Secom Home Service Co., Ltd.
Kurashi-TEL Co., Ltd.
Secom Engineering Co., Ltd.
Yanoshin Air Conditioning Co., Ltd.
Toko Create Co., Ltd.

3,700
3,000
10
400
100
45
490
50
20
32
100
100
80
50

99.9
86.7
(100.0)
100.0
100.0
100.0
100.0
(100.0)
100.0
100.0
60.0
100.0
100.0
96.6

Development of residential buildings
Real estate leasing
Management of real estate
Credit services
Printing services
Car maintenance
Employee welfare for SECOM Group
Employment agency
General office services
Lifestyle support services
Comprehensive lifestyle support services
Design, construction and maintenance of facilities
Sales of air-conditioning equipment
Electrical engineering<Insurance services>
Secom Insurance Service Co., Ltd.
Secom General Insurance Co., Ltd.

Lines of business(As of June 30, 2016)

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

(Continued )SECOM Annual Report 201685

MAJOR CONSOLIDATED SUBSIDIARIES

Overseas<Security services>
Secom plc
Secom (China) Co., Ltd.
Dalian Secom Security Co., Ltd.
Shanghai Secom Security Co., Ltd.
Beijing Jingdun Secom
Electronic Security Co., Ltd.
Qingdao Secom Security Co., Ltd.
Guangdong Jinpeng Secom Security Co., Ltd.
Fujian Secom Security Co., Ltd.
Sichuan Secom Security Co., Ltd.
Shaanxi Secom Security Co., Ltd.
Zhejiang Secom Security Co., Ltd.
Liaoning Secom Security Co., Ltd.
Tianjin Secom Property Management Co., Ltd.
Secom jindun (Tianjin) Security Co., Ltd.
Jiangsu Secom Security Co., Ltd.
PT. Secom Indonesia
Thai Secom Security Co., Ltd.
Secom Australia Pty. Ltd.
Secom Technical Services Unit Trust
Secom Guardall NZ Ltd.
Secom Vietnam Co., Ltd.
Secom Trading Co., Ltd.
Secom Vietnam Security Service Joint Stock Company
Secom (Singapore) Pte. Ltd.
D’Garde Security Pte. Ltd.
Secom Data Protection Pte. Ltd.
<Other services>
Shanghai Nohmi Secom
Fire Protection Equipment Co., Ltd.
Nohmi Taiwan Ltd.

Issued capital

Percentageof equity/
voting rights

Lines of business£44,126 thousand¥5,550 million
US$2,000 thousand
Rmb50,000 thousand
US$2,500 thousand

100.0%
100.0(95.0)(85.0)(80.0)

Security services
Holding company
Security services
Security services
Security services

US$1,000 thousand
US$4,500 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb10,000 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb2,000 thousand
Rmb5,000 thousand
Rmb15,000 thousand
US$4,111 thousand
THB378,934 thousand
AUD17,297 thousand
AUD5,951 thousand
NZD1,604 thousand
US$600 thousand¥120 million¥181 million
S$5,000 thousand
S$100 thousand
S$300 thousand(80.0)(90.0)(95.0)(100.0)(100.0)(97.0)(60.0)(80.0)(69.4)(100.0)
49.0
49.0
100.0
(70.0)(80.0)
80.0
100.0(49.0)
46.6(100.0)(100.0)

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Comprehensive building management services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security service-related consulting
Sales of security equipment
Security services
Security services
Security services
Data storage services

US$14,300 thousand(100.0)

NT$15,000 thousand(82.3)

Manufacturing and sales of fire protection equipment
and facilities
Manufacturing and sales of fire protection equipment
and facilities
Sales of fire protection equipment
Sales of fire protection equipment
Holding company
Hospital management
Management of hospital real estate
Geographic information services
Geographic information services
Geographic information services

Nittan Europe Ltd.
Nittan Fire Protection System (Zhongshan) Co., Ltd.
Secom Medical System (Singapore) Pte. Ltd.
Takshasila Hospitals Operating Pvt. Ltd.
Takshasila Healthcare and Research Service Pvt. Ltd.
Pasco Philippines Corp.
Pasco China Corp.
Suzhou Super Dimension Earth Science Researchand Development Co., Ltd.
Shanghai Pasco China Corp.
Pasco (Thailand) Co., Ltd.
PT. Nusantara Secom InfoTech£1,194 thousand
US$1,400 thousand
S$35,991 thousand
INR3,280 million
INR0.2 million
PHP20,400 thousand
Rmb22,320 thousand
Rmb1,000 thousand(100.0)(70.0)(100.0)(47.0)(49.0)(100.0)(99.0)(92.0)

Rmb800 thousand
THB129,000 thousand
US$3,304 thousand(100.0)(100.0)(100.0)

Pasco Lao Sole Co., Ltd.
FM-International Oy
Aerodata International Surveys BVBA
Pasco Europe B.V.
Pasco North America Inc.
Keystone Aerial Surveys Inc.
Pasco Geo-Spatial Vietnam Co., Ltd.
The Westec Security Group, Inc.
ClearLight Partners, LLC
ClearLight Partners II, LLC
ClearLight Partners III, LLC

LAK3,878 million
EUR10,994 thousand
EUR87 thousand
EUR4,000 thousand
US$5,621 thousand
US$0.6 thousand
VND8,908 million
US$0.3 thousand———(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)100.0(99.7)(99.0)(98.0)

Geographic information services
Geographic information services
Geographic information services andsoftware development
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Holding company
Investment
Investment
Investment

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

86

SECOM Annual Report 2016

(As of June 30, 2016)

SECOM’s Basic Business Areas
SECOM offers a wide range of services and ­products withthe aim of realizing its Social System Industry vision.

Static Guard Services

On-Line Security Systems

Static guard services are provided for facilities where customer needs are best
served by professionally trained on-site personnel.

Armored Car Services

Security Services
On-Line Security Systems
Commercial Use:

SECOM AXSECOM AX is an on-line security s­ ystem with advanced on-site image sensors
that incorporate microphones to enable the SECOM control center staff to checkthe subscriber’s premises by listening and viewing.
SECOM IXSECOM IX is a remote imaging security system for ­commercial facilities offering
around-the-clock services.
INTELLIGENT EMERGENCY ALERT SYSTEMThe Intelligent Emergency Alert System automatically recognizes robberies or othersuspicious situations and alerts a SECOM control center without the need foranyone to push an emergency alarm button, applying advanced image recognitionand voice processing technologies to aid in the early detection of irregularities.
SECOM DXSECOM DX is an on-line security system developed to meet the needs of shops,
offices, warehouses, factories and other commercial and industrial
establishments.
SECOM TXSECOM TX is an on-line security system for commercial ­buildings with more than
one tenant.
HANKS SYSTEMHANKS SYSTEM is an on-line security system for financial institutions, including
automated banking facilities.
SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.
SECOM LX
SECOM LX is an on-line security system that includes an access control function.
SECOM FXSECOM FX is a system that combines monitoring for intruders and fire withfacility control functions.
SECOM DRONE
Working in tandem with an on-line security system, this small autonomous
flying surveillance robot flies toward unauthorized individuals or vehicles,
choosing the optimal angles from which to capture images, which are thensent to a control center.

87

SECOM provides armored car services for the collection and t­ ransportation of
cash and other valuables.

SECOM AED Package Service

3

PoliceDept.

Dispatch SECOM
emergency response
personnel

Fire
Dept.

using
1 Alerttelecommunications
circuits

SECOM
Emergency
Depot

SECOM
Control Center

2

Alert SECOM
emergency
response personnel

Residential Use:

SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
around-the-clock ­intrusion- and fire-prevention services, emergency call services,
gas leak monitoring and medical emergency call ­services. SECOM Home Security
G-Custom combines these features with other useful services, including astorage service for important personal data and information on other services
available from Group-selected collaborating companies. Optional services­available to SECOM Home Security subscribers include the Keeping in Touchcall ­and the Keeping in Touch visiting services for seniors, both of which involve
SECOM staff checking in regularly with seniors living far away from their
loved ones.
SECURITY SYSTEMS FOR CONDOMINIUMS AND APARTMENTS
SECOM provides comprehensive building ­management functions forcondominiums and total safety with a centralized ­security sys­tem for each unit
in the building. SECOM’s menu includes services for small-scale apartments.
SECOM MY DOCTOR PLUS
SECOM My Doctor Plus is an emergency medical alert system for seniors
featuring an exclusive portable device that incorporates a GPS locator and a

Gas
Company• Alert emergency
services asnecessarycellular phone. Whether indoors or out, the device, when activated, sends anemergency signal to SECOM. If requested, SECOM dispatches emergency
response personnel. If deemed necessary, SECOM staff also contacts
emergency services and sends preregistered emergency information to thesubscriber’s device, thereby ensuring it is immediately available to ambulanceattendants and hospital staff. Other services include telephone healthconsultation. SECOM will also act as go-between with nursing care providers
for individuals who have independently contracted care services.

Large-Scale Proprietary Security Systems

TOTAX ZETATOTAX ZETA integrates networking capabilities and a security system into acomprehensive local control s­ ystem for industrial c­ omplexes and buildings.

COCO-SECOM

COCO-SECOM is an innovative system that uses signals from global
positioning system (GPS) satellites and cellular telephone base stations tolocate moving objects, such as people, vehicles and property. As an option,customers can also request to have emergency response personnel dispatchedto the location of the object or an emergency alert relayed to a p­ redetermined
telephone number.

The SECOM AED Package Service is a full-service package encompassing
leasing and maintenance of emergency lifesaving kits featuring automatedexternal defibrillators (AEDs) to non-medical professionals.

Merchandise

SECURITY CAMERA SYSTEM
This multifunctional, cost-effective security camera system provides stable
monitoring even in places where insufficient light makes clear images difficultand allows the combined use of digital and analog cameras. It is also capableof detecting attempts to disable or destroy the camera. The system offers an
optional service whereby camera images are transmitted via a network to a
SECOM data center facility for storage.
SECURILOCK SERIESThe SECURILOCK series uses identification numbers, integrated circuit (IC)pass cards and other methods to control access to restricted areas.
SESAMO SERIESThe SESAMO series comprises access-control systems for use in ­corporate
offices, factories, parking facilities and any other security-sensitive areas.
These systems employ such technologies as contactless IC pass cards,
magnetic cards, personal identification numbers, and finger veinauthentication.
TOMAHAWK SERIESThe Tomahawk series is an extensive lineup of innovative ­extinguishingsystems, including Tomahawk Mach II residential-use fire extinguisher
and Tomahawk III high-speed automated fire extinguishing system withgas suppression.
PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat­resistance and performance.
SECURIFACESECURIFACE is a residential intercom system that combines a face detection
function with SECOM Home Camera System, enhancing security for people
at home.
LASER SENSOR
Laser Sensor is an external monitoring sensor that uses a laser beam tofacilitate effective detection of intrusions over a broad area. The sensor is
flexible and can be programmed to accommodate various monitoring areas.

Fire Protection Services

Medical Services

Insurance Services

Information and Communication Related Services

Fire Alarm Systems
This business encompasses the assembly, installation and sale of a broad rangeof equipment and systems, including automatic fire alarm systems, environmental monitoring systems, and fire and smoke control systems, suited to buildingsof varying sizes and uses, from homes to large-scale ­commercial and industrial
facilities.
Fire Extinguishing Systems
SECOM offers an extensive lineup, including fire sprinklers and other water fire
extinguishing systems, foam fire extinguishing systems, dry chemical fire extinguishing systems and inert gas fire extinguishing systems, for applications­ranging from office buildings to chemical plants and tunnels.
Maintenance Services
This business centers on inspection, maintenance and repair services, as well
as around-the-clock on-line monitoring and other services provided through a­customer services center.
OthersThis category comprises the installation and maintenance of parking lot control
systems and the assembly and sale of printed circuit boards for manufacturers inother industries, including medical and electronics equipment.

HOME MEDICAL SERVICESSECOM’s medical services for patients at home include pharmaceutical services,encompassing the preparation and delivery of prescription pharmaceuticals, andhome nursing services provided through visiting nurse stations. SECOM also
provides consulting and support services for physicians opening home medicalcare clinics.
HOME-BASED PERSONAL CARE SERVICESSECOM provides patients recovering at home with caregivers to assist withpersonal hygiene, bathing, exercise and other daily activities, as well as provide
light housekeeping.
SECOM UBIQUITOUS ELECTRONIC MEDICAL REPORT (EMR)
SECOM Ubiquitous EMR is a medical report system for home medical care aimed
at clinics and small and medium-sized hospitals. The system enables the sharingof data among members of the home-care team, including the primary
physician, visiting nurse and pharmacy.
Hospi-net
Hospi-net, a remote image diagnosis support service, transmits magnetic
resonance imaging (MRI), computerized tomography (CT) and other images to
SECOM’s Hospi-net center, where d­ iagnostic experts examine them and provide
consultation to the primary physician.
MY SPOONMy Spoon is a robot that enables people with impaired upper body mobility to
eat with minimal assistance. This is the first robot of its kind in Japan.
RESIDENCES FOR SENIORS AND NURSING HOMESSECOM manages the Sacravia Seijo, Comfort Royal Life Tama, Comfort Garden
Azamino and Comfort Hills Rokko residences for seniors and the Alive Care
Home series of nursing homes.
SECOM Health Care CLUB KENKO
SECOM Health Care Club KENKO is a membership-based club that provides
access to a variety of health management services, including testing with a
PET/CT scanner. The club is offered through an alliance with Yotsuya Medical
Cube, a cutting-edge clinic in Tokyo.

SECURITY DISCOUNT FIRE POLICY
Security Discount Fire Policy is a commercial fire insurance policy that f­ eatures
reduced premiums for subscribers to commercial security systems.
SECOM ANSHIN MY HOME
SECOM Anshin My Home is a comprehensive fire insurance policy that­features reduced premiums for subscribers to home security systems.
MEDCOM
MEDCOM is an unrestricted treatment policy that covers the cost of cancer
treatment not covered by Japan’s national health insurance scheme, as well as
the patient’s portion of the cost of medical care covered by the national healthinsurance scheme. MEDCOM also provides hospital referrals and ­treatmentrelated c­ onsulting services.
SECOM ANSHIN MY CAR
SECOM Anshin My Car is a comprehensive automobile insurance policy that
includes on-site emergency services in the event of an accident, as well as
discounts for drivers without a traffic violation history or on cars equippedwith antitheft devices.

DATA CENTERS
Robust facility construction, stable electric power supplies, dependable
networks and top-grade SECOM security enable SECOM to provide safe
storage for information assets, as well as a variety of other services.
LARGE-SCALE DISASTER RESPONSE SERVICESSECOM provides solutions encompassing everything from services that
optimize companies’ preparedness for disasters to services that assist
companies when disaster strikes and during post-disaster reconstruction.
These include SECOM Safety Confirmation Service, which helps companies
confirm the safety of employees in the event of a disaster, as well as to gather
and share crucial information on conditions on the ground.
INFORMATION SECURITY SERVICESSECOM provides a variety of services designed to protect subscribers’
information against cyber attacks and other dangers, including diagnosing
and analyzing network problems, monitoring for system and network viruses
and emergency on-site response services in the event an irregularity isdetected.
CLOUD-BASED SERVICES
Capitalizing on its data center, information security, computer network andother service capabilities, SECOM provides a wide range of cloud-based
services, including SECOM Anshin Eco Document Digitization Service, whichhelps improve customers’ business processes.

SECOM Annual Report 2016

Geographic Information Services
PasCAL Series
Designed for local governments, the PasCAL series of comprehensive GIS
services facilitates the effective use of GIS in a variety of situations.
MarketPlanner Series
The MarketPlanner series uses a variety of data sorting and presentation­methods to support the efforts of growing companies to establish area
­marketing strategies.
Safe Route Mapping Service
This service helps companies ensure their employees are able to reach homesafely and assists crisis management efforts in the event of a major
earthquake. A version of this service is also available to individuals.

Real Estate and Other Services
REAL ESTATE DEVELOPMENT AND SALESSECOM offers Glorio condominiums.
Secom Home Service/Seikatsu Tasuke
SECOM Home Service is a suite of convenient lifestyle support services for
SECOM Home Security subscribers ranging from patrolling subscribers’ homes
when occupants are away to assistance with housekeeping. Seikatsu Tasuke is
a comprehensive suite of lifestyle and household support services.

SECOM Annual Report 201688

Directors, Audit and Supervisory Board Members
and Executive Officers

Audit and Supervisory Board Members

Directors

Takayuki Ito
Ryohei Komatsu
Hideki Kato*
Kenichi Sekiya*
Makoto Yasuda*

Makoto Iida

Yasuo Nakayama

FounderPresident andRepresentative Director*Outside

Executive Officers
Yasuo Nakayama

Yoichi Sugimoto

President andRepresentative Director

Executive Officer

Junzo Nakayama

Sumiyuki Fukumitsu
Executive Officer

Executive Director

Yasuyuki YoshidaKensuke Shindo
Executive Officer

Executive Director

Kenichi Furukawa

Yasufumi Kuwahara
Executive Officer

Managing Executive Officer

Junzo Nakayama

Yasuyuki Yoshida

Tatsuro Fuse

Executive Director

Executive Director

Managing Executive Officer

Masahiro Takeda

Noriyuki Fukuoka
Executive Officer

Takeshi Akagi
Executive Officer

Managing Executive Officer

Teruhisa Yoshimura

Sadahiro Sato
Executive Officer

Managing Executive Officer

Hideo Morishita

Osamu Ueda
Executive Officer

Managing Executive Officer

Tsuneo Komatsuzaki

Yoshinori Yamanaka
Executive Officer

Managing Executive Officer

Tatsuya Izumida

Ichiro Ozeki

Tatsushi Kurihara

Toshiaki Mizuno

Director

Director

Director

Managing Executive Officer

Shokichi Ishimura

Seiya Nagao
Executive Officer

Noriyuki Uematsu
Executive Officer

Managing Executive Officer

Tatsuya Izumida

Osamu Nagai
Executive Officer

Director

Ichiro Ozeki

Atsushi Komatsu
Executive Officer

Director

Tatsushi Kurihara
Director

89

Takaharu Hirose

Hirobumi Kawano

Hajime Watanabe

Outside Director

Outside Director

Outside Director

SECOM Annual Report 2016

(As of July 31, 2016)

SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Tokyo 150-0001, Japan
http://www.secom.co.jp/

Printed in Japan