AUDITED FINANCIAL STATEMENTSCONTENTSCONSOLIDATED FINANCIAL STATEMENTS .................................................................. 30
CONSOLIDATED BALANCE SHEETS.......................................................................... 30
CONSOLIDATED STATEMENTS OF INCOME............................................................. 32
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY............... 33
CONSOLIDATED STATEMENTS OF CASH FLOWS .................................................... 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................................. 35
INDEPENDENT AUDITORS’ REPORT............................................................................... 59

SECOM CO., LTD.

Annual Report 200929

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2009 and 2008

In millions of yen

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

March 31

March 31

2008

2009

Current assets:
Cash and cash equivalents (Notes 5 and 22).......................................................... ¥ 159,393 ¥ 214,577
Time deposits (Note 12)............................................................................................
8,775
8,820
Cash deposits (Note 6)..............................................................................................
56,66863,697
Short-term investments (Notes 7 and 22)...............................................................
13,8306,540
Notes and accounts receivable, trade.....................................................................
80,45788,411
Due from subscribers...............................................................................................
29,38429,947
Inventories (Note 8)..................................................................................................
96,071
118,442
Short-term receivables (Notes 12 and 20)..............................................................
15,00917,871
Allowance for doubtful accounts.............................................................................
(2,782)(1,827)
Deferred insurance acquisition costs (Note 13)......................................................
6,559
6,624
Deferred income taxes (Note 16).............................................................................
16,245
17,395
Other current assets..................................................................................................
12,932
10,041
			 Total current assets............................................................................................
492,541
580,538$ 1,626,459
89,541
578,245
141,122820,990299,837
980,316
153,153(28,388)
66,929165,765
131,960
5,025,929

ASSETS

2009

Investments and long-term receivables:
Investment securities (Notes 2 (7), 7, 12 and 22) ..................................................
Investments in affiliated companies (Note 9).........................................................
Long-term receivables (Notes 12 and 20)...............................................................
Lease deposits...........................................................................................................
Other investments.....................................................................................................
Allowance for doubtful accounts.............................................................................
			

161,668
40,072
74,962
13,213
9,943(8,940)290,918

196,688
46,81470,265
13,37011,290(8,826)329,601

1,649,673
408,898
764,918
134,827
101,459(91,224)
2,968,551

Property, plant and equipment (Notes 10, 12, 19 and 20):
Land............................................................................................................................
Buildings and improvements...................................................................................
Security equipment and control stations................................................................
Machinery, equipment and automobiles................................................................
Construction in progress..........................................................................................
			Accumulated depreciation.......................................................................................
			

86,699147,881251,01366,8286,817
559,238(299,956)
259,282

78,818143,661
244,933
71,945
5,977
545,334(293,823)
251,511884,684
1,508,990
2,561,357
681,918
69,561
5,706,510(3,060,776)
2,645,734

Other assets:
Deferred charges (Note 2 (12)).................................................................................
46,196
Goodwill (Note 11)....................................................................................................
15,440
Other intangible assets (Notes 11 and 12)..............................................................
18,921
Prepaid pension and severance costs (Note 14)....................................................
823
Deferred income taxes (Note 16).............................................................................
19,020			
100,400
			 Total assets......................................................................................................... ¥1,143,141

46,151
16,141
21,127
9,135
11,321
103,875¥1,265,525

471,388
157,551
193,071
8,398
194,082
1,024,490$11,664,704

See accompanying notes to consolidated financial statements.

30

SECOM CO., LTD.

Annual Report 2009

LIABILITIES AND SHAREHOLDERS’ EQUITY

In millions of yen

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

March 31

March 31

2008

2009

2009

Current liabilities:
Bank loans (Notes 6 and 12)..................................................................................... ¥ 78,180 ¥0,133,056
Current portion of long-term debt (Notes 12, 19 and 21)......................................
15,967
9,061
Notes and accounts payable, trade.........................................................................
28,942
30,956
Other payables..........................................................................................................
23,111
29,058Deposits received (Note 6).......................................................................................
33,47536,667
Deferred revenue......................................................................................................
42,64643,496
Accrued income taxes..............................................................................................
19,126
24,693
Accrued payrolls.......................................................................................................
23,526
22,572
Reserve for litigation loss (Note 24)........................................................................
2,415—
Other current liabilities (Notes 16, 21 and 22)........................................................
16,04917,668
			 Total current liabilities.......................................................................................
283,437
347,227$

797,755
162,929295,327
235,826
341,582
435,163
195,163240,061
24,643
163,765
2,892,214

Long-term debt (Notes 12, 19 and 21)........................................................................
Guarantee deposits received.......................................................................................
Accrued pension and severance costs (Note 14).......................................................
Deferred revenue..........................................................................................................
Unearned premiums and other insurance liabilities (Note 13).................................
Investment deposits by policyholders (Notes 13 and 21).........................................
Deferred income taxes (Note 16).................................................................................
Other liabilities..............................................................................................................
			 Total liabilities....................................................................................................

36,40432,25817,81421,30868,86986,064
1,224
5,973
553,351

44,18330,581
18,41922,28363,20587,252
10,075
5,235
628,460

371,469
329,163
181,776
217,429702,745878,204
12,49060,9485,646,438

Minority interests in subsidiaries ..............................................................................

61,06962,511

623,153

Commitments and contingent liabilities (Note 24)

Shareholders’ equity (Note 17):
Common stock:		 Authorized 900,000,000 shares;		 issued 233,288,717 shares in 2009 and 2008.....................................................
66,37866,378Additional paid-in capital.........................................................................................
79,99579,998Legal reserve.............................................................................................................
10,036
10,020Retained earnings.....................................................................................................
482,488
471,066
Accumulated other comprehensive income (loss):		 Unrealized holding losses on securities (Note 7)...............................................
(3,597)(3,137)
		 Unrealized losses on derivative instruments (Note 23).....................................
(187)
(94)
		 Pension liability adjustments (Note 14)...............................................................
(11,878)(4,726)
		 Foreign currency translation adjustments..........................................................
(19,618)(74)
			
(35,280)(8,031)
Common stock in treasury, at cost:
15,251,520 shares in 2009 and 8,323,599 shares in 2008.....................................
(74,896)(44,877)
			 Total shareholders’ equity.................................................................................
528,721574,554
			 Total liabilities and shareholders’ equity......................................................... ¥1,143,141 ¥1,265,525

SECOM CO., LTD.

677,327
816,276
102,408
4,923,347(36,704)(1,908)(121,204)(200,184)(360,000)(764,245)
5,395,113$11,664,704

Annual Report 200931

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 20092009

Net sales and operating revenue ................................................................... ¥688,771
Costs and expenses:
Cost of sales (Note 8).................................................................................... 464,154
Selling, general and administrative expense (Notes 2 (19) and 18)......... 144,270
Impairment loss on long-lived assets (Note 10).........................................
76
Impairment loss on goodwill (Note 11).......................................................
1,578
Loss on sales and disposal of property, plant and equipment, net..........
1,994

In millions of yen

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

Years ended March 31

Year ended March 31

2007

2009

¥706,695 ¥636,678$7,028,276

454,165
144,782
16
1,128
976

410,275
127,062
1,176
2,966
781

4,736,265
1,472,143
776
16,102
20,3472008

				

612,072

601,067

542,260

6,245,633				 Operating income...............................................................................

76,699105,628

94,418782,643

Other income:Interest and dividends..................................................................................
Gain on sales of securities, net (Notes 7 and 9).........................................
Gain on private equity investments............................................................
Other (Note 15)..............................................................................................

2,195
—
1,403
2,205

2,969
2,020
4,070
3,952

2,993
1,772
—
3,672

22,398—14,31622,500

				

5,803

13,011

8,437

59,214

Other expenses:
Interest...........................................................................................................
Loss on sales of securities, net (Note 7)......................................................
Loss on other-than-temporary impairment of investment securities.......
Provision for loss on litigation (Note 24)....................................................
Other (Note 15)..............................................................................................

2,019
231
8,831
2,415
5,676

2,094
—
1,912
—
4,370

1,815
—
1,026
—
4,678

20,602
2,357
90,112
24,643
57,919				

19,172

8,376

7,519

195,633				 Income before income taxes.............................................................

63,330110,263

95,336646,224

Income taxes (Note 16):
Current...........................................................................................................
Deferred.........................................................................................................

41,991(5,416)42,7694,337

40,136430

428,480(55,265)

				

36,575

47,10640,566373,215				 Income before minority interests in subsidiaries and equity				 in net income of affiliated companies ...........................................
Minority interests in subsidiaries...................................................................
Equity in net income of affiliated companies ...............................................

26,755(4,928)
8,733

63,157(6,639)5,238

54,770(4,649)5,768

273,009(50,285)
89,112¥ 61,756 ¥055,889$ 311,836

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

Years ended March 31

Year ended March 31				 Net income.......................................................................................... ¥ 30,560

2009

2008

2007

Basic net income per share (Note 2 (21))...................................................... ¥137.42¥274.51¥248.42$1.40

Cash dividends per share................................................................................ ¥ 85.00¥ 80.00¥ 60.00$0.87

See accompanying notes to consolidated financial statements.

32

SECOM CO., LTD.

Annual Report 2009

2009

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2009
In millions of yen										 Accumulated
Common					
Number of		 Additional			other comstock					sharesCommonpaid-in
Legal
Retainedprehensive
in treasury,					issuedstock
capitalreserveearnings income (loss)
at costBalance, March 31, 2006 .......................................................................
233,288,717¥66,378¥79,996¥ 9,825¥386,558¥10,689(¥44,750)
Comprehensive income:Net income..........................................................................................
————
55,889——Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding gains on securities—
			 Unrealized holding gains or losses arising during the period....
—
—
—
—
—
(1,562)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
(1,464)—
		 Unrealized losses on derivative instruments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(113)
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
30
—
		 Minimum pension liability adjustments..........................................
—
—
—
—
—
(21)
—
		 Foreign currency translation adjustments......................................
—
—
—
—
—
2,193
—
Total comprehensive income............................................................... 								Adjustments for initially applying SFAS No. 158, net of tax.....................
—
—
—
—
—
1,681
—
Cash dividends.........................................................................................
————(13,499)——
Transfer to legal reserve...........................................................................
—
—
—
98
(98)
—
—
Gain on disposal of treasury stock............................................................
—
—
2
—
—
—
—
Net changes in treasury stock..................................................................
—
—
—
—
—
—
(100)
Balance, March 31, 2007 .......................................................................
233,288,717
66,37879,998
9,923
428,850
11,433(44,850)
Cumulative effect of a change in accounting principle-adoption of
EITF 06-2, net of tax (Note 2 (16))..........................................................
————(1,227)——
Comprehensive income:Net income..........................................................................................
————
61,756——
Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding losses on securities—
			 Unrealized holding gains or losses arising during the period....
—
—
—
—
—
(11,034)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
(204)
—
		 Unrealized losses on derivative instruments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(54)
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
13
—
		 Pension liability adjustments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(5,564)—
			 Less: Reclassification adjustment for gains or losses			realized in net income.....................................................
—
—
—
—
—
(434)
—
		 Foreign currency translation adjustments......................................
—
—
—
—
—
(2,187)—
Total comprehensive income...............................................................
							Cash dividends.........................................................................................
————(17,998)——
Changes in scope of consolidation...........................................................
—
—
—
—
(218)
—
—
Transfer to legal reserve...........................................................................
—
—
—
97
(97)
—
—
Gains and losses on disposal of treasury stock........................................
—
—
0
—
—
—
—
Net changes in treasury stock..................................................................
—
—
—
—
—
—
(27)
Balance, March 31, 2008 .......................................................................
233,288,717
66,37879,99810,020471,066(8,031)(44,877)
Comprehensive income:Net income..........................................................................................
————
30,560——
Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding losses on securities—
			 Unrealized holding gains or losses arising during the period....
—
—
—
—
—
(10,522)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
10,062—
		 Unrealized losses on derivative instruments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(157)
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
64
—
		 Pension liability adjustments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(7,043)—
			 Less: Reclassification adjustment for gains or losses			realized in net income.....................................................
—
—
—
—
—
(109)
—
		 Foreign currency translation adjustments......................................
—
—
—
—
—
(19,544)—
Total comprehensive income...............................................................
							Cash dividends.........................................................................................
————(19,122)——
Transfer to legal reserve...........................................................................
—
—
—
16
(16)
—
—
Gains and losses on disposal of treasury stock........................................
—
—
(3)
—
—
—
—
Net changes in treasury stock..................................................................
—
—
—
—
—
—
(30,019)
Balance, March 31, 2009 .......................................................................
233,288,717¥66,378¥79,995¥10,036¥482,488(¥35,280)(¥74,896)

Total¥508,696
55,889(1,562)(1,464)
(113)
30
(21)
2,193
54,952
1,681(13,499)—2(100)
551,732(1,227)61,756(11,034)
(204)
(54)
13
(5,564)(434)(2,187)42,292(17,998)
(218)
—
0
(27)
574,554
30,560(10,522)
10,062(157)
64(7,043)(109)(19,544)
3,311(19,122)—(3)(30,019)¥528,721

Translation into thousands of U.S. dollars (Note 3)										 Accumulated
Common							 Additional			other comstock						
Commonpaid-in
Legal
Retainedprehensive
in treasury,						
stock
capitalreserveearnings income (loss)
at costBalance, March 31, 2008....................................................................................................
$677,327$816,306 $102,245$4,806,796($ 81,949)($457,929)
Comprehensive income:Net income......................................................................................................................
———
311,836——
Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding losses on securities—
			 Unrealized holding gains or losses arising during the period................................
————(107,367)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income................................................................................
————
102,673—
		 Unrealized losses on derivative instruments—
			 Unrealized gains or losses arising during the period.............................................
————(1,602)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income................................................................................
—
—
—
—
653
—
		 Pension liability adjustments—
			 Unrealized gains or losses arising during the period.............................................
————(71,867)—
			 Less: Reclassification adjustment for gains or losses			realized in net income.................................................................................
————(1,112)—
		 Foreign currency translation adjustments..................................................................
————(199,429)—
Total comprehensive income...........................................................................................							Cash dividends.....................................................................................................................
———(195,122)——
Transfer to legal reserve.......................................................................................................
—
—
163
(163)
—
—
Gains and losses on disposal of treasury stock....................................................................
—
(30)
—
—
—
—
Net changes in treasury stock..............................................................................................
—
—
—
—
—
(306,316)
Balance, March 31, 2009 ...................................................................................................
$677,327$816,276 $102,408$4,923,347($360,000)($764,245)

Total$5,862,796
311,836(107,367)
102,673(1,602)653(71,867)(1,112)(199,429)
33,785(195,122)—(30)(306,316)$5,395,113

See accompanying notes to consolidated financial statements.
SECOM CO., LTD.

Annual Report 200933

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2009

2009

In millions of yen

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

Years ended March 31

Year ended March 31

2008

2007

Cash flows from operating activities:
Net income.......................................................................................................................... ¥ 30,560 ¥ 61,756 ¥ 55,889
Adjustments to reconcile net income to net cash provided
by operating activities—
		 Depreciation and amortization, including amortization of deferred charges............
54,62558,19458,248
		 Accrual for pension and severance costs, less payments..........................................
(5,313)(4,083)(2,972)
		 Deferred income taxes...................................................................................................
(5,416)4,337
430
		 Loss on sales and disposal of property, plant and equipment, net...........................
1,994
976
781
		 Impairment loss on long-lived assets (Note 10)..........................................................
76
16
1,176
		 Write-down on real estate inventories (Note 8)...........................................................
8,366
—
—
		 Gain on private equity investments..............................................................................
(1,403)(4,070)—		 Provision for loss on litigation (Note 24)......................................................................
2,415
—
—
		 Impairment loss on goodwill (Note 11)........................................................................
1,578
1,128
2,966
		 Gain on sales of securities, net.....................................................................................
(299)(4,593)(5,715)
		 Loss on liquidation of subsidiaries...............................................................................
32
485—
		 Loss on other-than-temporary impairment of investment securities........................
19,5142,562
1,357
		 Equity in net income of affiliated companies...............................................................
(8,733)(5,238)(5,768)
		 Minority interests in subsidiaries..................................................................................
4,928
6,639
4,649
		 Changes in assets and liabilities, net of effects from acquisitions and disposals:			 (Increase) decrease in cash deposits........................................................................
7,030
11,632(10,142)			 (Increase) decrease in receivables and due from subscribers, net of allowances....
8,525(4,766) (13,798)
			 (Increase) decrease in inventories............................................................................
10,099(19,267) (17,264)
			 Increase in deferred charges..................................................................................... (15,972)(16,336) (18,267)
			 Increase (decrease) in deposits received.................................................................
(3,136)(14,023)
9,022
			 Increase (decrease) in deferred revenue..................................................................
(1,037)1,468
2,137
			 Increase (decrease) in accrued income taxes..........................................................
(5,530)(332)
1,697
			 Increase in guarantee deposits received..................................................................
1,811
329
2,318
			 Increase in unearned premiums and other insurance liabilities............................
5,664
4,939
4,936
			 Other, net.....................................................................................................................
(2,968)
10,820(3,794)2009$ 311,836
557,398(54,214)(55,265)
20,347776
85,367(14,316)
24,643
16,102(3,051)
327
199,122(89,112)50,28571,73586,990103,051(162,980)(32,000)(10,582)(56,429)
18,48057,796(30,286)				 Net cash provided by operating activities............................................................

107,410

92,57367,886

1,096,020

Cash flows from investing activities:
Increase in time deposits...................................................................................................
Proceeds from sales of property, plant and equipment..................................................
Payments for purchases of property, plant and equipment...........................................
Proceeds from sales and redemptions of investment securities...................................
Payments for purchases of investment securities...........................................................
(Increase) decrease in short-term investments................................................................
Acquisitions, net of cash acquired (Note 4).....................................................................
Payments for investments in affiliated companies (Note 9)...........................................
(Increase) decrease in short-term receivables, net..........................................................
Payments for long-term receivables.................................................................................
Proceeds from long-term receivables...............................................................................
Other, net.............................................................................................................................

(12)
206
(44,790)
60,118(57,133)(3,317)(1,498)—87(6,796)
7,160(3,944)(1,612)(2,425)
4,277
3,919(45,332) (46,378)
87,439 132,923(99,262) (103,242)
6,397
32,548(317)
4,648(1,741)(5,158)(1,207)(474)(3,773)(6,898)6,581
15,740(3,557)(3,167)

(122)
2,102
(457,041)
613,449(582,990)(33,847)(15,286)—
888(69,347)
73,061(40,245)				 Net cash provided by (used in) investing activities.............................................

(49,919)(52,107)

22,036(509,378)

Cash flows from financing activities:
Proceeds from long-term debt..........................................................................................
Repayments of long-term debt.........................................................................................
Increase (decrease) in bank loans, net..............................................................................
Decrease in investment deposits by policyholders.........................................................
Dividends paid....................................................................................................................
Increase in treasury stock, net...........................................................................................
Other, net.............................................................................................................................

11,396(13,411)(55,161)(1,188)(19,122)(30,019)(2,412)

12,955(12,792)
6,075(6,109)(17,998)(27)(1,430)12,154(52,269)
20,687(94,424)(13,499)
(100)
(920)

116,286(136,847)(562,867)(12,122)(195,122)(306,316)(24,614)(19,326) (128,371)(1,121,602)

				 Net cash used in financing activities.................................................................... (109,917)
Effect of exchange rate changes on cash and cash equivalents . .....................................

(2,758)222

620(28,142)

Net increase (decrease) in cash and cash equivalents ......................................................
Cash and cash equivalents at beginning of year . ..............................................................

(55,184)
214,577

21,362
193,215(37,829)
231,044(563,102)
2,189,561¥214,577 ¥193,215$1,626,459

Cash and cash equivalents at end of year............................................................................ ¥159,393
See accompanying notes to consolidated financial statements.

34

SECOM CO., LTD.

Annual Report 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2009

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the areas of security services,
fire protection services, medical services, insurance services,
geographic information services, real estate development
and sales, and information and communication related andother services. With these services combined, the Company
is focusing on its “Social System Industry,” a network ofintegrated systems and services, targeted at the needs ofpeople and business.
The Company’s principal business activities are security
services, including on-line centralized security services forcommercial and residential premises, static guard services,armored car services for cash collection and deposit, andthe development, manufacturing and sale of various security
equipment. The Company has also been diversifying theoperation of its services covering: fire protection services,
including automatic fire alarm systems and fire extinguishing systems; home and other medical services; non-life
insurance services; geographic information services using
geographic information system (“GIS”) and surveying andmeasuring technology; real estate development and sales,
focusing on development and sale of condominiums thatreinforce security; and information and communication
related services, centered on information security services
and the provision of comprehensive information networks
designed to assist people and companies in the event of amajor disaster; lease of real estate and other services.
2. Significant Accounting Policies
The parent company and its Japanese subsidiaries­maintain their records and prepare their statutory financial­statements in accordance with accounting principles
generally accepted in Japan. Certain adjustments
and reclassifications have been incorporated in theaccompanying financial statements to ­conform withaccounting principles generally accepted in the United Statesof America. These adjustments were not recorded in thestatutory books of account.
Significant accounting policies used in the preparation of
the accompanying consolidated financial statements are
summarized below:(1) Basis of Consolidation and Investments in Affiliated­Companies
The consolidated financial statements include the accountsof the parent company and those of its majority owned­subsidiaries. The consolidated financial statements also
include variable interest entities to which the Company is theprimary beneficiary. All significant intercompany transactions
and accounts have been eliminated in consolidation.
Investments in 20 to 50 percent owned companies, inwhich the ability to exercise significant influence exists, areaccounted for under the equity method. Consolidated income
includes the Company’s current equity in the net income ofaffiliated companies, after elimination of intercompany profits.
The excess of cost over underlying identifiable net assets at
acquisition dates of investments in subsidiaries and affiliatedcompanies is recorded as goodwill.

On occasion, a consolidated subsidiary or affiliatedcompany accounted for using the equity method may issue
its shares to third parties as either a public or private offeringor upon ­conversion of convertible bonds to common stock at
amounts per share in excess of or less than the Company’s
average per share carrying value. With respect to suchtransactions, where the sale of such shares is not a part of abroader corporate reorganization contemplated or plannedby the Company, the resulting gains or losses arising fromthe change in ownership interest are recorded in income forthe year the transaction occurs.
(2) Consolidation of Variable Interest Entities
In December 2003, the Financial Accounting Standards
Board (“FASB”) issued FASB Interpretation No. 46 (revised
December 2003) (“FIN No. 46R”), “Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51.” FIN No.
46R addresses the consolidation and ­disclosure by business­enterprise of a variable interest entity (“VIE”) as definedin the Interpretation. FIN No. 46R requires that the primary
beneficiary—a party that absorbs a majority of the entity’s
expected loss and receives a majority of the entity’s expected
residual returns, or both, as a result of holding variable­interests—consolidates the VIE and an enterprise that holds­significant variable interests but is not the ­primary beneficiary discloses certain required information about the VIE. FIN
No. 46R was effective immediately for all new VIEs created or
acquired after January 31, 2003. For VIEs created or acquired
prior to February 1, 2003, FIN No. 46R was e­ ffective for theCompany on April 1, 2004.
The Company provides loans and guarantees to­organizations managing hospitals and health care-related
institutions and to a PFI (Private Finance Initiative)
organization which was established to build, maintain andoperate correctional facilities. Certain organizations are
considered as VIEs under FIN No. 46R.
Total assets held by VIEs to which the Company is theprimary beneficiary were ¥16,594 million ($169,327 thousand)and ¥17,284 million at March 31, 2009 and 2008, respectively.
Total assets held by VIEs to which the Company holds­significant variable interests but is not the primary beneficiaryat March 31, 2009 and 2008 were ¥46,654 million ($476,061
thousand) and ¥45,889 million, respectively. The Company’s
maximum exposure to losses related to VIEs at March 31,
2009 and 2008 were ¥9,794 million ($99,939 thousand) and¥9,164 million, r­ espectively.
The Company also provided loans and guarantees to realestate investment companies. Certain investment companies
were considered as VIEs under FIN No. 46R. In September
2006, the Company acquired 100% ownership of these VIEs
and consolidated as its subsidiaries. There are no such VIEs
to which the Company holds significant variable interests but
was not primary
beneficiary at March 31, 2009.
­

SECOM CO., LTD.

Annual Report 200935

CONSOLIDATED FINANCIAL STATEMENTS(3) Revenue Recognition
The Company generates revenue principally through salesof security services, merchandise and software, and insurance
services under separate contractual arrangements. The
Company recognizes revenue when persuasive evidence of anarrangement exists, delivery has occurred or services havebeen rendered, title and risk of loss have been transferred tothe customer, the sales price is fixed or determinable, andcollectibility is probable.
Revenue from security services is recognized over thecontractual period or, in the case of specific services, whensuch services are rendered. Subscribers are generally
requested to prepay a portion of service charges which arecredited to deferred revenue and taken into income ratably
over the ­covered service period. Revenue from installation
services of security equipment related to on-line centralized
security ­services is deferred and recognized over thecontractual period of security services after completion of theinstallation. The related installation costs are also deferred
and amortized over the c­ ontractual period (Note 2 (12)).
The Company enters into arrangements with multiple
elements, which may include any combination of security
equipment, installation and security service. The Company
allocates revenue to each element based on its relative fairvalue if such ­element meets criteria for treatment as a­separate unit of accounting as prescribed in the Emerging
Issues Task Force (“EITF”) No. 00-21, “Accounting for
Revenue Arrangement with Multiple Deliverables.”Otherwise, revenue is deferred until the undelivered­elements are fulfilled as a single unit of accounting.
Revenue from sales of merchandise and software is­recognized when the merchandise and software are received
by the customer and, in the case of installations, when such
installations are completed.
Revenue from construction contracts for fire protection
services is recognized when constructions are completed.
Revenue from long-term contracts for geographic­informa­tion services is recognized under the percentageof-­completion method.
Property and casualty insurance premiums are earned­ratably over the terms of the related insurance contracts.
Unearned ­premiums are earned ratably over the terms of theunexpired portion of premiums written.
Revenue from sales of real estate is recognized when theownership of real estates are transferred to the customers.
Revenue from sales of equipment under sales-type leases
is recognized at the inception of the lease. Unearned incomeon sales-type leases and direct-financing leases is recognizedover the life of each respective lease using the interest
method. Leases not qualifying as sales-type leases or directfinancing leases are accounted for as operating leases andthe related ­revenue is recognized over the lease term.
Taxes collected from customers and remitted to­governmental authorities on revenue-producing transactions
are accounted for on a net basis and therefore are excluded
from net sales and operating revenue in consolidated­statements of income.

36

SECOM CO., LTD.

Annual Report 2009

(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 effect at year-end and all income and expense
accounts are translated at average rates of exchange
during the year. The resulting translation adjustments areaccumulated and reported as part of other comprehensive
income (loss).
Foreign currency receivables and payables of the Company
are translated into yen at the rate in effect at the balance
sheet date and the resulting translation gains and losses are
credited or charged to income for the year.
(5) Cash Equivalents
For the purpose of the statements of cash flows, theCompany considers all highly liquid investments purchasedwith initial 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-tomaturity” securities are those securities in which the Company
has the ability and intent to hold the security until maturity. All
securities not included in “trading” or “held-to-maturity” areclassified as “available-for-sale” securities. Market­able debt
and equity securities which are classified as “available-forsale” are recorded at fair value. Unrealized holding gains
and losses on securities classified as “available-for-sale”
are reported as part of other comprehensive income (loss),
net of tax. Debt securities classified as “held-to-maturity”
are reported at a
­ mortized 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 carrying amount to fair value.
The impairment is charged to income and a new cost basis
for the securities is established. To determine whether an
impairment is other-than-temporary, the Company considers
the length of time and extent to which the market value ofthe security has been less than its original cost, the financial
condition, other specific factors affecting the market value,
deterioration of the credit condition of the issuers, andwhether 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.
Other investments in non-public companies arerecorded at cost as fair value is not readily determinable.
The Company periodically evaluates the values of otherinvestments in ­non-public companies for possible
impairment by taking into consideration the financial andoperating conditions of the issuer, the general market
conditions in the issuer’s industry and the period of thedecline in the estimated fair value and other relevant factors.
If the impairment is determined to be other-than-temporary,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 to income.

(7) Private Equity Investments
The Company accounts for private equity investmentsin accordance with “AICPA Audit and Accounting Guide:
Investment Companies,” in which investments are accounted
for at fair value based on the Company’s assessment of eachunderlying investment. The investments, by their nature, havelittle or no price transparency. Investments are initially carriedat cost as an approximation of fair value. Adjustments tocarrying value are made if there is evidence of a change infair value. Downward adjustments are also made, in theabsence of third-party transactions, if it is determined thatthe expected realizable value of the ­investment has declined
below the carrying value.
The carrying value of private equity investments was¥20,861 million ($212,867 thousand) and ¥33,153 million atMarch 31, 2009 and 2008, 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 information andother related products, are stated at the lower of cost or
market. Cost is determined, in the case of real estate, basedon the specific identification method and, in the case of otherinventories, primarily using the ­moving-­average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful
accounts to ensure trade and other receivables are notoverstated 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 pastdue, macroeconomic conditions, significant one-time eventsand historical experience. An additional reserve for individual
accounts is recorded when the Company becomes awareof a customer’s inability to meet its financial ­obligations,such as in the case of bankruptcy filings or deteriorationin the customer’s operating results or financial position. If
circumstances related to customers change, estimates of the­recoverability of receivables would be further adjusted.
(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring
new insurance policies are deferred and are being amortizedprincipally over the premium-paying period of the related­insurance policies applying a percentage relationship of cost
incurred to premiums from contracts issued to applicable
unearned ­premiums throughout the period of the contract.
(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant­leasehold improvements, are carried at cost and depreciatedat rates based on the estimated useful lives of the assets.
From April 1, 2008, depreciation is computed using thestraight-line method for assets except security equipment
and control stations. Prior to April 1, 2008, these assets weredepreciated primarily using the declining-balance method.
Security equipment and control stations are depreciated byusing 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 ¥33,417 million ($340,990 thousand), ¥37,241
mil­lion and ¥38,719 million for the years ended March 31,
2009, 2008 and 2007, respectively. Maintenance, repairs andrenewals are charged to income as incurred.
The estimated useful lives of depreciable assets areas ­follows:		 Buildings
22 to 50 years
		 Security equipment and control stations
5 to 8 years
		 Machinery, equipment and automobiles
2 to 20 years
Effective April 1, 2008, the Company adopted thestraight-line method of depreciation for assets except
security equipment and control stations. In accordancewith Statement of Financial Accounting Standards (“SFAS”)
No. 154, “Accounting Changes and Error Corrections, areplacement of APB Opinion No. 20 and FASB Statement
No. 3,” this change in depreciation method is treated ona prospective basis as a change in estimate. Prior period
results have not been restated. The Company has unified its
accounting policy within the Group, as it believes that thechange of depreciation method for assets except security
equipment and control stations better reflects the pattern ofconsumption of the future benefits to be derived from thoseassets being depreciated and provides a better matching ofcosts and revenues over the assets’ estimated useful lives. The
effect of the change in depreciation method for the year ended
March 31, 2009, was to reduce depreciation expense by ¥2,203
million ($22,480 thousand) and increase net income and basic
net income per share by ¥1,336 million ($13,633 thousand)and ¥6.01 ($0.06), respectively.
The Company recognizes an asset retirement liability if
the fair value of the obligation can be reasonably estimated.
Asset retirement obligations include those for which anentity has a legal obligation to perform an asset retirement
activity, however, the timing and/or method of settling theobligation are conditional on a future event that may or may
not be within the control of the entity.
(12) Deferred Charges
Deferred charges primarily consist of costs related to
installation services of security equipment related to on-line
centralized security services. The installation costs aredeferred and amortized using the straight-line method overthe contractual period of security services after completionof the installation. Amortiza­­tion expense was ¥15,359 million($156,724 thousand), ¥14,953 million and ¥14,474 million forthe years ended March 31, 2009, 2008 and 2007, respectively.

SECOM CO., LTD.

Annual Report 200937

CONSOLIDATED FINANCIAL STATEMENTS(13) Impairment or Disposal of Long-Lived Assets
In accordance with SFAS No. 144, “Accounting for
Impairment or Disposal of Long-Lived Assets,” 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 or changes in circumstances ­indicated that the carrying
amount may not be recoverable. Long-lived assets to beheld and used are reviewed for impairment by comparing
the carrying amount of the assets with their estimatedfuture undiscounted cash flows. If it is determined that an
impairment loss has occurred, the loss would be recognized
during the period. The impairment loss would be calculated
as the difference between the assets’ carrying amount andthe fair value. Long-lived assets that are to be disposed ofother than by sale are considered held and used until they
are disposed of. Long-lived assets that are to be disposed ofby sale are reported at the lower of their ­carrying amount orfair value less cost to sell. Reductions in carrying amount are­recognized in the period in which the long-lived assets areclassified as held for sale.
(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fairvalue of assets of business acquired. Pursuant to SFAS
No. 142, “Goodwill and Other Intangible Assets,” goodwill
and i­ntangible assets acquired in a purchase businesscombination and determined to have an indefinite useful life
are not amortized, but instead tested for impairment at least
annually. SFAS No. 142 also requires that intangible assets
with estimable ­useful lives be amortized over their respective
estimated useful lives to their estimated residual ­values, andreviewed for impairment in accordance with SFAS No. 144.
The Company conducts its annual impairment test at the endof each fiscal 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 theremaining contract period. Other insurance liabilities consist
principally of liabilities for unpaid claims and adjustment
expenses, which are estimates of payments to be made onreported claims and incurred but not reported claims, which
are computed based on past experience for unpaid losses.
(16) Compensated Absences
In June 2006, the FASB ratified the Emerging Issues Task
Force (“EITF”) consensus on EITF Issue No. 06-2 (“EITF 06-2”),“Accounting for Sabbatical Leave and Other Similar Benefits
Pursuant to FASB Statement No. 43.” EITF 06-2 provides
guidance for an accrual of compensated absences that requirea minimum service period but have no increase in the benefit
even with additional years of service. On April 1, 2007, theCompany adopted EITF 06-2 and recorded an increase in the
beginning balance of accrued payrolls of ¥2,265 million andan increase in the beginning balance of deferred income taxes(Other assets) of ¥846 million, with a decrease in the beginningbalance of retained earnings of ¥1,227 million.

38

SECOM CO., LTD.

Annual Report 2009(17) 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 the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases,
and operating loss carryforwards. Deferred tax assets andliabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those
temporary differences and carryforwards are expected tobe realized or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized in incomein the period that includes the enactment date. Valuation
allowances are recorded to reduce deferred tax assets when
it is more likely than not that a tax benefit will not be realized.
On April 1, 2007, the Company adopted FASB Interpretation
No. 48 (“FIN No. 48”), “Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement No. 109,” which
requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return.
The Company recognizes interest and penalties accrued
related to unrecognized tax benefits in income taxes in the
consolidated statement of income.
(18) Research and Development
Research and development costs are charged to income
as incurred.
(19) Advertising Costs
Advertising costs are charged to income as incurred,
except for the costs related to insurance policies. Advertisingcosts for acquiring new insurance policies are deferred andamortized as part of insurance acquisition costs. Advertisingexpenses included in selling, general and administrative
expenses for the years ended March 31, 2009, 2008 and 2007
were ¥5,416 million ($55,265 thousand), ¥5,996 million and¥5,348 million, respectively.
(20) Derivative Financial Instruments
The Company accounts for derivative financial instrumentsin accordance with SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended.
The Company recognizes all derivative financial
instruments in the consolidated financial statements atfair value regardless of the purpose or intent for holding
them. Changes in the fair value of derivative financial
instruments are either recognized periodically in income or inshareholders’ equity as a component of 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 the portion of the change in the fair value of thehedged item that relates to the hedged risk. Changes in thefair value of derivative financial instruments accounted for asa cash flow hedge, to the extent it is effective as a hedge, arerecorded in other comprehensive income (loss), net of tax.
Changes in the fair value of derivative financial instruments
not qualifying as a hedge are reported in income.

The Company meets the documentation requirements
which include their risk management objective and strategy
for undertaking various hedge transactions. In addition,formal assessment is made at the hedge’s inception andperiodically on an on-going basis, as to whether thederivatives used in hedging activities are highly effective
in off-setting changes in fair values or cash flow of hedged
items. Hedge accounting is discontinued for ineffective
hedges, if any. Discontinued hedges are recognized incurrent earnings.
(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 for the years ended March 31, 2009, 2008
and 2007 was 222,378 thousand shares, 224,967 thousand
shares and 224,974 thousand shares, respectively. There
were no potentially dilutive shares outstanding during theyears ended March 31, 2009, 2008 or 2007.
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 and assumptions relating to the reported amountsof assets and liabilities, the disclosures of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the period. Significant items subject to such estimatesand assumptions include the carrying amounts of inventories, investment securities, other investments, property, plantand equipment, goodwill and other intangible assets; valuation allowances for receivables and deferred income taxes;
valuation of derivative instruments; assets and obligations
related to employee benefits; income tax uncertainties; andother contingencies.
(23) Recent Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair
Value Measurements.” SFAS No. 157 defines fair value,establishes a framework for measuring fair value, andexpands disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007, and was adopted by the Company inthe fiscal year beginning April 1, 2008. In February 2008,
the FASB issued Staff Positions (“FSP”) No. FAS 157-1,“Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification
or Measurement under Statement 13” and No. FAS 157-2,“Effective Date of FASB Statement No. 157,” which delays
the effective date of SFAS No. 157 for all nonfinancial assets
and nonfinancial liabilities, except those that are recognizedor disclosed at fair value in the financial statements on arecurring basis (at least annually) and remove certain leasingtransactions from its scope. The Company has not applied

the provisions of SFAS No. 157 to the impairment of long-lived
assets and goodwill that have been recognized or disclosed atfair value for the year ended March 31, 2009. The adoption did
not have a material impact on the Company’s consolidated
results of operations or financial positions.
In February 2007, the FASB issued SFAS No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities—
Including an amendment of SFAS No. 115.” SFAS No. 159
provides companies with an option to report selected financial
assets and liabilities at fair value. Unrealized gains and losses
on items for which the fair value option has been elected arerecognized in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007, and was adopted
by the Company in the fiscal year beginning April 1, 2008.
The adoption of SFAS No. 159 did not have an impact on the
Company’s consolidated results of operations and financial
condition as the Company did not elect to report financial
assets and liabilities under the fair value option.
In December 2007, the FASB issued SFAS No. 141(R),“Business Combinations.” SFAS No. 141(R) establishes
principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrollinginterest in the acquiree and the goodwill acquired. SFAS
No. 141(R) also establishes disclosure requirements to­enable the evaluation of the nature and financial effects ofthe business combination. SFAS No. 141(R) is effective forfiscal years beginning after December 15, 2008 and isrequired to be adopted by the Company in the fiscal year
beginning April 1, 2009. The effect of adopting SFAS No. 141(R)will depend on the nature and significance of any acquisitions
subject to SFAS No. 141(R).
In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51.” SFAS No. 160
requires that the noncontrolling interest in the equity of a
subsidiary be accounted for and reported as equity, provides
revised guidance on the treatment of net income and losses
attributable to the noncontrolling interest and changes inownership interests in a subsidiary. SFAS No. 160 also
requires additional disclosures that identify and distinguishbetween the interests of the controlling and noncontrolling
owners. SFAS No. 160 is effective for fiscal years beginning
after December 15, 2008 and is required to be adopted by theCompany in the fiscal year beginning April 1, 2009. The effectof adopting SFAS No. 160 will depend on the nature andsignificance of any transactions subject to SFAS No. 160.
In December 2008, the FASB issued FSP FAS No. 132(R)-1(“FSP 132R-1”), “Employers’ Disclosures about Postretirement
Benefit Plan Assets.” FSP 132R-1 requires additional disclosuresabout assets held in an employer’s defined benefit pension
or other postretirement plan. FSP 132R-1 is effective for fiscal
years ending after December 15, 2009 and is required to be
adopted by the Company in the fiscal year ending March 31,
2010. The Company is currently evaluating the requirements of
the additional disclosures, and does not expect the adoption of
FSP 132R-1 to have a material impact on its consolidated resultsof operations or financial positions.

SECOM CO., LTD.

Annual Report 200939

CONSOLIDATED FINANCIAL STATEMENTSIn April 2009, the FASB issued FSP FAS No. 115-2 and 124-2,“Recognition and Presentation of Other-Than-Temporary
Impairments” (“FSP 115-2 and 124-2”). FSP 115-2 and 124-2
revises the recognition and presentation requirements forother-than-­temporary impairments for debt securities, andcontains additional disclosure requirements related to debt
and equity securities. FSP 115-2 and 124-2 is effective forfiscal years ending after June 15, 2009 and is required to be
adopted by the Company in the fiscal year ending March 31,
2010. It is not anticipated that the adoption will have a material
impact on the Company’s consolidated results of operations
or financial position.
In June 2009, the FASB issued SFAS No. 167, “Amendments
to FASB Interpretation No. 46(R).” This statement requires
reporting entities to evaluate former QSPEs for consolidation,changes the approach to determining a VIE’s primary
beneficiary from a mainly quantitative assessment to an
exclusively qualitative assessment designed to identify acontrolling financial interest, and increases the frequency of
required reassessments to determine whether a company is
the primary beneficiary of a VIE. SFAS 167 is effective forfiscal years beginning after November 15, 2009. Earlier
application is prohibited. SFAS 167 will be adopted by theCompany in the fiscal year beginning April 1, 2010. The
Company is currently evaluating the effect of adopting SFAS
167 on its consolidated financial statements.
(24) Reclassifications
The accompanying consolidated financial statements forthe years ended March 31, 2008 and 2007 have been­reclassified to conform to the presentation used for the year
ended March 31, 2009.
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 therate of ¥98=US$1, the rate ­prevailing on the Tokyo Foreign
Exchange Market on March 31, 2009. These ­translations
should not be construed as representing that the yenamounts actually represent, or have been or could be
converted into U.S. dollars at that rate.
4. Acquisition
In December 2006, the Company acquired 18,500,000
newly issued shares—equivalent to 30.8 percent of
total outstanding common stocks—of Nohmi Bosai Ltd.
(“Nohmi Bosai”), listed on the First Section of the Tokyo
Stock Exchange for an aggregate value of ¥14,060 million.
Nohmi Bosai operates automatic fire alarms, fire

40

SECOM CO., LTD.

Annual Report 2009

extinguishing and other fire protection systems. As aresult of this new share acquisition, the Company owns
50.4 percent of the total outstanding ­common stocks ofNohmi Bosai. The operating results of Nohmi Bosai and its
subsidiaries (collectively, “Nohmi Bosai group”) have been
included in the consolidated financial statements since thedate of acquisition. The Company has been in an alliancewith Nohmi Bosai, which had been accounted for under theequity method before this new share acquisition. Purpose ofthis acquisition is to reinforce its alliance with Nohmi Bosai
by integrating the Company’s expertise in security systems
with Nohmi Bosai’s fire protection technologies.
The value of the transaction was determined based on the
average closing price of Nohmi Bosai’s common stocks on
the Tokyo Stock Exchange over the one month period (fromOctober 23, 2006 to November 21, 2006). Price per sharewas ¥760, which represents a 5.6 percent discount from theaverage share price.
The following table summarizes the estimated fair valuesof the assets acquired and liabilities assumed at the date ofacquisi­tion. The excess of the fair value of acquired net
assets over cost was deducted on a pro rata basis to all
acquired assets except financial assets other than­investments accounted for under the equity method,deferred tax assets, prepaid pension and severance costs,
and any other current assets.
		In millions of yen

Cash and cash equivalents........................................
Receivables and othercurrent assets............................................................
Investments andlong-term receivables...............................................
Property, plant and equipment..................................
Intangible assets.........................................................
Total assets acquired..............................................
Current liabilities.........................................................
Other liabilities............................................................
Total liabilities assumed.........................................
Minority interests in subsidiaries..............................
Net assets acquired................................................

¥17,513
41,991
9,015
5,973
4,769
79,26127,001
7,757
34,758124¥44,379

Substantially all of the trademarks (including trade names)
assigned for ¥1,879 million out of total intangible assets
acquired for ¥4,769 million are not subject to amortization.
¥2,890 million of acquired intangible assets were assigned
to assets subject to amortization, which have a weightedaverage useful life of approximately 16 years, including
customer contracts and related customer relationships of¥1,908 million with a 20-year weighted-average useful life.

The following unaudited pro forma information shows
the Company’s consolidated results of operations for theyear ended March 31, 2007 as though Nohmi Bosai group
had been consolidated at the beginning of the year.
Unaudited
In millions of yen
Year ended March 31
2007

Pro forma net sales and operating revenue....
Pro forma net income........................................

¥686,429
56,090
UnauditedIn yenYear ended March 31
2007

Pro forma basic net income per share.............

¥249.32

The unaudited pro forma data is not necessarily indicativeof the Company’s consolidated results of operations thatwould actually have been reported if the transaction in fact
had occurred at the beginning of the year, and is not necessarily representative of the Company’s consolidated resultsof ­operations for any future period.

6. Cash Deposits
The Company operates cash collection and deposit services
for financial institutions relating to cash dispensers locatedoutside of financial institution facilities and also operates cash
collection service for entities other than financial institutions.
Cash deposit balances of ¥56,668 million ($578,245 thousand)and ¥63,697 million at March 31, 2009 and 2008, respectively,
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 through bank overdrafts
and deposits. Bank loans and deposits received, which relate
to these operations, were ¥26,894 million ($274,429 thousand)and ¥29,084 million ($296,776 thousand), respectively, atMarch 31, 2009, and ¥30,402 million and ¥32,619 million,
respectively, at March 31, 2008. As part of its fee arrangement,
the Company is reimbursed for the interest cost of therelated overdrafts.
7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(non-current) include debt and equity securities. The related
aggregate fair value, gross unrealized gains, gross unrealized
losses and cost pertaining to “available-for-sale” and “heldto-maturity” investments at March 31, 2009 and 2008 wereas ­follows:

5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2009 and 2008
were comprised as follows:

In millions of yen
March 31, 2009
Gross unrealized		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2009

¥100,327 ¥149,874
19,609 42,936
36,500 19,000
2,957
2,767
¥159,393 ¥214,577$1,023,745
200,092
372,449
30,173$1,626,459

2009

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

Investment securities include commercial papers andmoney management funds. These agreements mature within
three months and their carrying values approximate ­fairvalue. The Company has not experienced any losses throughdefault of the financial institutions and does not ­anticipate
default of any outstanding agreements.

Cost

Short-term investments:
Available-for-sale:		 Equity securities........ ¥710
		 Debt securities...........
11,962
Held-to-maturity:
		 Debt securities...........
1,485
		
¥ 14,157
Investment securities:
Available-for-sale:		 Equity securities........ ¥ 43,221
		 Debt securities...........
84,918
Held-to-maturity:
		 Debt securities...........
6,232
		¥134,371

Gains

LossesFair value

—
22

¥ 133
216

¥

2
24

—
¥ 349

1,487
¥ 13,832¥2,408534¥3,8403,380¥ 41,789
82,072—¥2,942102¥7,3226,130¥129,991¥¥

SECOM CO., LTD.

Annual Report 2009

577
11,76841

CONSOLIDATED FINANCIAL STATEMENTS

In millions of yen

In thousands of U.S. dollars
March 31, 2009

March 31, 2008
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
		 Debt securities........... ¥Held-to-maturity:
		 Debt securities...........
		
¥

5,051
1,603
6,654

Investment securities:
Available-for-sale:		 Equity securities........ ¥ 62,195
		 Debt securities...........
85,426
Held-to-maturity:
		 Debt securities...........
8,242
		
¥155,863

Gains

¥

1

¥

0
1

Losses

¥

115

¥

0
115

Less than 12 months
Fair value

¥

4,937

¥

1,603
6,540

¥5,051918¥ 8,485
1,962¥ 58,761
84,382

1¥5,970348¥10,795

7,895¥151,038

In thousands of U.S. dollars
March 31, 2009
Gross unrealized
Cost

Gains

Short-term investments:
Available-for-sale:		 Equity securities....... $7,245 $
		 Debt securities..........
122,061
Held-to-maturity:
		 Debt securities..........
15,152
		$ 144,458 $LossesFair value—
225$ 1,357 $
5,888
2,204
120,08220
245—
15,172$ 3,561 $ 141,142

Investment securities:
Available-for-sale:		 Equity securities....... $ 441,031 $24,571
		 Debt securities..........
866,5105,449
Held-to-maturity:
		 Debt securities..........
63,592—
		$1,371,133 $30,020$39,184 $ 426,418
34,490837,469
1,041
62,551$74,715 $1,326,438

In millions of yen
March 31, 2009		

12 months or longer

Gross		Grossunrealized		 unrealized
lossesFair value
lossesAvailable-for-sale:
Equity securities........
Debt securities...........
		 Total.........................

¥ 7,71125,704¥33,415¥1,272
1,416¥2,688¥ 8,653
28,299¥36,952¥2,701
2,180¥4,881

Held-to-maturity:
Debt securities...........

¥

¥

¥

¥ 102

42

Annual Report 2009

SECOM CO., LTD.

——

Gross		Grossunrealized		 unrealized
lossesFair value
lossesAvailable-for-sale:
Equity securities........ $ 78,684
Debt securities........... 262,286
		 Total......................... $340,970$12,980
14,449$27,429$ 88,296
288,765$377,061$27,561
22,245$49,806

Held-to-maturity:
Debt securities........... $$$$ 1,041

—

—

4,061

Based on the Company’s ability and intent to hold theinvestment for a reasonable period of time sufficient for arecovery of fair value, the credit condition of the issuers, thefact that the markets have gradually showed a certain level ofrecovery and other relevant factors, the Company does notconsider these investments to be other-than-temporary
impaired at March 31, 2009.
At March 31, 2009, debt securities principally consisted ofshort-term investments in monetary trusts, Japanese­govern­ment 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, 2009 are as follows:
In millions of yen
March 31, 2009

		

		
		
Fair value				
Fair value

Available-for-sale

Gross unrealized losses on, and fair value of, “availablefor-sale” and “held-to-maturity” securities, aggregated byinvest­ment category and the length of time that individual
securities have been in a continuous unrealized loss position,
at March 31, 2009 were as follows:

Less than 12 months

12 months or longer

398

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¥11,962¥11,768¥1,485

Cost Fair value¥1,487

52,77750,497——

26,056
6,085¥96,880

25,6305,945¥93,840—
6,232¥7,717—6,130¥7,617In thousands of U.S. dollars
March 31, 2009
Available-for-sale

Held-to-maturity

Cost

Fair value

Cost Fair value

Due within 1 year.......... $122,061
Due after 1 year
through 5 years........... 538,541
Due after 5 years
through 10 years......... 265,878
Due after 10 years . ......
62,091
		 .................................. $988,571$120,082$15,152 $15,172

515,276
261,531
60,662$957,551————
63,592 62,551$78,744 $77,723

During the years ended March 31, 2009, 2008 and 2007,
the net ­unrealized gains and losses on “available-for-sale”
securities included as part of other comprehensive income(loss), net of tax, decreased by ¥460 million ($4,694 thousand),¥11,238 m­ illion and ¥3,026­million, respectively.

Proceeds from the sale of “available-for-sale” securities
for the years ended March 31, 2009, 2008 and 2007 were¥59,340 million ($605,510 thousand), ¥106,925 million and¥109,405 million, respectively. On those sales, the gross­realized gains and gross realized losses, using moving-­
average cost basis, for the years ended March 31, 2009,2008 and 2007 were as follows:		 In thousands ofGross realized gains........
Gross realized losses.......

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

2007

2009

¥679
325

¥3,005623¥4,076295$6,9293,316

The Company maintains long-term investment securities,
included as investment securities, issued by a number of
non-public companies. The aggregate carrying amount of theinvestments in non-public companies, at cost net of otherthan-temporary impairment, was ¥10,714 million ($109,327
thousand) and ¥12,150 million at March 31, 2009 and 2008,
respectively. The corresponding fair value at that date was
not computed as such estimation was not practical.
8. Inventories
Inventories at March 31, 2009 and 2008 comprised the­following:
		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2008

2009

Security-related products............... ¥ 7,333 ¥ 7,732
Fire protection-related products.... 16,241 13,747
Real estate....................................... 67,614 91,182
Information and other-related
products.........................................
4,883
5,781
			 .............................................. ¥96,071 ¥118,442

2009$ 74,826
165,724
689,939
49,827$980,316

Work in process for real estate inventories at March 31,
2009 and 2008, amounting to ¥61,437 million ($626,908
thousand) and ¥73,312 million, respectively, are included inreal estate.
The amount of write-down on real estate inventories
included in cost of sales for the year ended March 31, 2009was ¥8,366 million ($85,367 thousand).
9. Investments in Affiliated Companies
The Company has investments in affiliated companies thatare accounted for under the equity method. Investments
principally consist of investments in Taiwan Secom Co., Ltd.,a 28.1 percent owned affiliate, which is listed on the Taiwan
Stock Exchange; S1 Corporation, a 27.2 percent owned
affiliate, which is listed on the Korea Exchange; Toyo Tech
Co., Ltd., a 27.8 percent owned affiliate acquired—amounting

to ¥5,146 million—in December 2006, which is listed on theSecond Section of the Osaka Securities Exchange; and Tokyo
Biso Kogyo Corporation, a 36.6 percent owned new affiliate byadditionally acquiring ¥1,740 million—equivalent to 16.6
percent of total outstanding common stocks—in May 2007
and March 2008, which is listed on the Second Section of theTokyo Stock Exchange.
In December 2006, the Company additionally acquired
18,500,000 newly issued shares of Nohmi Bosai, listed on theFirst Section of the Tokyo Stock Exchange, and as a result theCompany held 50.4 percent of its ownership. Nohmi Bosai
had been accounted for under the equity method before theacquisition and has been consolidated as its subsidiaries
since the date of acquisition. (For more details, see Note 4.)
Summarized financial information regarding the affiliated­companies accounted for under the equity method was
as ­follows:		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2009

Current assets.............................. ¥ 90,419 ¥ 96,089
Non-current assets...................... 106,004 134,467$ 922,643
1,081,673

Total assets............................... ¥196,423 ¥230,556$2,004,316

Current liabilities.......................... ¥ 39,994 ¥ 48,212
Non-current liabilities..................
34,48636,846
Shareholders’ equity................... 121,943 145,498$ 408,102
351,898
1,244,316

Total liabilities andshareholders’ equity.............. ¥196,423 ¥230,556$2,004,316

		

2009

		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2009

Net sales...................... ¥177,465 ¥202,335 ¥196,486

2009$1,810,867

Gross profit................. ¥ 54,621 ¥ 64,213 ¥ 67,315$ 557,357

Net income.................. ¥ 18,574 ¥ 22,576 ¥ 18,851$ 189,531

2008

Dividends received from affiliated companies for the years
ended March 31, 2009, 2008 and 2007 were ¥2,503 million($25,541 thousand), ¥2,657 million and ¥2,193 million,
respectively.
Four listed affiliated companies accounted for under theequity method with an aggregated carrying amount of¥29,752 million ($303,592 thousand) and ¥37,035 ­million atMarch 31, 2009 and 2008, respectively, had a quoted market
value of ¥53,118 million ($542,020 thousand) and ¥80,984­million at March 31, 2009 and 2008, respectively.
The amounts of goodwill were ¥2,710 million ($27,653
thousand) and ¥2,710 million at March 31, 2009 and 2008,
respectively.

SECOM CO., LTD.

Annual Report 200943

CONSOLIDATED FINANCIAL STATEMENTS

In November 2006, the parent company sold theoutstanding shares of Miyagi Network Inc., a 39.4 percent
owned affiliate, to Mediatti Communications, Inc. for ¥1,419
million. The sales resulted in a gain of ¥855 million.
A summary of transactions and balances with the affiliatedcompanies accounted for under the equity method ispresented below:

Impairment loss on long-lived assets by ­business segment
for the years ended March 31, 2009, 2008 and 2007 was
as follows:		 In thousands of

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

2007

2009

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

¥1,737¥2,584¥1,843$17,724

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

¥8,293¥6,237¥3,777$84,622

		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2009

2008

2009

Notes and accounts
receivable, trade........................... ¥ 461¥ 523$ 4,704

Loans receivable............................. ¥

¥

$

		

92

98

¥2,482$30,092

Guarantees for bank loans............. ¥

¥

$

10

82

The Company's equity in undistributed income of affiliates
at March 31, 2009 and 2008 included in retained earnings
was ¥23,147 million ($236,194 thousand) and ¥15,496 million,
respectively.
10. Long-Lived Assets
The Company has assessed the potential impairment for its
long-lived assets. As a result of significant decreases in rental
rates, market prices and revenue forecasts, and changes ofassumptions regarding useful lives before sale, the Company
principally recognized impairment losses on medical services
equipment for the year ended March 31, 2007. The fair value
was determined by the estimated present value of future
cash flows or appraisal value.

44

SECOM CO., LTD.

Annual Report 2009

Year ended
March 31

2009

2008

2007

2009

¥34
—
—
—

¥— ¥ —
16
32
0 1,134
—
—

$347
—
—
—

42

—

10

429

—

—

—

—

—
—

—
—

—
—

—
—

		 Total..............................

¥76¥16 ¥1,176

$776

939

Notes and accounts payable.......... ¥2,949
8

U.S. dollars

Years ended
March 31

Security services.................
Fire protection services......
Medical services.................
Insurance services..............
Geographic information
services..............................
Real estate development
and sales............................
Information andcommunication related
and other services............
Corporate items..................

		 In thousands ofIn millions of yen

In millions of yen

11. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding
goodwill at March 31, 2009 and 2008 were as ­follows:
In millions of yen
March 31, 2009
Gross		carrying Accumulated
amount amortization

Net
carrying
amountAmortized intangible assets:
Software...................................... ¥30,725
Other............................................
5,058
		 Total . ....................................... ¥35,783(¥18,739)(2,179)(¥20,918)¥11,986
2,879¥14,865

Unamortized intangible assets...... ¥ 4,056¥¥ 4,056—

In millions of yen
March 31, 2008
Gross		carrying Accumulated
amount amortization

Net
carrying
amountAmortized intangible assets:
Software...................................... ¥30,055
Other............................................
4,911
		 Total . ....................................... ¥34,966(¥16,488)(1,764)(¥18,252)¥13,567
3,147¥16,714

Unamortized intangible assets...... ¥ 4,413¥¥ 4,413—

In thousands of U.S. dollars
March 31, 2009
Gross		carrying Accumulated
amount amortization

Net
carrying
amountAmortized intangible assets:
Software...................................... $313,520
Other............................................ 51,612
		 Total . ....................................... $365,132($191,214) $122,306(22,235)
29,377($213,449) $151,683

Unamortized intangible assets...... $ 41,388$— $ 41,388

Aggregate amortization expense for the years ended
March 31, 2009, 2008 and 2007 was ¥5,850 million ($59,694
thousand), ¥5,999 million and ¥5,055 million, respectively.
Amortized intangible assets are amortized using the straightline method over the estimated useful lives. The weighted
average amortization period for internal use software isapproximately five years.
The estimated aggregate amortization expense for­intangible assets for the next five years is as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010......................................................
2011......................................................
2012......................................................
2013......................................................
2014......................................................

¥4,743
3,868
2,846
1,697
347

$48,398
39,46929,041
17,316
3,541

The changes in the carrying amount of goodwill by businesss­ egment for the years ended March 31, 2009 and 2008 wereas follows:
In millions of yen						 Information and				 Geographic Real estate communication
		
Security
Medical information development
related and		services
services
servicesand sales other services

March 31, 2007.... ¥1,457 ¥7,047 ¥3,623
Goodwillacquired during
the year..............
117——
Disposal...............
——(1)
Impairment
losses................. (117)(876)—
Translation
adjustment........
(30)——
March 31, 2008.... 1,427 6,171 3,622
Goodwillacquired during
the year.............. 1,386—
155
Disposal...............
———
Impairment
losses................. (407)(996)—
Translation
adjustment........ (664)——March 31, 2009.... ¥1,742 ¥5,175 ¥3,777

Total

¥ 135

¥5,101¥17,363

—
—

—
(180)

117
(181)

(135)

—

(1,128)

—
—

—
4,921

(30)
16,141

—
—

—
—

1,541
—

—

(175)

(1,578)—¥ ——¥4,746(664)¥15,440

In thousands of U.S. dollars						 Information and				 Geographic Real estate communication
		
Security
Medical information development
related and		services
services
servicesand sales other services

March 31, 2008.... $14,561 $62,969 $36,959
Goodwillacquired during
the year.............. 14,143— 1,582
Disposal...............
———
Impairment
losses................. (4,153) (10,163)—
Translation
adjustment........ (6,775)——
March 31, 2009.... $17,776 $52,806 $38,541

$—
—
—

Total

$50,214 $164,703——

15,725——(1,786) (16,102)—$——(6,775)$48,428 $157,551

The Company principally recognized impairment losses
related to goodwill allocated to the reporting units in the
medical services segment of ¥996 million ($10,163 thousand)and ¥876 million, and in the security services segment of ¥407
million ($4,153 thousand) and ¥117 million for the years ended
March 31, 2009 and 2008, respectively, due to decreases in theestimated fair value of these reporting units mainly caused bydecreases of expected cash flows.
The fair value was deter­mined by the estimated present
value of future cash flows or quoted market prices.
12. Bank Loans and Long-Term Debt
Bank loans of ¥78,180 million ($797,755 thousand) and¥133,056 million at March 31, 2009 and 2008, respectively,
are generally comprised of 30 to 365 day notes. Theirweighted average interest rates were 1.28 percent and1.37 percent at March 31, 2009 and 2008, 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
future loans with such banks, collateral (including sums on
deposit with such banks) or guarantors shall be provided
immediately upon request. Further, any collateral furnishedpursuant to such agreements or otherwise will be applicable
to all indebted­ness to such banks. The Company has notbeen requested to submit such additional security.
At March 31, 2009, Nohmi Bosai, a subsidiary of theparent company, had unused committed line of credit fromshort-term arrangement aggregating ¥4,000 million ($40,816
thousand). The line of credit expires in March 2010. Under theagreement, Nohmi Bosai is required to pay committed feesat an annual rate of 0.15 percent, on the unused portion of
the line of credit. At March 31, 2009, the parent company had
overdraft agreements with seven banks and its unused linesof credit amounted to ¥67,000 million ($683,673 thousand).
The parent company incurs no fee on the unused portionof the lines of credit. The overdraft agreements expire
in the period from April 2009 to March 2010. The p­ arent
company has the ability and intent to extend these overdraft
agreements under similar terms and conditions.

SECOM CO., LTD.

Annual Report 200945

CONSOLIDATED FINANCIAL STATEMENTS

Long-term debt at March 31, 2009 and 2008 comprisedthe ­following:
		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2008

2009

2009

Loans, principally from banks
due 2008–2027 with interest
rates ranging from 1.17% to10.05% in 2009 and 2008:
Secured........................................... ¥20,811 ¥20,624
Unsecured...................................... 4,336
5,249
0.61% unsecured bonds due 2010....
450
750
0.91% unsecured bonds due 2010....
440
660
1.14% unsecured bonds due 2013.... 4,590—
Unsecured bonds due 2009–2014
with floating interest rates basedon 6-month TIBOR plus
0.00%–0.20%.................................... 12,230 14,051
Obligations under capital leases,
due 2008–2026 (Note 19)................. 9,514 11,910
			 ................................................. 52,371 53,244
Less:
Portion due within one year........... 15,967
9,061
			 ................................................. ¥36,404 ¥44,183$212,357
44,2454,592
4,490
46,837

124,796
97,081
534,398
162,929$371,469

Property, plant and equipment with a carrying amount of¥58,100 million ($592,857 thousand), investment securities
with a carrying amount of ¥745 million ($7,602 thousand),time deposits of ¥1,483 million ($15,133 thousand), short-termand long-term receivables of ¥1,095 million ($11,173 thousand)and other intangible assets and other with a carrying amountof ¥818 million ($8,347 thousand) were pledged as ­collateralfor bank loans and long-term debt at March 31, 2009.
The aggregate annual maturities on long-term debt after
March 31, 2009 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010.....................................................
2011.....................................................
2012.....................................................
2013.....................................................
2014.....................................................
Thereafter............................................
............................................................

¥15,967
8,389
6,796
8,826
6,503
5,890
¥52,371$162,929
85,602
69,34790,061
66,357
60,102$534,398

13. 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 the accounting
principles and ­practices generally accepted in Japan, whichvary in certain respects from account­ing principles generally
accepted in the United States of America. Those differences
are principally, (a) that insurance acqui­sition costs arecharged to income when incurred in Japan whereas in
the United States of America those costs are deferred andamortized generally over the premium-­paying period of
the insurance policies, (b) that liabilities related to incurred
but not reported claims are computed based on related
regulations in Japan whereas in the United States of America
those liabilities are computed based on past experience

46

SECOM CO., LTD.

Annual Report 2009

for unreported losses, and (c) that unearned premiums
are calculated based on the ­documents authorized by theSupervisory Authorities in Japan whereas in the UnitedStates of America unearned premiums are reflected basedon the lapse and ­surrender over the contract period.
In addition, under certain property and casualty insurance
contracts with a refund clause and long-term insurance
policies that p­ rovide refunds at maturity, such as personal
accident and fire, the policyholder 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 portionof the net pre­mi­ums written, together with interest thereon,as investment deposits by policyholders. Contract and policy
terms are p­ rincipally five years.
For purposes of preparing the consolidated financial­state­ments, appropriate adjustments have been made toreflect such items in accordance with account­ing principles
generally accepted in the United States of America.
The net equity of Secom Insurance at March 31, 2009 and2008 was ¥47,753 million ($487,276 thousand) and ¥35,218
million, respectively.
Net sales and operating revenue of Secom Insurance
include net realized investment gains and losses, including
the results on sales of securities, loss on other-thantemporary impairment of investment securities andimpairment loss on long-lived assets. Net realized
investment gains and losses for the years ended March 31,
2009, 2008 and 2007 were losses of ¥10,152 million ($103,592
thousand), and gains of ¥1,922 million and ¥3,612 million,
respectively. Loss on other-than-temporary impairment ofinvestment securities for the years ended March 31, 2009,2008 and 2007 were ¥10,683 million ($109,010 thousand),¥650 million and ¥331 million, respectively.
14. Pension and Severance Costs
Employees of the parent company and its domestic­subsidiaries whose services are terminated are, under most­circumstances, eligible for lump-sum benefits and/or ­eligible
for pension benefits.
The parent company and certain domestic subsidiaries
have adopted a cash balance pension plan and a defined
contribution pension plan. Benefits under the cash balance
pension plan are calculated by the amount equal to a certain
percentage of employee’s annual income over their period ofservice, plus interest calculated by the 3-year average yieldfor 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. Specified
percentage of employees’ annual income is contributed tothe 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 ratio of the accumulated amount in
the cash balance pension plan and the amount ofcontributions to the defined contribution pension planchanged to 70 percent and 30 percent, including portions
funded in prior periods.

In March 2009, Pasco Corporation and its domestic
subsidiaries settled and transferred a portion of the taxqualified non-contributory pension plan to the defined
contribution pension plan. In accordance with SFAS No. 88“Employers’ Accounting for Settlements and Curtailments ofDefined Benefit Pension Plans and for Termination Benefits,”
the Company accounted for these transfers as a partial
settlement of benefit obligation. The amount of settlement
loss was immaterial for the year ended March 31, 2009.
On March 31, 2007, the Company adopted the recognitionand disclosure provisions of SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statement
No. 87, 88, 106, and 132(R).” SFAS No. 158 required theCompany to recognize the funded status (i.e., the difference
between the fair value of plan assets and the projected­benefit obligations) of its pension plans in the consolidatedbalance sheet at March 31, 2007, with a corresponding
adjustment to accumulated other comprehensive income(loss), net of tax. The adjustment to accumulated other­comprehensive income (loss) at adoption represents theunrecognized actuarial loss and unrec­ognized prior service
benefit, both of which were previously netted against theplan’s funded status in the consolidated balance sheets­pursuant to the provisions of SFAS No. 87 “Employers’
Accounting for Pensions.” These amounts will be subsequently recognized as net periodic pension and severance
costs pursuant to the Company’s historical accounting policy
for amortizing such amounts. In addition, actuarial gains andlosses that arise in subsequent periods and are not recognized as net periodic pension and severance cost in the same
periods will be ­recognized as other comprehensive income(loss). Those amounts will be subsequently recognized as acomponent of net periodic pension and s­ everance cost on thesame basis as the amounts recognized in accumulated other­comprehensive income (loss) at a
­ doption of SFAS No. 158.
Net periodic pension and severance costs for the years
ended March 31, 2009, 2008 and 2007 were as follows:		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2007

Net periodic pension andseverance costs:
Service cost....................... ¥4,694 ¥4,511 ¥3,998
Interest cost....................... 1,430 1,424 1,146
Expected return onplan assets....................... (1,952) (1,808) (1,620)
Amortization of priorservice benefit................. (1,713) (1,715) (1,715)
Recognized actuarialloss...................................
861 1,005 1,123
		 Net periodic pension
		 and severance costs... ¥3,320 ¥3,417 ¥2,932

2009

The changes in benefit obligation, assets and funded­status were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		

2009

2009

2008

Change in benefit obligation:
Benefit obligation
at beginning of year.............. ¥71,820 ¥71,000
Service cost..............................
4,694
4,511
Interest cost..............................
1,430
1,424
Actuarial loss............................
818
337
Benefits paid............................
(4,989) (5,452)
Settlement................................
(1,683)—
Benefit obligation
at end of year.........................
72,09071,820Change in plan assets:
Fair value of plan assets
at beginning of year..............
62,536
68,371
Actual loss on plan assets.......
(9,887) (7,792)
Employer contribution.............
5,979
5,509
Benefits paid............................
(3,529) (3,552)
Fair value of plan assets
at end of year.........................
55,09962,536
Funded status
at the end of year....................... (¥16,991) (¥ 9,284)$732,857
47,898
14,592
8,347(50,908)(17,173)735,613638,123(100,888)
61,010(36,010)562,235($173,378)

Amounts recognized in the consolidated balance sheet atMarch 31, 2009 and 2008 consist of:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		

2009

2009

2008

Prepaid pension andseverance costs........................... ¥ 823 ¥ 9,135
Accrued pension andseverance costs........................... (17,814) (18,419)
			 Net amount recognized.... (¥16,991) (¥ 9,284)

$

8,398

(181,776)($173,378)

Other changes in plan assets and benefit obligationsr­ ecognized in other comprehensive income (loss) for the year
ended March 31, 2009 were summarized as follows:		 In thousands of$47,898
14,592(19,918)(17,480)
8,786

In millions of yen

Current year actuarial loss...................
Amortization of actuarial loss..............
Settlement of actuarial loss.................
Amortization of prior service benefit...
Settlement of prior service benefit......
			¥12,657
(861)
(596)
1,713
78
¥12,991

U.S. dollars$129,153(8,786)(6,082)
17,480796$132,561$33,878

SECOM CO., LTD.

Annual Report 200947

CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2009 and 2008 consist of:

The weighted-average asset allocation of the Company’s­pension plans at March 31, 2009 and 2008 were as follows:		 In thousands of

		 March 31

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		

2009

2009

2008

Actuarial loss.................................... ¥33,903 ¥22,703
Prior service benefit......................... (12,536) (14,327)
			 Net amount recognized....... ¥21,367 ¥ 8,376$345,949(127,918)$218,031

The estimated prior service benefit and actuarial loss forthe defined benefit pension plans that will be amortized fromaccumulated other comprehensive income (loss) into net
periodic benefit cost over the next year are ¥1,682 million($17,163 thousand) and ¥1,021 million ($10,418 thousand),
respectively.
The accumulated benefit obligation for the pension planwas ¥66,154 million ($675,041 thousand) and ¥66,079 million
at March 31, 2009 and 2008, respectively.
The projected benefit obligation, accumulated benefit­obligation and fair value of plan assets for the pension plans
with ­accumulated benefit obligation in excess of plan assets
were ¥26,072 million ($266,041 thousand), ¥23,093 million($235,643 thousand) and ¥8,361 million ($85,316 thousand),
respectively, at March 31, 2009, and ¥27,588 million, ¥24,775
million and ¥9,335 million, respectively, at March 31, 2008.
The Company uses March 31 as the measurement date forthe domestic pension plan.
Weighted-average assumptions used to determine
the benefit obligation at March 31, 2009 and 2008 wereas follows:		 March 31

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

2009

2008

2.1%
2.7

2.0%
2.7

Weighted-average assumptions used to determine net­ ension and severance costs for the years ended March 31,p2009, 2008 and 2007 were as follows:
Years ended
March 31

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

2009

2008

2007

2.0%
3.0
2.7

2.0%
3.0
2.7

1.9%
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 actual­historical returns of each plan asset category.

48

SECOM CO., LTD.

Annual Report 2009

2009

Asset category:
Equity securities...................................................
Debt securities.....................................................
Call loan................................................................
Other.....................................................................
		 Total...................................................................

2008

6.9% 26.6%
43.5
20.9
16.2
11.6
33.4
40.9
100.0% 100.0%

The Company’s investment policy is designed toensure that sufficient plan assets are available to provide
future p­ ayments of pension benefits to the eligible plan
participants. The policy does not use target allocations forthe individual asset catego­ries. Plan assets are invested
primarily in equity and debt securities, and mutual fundswith the objective to minimize risk and achieve the expected
rate of return. The investment results are periodicallymonitored and asset allocation is adjusted as necessary.
The Company expects to contribute ¥5,248 million ($53,551
thousand) to its domestic defined benefit plans in the year
­ending March 31, 2010.
The following benefit payments, which reflect future­services, as appropriate, are expected to be paid.
		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010.....................................................
2011.....................................................
2012.....................................................
2013.....................................................
2014.....................................................
2015–2019............................................

¥ 4,130
4,154
4,250
4,523
4,622
22,741$ 42,143
42,38843,367
46,15347,163232,051

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,
2009, 2008 and 2007 were ¥1,469 million ($14,990 thousand),¥1,413 million and ¥1,392 ­million, respectively.
15. Exchange Gains and Losses
Other expense for the year ended March 31, 2009 and 2008
include net exchange losses of ¥1,564 million ($15,959
thousand) and ¥826 million. Other income for the year ended
March 31, 2007 includes net exchange gains of ¥76 million.

16. Income Taxes
Total income taxes for the years ended March 31, 2009,2008 and 2007 were allocated as follows:

The significant components of deferred tax assets andliabilities at March 31, 2009 and 2008 were as follows:­		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2009

Net Income.......................... ¥36,575 ¥47,106 ¥40,566
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized holding gains(losses) on securities....
(452) (8,189) (3,437)
Unrealized gains(losses) on derivative
instruments...................
(102)
(8)
(17)
Pension liability
adjustments................... (4,863) (3,901)—
Minimum pension
liability adjustments.....
——(20)
Foreign currencytranslation
adjustments...................
(859)
(497)
476
Cumulative effect ofchange in accounting
principle-adoptionof EITF 06-2........................
—
(846)
—
Adjustments for initiallyapplying SFAS No. 158.....
——
897
		 . .................................... ¥30,299 ¥33,665 ¥38,465$373,215

2008(4,612)(1,041)(49,623)—(8,765)——$309,174

The parent company and its domestic subsidiaries were
­subject to a corporate tax of 30 percent, an inhabitants tax ofapproximately 20.3 percent, and a deductible enterprise tax
of approximately 7.4 percent, which, in the aggregate, indicate
a statutory tax rate in Japan of approximately 40.5 ­percent
for the years ended March 31, 2009, 2008 and 2007.
Reconciliations of the differences between income taxes­computed at statutory tax rates and consolidated income
taxes from continuing operations were as follows:		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2007

Income taxes computed
at statutory tax rate of
40.5%................................. ¥25,649 ¥44,658 ¥38,611
Increase (decrease)resulting from:
Unrecognized tax
benefits fromsubsidiaries in loss
positions........................ 10,214
2,309
1,552
Reversal of valuation
allowance due toutilization of operating
loss carryforwards........
(187) (1,260) (1,629)
Per capita tax...................
811
805
713
Other, net.........................
88
594
1,319
		 Consolidated
		 income taxes............. ¥36,575 ¥47,106 ¥40,566

2009$261,724

		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2009

		

2009

Deferred tax assets:
Loss carryforwards..................... ¥17,465 ¥ 9,907
Deferred revenue........................ 12,896 13,601
Adjustment of book value atthe date of acquisition—
		 Land and buildings.................
7,320
4,899
		 Other assets.............................
462
2,764
Accrued pension andseverance costs.........................
6,810
7,149
Property, plant andequipment................................
6,137
6,524
Accrued bonus............................
5,323
5,053
Intangible assets.........................
4,006
2,634
Allowance for doubtful
accounts....................................
3,957
2,239
Vacation accrual..........................
3,589
3,427
Investment securities..................
3,505
1,641
Write-down on real estate
inventories.................................
2,573—
Unrealized holding losses on
securities...................................
1,405
1,941
Other............................................
9,387
9,014
		 Gross deferred tax assets....... 84,835 70,793
		 Less: Valuation allowance...... (26,863) (17,068)
		 Total deferred tax assets........ 57,972 53,725
Deferred tax liabilities:
Deferred installation costs........... (8,137) (8,408)
Adjustment of book value atthe date of acquisition—
		 Land and buildings................... (4,514) (5,180)
		 Other assets.............................
(1,734) (1,740)
Investments in affiliatedcompanies................................... (2,705) (7,496)
Unearned premiums andother insurance liabilities........... (2,679) (3,324)
Prepaid pension andseverance costs...........................
(104) (3,189)
Other.............................................. (4,982) (7,157)
		 Gross deferred tax liabilities.... (24,855) (36,494)
			 Net deferred tax assets . ...... ¥33,117 ¥17,231$178,214131,592
74,694
4,714
69,49062,62254,31640,87840,37836,62235,76526,255
14,337
95,786865,663(274,112)
591,551(83,031)(46,061)(17,694)(27,602)(27,337)(1,061)(50,837)(253,623)$337,928

The valuation allowance principally relates to deferred tax
assets of the subsidiaries with operating loss carryforwards,
for tax purposes, that are not expected to be realized. The netchange in the total valuation allowance for the years ended
March 31, 2009, 2008 and 2007 was an increase of ¥9,795
million ($99,949 thousand), ¥1,477 million and ¥245 million,
respectively.

104,224(1,908)8,276
899$373,215

SECOM CO., LTD.

Annual Report 200949

CONSOLIDATED FINANCIAL STATEMENTS

In assessing the realizability of deferred tax assets, theCompany 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 management
considered the sched­uled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies
in making this assessment. Based upon the level of historicaltaxable income and projec­tions for future taxable income
over the periods in which the deferred tax assets are
deductible, the Company management believes it is more
likely than not that the Company will realize the benefits ofthese deductible differences, net of the existing valuation
allowance at March 31, 2009 and 2008.
Net deferred tax assets at March 31, 2009 and 2008 arereflected in the accompanying consolidated balance sheets
under the following captions:
		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2008

2009

2009

Deferred income taxes(Current assets)............................. ¥16,245 ¥17,395
Deferred income taxes(Other assets)................................ 19,020 11,321
Other current liabilities...................
(924) (1,410)
Deferred income taxes(Liabilities).....................................
(1,224) (10,075)
		 Net deferred tax assets . ........ ¥33,117 ¥17,231$165,765
194,082(9,429)(12,490)$337,928

The Company has not recognized deferred tax liabilities of¥455 million ($4,643 thousand) for a portion of undistributed
earnings of foreign subsidiaries totaling ¥10,551 million($107,663 thousand) at March 31, 2009 as they are notexpected to be remitted in the foreseeable future.
At March 31, 2009, the operating loss carryforwards ofdomestic subsidiaries amounted to ¥40,529 million ($413,561
thousand) and are available for offsetting against futuretaxable earnings of such subsidiaries for up to seven years,
as follows:		In thousands ofExpires in the years ending March 31
In millions of yen
U.S. dollars

2010......................................................
2011......................................................
2012......................................................
2013......................................................
2014......................................................
2015......................................................
2016......................................................
..............................................................

¥ 1,837
2,360
3,222
1,871
4,090
3,468
23,681¥40,529$ 18,745
24,08232,87819,092
41,73535,388
241,641$413,561

The operating loss carryforwards of overseas subsidiaries
at March 31, 2009 amounted to ¥4,734 million ($48,306
thousand), a part of which will begin to expire in the year
ending March 31, 2010.
The Company adopted the provisions of FIN No. 48 on
April 1, 2007. The adoption of FIN No. 48 did not have amaterial effect on the Company’s financial position andresults of operations.
The total amount of unrecognized tax benefits as of thedate of adoption of FIN No. 48 and for the years ended March
31, 2009 and 2008 were insignificant. Also there were no
movements of the gross amounts in unrealized tax benefits
and the amounts of interest and penalties recognized due tothe unrecognized tax benefits during the years ended March
31, 2009 and 2008.
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 in the future periods.
Based on the information available as of March 31, 2009,
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 toregular income tax examinations by the tax authorities foryears before 2007. In other foreign tax jurisdictions, major
subsidiaries are no longer subject to income tax examinations
by tax authorities for years before 2008 with few exceptions.
17. Shareholders’ Equity(1) Retained Earnings
The Japanese Corporate Law, enforced on May 1, 2006,
provides that an amount equal to 10 percent of surplus
distributed by the parent company and its Japanesesubsidiaries 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 Japanese­Corporate Law is based on the amount recorded in the­parent company’s nonconsolidated statutory financial
statements in accordance with the accounting principle
generally accepted in Japan. Such amount was ¥346,419
million ($3,534,888 thousand) at March 31, 2009.
Subsequent to March 31, 2009, the parent company’s Boardof Directors declared an annual cash dividend of ¥85.00 ($0.87)
per share, totaling ¥18,533 million ($189,112 thousand), toshareholders of record on March 31, 2009. The dividend
declared was approved at the general shareholders’ meeting
held on June 25, 2009. Dividends are recorded in the period
they are declared.
The Japanese Corporate Law provides that a company
can make dividends of surplus anytime with resolution of
the shareholders.
(2) Common Stock in Treasury
The Company may repurchase its common stock fromthe market pursuant to the Japanese Corporate Law. For
the year ended March 31, 2009, 6,928 thousand shareswere repurchased for the aggregate cost of ¥30,019 million($306,316 thousand).

50

SECOM CO., LTD.

Annual Report 2009

(3) Other Comprehensive Income (Loss)
Components of other compre­hensive income (loss) for theyears ended March 31, 2009, 2008 and 2007 is as follows:
In millions of yen
Pre-tax
amount

For the year ended March 31, 2009:
Unrealized holding losses on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period..................................... (¥17,054)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income.......................... 16,142
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year................
(263)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income..........................
68
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period............. (11,602)
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income......................
(413)
Foreign currencytranslation adjustments................... (20,403)
			 Other comprehensive
			 income (loss)............................ (¥33,525)

Tax(expense) Net-of-tax
or benefit
amount¥6,532 (¥10,522)(6,080)10,062

106

(157)

(4)

64

4,559

(7,043)In millions of yen
Pre-tax
amount

For the year ended March 31, 2007:
Unrealized holding gains on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period..................................... (¥ 2,924)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income.......................... (3,539)
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year................
(132)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income..........................
32
Minimum pension
liability adjustments........................
(41)
Foreign currencytranslation adjustments...................
2,669
			 Other comprehensive
			 income (loss)............................ (¥ 3,935)

Tax(expense) Net-of-tax
or benefit
amount¥1,362 (¥ 1,562)

2,075(1,464)

19

(113)

(2)

30

20

(21)

(476)

2,193

¥2,998 (¥937)

In thousands of U.S. dollars

304

(109)

859

(19,544)¥6,276 (¥27,249)

For the year ended March 31, 2008:
Unrealized holding losses on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period..................................... (¥18,914) ¥ 7,880 (¥11,034)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income..........................
(513)
309
(204)
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year................
(61)
7
(54)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income..........................
121
13
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period............. (9,209)
3,645(5,564)
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income......................
(690)
256
(434)
Foreign currencytranslation adjustments................... (2,684)
497(2,187)
			 Other comprehensive
			 income (loss)............................ (¥32,059) ¥12,595 (¥19,464)

Tax
Pre-tax (expense)amount or benefit

Net-of-tax
amount

For the year ended March 31, 2009:
Unrealized holding losses on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period................................. ($174,020) $66,653 ($107,367)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income...................... 164,714 (62,041) 102,673
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year............
(2,684) 1,082(1,602)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income......................
694
(41)
653
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period......... (118,388) 46,521 (71,867)
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income..................
(4,214) 3,102(1,112)Foreign currencytranslation adjustments............... (208,194) 8,765 (199,429)
			 Other comprehensive
			 income (loss)........................ ($342,092) $64,041 ($278,051)

18. Research and Development Expenses
Research and development expenses included in selling,
general and administrative expenses for the years ended
March 31, 2009, 2008 and 2007 were ¥5,943 million ($60,643
thousand), ¥5,792 million and ¥5,875 million, respectively.

SECOM CO., LTD.

Annual Report 2009

51

CONSOLIDATED FINANCIAL STATEMENTS

19. Lessee
The Company leases certain office space, employee
residen­tial facilities, computer and transportation equipment.
Some leased buildings and computer and transportationequipment are held under capital leases. The other leases areclassified as ­operating leases.
On April 23, 1996, the Company entered into a long-termlease agreement for a building and land in Mitaka, Tokyo.
The lease agreement extends for 30 years beginning May
1, 1996. For financial reporting purposes, the portion of thelease relating to the building has been classified as a capitallease; accordingly, an asset of approximately ¥5,086 million($51,898 thousand) has been recorded in the building andimprovements account. The portion of the lease relating to
the land has been classified as an operating lease. The future
minimum lease payments for the site at March 31, 2009 were
¥5,593 ­million ($57,071 thousand).
A summary of leased assets under capital leases at March
31, 2009 and 2008 is as follows:		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2009

¥ 5,243 ¥ 5,208$ 53,500

12,043 15,672
593
791(9,811) (10,814)¥ 8,068 ¥10,857

122,888
6,051(100,112)$ 82,327		

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

2009

Depreciation expenses under capital leases for the years
ended March 31, 2009, 2008 and 2007 were ¥3,328 million($33,959 thousand), ¥4,089 million and ¥3,704 million,­respectively.
The following is a schedule by year of future minimum
lease payments under capital leases together with the present
value of the net minimum lease payments at March 31, 2009:
		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010........................................................
2011........................................................
2012........................................................
2013........................................................
2014........................................................
Thereafter...............................................
Total minimum lease payments...........
Less: Amount representing interest.....
Present value of net minimum
lease payments (Note 12)...................
Less: Current portion.............................
Long-term capital leaseobligations........................................

¥ 2,907
2,097
1,339
794
449
4,173
11,7592,245$ 29,663
21,39813,663
8,102
4,582
42,582
119,990
22,909

9,514
2,571

97,081
26,234¥ 6,943$ 70,847

Rental expenses under operating leases for the years
ended March 31, 2009, 2008 and 2007 were ¥15,494 million($158,102 thousand), ¥15,912 million and ¥15,771 million,
respectively. A significant portion of such rentals relates tocancelable short-term leases for office space and employee
residential facilities, many of which are renewed upon
­expiration.

52

SECOM CO., LTD.

Annual Report 2009

On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The
lease agreement extends for 20 years beginning December 8,
2000. For financial reporting purposes, the lease has beenclassified as an operating lease. Based on the agreement,
annual lease payments for the site are approximately ¥1,339
million ($13,663 thousand) over a 20-year period.
The future minimum lease payments required underoperat­ing leases that have initial or remaining non-­cancelable lease terms in excess of one year at March 31,
2009 are as follows:		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010........................................................
2011........................................................
2012........................................................
2013........................................................
2014........................................................
Thereafter...............................................
Total future minimum lease
payments..........................................

¥ 2,419
2,288
2,242
2,197
2,193
18,719$ 24,684
23,34722,87822,41822,378191,009¥30,058$306,714

20. Lessor
The Company’s leasing operations consist principally ofleasing of security equipment and real estate for office andmedical institutions. Most of the security equipment andcertain real estate for medical institutions on lease areclassified as sales-type leases or direct-financing leases.
The other leases are ­classified as ­operating leases.
A summary of lease receivables under sales-type anddirect-financing leases at March 31, 2009 and 2008 is
as follows:		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2009

¥48,511 ¥48,206(3,620) (3,576)$495,010(36,939)3,474 3,480(12,264) (13,069)
36,101 35,041(8,287) (7,820)

35,449(125,142)
368,378(84,562)¥27,814 ¥27,221$283,816

		

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

2009

The following is a schedule by year of future minimum
lease payments to be received under sales-type leases anddirect-financing leases at March 31, 2009:
		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010........................................................
2011........................................................
2012........................................................
2013........................................................
2014........................................................
Thereafter...............................................
Total future minimum lease
payments to be received.................

¥ 9,873
8,397
6,426
4,368
2,348
17,099$100,745
85,68465,571
44,571
23,959174,480¥48,511$495,010

A summary of investment in property on operating leases
and property held for lease at March 31, 2009 and 2008 is
as follows:		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2009

¥32,579 ¥27,223
29,660 26,955
662
775(8,539) (7,634)¥54,362 ¥47,319$332,439
302,653
6,755(87,133)$554,714		Land.................................................
Buildings and improvements........
Other intangible assets..................
Accumulated depreciation.............
		 . ................................................

2009

The future minimum rentals on non-cancelable operatingleases at March 31, 2009 are as follows:		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2010........................................................
2011........................................................
2012........................................................
2013........................................................
2014........................................................
Thereafter...............................................
Total future minimum rentals...........

¥ 2,545
775
775
775
775
11,270¥16,915$ 25,969
7,908
7,908
7,908
7,908
115,001$172,602

21. Fair Value of Financial Instruments
The following methods and assumptions were used to­estimate the fair value of financial instruments in cases forwhich it is ­practicable.
(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits; Notes and Accounts Receivable, Trade; Due from Subscribers; Short-Term Receivables; Bank Loans; Notes andAccounts Payable, Trade; Other Payables; Deposits Received;and Accrued ­Payrolls
The carrying amounts approximate fair value because of
the short-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 price.
(3) Long-Term Receivables
The fair values of long-term receivables are based on thepresent value of future cash flows through estimatedmaturity, discounted using estimated market discount rates.
The carrying amount of long-term receivables approximatesfair value.
(4) Long-Term Debt Including Current Portion
The fair value of long-term debt including the current­portion was estimated based on the discounted amounts offuture cash flows of each instrument at the Company’s current
incremental borrowing rates for similar liabilities.

(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are
estimated by discounting future cash flows using the interest
rates currently being offered for similar contracts.
(6) Derivatives
The fair values of interest rate swaps and embedded­derivatives are estimated using current market pricing models by obtaining quotes from ­financial institutions.
The carrying amounts and estimated fair values of thefinan­cial instruments excluding debt and equity securities
which are disclosed in Notes 2 (7) and 7 at March 31, 2009
and 2008 are as follows:		

In millions of yen

		March 31

Carrying
amountNon-derivatives:
Liabilities—
		 Long-term debt
		 including current		 portion.......................... ¥52,371
		 Investment deposits
		 by policyholders........... 86,064
Derivatives:
Liabilities—
		 Interest rate swaps.........
242
		 Embedded derivatives....
—

2009

2008

Estimated
fair value

Carrying Estimatedamount fair value¥52,451 ¥53,244¥53,344

87,891

87,252

89,373

242
—

135
514

135
514

In thousands of U.S. dollars
March 31
2009
Carrying Estimatedamount fair value

Non-derivatives:
Liabilities—
		 Long-term debt including current		 portion..................................................
		 Investment deposits
		 by policyholders...................................
Derivatives:
Liabilities—
		 Interest rate swaps.................................
		 Embedded derivatives............................

$534,398 $535,214
878,204 896,847
2,469
—

2,469
—

Limitation:
Fair value estimates are made at a specific point intime based on relevant market information and information
about the financial instruments. These estimates are­subjective in nature and involve uncertainties and matters ofsignificant ­judgment and therefore cannot be determinedwith precision. Changes in assumptions could significantly
affect the estimates.

SECOM CO., LTD.

Annual Report 200953

CONSOLIDATED FINANCIAL STATEMENTS

22. Fair Value Measurements
SFAS 157 defines fair value as the price that would bereceived to sell an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for theasset or liability in an orderly transaction between market
participants at the measurement date. SFAS 157 establishes
a three-level fair value hierarchy that prioritizes the inputs
used to measure fair value as follows:
Level 1— Inputs are quoted prices in active markets for
identical assets 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 thatare not active, inputs other than quoted pricesthat are observable, and inputs that are derived
principally from or corroborated by observable
market data by correlation or other means.
Level 3— Inputs are derived from valuation techniques inwhich one or more significant inputs or value
drivers are unobservable, which reflect thereporting entity’ own assumptions about theassumptions that market participants would use
in establishing a price.
The following table presents the Company’s assets and­liabilities that are measured at fair value on a recurring basis
at March 31, 2009 consistent with the fair value hierarchy
provisions of SFAS No. 157.
		

Assets:Cash equivalents....
Short-term
investments andinvestment
securities.............
Total assets................
Liabilities:
Derivatives.............
Total liabilities...........

¥

Level 1

Level 2350

¥ 2,607

In millions of yen

Level 3

¥

—

Total

¥

2,957

76,55676,90653,52856,13526,983
26,983

157,067
160,024

—
—

242
242

—
—

242
242

Level 1

Level 2In thousands of U.S. dollars
Level 3

Total

Assets:Cash equivalents.... $ 3,571 $ 26,602 $— $ 30,173
Short-term
investments andinvestment
securities.............
781,183 546,204 275,337
1,602,724
Total assets................
784,754 572,806 275,337
1,632,897
Liabilities:
Derivatives.............
Total liabilities...........

54

SECOM CO., LTD.

—
—

2,469
2,469

Annual Report 2009

—
—

2,469
2,469

Cash Equivalents
All highly liquid investments with initial maturities of threemonths or less are considered to be cash equivalents, andprincipally valued using quoted prices for identical assets inmarkets that are not active.
Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1
assets are valued using unadjusted quoted market price in
active markets with sufficient volume and frequency oftransactions.
Level 2 assets are comprised principally of debt securities,
which are valued using quoted prices for similar assets inactive markets, or quoted price 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.
Derivative Financial Investments
Derivative financial instruments are comprised of interest
rate swaps. These derivative instruments are valued using
observable market data and classified as Level 2 liabilities.
The following table presents the changes in Level 3 assets
measured on a recurring basis for the year ended March 31, 2009.
		In thousands ofIn millions of yen
U.S. dollars

Balance at beginning of year...............
Total gains or losses(realized or unrealized):		 Included in earnings.....................
		 Included in other		 comprehensive income (loss)......
Purchase, issuances, andsettlements, net..............................
Foreign currency translation
adjustments.....................................
Balance at end of year..........................

¥40,980$418,163(3,907)(39,867)(1,705)(17,398)(2,393)(24,418)(5,992)¥26,983(61,143)$275,337

Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with carrying amountof ¥10,830 million ($110,511 thousand) were written down
to their fair value of ¥10,714 million ($109,327 thousand),resulting in an other-than-temporary impairment charge of¥116 million ($1,184 thousand), which was included inearnings for the year ended March 31, 2009. All impaired
non-marketable equity securities were classified as Level 3
assets, as the Company uses unobservable inputs to value
these investments.

23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instrumentsin the normal course of business to reduce exposure tofluctuations in interest rate. The Company assesses interest
rate risk by con­tinu­ally monitoring changes in the exposureand 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 by counterparties toderivative financial instru­ments, but it is not expected thatany counterparties will fail to meet their obligations, because
most of the counterparties are internationally recognizedfinancial institutions and contracts are diversified to a­number of major financial institutions.
(2) Interest Rate Risk Management
The Company’s exposure to the market risk of changes
in interest rates relates ­primarily to its debt obligations.
The Company principally enters into interest rate swap
agreements to manage 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 byentering into receive-floating, pay-fixed interest rate swaps
under which the Company receives floating interest rate
­proceeds and makes fixed interest rate payments, thereby­effectively creating fixed-rate debt.
(3) Cash Flow Hedge
The Company ­designates interest rate swap agreements
as cash flow hedges for variability of cash flows originatedfrom floating rate borrowings. The interest rate swap
­agreements mature at various dates through 2022. The­effective portion of changes in fair values of derivative­instruments designated as cash flow hedges of 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 the hedge
ineffectiveness and net gains or losses excluded from theassessment of hedge effectiveness is not material for theyears ended March 31, 2009, 2008 and 2007 as the criticalterms of most of the interest rate swap agreements matchthe terms of the hedged debt obligations. Approximately¥21 million ($214 thousand) of net derivative losses included
in other comprehensive income (loss), net of tax at March 31,
2009, will be reclassified into current income within 12
months from that date. At March 31, 2009 and 2008, thenotional principal amounts of interest rate swap agreements
designated as cash flow hedges were ¥8,723 million ($89,010
thousand) and ¥21,111 million, respectively.

(4) Derivative Instruments Not Designated as Hedges
Certain subsidiaries enter into interest rate swap agreements to change the effective interest rates on debt securities
held as investments with the objective of increasing current
interest income. Certain subsidiaries hold embedded derivatives that must be separated from the host debt securities
and accounted for as derivative instruments, which are also
to increase investment income. Changes in fair value of theabove noted derivative financial instruments, which are not­designated as hedges, are reported in current income.
24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March
31, 2009 for the ­purchase of property, plant and equipment
approximated ¥6,588 million ($67,224 thousand).
The Company provides guarantees to third parties
mainly with respect to bank loans extended to its affiliatedcompanies and other entities. Such guarantees are provided
to enhance the credit standing of the affiliated companies
and other entities. For each guarantee provided, theCompany would have to per­form under the guarantee,
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 ¥7,061 million ($72,051 thousand) at March 31,
2009. The carrying amounts of the liabilities recognized for
the Company’s obligations under these ­guarantees at March
31, 2009 and 2008 were deemed insignificant.
In July 2004, Fujitsu Limited filed a lawsuit against Secom
Insurance in the Tokyo District Court, claiming compensation
for costs related to a system development order in the amountof ¥2,500 million ($25,510 thousand). Secom Insurance is not
only contesting this lawsuit on the grounds that it is without
merit, but has also filed a countersuit claiming damages in
the amount of ¥1,000 million ($10,204 thousand). However,on January 16, 2009, Secom Insurance resolved the matterby reaching a settlement involving the payment to Fujitsu
Limited in the amount of ¥1,000 million ($10,204 thousand),
which was paid on January 30, 2009.
Pasco Corporation filed a lawsuit against Sumitomo
Mitsui Banking Corporation for a confirmatory judgment to
the effect that it does not owe an obligation in the amountof ¥2,010 million ($20,510 thousand) to Sumitomo Mitsui
Banking Corporation with the Tokyo District Court on October
31, 2005. Sumitomo Mitsui Banking Corporation allegedthat it made a loan to a third party and acquired from thethird party its claim against Pasco Corporation for an alleged
sale of equipment to Pasco Corporation, as collateral for theloan, and demanded Pasco Corporation to pay such claim
to Sumitomo Mitsui Banking Corporation. Furthermore, on
December 5, 2005, Sumitomo Mitsui Banking Corporation
brought a cross action against Pasco Corporation in ­relation
to a demand for payment of a transferred receivable.
Subsequently, both actions were consolidated according
to a court procedure. The oral argument was concluded on
October 31, 2008, and on March 27, 2009 Tokyo District Court
rendered the following decision;

SECOM CO., LTD.

Annual Report 2009

55

CONSOLIDATED FINANCIAL STATEMENTS(Contents of decision)
1. Pasco Corporation must pay money for Sumitomo Mitsui
Banking Corporation in an amount of ¥2,010 million($20,510 thousand) as well as interest of the rate of 6
percent per annum on ¥600 million ($6,122 thousand),from November 1, 2005, and on ¥1,410 million ($14,388
thousand), from December 1, 2005, up to the full paymentof the respective amounts;
2. Pasco Corporation incurs the cost of lawsuits including thecost caused by supplementary participation; and3. The judgement can be provisionally executed.
Pasco Corporation appealed the case to the Tokyo High
Court on April 6, 2009.
Following the decision, Pasco Corporation provided areserve for litigation loss of ¥2,415 million ($24,643 thousand)for the year ended March 31, 2009.
Other than those above, it is not anticipated that damages,
if any, resulting from other legal actions will have a material
impact on the Company’s consolidated financial statements.
25. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2009

2007

Cash paid during theyear for:
Interest.............................. ¥ 1,978 ¥ 2,082 ¥ 1,865
Income taxes.................... 47,419 43,067 38,360
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases....... ¥ 803 ¥ 2,668 ¥ 5,395$ 20,184
483,867$

8,194

26. Segment Information
The Company has applied SFAS No. 131, “Disclosuresabout Segments of an Enter­prise and Related Information,”
which requires disclosure of financial and descriptive­information about the Company’s reportable operating
segments. The ­operating segments reported below are
the segments of the Company for which separate financial
information is available and for which ­operating profit/loss
amounts are evaluated regu­larly by ­management in deciding
how to allocate resources and assess performance.

56

SECOM CO., LTD.

Annual Report 2009

The Company has seven reportable business segments:
security services, fire protection services, medical services,
insurance services, geographic information services, real estatedevelopment and sales, and information and communication
related and other services. From December 2006, theCompany newly established a business segment, the fire
protection services, due to the acquisition of Nohmi Bosaigroup. During the year ended March 31, 2009, the Company
decided to separately disclose the real estate development
and sales, which was previously included in the informationand communication related and other services segment, due
to the fact that the reporting loss exceeded the quantitative
threshold. Accordingly, segment information of all prior periods
has been restated to conform to the presentation used forthe year ended March 31, 2009.
The security services segment provides various types ofsecu­rity services by utilizing the Company’s unique security
systems and manufacturing and selling security equipment.
The fire protection services segment provides various typesof fire protection equipment, such as automatic fire alarmand fire extinguishing and other fire protection systems
for office buildings, plants, tunnels, ships, residences andcultural monuments. The medical ser­vices segment provides
intravenous solutions to patients at home, home-based­nursing care services, medical data trans­mission services byutilizing the Company’s network and leas­ing of real estate
for medical institutions. In addition, the VIEs to which theCompany is primary beneficiary manage hospitals andhealth ­care-related institutions. The insurance services­segment represents non-life insurance-related underwriting
business in the Japanese market. The geographic information services segment represents surveying and measuringservices and GIS services. The real estate development andsales ­segment represents development and sales of condominiums that reinforce security. The information and communication related and other services ­segment represents
the Company’s network business, leasing of real estate and­management of hotel business.
Corporate expenses consist principally of general and­administrative expenses of the planning, personnel andadmin­istrative departments of the parent company andadministrative ­departments of the foreign holding company.
Intersegment sales are priced on a basis intended to­approximate amounts charged to unaffiliated customers.
Identifiable assets are those assets used exclusively in theoperations of each segment or which are allocated whenused jointly. Corporate assets, which are held by the parent
company and the foreign holding company for general andadministra­tive facilities, ­consist principally of cash and cash
equivalents, short­-term investments, investment securities,
land, buildings, machinery and equipment.

Information by business and geographic segments for theyears ended March 31, 2009, 2008 and 2007 is as follows:(1) Business Segment Information
		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2009

2008

Net sales andoperating revenue:
Security services—		 Customers.................. ¥436,918 ¥435,306 ¥415,410
		 Intersegment..............
1,516
1,375
1,491
			 .................................. 438,434
436,681
416,901
Fire protection
services—
		 Customers.................. 84,175
82,57227,448
		 Intersegment..............
5,659
4,046
944
			 .................................. 89,834
86,61828,392
Medical services—		 Customers.................. 52,220
50,74145,852
		 Intersegment..............
123
127
233
			 .................................. 52,343
50,86846,085
Insurance services—		 Customers.................. 21,530
33,22931,978
		 Intersegment..............
2,919
2,894
2,702
			 .................................. 24,449
36,12334,680Geographic
information
services—
		 Customers.................. 40,207
39,37636,438
		 Intersegment..............
117
321
138
			 .................................. 40,324
39,69736,576
Real estate development
and sales—
		 Customers.................. 22,072
29,92845,431
		 Intersegment..............
2,361
—
—
			 .................................. 24,433
29,92845,431
Information andcommunication
related and otherservices—
		 Customers.................. 31,649
35,54334,121
		 Intersegment..............
8,863
8,782
9,127
			 .................................. 40,512
44,32543,248
Total............................... 710,329
724,240
651,313
Eliminations.................. (21,558)(17,545)(14,635)
		 Total net sales and		 operating revenue.... ¥688,771 ¥706,695 ¥636,678$4,458,347
15,4694,473,816
858,92957,745
916,674
532,857
1,255
534,112219,694
29,786249,480

410,276
1,194
411,470
225,224
24,092
249,316

322,949
90,439413,3887,248,256(219,980)$7,028,276

		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2009

2008

Operating income (loss):
Security services......... ¥102,475 ¥103,137 ¥ 96,162
Fire protection
services......................
5,353
4,948
1,815
Medical services.........
11(1,083)(2,914)
Insurance services......
(8,222)
3,766
3,752
Geographic
information
services......................
2,045
1,439
394
Real estate development
and sales....................
(17,577)673
4,436
Information andcommunication
related and otherservices......................
4,918
4,718
2,899
Total.............................
89,003
117,598
106,544
Corporate expenses
and eliminations.......
(12,304)(11,970) (12,126)
Operating income....... ¥ 76,699 ¥105,628 ¥ 94,418
Other income..............
5,803
13,011
8,437
Other expenses...........
(19,172)(8,376)(7,519)
		 Income before		 income taxes.......... ¥ 63,330 ¥110,263 ¥ 95,336$1,045,663
54,623
112(83,898)
20,867(179,357)

50,184
908,194(125,551)$ 782,643
59,214(195,633)$ 646,224

		 In thousands of2009

In millions of yen

U.S. dollars

March 31

March 31

2007

2009

2008

Assets:Security services......... ¥ 395,814 ¥ 473,582 ¥ 468,256
Fire protection
services......................
81,40480,777
77,850
Medical services......... 122,960
119,251
105,158
Insurance services...... 197,844
188,538
196,798
Geographic
information
services......................
58,141
58,03855,124
Real estate development
and sales....................
76,09597,261
82,840Information andcommunication
related andother services............
96,47698,081
95,693
Total............................. 1,028,734 1,115,528 1,081,719
Corporate items..........
74,335
103,183
120,631
Investments
in and loans
to affiliatedcompanies.................
40,072
46,814
38,832
		 Total assets............... ¥1,143,141 ¥1,265,525 ¥1,241,182

SECOM CO., LTD.

$ 4,038,918
830,653
1,254,694
2,018,816
593,276
776,480

984,449
10,497,286
758,520

408,898$11,664,704

Annual Report 200957

CONSOLIDATED FINANCIAL STATEMENTS

		 In thousands of2009

Depreciation andamortization:
Security services.........
Fire protection
services......................
Medical services.........
Insurance services......
Geographic
information
services......................
Real estate development
and sales....................
Information andcommunication
related and otherservices......................
Total.............................
Corporate items..........
		 Total depreciation
		 and amortization....
Capital expenditures:
Security services.........
Fire protection
services......................
Medical services.........
Insurance services......
Geographic
information
services......................
Real estate development
and sales....................
Information andcommunication
related and otherservices......................
Total.............................
Corporate items..........
		 Total capital		 expenditures...........

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2009

2008

¥45,428¥47,191¥49,168$463,551

1,250
2,026
1,220

1,171
3,816
1,225

326
3,202
1,206

12,755
20,673
12,449

1,675

1,666

1,631

17,092

58

51

54

592

2,680
54,337288

2,707
57,827367

2,360
57,947301

27,347554,459
2,939¥54,625¥58,194¥58,248$557,398¥29,722¥33,192¥33,306$303,286

1,524
2,153
309

1,556
4,674
8

364
5,985
49

15,551
21,969
3,153

299

1,450

1,882

3,051

7

258

38

72

10,614
44,628227

5,622
46,76063

6,125
47,74912

108,306
455,3882,316¥44,855¥46,823¥47,761$457,704

The capital expenditures in the above table represent the­additions to property, plant and equipment of each segment.
The Company has no single customer that accounts formore than 10 percent of total revenues.

58

SECOM CO., LTD.

Annual Report 2009

The following table is a breakdown of security services revenue to external customers by service category. The security
services business is managed as a single operating segmentby the Company’s management.
		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2007

Electronic security
services...................... ¥303,505 ¥296,167 ¥285,858
Other security
services:
Static guard
services..................
47,99946,64842,144
Armored car
services..................
20,31019,547
20,308Merchandise andother ..........................
65,10472,944
67,100Total security
services.................. ¥436,918 ¥435,306 ¥415,410

2009$3,096,990

489,786
207,245664,326$4,458,347(2) Geographic Segment Information
Net sales and operating revenue attributed to countries
based on location of customers and long-lived assets for theyears ended March 31, 2009, 2008 and 2007 were as follows:		 In thousands of2009

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2009

Net sales andoperating revenue:
Japan....................... ¥668,451 ¥684,909 ¥620,435
Other........................
20,32021,786
16,243
		 Total...................... ¥668,771 ¥706,695 ¥636,678$6,820,929
207,347$7,028,2762008

		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2007

2009

Long-lived assets:
Japan...................... ¥351,143 ¥345,318 ¥347,546
Other.......................
4,925
6,185
5,023
		 Total..................... ¥356,068 ¥351,503 ¥352,569$3,583,092
50,255$3,633,347

2009

2008

There are no individually material countries with respect to
net sales and operating revenue and long-lived assets
included in other areas.

INDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
Secom Co., Ltd.:

ドラインは、ロゴに必要なクリアスペースです。
中に、他のオブジェクトやテキストが入らないよう、ご留意ください。

We have audited the accompanying consolidated balance sheets of SECOM CO., LTD. and subsidiaries as of March 31, 2009
and 2008, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of theyears in the three-year period ended March 31, 2009, all expressed in Japanese yen. These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, ­evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of SECOM CO., LTD. and subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash
flows for each of the years in the three-year period ended March 31, 2009, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements as of and for the year ended March 31, 2009 have been translated
into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, theconsolidated financial statements expressed in Japanese yen have been translated into United States dollars on the basis set
forth in Note 3 of the notes to the consolidated financial statements.

Tokyo, Japan
June 25, 2009

SECOM CO., LTD.

Annual Report 200959

OTHER FINANCIAL DATACONTENTSSUMMARY OF SELECTED FINANCIAL DATA................................................................. 61
COMMON STOCK DATA............................................................................................. 63

60

SECOM CO., LTD.

Annual Report 2009

SUMMARY OF SELECTED FINANCIAL DATASECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2009

2008

2007

2006

2005

2004

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue................................................... ¥688,771 ¥706,695 ¥636,678 ¥580,526 ¥552,354 ¥517,435
435,306
400,044415,410382,360
Security services:......................................................................... 436,918
367,482
61.6%
63.5%
68.9%
65.3%
69.2%
				 As a percentage of net sales and operating revenue....
71.0%
296,167
303,505
277,892
285,858
271,872
		 Electronic security services—263,900
41.9
44.1
47.9
44.9
49.2
				 As a percentage of net sales and operating revenue....
51.0
		 Other security services—
46,64841,48042,14438,302
			 Static guard services............................................................ 47,999
37,537
6.6
7.0
7.1
6.6
6.9
				 As a percentage of net sales and operating revenue....
7.2
19,547
19,36920,30818,462
			 Armored car services........................................................... 20,310
18,618
2.8
2.9
3.3
3.2
3.4
				 As a percentage of net sales and operating revenue....
3.6
66,19560,84962,452
56,764					 Subtotal.......................................................................... 68,309
56,15572,94461,303
67,10053,724
		 Merchandise and other........................................................... 65,104
47,427
10.3
9.5
10.6
10.6
9.7
				 As a percentage of net sales and operating revenue....
9.2
82,572—27,448—Fire protection services............................................................... 84,175
—
11.7
12.2
—
4.3
—
				 As a percentage of net sales and operating revenue....
—50,741
39,21545,852
34,688
Medical services.......................................................................... 52,220
21,147
7.2
7.6
6.7
7.2
6.3
				 As a percentage of net sales and operating revenue....
4.1
33,22929,537
31,97826,465
Insurance services....................................................................... 21,530
23,536
4.7
3.1
5.1
5.0
4.8
				 As a percentage of net sales and operating revenue....
4.5
39,37635,27136,43834,915
Geographic information services............................................... 40,207
32,346
5.6
5.8
6.1
5.7
6.3
				 As a percentage of net sales and operating revenue....
6.3
29,92841,96745,431
39,699Real estate development and sales........................................... 22,072
39,193
4.2
3.2
7.2
7.1
7.2
				 As a percentage of net sales and operating revenue....
7.6
Information and communication related
35,54334,492
34,121
34,227and other services..................................................................... 31,649
33,731
5.0
4.6
6.0
5.4
6.2
				 As a percentage of net sales and operating revenue....
6.5
Net income, cash dividends and shareholders’ equity
Net income....................................................................................... ¥ 30,560
Cash dividends (paid)(2)................................................................... 19,122
Shareholders’ equity....................................................................... 528,721
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
		 Bank loans................................................................................
		 Current portion of long-term debt..........................................
		 Convertible bonds....................................................................
		 Straight bonds..........................................................................
		 Other long-term debt...............................................................
			 Total debt...............................................................................
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)........................................

¥ 61,756
17,998574,554¥ 55,889
13,499551,732¥ 50,331
11,251
508,696¥ 52,133
10,127457,837¥ 23,479
9,003
415,852

11.9
2.4
—
1.9
3.6
19.8
80.2
100.0
2.7
5.8

17.5
1.2
—
1.8
4.0
24.5
75.5
100.0
4.9
10.7

17.4
1.4
—
1.9
3.6
24.3
75.7
100.0
4.5
10.1

15.2
6.4
—
1.6
3.6
26.8
73.2
100.0
4.1
9.9

16.1
1.7
—
6.4
3.9
28.1
71.9
100.0
4.5
11.4

17.7
2.1
—
5.2
9.2
34.2
65.8
100.0
2.0
5.6

7.9
2.2

8.2
2.3

9.1
2.5

9.0
2.7

9.1
2.6

10.1
2.8

64.4
2.66
32.4

63.8
2.81
53.7

62.3
2.54
53.5

60.5
2.39
48.8

60.0
2.43
39.3

54.8
1.74
15.9

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

SECOM CO., LTD.

Annual Report 2009

61

SUMMARY OF SELECTED FINANCIAL DATA

2009

2008

2007

2006

2005

2004

Number of shares outstanding
Issued...................................................................... 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,281,133
8,323,599
8,318,900
8,301,997
8,266,043
8,228,652
Owned by the Company....................................... 15,251,520
Balance................................................................... 218,037,197 224,965,118 224,969,817 224,986,720 225,022,674 225,052,481
Per share information¥ 274.51¥ 248.42¥ 223.69¥ 231.66¥ 104.32¥ 137.42
Basic net income per share (in yen) (1) .................
80.00
60.00
50.00
45.00
40.00
85.00
Cash dividends paid per share (in yen) (2) . ..........
2,553.97
2,452.47
2,261.00
2,034.63
1,847.80
2,424.91
Shareholders’ equity per share (in yen) (3) . .........
448.19427.34396.31410.29294.56299.72
Cash flow per share (in yen) (1) (e) . .........................
1.90
2.23
2.66
2.19
2.46
1.50
Price/Book value ratio............................................
17.63
22.02
26.91
19.25
43.52
26.41
Price/Earnings ratio...............................................
10.80
12.80
15.19
10.87
15.41
12.11
Price/Cash flow ratio..............................................
4,840
5,470
6,020
4,460
4,540
3,630
Stock price at year-end (in yen)............................
Notes: (a) Net income/Total assets(b) Net income/Shareholders’ equity(c) Including discontinued operations(d)		(Income before income taxes + Interest expense)/Interest expense(e) (Net income + Depreciation and amortization - Dividends approved) /Average number of shares outstanding during each period

62

SECOM CO., LTD.

Annual Report 2009(1) Per share amounts are based on the average number of shares
outstanding during each period.
(2) Subsequent to March 31, 2009, cash dividends of ¥18,533 million(¥85.00 per share) were approved at the general shareholders‘meeting on June 25, 2009 (see Note 17 of the accompanying notes
to consolidated financial statements).
(3) Per share amounts are based on the number of shares outstandingat the end of each period, minus treasury stock.

COMMON STOCK DATASECOM CO., LTD.
As of March 31

Shareholder Information
Number of shareholders........................................
Common shares held by:
Financial institutions...........................................
Securities firms...................................................
Other corporations..............................................
Foreign investors................................................
Individuals and others........................................
		 Total..................................................................

2009

2008

2007

2006

2005

2004

30,85928,51230,68319,807

21,327

21,72035.67%
2.55
3.76
38.17
19.85
100.00%33.84%
3.86
3.81
41.71
16.78
100.00%32.21%
3.68
3.86
42.43
17.82
100.00%33.04%
2.16
3.92
43.40
17.48
100.00%34.32%
1.99
4.13
40.75
18.81
100.00%37.04%
2.19
4.29
37.22
19.26
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2007
2008

2009

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

¥5,860
5,830
6,340
6,200
5,330
5,310
4,700
4,700

¥5,360
5,060
5,480
4,720
4,710
4,300
2,790
3,100

¥18,240.30
18,261.98
17,458.98
14,691.41
14,489.44
13,603.31
11,368.26
9,239.24¥17,028.41
15,273.68
14,837.66
11,787.51
12,656.42
11,259.86
7,162.90
7,054.98

SECOM CO., LTD.

Annual Report 200963

COMMON STOCK DATACOMMON STOCK ISSUES
			
		
		
Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

June 15, 1974
Dec. 21, 1974
May 21, 1975
May 21, 1975
Dec. 1, 1975
May 31, 1976
June 1, 1976
Dec. 1, 1976
Nov. 30, 1977
Dec. 1, 1977
Dec. 1, 1978
June 1, 1981
Dec. 1, 1981
Jan. 20, 1983
Nov. 30, 1983
Nov. 30, 1984
Nov. 30, 1985
Jan. 20, 1986
Nov. 30, 1986
Nov. 30, 1987
Jan. 20, 1988
Nov. 30, 1988
Nov. 30, 1989
Jan. 19, 1990
Mar. 31, 1990
Mar. 31, 1991
Mar. 31, 1992
Mar. 31, 1993
Mar. 31, 1994
Mar. 31, 1995
Mar. 31, 1996
Mar. 31, 1997
Mar. 31, 1998
Mar. 31, 1999
Nov. 19, 1999
Mar. 31, 2000
Mar. 31, 2001
Mar. 31, 2002
Mar. 31, 2003
Mar. 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, 2009, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

64

SECOM CO., LTD.

Annual Report 2009