Directors, Audit and Supervisory Board Members andExecutive Officers

Audit and Supervisory Board Members

Directors

Seiji Sakamoto
Katsuhisa Kuwahara
SECOM CO., LTD.

Ken Tsunematsu*
Hideki Kato*
Kenichi Sekiya**Outside

Executive Officers

Makoto Iida
Founder

Shuji Maeda

Takayuki Ito

Chairman and
Representative Director

Executive Officer

Hiroshi Ito
President andRepresentative Director

Executive Director

Kazuaki Anzai
Executive Director

Shuji Maeda

Hiroshi Ito

Junzo Nakayama

Chairman and
Representative Director

President andRepresentative Director

Executive Director

Kenichi Furukawa
Executive Director

Toshiyuki Mukai
Managing Executive
Officer

Masahiro Takeda
Managing Executive
Officer

Yasuo Nakayama

Kazuaki Anzai

Junzo Nakayama

Kenichi Furukawa

Executive Director

Executive Director

Executive Director

Executive Director

Teruhisa YoshimuraManaging Executive
Officer

Executive Officer

Keitaro Arai
Executive Officer

Hiromichi Sonoda

SECOM CO., LTD.

Executive Officer

5-1, Jingumae 1-chome, Shibuya-ku,

Hiroshi Ishikawa

Tokyo 150-0001, Japan

Executive Officer

ANNUAL REPORT 2014

Yasuo Nakayama

Ryohei Komatsu

http://www.secom.co.jp/

Yoichi Sugimoto
Executive Officer

Tatsuya Izumida
Executive Officer

Shokichi Ishimura
Executive Officer

Toshiaki Mizuno
Executive Officer

Sumiyuki Fukumitsu
Executive Officer

Hideo Morishita
Managing Executive
Officer

Tsuneo Komatsuzaki

ANNUAL REPORT 2014

Managing Executive
OfficerYear ended March 31, 2014

Yasuyuki Yoshida
Director

Yasuyuki Yoshida
Director

Tatsuro Fuse
Director

Takaharu Hirose
Outside Director

Takashi Sawada

Tatsuro Fuse

Outside Director

Director

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

(As of July 31, 2014)

Printed in Japan

89

SECOM Annual Report 2014

Profile

Since its establishment in 1962,

SECOM CO., LTD., a pioneer in Japan’s security services industry,has sought to develop and encourage broad acceptance of pioneering services and systems that provide security
and peace of mind, in line with its belief in the importance of contributing to society through its business activities.

Beginning with Japan’s first on-line security system for commercial use, SECOM has continued to growits businesses by developing and popularizing a wide range of services and systems over the years thatreflect evolving social imperatives. These include an on-line home security system and COCO-SECOM,
a mobile personal security system for outdoor use.
Today, the overarching mission of SECOM—comprising the parent company and the companies of
the SECOM Group—is to provide safety and security for people whenever and wherever necessary.
Accordingly, we are pressing ahead with efforts to realize our vision for the future, the Social System
Industry, which describes a framework of distinctive, integrated services and systems that make life
more secure, convenient and comfortable. To this end, we have capitalized on our extensive businessportfolio—which has expanded to include security services, fire protection ­services, medical services,
insurance services, geographic information services, information and communication related services,and real estate and other services—to create a solid foundation for future growth, working not only toenhance individual businesses but also to integrate services and systems, thereby yielding considerable
synergies to drive future growth.
Today, we continue to maximize Group synergies to expand the scope of our operations by promoting the “ALL SECOM” concept, which focuses on rallying Group strengths to create uniquely SECOM
services and systems that enhance convenience and comfort and deliver security and peace of mind.
Through these efforts, we seek to encourage people to turn to SECOM with the confidence that doing
so will help them resolve security and other concerns.
We have also expanded outside Japan. Currently active in 21 countries and territories, where we
provide uniquely SECOM security services, fire protection services, medical services and geographic
information services customized to reflect local needs and sensibilities, we continue to strengthen andgrow our overseas operations.

Contents
2 SECOM’s Vision
4 Financial Highlights
6 A Message to Shareholders
10 Special Feature: ALL SECOM—Making Use of Big Data to Expedite
the Creation of New Services
14 SECOM Today
30 CSR
32 Financial Review
37 Audited Financial Statements
70 Other Financial Data
75 Consolidated Financial Data (Based on Japanese GAAP) [Reference]
79 Nonconsolidated Financial Data (Based on Japanese GAAP) [Reference]
83 Corporate Information
87 SECOM’s Basic Business Areas
89 Directors, Audit and Supervisory Board Members and Executive Officers

SECOM Annual Report 2014

1

SECOM’s Visionystem Indu
S
l
str
cia
y
o
S
Realizing the Social System Industry

Security
services
Real estateand other services

Information andcommunication
related services

Fire protection
services

Medicalservices

Our Social System Industry vision describes a framework of innovative services and systems that makelife more secure, convenient and comfortable. We have worked steadily to make this vision a reality bybuilding a broad business portfolio that today encompasses seven segments. We combine the services
and systems in these segments into distinctive packages, in line with our overarching ­mission, which isto provide security and peace of mind wherever and whenever necessary. This approach encourages
people to turn to SECOM with the confidence that doing so will help them resolve security and otherconcerns. Looking ahead, we will continue working to provide services that respond to customers’
expectations with the aim of making SECOM an ever-present and trusted part of our customers’ lives.
To hasten the realization of our Social System Industry vision, in 2010 we introduced the
ALL SECOM concept. Under the ALL SECOM banner, we are encouraging employees everywhere towork together as one, actively sharing information, ideas and objectives and rallying comprehensive
Group capabilities to drive future growth, to develop services that make use of Big Data in line withthree key themes: security services, a super-aged society and disaster preparedness/business continuity
planning (BCP)/environmental preservation.

Applying Our Corporate Philosophy and Advancing the ALL SECOM Concept

Geographic
information
services

2

SECOM Annual Report 2014

Insuranceservices

Since our establishment, we have sought to contribute to the resolution of social issues through ourbusiness activities. The efforts of every SECOM employee working toward the realization of our Social
System Industry vision are guided by this objective, and by our corporate philosophy, which emphasizes
a refusal to be content with the status quo and a commitment to doing what is appropriate. The­former means seeking constantly to provide innovative services and systems by challenging accepted
norms, while the latter means judging the legitimacy of our actions by ­examining whether they are
just, fair and beneficial, not only to SECOM but to society as a whole. This philosophy continues to bea major driving force behind our growth and evolution.
As we work to grow our businesses and earn ever-broader acceptance of our many services, theexpectations of society will continue to rise, as will those of our customers. By applying our corporate
philosophy and advancing the ALL SECOM concept, we will continue to accurately identify and interpret the needs of customers, thus ensuring our ability to provide services that enhance convenienceand comfort and deliver security and peace of mind.

SECOM Annual Report 20143

Financial Highlights

U.S. GAAP

Japanese GAAPSECOM CO., LTD. and Subsidiaries
For the years ended/as of March 31, 2014

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

In thousands of U.S. dollars

Years ended March 31

Year ended March 31

2014

2013

2012

2014

¥ 921,178
120,089
73,9791,440,705
753,099¥ 858,438
113,557
70,5801,340,350
679,176¥ 769,643
87,933
41,237
1,179,824
612,855$ 8 ,9 4 3, 476
1,165,913
718 , 24 3
13,9 87, 4 27
7, 311,6 41

In yenIn U.S. dollars

188.9790.00
2,807.77$ 3.291.02
33.50¥ 338.94
105.003,450.36¥

323.3690.00
3,111.64¥

2014

Revenue
Operating profit
Ordinary profit
Net income
Total assets
Total net assets¥

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

Year ended March 31

2013

¥

765,635
108,370
113,618
63,6581,249,110
764,139¥291.6590.00
3,065.13

¥

2012

2014

679,173
81,07887,83935,4891,101,884
671,517$ 7,982,796
1,165,223
1,229,874
678,408
12,895,398
8,061,835

In yenIn U.S. dollars

162.6390.00
2,785.56$ 3.11
1.02
32.48

¥

Net Income (Japanese GAAP)(In billions of yen)

(In billions of yen)

100

70.6

74.0

80

62.7

63.7

60.8

60

69.9

60
47.6

47.0

41.2

35.5

40

30.6

Financial Review

40

320.14105.003,345.06

In thousands of U.S. dollars

Note: Cash dividends per share of common stock shown are based on dividends approved and paid in each period. Subsequent to March 31, 2014, cash
dividends of ¥115.00 per share were approved at the general shareholders’ meeting held on June 25, 2014.

100

80

822,228
120,018
126,677
69,876
1,328,226
830,369

In millions of yen
Years ended March 31

Corporate Social Responsibility

Net income attributable to
SECOM CO., LTD. (U.S. GAAP)For the years ended/as of March 31, 2014

21.5
20

0

20

2009

2010

2011

2012

2013

2014

0

2009

2010

2011

2012

2013

2014

SECOM Annual Report 2014

Financial Section

Note: Net income attributable to SECOM CO., LTD., in the year ended March 31, 2014, rose ¥3.4 billion, to ¥74.0 billion. Factors behind this result
include an increase in operating income in the fire protection services segment, owing to robust segment net sales and operating revenue
and the reduction of cost of sales; a full year of contributions from information and communication related services segment subsidiary At
Tokyo Corporation, consolidated in the previous period; and an increase in operating income in the security services segment, attributable tohigher segment net sales and operating revenue.
Net income attributable to SECOM CO., LTD., in the year ended March 31, 2013, climbed ¥29.3 billion, to ¥70.6 billion. This result wasdue primarily to the contributions of two newly acquired subsidiaries in Japan—Nittan Co., Ltd., a major domestic provider of fire protection
services, and At Tokyo, a leading data center services firm, which were consolidated during the period, as well as to a decline in write-down
on real estate inventories and a decrease in impairment loss on long-lived assets, which is included in loss from discontinued operations.
Net income attributable to SECOM CO., LTD. in the year ended March 31, 2012, fell ¥21.4 billion, to ¥41.2 billion. This result reflected anincrease in write-down on real estate inventories in light of dwindling demand in the condominium market, which prompted a dramatic
reorganization of related businesses, and the recognition of an impairment loss on long-lived assets, principally real estate, owing to flagging
economic conditions, which is included in loss from discontinued operations.

4

SECOM Today

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of ¥103=US$1, the rate prevailing on theTokyo Foreign Exchange Market on March 31, 2014.
2. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number of shares outstanding during each period,
less treasury stock.
3. SECOM CO., LTD. shareholders’ equity per share of common stock is based on the number of shares outstanding at the end of each period, lesstreasury stock.
4. Cash dividends per share of common stock shown are based on dividends approved and paid in each period. Subsequent to March 31, 2014, cash
dividends of ¥115.00 per share were approved at the general shareholders’ meeting held on June 25, 2014 (see Note 18 of the accompanying
Notes to Consolidated Financial Statements).
5. Effective from the fiscal year ended March 31, 2014, losses attributable to certain businesses in the real estate and other services segment arereclassified and presented as “loss from discontinued operations, net of tax” in the consolidated statements of income. Figures for previous fiscal
years have been restated to conform with this change.

SECOM CO., LTD. and Subsidiaries

Special Feature

Net sales and operating revenue
Operating income
Net income attributable to SECOM CO., LTD.
Total assets
Total SECOM CO., LTD. shareholders’ equity

In millions of yen

The Management

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

SECOM Annual Report 2014

5

A Message to Shareholders

The Management

Looking to the future, we are working to expedite thedevelopment of new services under the ALL SECOM banner
to realize a broader range of services that benefit society
and position us for a new stage of growth.

New Management Team
Changes to the responsibilities of directors were approved at a meeting of the Board of Directorsof SECOM held on May 8, 2014. As a consequence, effective June 1, 2014, Shuji Maeda
became chairman and representative director and Hiroshi Ito was appointed president andrepresentative director.

Understanding and Responding to Change
Makoto Iida
Founder

Consolidated Operating Results
In the fiscal year ended March 31, 2014, the Japanese economy remained on a path of gradual
recovery, as the positive impact of fiscal and monetary policies continued to support a weak yen
and high share prices, as a result of which corporate earnings rallied, while improvements wereseen in employment and in personal income. Economic conditions were also bolstered by alast-minute demand rush in advance of an increase in Japan’s consumption tax.
In this environment, we continued working toward the realization of our vision for the
future—the Social System Industry—by responding to the needs of customers through the provision of high-grade services and systems in our security services segment, as well as in our othersegments: fire protection services, medical services, insurance services, geographic information
services, information and communication related services, and real estate and other services. We
also pressed forward with efforts to apply the ALL SECOM concept, which emphasizes cooperation among our various independent businesses to strengthen the Group as a whole, with a viewto hastening our advance to a new stage of growth.
Consolidated net sales and operating revenue rose 7.3%, or ¥62.7 billion, to ¥921.2 billion.
This result was attributable principally to increases in net sales and operating revenue contributedby At Tokyo Corporation and certain subsidiaries providing security services, newly consolidated
from the previous period, as well as to higher net sales and operating revenue in all segments
except for the real estate and other services segment. Operating income grew 5.8%, or ¥6.5 billion, to ¥120.1 billion, bolstered by the increase in net sales and operating revenue and a reduction in cost of sales in the fire protection services segment, the full year contribution of At Tokyo
in the information and communication related services segment, as well as the higher net sales
and operating revenue in the security services segment. Net income attributable to SECOM CO.,LTD., advanced 4.8%, or ¥3.4 billion, to ¥74.0 billion.

Distribution of Dividends
Recognizing the provision of a fair return to shareholders as a crucial management task, wedetermine our consolidated dividend payout ratio based on an overall assessment of trends inour consolidated operating performance, in line with our policy of ensuring a consistent, stable
distribution of profits. At the Ordinary General Meeting of Shareholders, held on June 25, 2014,
management proposed and shareholders approved the payment of annual cash dividends of¥115.00 per share, up ¥10.00 from the previous fiscal year. A partial amendment to the Articles
of Incorporation to facilitate the introduction of an interim dividend was also proposed bymanagement and approved by shareholders.

6

SECOM Annual Report 2014

Needs for security, peace of mind, convenience and comfort are expected to become increasingly
diverse and sophisticated. Another factor behind the significant growth potential for our services
is broader acceptance of security systems with high-value-added features. Under these circumstances, we continue to draw on our own proprietary technological capabilities and our knowhow in system operation to swiftly identify needs and to respond promptly and accurately bydeveloping and providing services and systems that reflect evolving social imperatives,
infrastructure changes and technology trends.
In the security services business, we continued to actively cultivate new subscribers in the
period under review. We also endeavored to further strengthen our relations with existing subscribers, as well as to enhance customer satisfaction, through in-person visits and direct contact,enabling us to effectively interpret needs and propose the most appropriate systems from ourextensive lineup.
In commercial security services, we expanded sales of mainstay on-line security systems such
as SECOM AX, a remote imaging on-line security system that features advanced image recognition technologies; SECOM LX, which integrates an on-line security system and access control
functions; and SECOM FX, an on-line system that incorporates facility control functions. In addition, we responded to growing needs for systems that help strengthen internal controls—a trend
propelled by, among others, an incident in Japan in which food products were laced with a toxic
substance—by promoting security camera and access control systems. In the area of home security systems, we sought to bolster sales of SECOM Home Security G-Custom, a residential security
system that also includes a variety of features that make daily life more convenient.
In overseas markets, we continued working to encourage broad acceptance of SECOM-stylesecurity services, focusing on the rapidly growing economies of the People’s Republic of China(PRC) and Southeast Asia, and establishing a presence in Myanmar. “SECOM-style security
services” is a term used to describe comprehensive on-line security systems that encompass theinstallation of security equipment at the subscriber’s premises, around-the-clock monitoringfrom a SECOM control center via telecommunications circuits and the prompt dispatch of highly
trained emergency response personnel should an irregularity be detected.
Guided by our Social System Industry vision, we also implemented a number of strategic
measures in our other businesses. In fire protection services, subsidiaries Nohmi Bosai Ltd. andNittan Co., Ltd., two of Japan’s leading fire protection services providers, continued to leverage
their respective business foundations and product development capabilities to provide high-grade
automatic fire alarm systems, fire extinguishing equipment and other fire protection services, aswell as to secure orders for fire protection systems for large-scale building renovation projects,
tunnels, hospitals and other applications.
In the medical services business, we continued to promote our extensive range of services,which centers on Home Medical Services—comprising home nursing and pharmaceutical

Shuji Maeda
Chairman and Representative Director

Hiroshi Ito
President and Representative Director

SECOM Annual Report 2014

7

A Message to Shareholders

The Management

dispensing services—and includes the operation of residences for seniors, electronic medical
report systems, sales of medical equipment and pharmaceuticals, personal care services and support for associated hospitals. With the aim of accommodating emerging needs in a super-agedsociety, we opened SECOM CAREA Azamino, a complex for seniors that combines a residence,a day service and other services, located in the Azamino district of Yokohama. Overseas, Sakra
World Hospital in Bangalore, India, a joint venture with a Japanese trading company and a local
firm, opened its doors to the public.
Efforts in our insurance services business continued to focus on promoting sales of our distinctive non-life insurance policies. These include the Security Discount Fire Policy, a fire insurance
policy for commercial premises, and SECOM Anshin My Home, a comprehensive fire insurance
policy for homes, both of which offer discounts for subscribers who have installed on-line security systems, recognizing the risk-mitigating nature of such systems; MEDCOM, an unrestricted
cancer treatment policy that covers all treatment costs; and SECOM Anshin My Car, a comprehensive automobile insurance policy that includes access to on-site support services provided byour emergency response personnel.
In the area of geographic information services, we collect geographic data from sources suchas commercial satellite images and aerial photography, which we integrate, process and analyze
to provide geospatial information services. In the period under review, we capitalized on needs
for geospatial information associated with, among others, comprehensive inspections of roads,
bridges and other structures that support society and ongoing reconstruction efforts in areasin Japan devastated by the 2011 Great East Japan Earthquake. As a consequence, we saw firm
demand from public sector customers in Japan, while orders from private sector customers inJapan and from overseas customers expanded.
We continue to provide a variety of uniquely SECOM information and communication
related services, which center on data center services and also encompass BCP support services,
information security and cloud-based services, thereby achieving solid results for the period.
Accommodating needs for effective protection of information in the event of a disaster, whichhave risen since the Great East Japan Earthquake, we opened two new Secure Data Center
facilities, in Tokyo and Osaka. We also introduced the Real-Time Disaster Information Service,
which leverages our Big Data analysis capabilities to provide crucial information to subscribers,
including information essential to effective evacuation procedures and BCP.
Our real estate and other services business continued to emphasize the development and saleof condominiums with distinctive security and contingency planning features.

Backed by a business infrastructure anchored by our data center business, we will continue
to actively leverage our expertise to develop new services that anticipate future needs in linewith three key themes—security services, a super-aged society and disaster preparedness/BCP/
environmental preservation.
Ever more varied and sophisticated security needs continue to drive demand for high-grade
security solutions that improve subscribers’ security levels. One example of such a solution is ourrecently launched SECOM NVR System, a next-generation security camera system that enables
subscribers to store images remotely at a data center facility.
In response to increasingly diverse needs engendered by demographic trends in Japan, we
will promote the creation of comprehensive services for seniors that integrate personal care,health care, residential accommodation and lifestyle support and other services designed tosupport the well-being of seniors. In the area of infrastructure improvement, we are taking othersteps to expand our menu of data center-backed services, including establishing the SECOM
Anshin Information Center, which is charged with overseeing the operation of Real-Time Disaster
Information Service, our next-generation disaster mitigation service.
We are one of Japan’s preeminent data center operators in terms of capacity for the efficientcollection and safe management of data, a position we recognize as crucial to realizing newservices based on the gathering and analysis of Big Data. Going forward, we will refine ourcapabilities in the analysis of Big Data and capitalize on our around-the-clock operations to create
services that customers seek.
By providing services that make life more convenient and comfortable, as well as deliver
security and peace of mind, we have traditionally sought to encourage people to turn to SECOM
with the confidence that doing so will help them resolve security and other concerns. Looking
ahead, our focus will be on making SECOM an ever-present and trusted part of our customers’
lives. As always, we must earn the trust of our customers by providing indispensible services that
respond to their expectations. In the words of our corporate message—“Providing reliable peaceof mind”—we vow to continue working as one to realize our Social System Industry vision.
In closing, we would be remiss if we did not mention the passing of SECOM’s co-founder
Juichi Toda on January 30, 2014. Mr. Toda devoted many years to growing and evolving the
SECOM Group. While saddened, the management team pledges to honor Mr. Toda’s memory
by remaining true to the SECOM vision.
In all of our endeavors, we look forward to the support and guidance of our shareholders.

Accelerating Growth: The ALL SECOM Concept
Looking to the future, we will continue to rally the capabilities of the SECOM Group, guided by
the ALL SECOM concept, to develop innovative services with the aim of accelerating growth.
Our approach to developing new services begins with looking at how society is likely tochange in the years ahead and at what sort of services will be needed. We also consider whatkind of infrastructure and technological capabilities are necessary to create a viable service.
This approach is what makes it possible for us to realize forward-looking services that are truly
original and at the same time useful to society—services that customers immediately recognize
as being exactly what they need and want, encouraging them to turn to us and to see us as animportant partner for the future.

8

SECOM Annual Report 2014

June 25, 2014

Makoto Iida
Founder

Shuji Maeda
Chairman and Representative Director

Hiroshi Ito
President and Representative Director

SECOM Annual Report 20149

Special ALL SECOM—Making Use of Big Data to Expedite
Feature the Creation of New Services

 Making effective use of Big Data: Introducing theReal-Time Disaster Information Service
The Real-Time Disaster Information Service is a next-generation
disaster mitigation service that capitalizes on our proprietarycapabilities in Big Data analysis to provide reliable informationin the event of a disaster. This service brings together our
know-how in security services, fire protection services andinformation and communication related services under the ALL
SECOM banner. With this system, we collect massive amountsof raw data, including information from SECOM’s security
services operations, social networking service (SNS) information and information released by public agencies, at a Secure
Data Center facility. There, data is analyzed to uncover useful
information regarding, among others, safe escape routes anddecision making and directions for restarting operations in thewake of a disaster, which we provide to subscribers.
Information on safe escape routes is provided as “hazard
information,” which is customized to reflect the subscriber’s
registered business address and current location classified as
personal or corporate and categorized according to type of risk,for example, fire, liquefaction or flood position. BCP-specificinformation is uploaded to an exclusive site established for thesubscriber’s BCP team as disaster-related information. This information, together with information on branch or store locations
provided by the subscriber in advance and disaster informationthat we have collected, is customized for the subscriber, making it possible to ascertain the situation on the ground and to
determine the most effective allocation of personnel.
The Real-Time Disaster Information Service is administeredby the SECOM Anshin Information Center, which is locatedadjacent to our Secure Data Center. This facility is designed tomaintain operations in the event of a disaster of any variety,monitoring and analyzing data and providing information to
subscribers around the clock. Having repositioned our data

SECOM
ALL

Super-aged society
Insurance
Health care

Lifestyle support

Shortage of doctors
and nurses
Need for nursing
and other care services

Disaster preparedness/BCP/Environmental preservation
Typhoons

Data Center
Security, peace of mind,
convenience and comfort

Energy conservation

Population decline

Facility
management

Guided by the ALL
and convenient and to deliver

center facilities as service centers that underpin our various
services, we will continue working to make effective use of
Big Data analysis to expedite the creation of services that
benefit society.

Energy shortages

Living environments

Information leaks

Burglaries

TsunamiEarthquakes

Fires

Special Feature

We are making effective use of Big Data
to address everyday concerns in line withthree key themes: Security services,a super-aged society and disaster
preparedness/BCP/environmental
preservation. To this end, we arecollecting and analyzing Big Data tocreate uniquely SECOM services anddrive future growth.

Addressing challenges in three areas under the ALL SECOM banner
Realizingl System Ind
ocia
us
S
try
e
h
t

Sudden illness
Missing children
Theft

Security services

SECOM concept, we are working to make life more comfortablesecurity and peace of mind by responding to social imperatives andhelping to resolve everyday concerns.
 Principal sources of competitivenessWe acknowledge three core components of our operating
foundation as the principal sources of our competitiveness:
our technologies, our people and our operational structure.
On the technology front, the SECOM Intelligent Systems
Laboratory conducts research aimed at developing core technologies necessary to realize our Social System Industry vision.
The SECOM Development Center uses these core technologies
to promote the swift and accurate development of systems
that are distinctive and reliable and respond to the requirements of customers. Having recognized that technologicalprowess is crucial to maintaining a competitive edge in the
security services market, we keep abreast of evolving social
imperatives, technical trends and changing patterns of criminal
behavior while advancing the development and provision ofsystems that incorporate the most up-to-date technologies.
To foster the capabilities of our human resources, we provide training for employees, who include emergency response
personnel, sales staff and administrative staff, at four training

centers across Japan. This enables us to equip our people withthe advanced knowledge and technological skills they need,as well as to ensure they understand our corporate philosophy
and observe a code of conduct befitting security professionals,
enabling them to provide high-grade services.
The effectiveness of our operational structure depends on
our ability to create systems that combine the precision ofequipment—such as sensors, to monitor subscribers’ premises
around the clock for fire, intrusions and other irregularities—
with the skills and prompt decision-making capabilities ofpeople, notably our control center staff, who determine
whether to dispatch emergency response personnel. In addition, we have a nationwide network of more than 2,800
emergency depots, enabling us to provide prompt emergency
response services.
Our competitive advantage in the security services businessderives from our commitment to providing comprehensive
on-line security systems, whereby we take responsibility for
all aspects, from R&D to production, marketing, security

Secure Data Center

10

SECOM Annual Report 2014

SECOM Annual Report 201411

Special Feature: ALL SECOM—Making Use of Big Data to Expedite the Creation of
New Services

SECOM On-Line Security Systems

R&D
Emergency
response services

Intelligent Systems Laboratory
Development Center

Emergency response
personnel

Production andassembly of systems
Secom Industries Co., Ltd.

SECOM Intelligent Systems Laboratory conducts research in a broad
range of areas, including security and medical systems

Around-the-clockmonitoring

Marketing

SECOM control center

Security planning teamInstallation
Techniciansplanning, installation, around-the-clock monitoring, emergency
response services and maintenance. Our rental format is
another key factor. Because we retain ownership of security
equipment, which we rent out, the initial costs for subscribers
are minimized. The rental format also means that we look after
maintenance and upkeep, enabling us to guarantee the qualityof our security services.
 Providing effective security services

We provide high-value-added security systems that respondto the needs of a broad range of subscribers. Our commercial
security lineup, which includes SECOM AX, a remote imaging
on-line security system, comprises offerings suited to the security requirements of different types of facilities, including tenantbuildings, factories, offices and stores. In the area of home
security services, our lineup includes SECOM Home Security
G-Custom, an on-line security system that delivers security andpeace of mind and at the same time makes life more pleasantand convenient, and COCO-SECOM, a mobile security systemthat continues to attract attention as a solution to wanderingby seniors suffering from dementia. We also offer access
control systems that help prevent the leakage of confidential
information, as well as security camera systems designed
to discourage crime.
In addition to physical security, the need to protect information against misuse has emerged as a key theme in recent
years. We protect subscribers’ information by offering prompt
expert response services, including diagnosing and analyzing
problems, monitoring for viruses and detecting irregularities,

12

SECOM Annual Report 2014

and providing swift on-site support. A new addition to our
lineup is SECOM Premium Net Service, a system designed toprotect against online banking scams, including those involving
illegal transfers of funds, the incidence of which continues toexpand rapidly.
 Responding to the needs of a super-aged society

We continue to develop and market a variety of services
designed to respond to needs engendered by a super-agedsociety today and in the future. SECOM My Doctor Plus, an
optional service available to SECOM Home Security subscribers,
is an emergency medical alert system for seniors that assists
them in the event of an unexpected illness or injury. Evocativeof the ALL SECOM concept, SECOM My Doctor Plus combines
emergency response services and personal care and has alreadyproven its worth numerous times. Other options available to
SECOM Home Security subscribers include the Keeping inTouch call and the Keeping in Touch visiting services for seniors,
which bring together medical and lifestyle support services tohelp ensure peace of mind both for seniors and for loved ones
living far away.
Recent initiatives include SECOM CAREA Azamino, a
multipurpose complex for seniors that features a rental-based
assisted living facility for seniors, as well as a day service anda public space that promotes interaction between seniors andother members of the community. Building on our wealth ofknow-how in the provision of various home-based services,
we recently opened SECOM Home Health Care Center
Kamakura, a comprehensive senior care facility that offers

SECOM control center

home nursing, home-based personal care, day services andhome care support services.
In response to growing needs for home health care services,
we recently began developing a mobile remote image examination system. This system will be able to convey highly precise
images of the patient to wherever doctors are located, facilitating diagnoses without the patient having to leave home.
Going forward, we will continue to develop and market
new systems that respond to the needs of seniors by promoting the integration and alignment of services, as well as work
to improve efficiency. We will also expand the focus of suchservices to include overseas markets.
 Enhancing disaster preparedness/BCP/

environmental preservation
We provided a number of services that help subscribers toenhance disaster preparedness and BCP, ranging from support
for advance preparations to services that assist subscribers
in the event of a disaster, including immediate assessment,
initial response services and assistance with recovery.
Our comprehensive BCP support services include support
for the preparation of initial response manuals. The SECOM
Safety Confirmation Service helps to confirm the safety of
employees and assess the extent of damage to facilities in theaftermath of a disaster. The Real-Time Disaster Information
Service leverages our capabilities in Big Data analysis to help
ensure effective initial responses and swift recovery.
Subsidiary Pasco Corporation collects geographic data from,among others, satellite images and aerial photography, which
it integrates, processes and analyzes to provide geospatial
information services. In 2013, map data prepared by Pasco
was instrumental in measuring river levels and in assessing
damage due to landslides on the island of Izu Oshima caused
by a major typhoon.

Special Feature

Providing reliable peace of mind

SECOM Home Health Care Center Kamakura

In the area of environmental preservation, SECOM FX, a
security and facility control system that combines an on-line
security system with effective facility control functions, helps
to minimize energy consumption and reduce costs. Because
sensors can be set to accommodate the subscriber’s schedule,
SECOM FX is suitable not only for office buildings, but also for
unattended facilities, such as laundromats and common areasof condominium complexes. We also offer the SECOM Anshin
Eco Document Digitization Service, which facilitates the digitization of pay slips and other key internal documents, thereby
reducing consumption of paper.
 Creating truly original new services that contributeto society: SECOM’s mission
In considering any new business, we are guided by our
corporate philosophy, one key aspect of which is a commitment to doing what is appropriate, that is, beneficial to society,and what our competencies best qualify us to do. Going forward, we will continue to see our mission as being to develop
and provide distinctive services that contribute to society. To
this end, we will step up efforts to make effective use of Big
Data analysis as we move decisively to create new services thatwill drive growth in the future.

SECOM Annual Report 2014

13

SECOM Today
Commercial Security Services

SECOM emergency response personnel

We are accelerating our marketing efforts with the aim of providing distinctive
high-performance systems that respond to evolving social imperatives.

Promoting SECOM LX and SECOM FX security

systems
We offer an extensive selection of on-line security systems that
respond to the needs of a broad range of subscribers. In thearea of commercial security services, we continue to see brisk
sales of SECOM LX and SECOM FX, which not only provide
excellent security but also assist subscribers’ efforts to manage
costs and reduce energy consumption. SECOM LX is a systemthat combines an on-line security system with access control
functions. The former includes monitoring for intruders andfires and an emergency call service, while the latter centers
on a card reader that automatically records people entering

14

SECOM Annual Report 2014

and exiting, facilitating the effective management of personal
information, management data and other key corporate
resources. In addition to facilitating the continued use ofcurrent IC cards, SECOM LX also includes an employee attendance management feature, thereby helping improve businessefficiency and reduce costs.
SECOM FX is a security and facility control system thatcombines monitoring for intruders and fires with effective
facility control functions. Sensors set to suit the subscriber’s
control preferences and timetable, provide around-the-clockmonitoring for intruders and fires. The facility control function can be set to automatically turn lights, air conditioners,

SECOM Today

SECOM control centersignage illumination and security cameras on and off inaccordance with the subscriber’s schedule. This also makes itsuitable for use at, among others, unattended facilities, where
it enables customers to automatically control the raising andlowering of shutters and turning on and off of lights, without
actually having to be on-site. Installed in small offices or showrooms, SECOM FX can be set to automatically turn lights andair conditioners on and off not only when employees arriveand leave but also when they step out of the office for lunchor other reasons, which helps minimize heating and lighting
bills and reduce energy consumption.

An incident in Japan in December 2013 involving processedfood products being laced with an agricultural chemical, later
proven to have been perpetrated by employees, prompted
food processing facilities across the country to revamp theirproduction management systems. Demand for the installationof security camera systems has thus increased as companies
seek to strengthen internal controls. SECOM is actively
reinforcing efforts to promote its security camera systems to
respond to the needs of customers in different industries withthe aim of helping to realize a safer, more secure society.

Next-generation SECOM NVR System security

Demand increases for security camera systems forfood processing facilities
With security camera footage often providing the evidence
needed to arrest the perpetrator of a crime, security camera
systems are important for ensuring safety and peace of mind.

camera and data center image storage system
introduced
The growing popularity of security camera systems hasbrought to light a number of issues, including recording
failures due to users forgetting to switch systems on and the

SECOM Annual Report 201415

Commercial Security Services

Centralized (On-Line) Security Systems
SECOM sticker

Flashing light

Subscribers display the
SECOM security
sticker, the signof well-protected
premises.

Light flashes if the system
detects an abnormality to warn
people in the vicinity and to
guide SECOM emergency
responser
personnel
dispatcheddto thecustomer’scpremises.
p

Subscriber
Police
Dept.
Fire
Dept.
Gas
Company

SECOM NVR SystemAlertemergency
services asnecessaryusing
1 Alerttelecommunications

SECOM
3 Dispatch
emergency response

circuits

personnel

SECOM
Control Center

SECOM
2 Alertemergency

SECOM
Emergency
Depot

response personnel

inconvenience of having to replace components that wear out
to keep recording devices operational. Options available with
the SECOM NVR System include access to the SECOM Image
Archive Service, which enables them to store camera images
at a Secure Data Center facility, thereby eliminating the needfor a recording device and for the management of images.
Security is further enhanced by around-the-clock monitoring,which ensures that recording continues uninterrupted evenif cameras malfunction or an attempt is made to interrupt
operation by, for example, cutting wires. A wide range of cameras are offered, including full high-definition and illumination
correction models.
Thanks to the added convenience it offers, the SECOM
NVR System, which capitalizes on SECOM’s proprietary security
services network, is a particularly attractive option for businessowners with multiple locations and individuals responsible
for management of several premises. Looking ahead, we will

16

SECOM Annual Report 2014

continue working to cultivate demand for security camera
systems that deliver safety and peace of mind, as well as
convenience and comfort.
Cellular phone links used by SECOM security

services top one million
In April 2001, we launched COCO-SECOM, a portable
outdoor mobile security system—the first such system with acellular phone network-based infrastructure—that uses signals
from global positioning system (GPS) satellites and cellular
phone base stations to locate people or objects with superb
precision. Since then, we have steadily evolved and expanded
our portfolio of services that use cellular phone networks,
which now ranges from services that monitor and report
irregularities to the recently introduced SECOM My Doctor
Plus, an emergency medical alert system for seniors. As aconsequence, in early 2014 we became the first mobile

Contracts forCentralized Security Systems(As of March 31, 2014)

Home

Commercial
C mmerCo

The robot takes off autonomously and flies toward intruders

SECOM’s autonomous
flying surveillance robot
capitalizes on numerous
proprietary technologies

Financial services
Service industries
Retailing/wholesaling
Manufacturing
Government agencies
Other
Residences (excluding

virtual network operator (MVNO) in Japan, apart from thecountry’s cellular phone carriers, to use more than one million
cellular phone links.
Going forward, we will continue to position Japan’s cellular
phone networks as a network infrastructure that facilitates
the gathering and transmission of information from various
sources to portable telecommunication devices to protect people and vehicles on the move outdoors. We will also capitalize
on information thus gathered to realize more sophisticatedand convenient new services.

33.5%
19.9%

SECOM Today

condominiums andapartments)
Condominiums andapartments

8.6%
7.9%
4.5%
3.9%
3.9%
17.8%

which it transmits to SECOM in real time, thus hastening
the implementation of appropriate response measures.
Our new small flying surveillance robot leverages ourwealth of advanced image analysis and sensing technologies,
as well as our robotics and tracking technologies. Under
the ALL SECOM banner, we are building on our proprietary
physical security, data center and information security technologies and on the geospatial information processing andanalysis technologies of subsidiary Pasco, with the aim ofcommercializing this exciting device.

Advancing efforts to commercialize a small

autonomous flying surveillance robot
Working in tandem with an on-line security system, our new
small flying surveillance robot autonomously takes off andflies toward unauthorized individuals or vehicles, choosing
the optimal angles from which to shoot sharp, clear images,

SECOM Annual Report 201417

Home Security Services

In addition to providing homeowners and renters with safety and peace of mind,
SECOM Home Security helps make life more convenient and comfortable.

SECOM Home Security: Growing and evolving

We completed development and commenced sales of Japan’s
first-ever on-line home security system in 1981. Since then, we
have sought to respond effectively to the needs of subscribers
by continuously modifying SECOM Home Security with theaim of providing not only safety and peace of mind, but also
convenience and comfort.
SECOM Home Security comprises security equipment,
which is placed in and around the subscriber’s home, providing around-the-clock monitoring for intruders, fires, gas leaks,
as well as emergency alerts and medical emergency calls.

18

SECOM Annual Report 2014

If sensors detect an irregularity, the system alerts a SECOM
control center, where staff monitor and assess the situation,
dispatch emergency personnel and, if necessary, notify thepolice and/or the fire department.
The solid support SECOM Home Security enjoys from subscribers reflects the highly valued comprehensive nature of thisuniquely SECOM system, which encompasses a wide range ofservices evocative of the ALL SECOM concept that help makelives more convenient and comfortable. Looking ahead, we
will continue to expand the scope of SECOM Home Security toaccommodate a greater range of age groups and dwellings.

SECOM My Doctor Plus emergency
medical alert system for seniors
SECOM Home Security G-Custom’s
touch screen ensures easy operation


Bolstering sales of SECOM Home Security

G-Custom
SECOM Home Security G-Custom combines home security
with a variety of features designed to add convenience.
These include a data storage service that enables subscribers
to entrust important documents, including driver’s licenses,
passports and health insurance cards, which provide proof ofidentity, as well as prescriptions for medications; on-line accessto convenient SECOM lifestyle support services and products;
and a data-sharing service that enables immediate family
members and relatives to exchange photographs and send
messages. SECOM Home Security G-Custom also offers My
Page, which gives subscribers access to information from anextensive menu of selected collaborating companies, as wellas to make purchases on-line. Going forward, we will continue
working to boost sales of this service, which provides safety
and peace of mind and enriches everyday life.

SECOM Today

SECOM Home Security G-Custom
delivers security and peace of mind
and enhances convenience and comfort


SECOM My Doctor Plus: Resolving the concernsof seniors
Classified as a “super-aged society,” Japan continues to see
a steady increase in the number of seniors who feel uneaseabout how to cope with unexpected illnesses or injuries.
SECOM My Doctor Plus, an emergency medical alert system
for seniors, was developed with the aim of alleviating suchconcerns.
SECOM My Doctor Plus features an exclusive portabledevice incorporating cellular phone, GPS locator and emergency medical alert functions. When activated, the device
sends an emergency signal indicating that medical assistance isrequired regardless of location or time. SECOM control center
staff confirm the subscriber’s situation by telephone and if
requested dispatch emergency response personnel. Other
services offered with this system include consultation by telephone with staff at a SECOM nurse center at any time of the

SECOM Annual Report 2014

19

Home Security Services

SECOM emergency response personnel
are dispatched promptly in the event of
an irregularity

Subscribers of SECOM Home Security can seek the advice ofSECOM nurses on health-related matters

day or night. If the subscriber requests that an ambulance becalled, the subscriber’s emergency information, which is stored
at a Secure Data Center facility, is sent to the portable device,
thereby ensuring such information is immediately available toambulance attendants and hospital staff. Individuals requiring
specialized personal care who have contracted care from aservice provider in advance can request that we arrange thedispatch of a home-care helper. In addition to offering SECOMMy Doctor Plus as an option for subscribers to SECOM Home
Security, we also extend it as a standalone service for local
governments and corporate customers.

20

SECOM Annual Report 2014

Providing security systems for apartments

In Japan, an increasing number of newly built apartmentcomplexes feature security systems designed for apartments.
The installation of a SECOM security system ensures safety
and peace of mind for residents and enables landlords to use
such safety and security features to differentiate their properties. With sophisticated safety and contingency planningfeatures essential to attracting occupants to apartments andcondominiums, we will continue promoting sales of security
systems not only for new buildings, but also for existing
apartment buildings.

Other Security Services
COCO-SECOM

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

GPS satellite
Positioning
information

Notification of police(if warranted)

COCO-SECOM
Operations
CenterCellular phonebase station

SECOM
Emergency
Depot

Request forsearch(telephone/Internet)
COCO-SECOM Transmitter
Device (vehicle-mounted)

Subscriber

COCO-SECOM
Transmitter
Device (portable)

Policedepartment,
emergency
services

Dispatchemergency
response
personnel(if requested)

Package Service
An automated external defibrillator (AED) is a portable device
that treats cardiac arrhythmia due to ventricular fibrillation byadministering an electrical pulse to the heart to reestablish anormal rhythm.
We began marketing the SECOM AED Package Service,a full-service AED rental package, in 2004 with the aim ofencouraging broad public acceptance of these devices. With
this service, we replace SECOM AEDs free of charge in theevent of malfunction, damage or theft, as well as replacing
expendables prior to depletion or expiry, thereby ensuring that
units are always in operating order. Subscribers also enjoy aneffective support system that includes access to an aroundthe-clock support center. As the installation of SECOM AEDs
increased, so did needs for enhanced management services.
We responded in 2010 with the introduction of SECOM
On-Line AED Management Service, an automated around-theclock maintenance service that monitors operational status,
inspects units and replaces expendables.
In addition to hospitals and fire stations, we have installed
SECOM AEDs at a wide range of public- and private-sector
facilities. We will continue to expand our AED services
business with the aim of helping to save more lives.

SECOM Today

In addition to reinforcing marketing of the
SECOM AED Package Service, we are responding
to growing demand for the COCO-SECOM mobile
security system for use by seniors.
Stepping up efforts to market the SECOM AED

COCO-SECOM Operations Center

SECOM On-line
AED Management
Service
COCO-SECOM: Attracting attention as a locating

device for dementia sufferers who wander
The COCO-SECOM mobile security system uses signals fromGPS satellites and cellular phone base stations to pinpoint
the location of portable transmitter devices with superb
precision. If a subscriber feels he or she is in danger, pressing
the alert button on the transmitter will instantly notify the
COCO-SECOM Operations Center, which is on call around theclock and if requested will immediately dispatch emergency
response personnel.
Developed initially as a way to foil child abductions andavert the theft of cars and motorcycles, COCO-SECOM’s effectiveness has attracted use for increasingly diverse applications,
including protecting personal safety, preventing the theftof construction equipment and automated teller machines(ATMs) and managing taxi and bus fleets. In recent years,
COCO-SECOM has attracted renewed attention as a solution
to wandering by seniors suffering from dementia, which hasbolstered demand for this system.
Going forward, we will continue to promote COCOSECOM as an effective way to enhance safety and peace ofmind both inside and outdoors.

SECOM Annual Report 201421

Overseas Security Services

Security staff of Secom (Malaysia) Sdn. Bhd.

Emergency response personnel (Thaisecom Pitakkij Co., Ltd.)

Control center (Secom Australia Pty. Ltd.)SECOM-style on-line security systems, which include emergency response services,
continue to earn praise from customers in overseas markets, as a result of which
demand continues to expand.
Active in 12 countries and territories


Security services company established in Vietnam

We made our overseas debut in 1978, when we established apresence in Taiwan. Today, our overseas security services business encompasses operations in 12 countries and territories.
The distinguishing feature of our overseas security services
is that we offer SECOM-style on-line security systems, which
include emergency response services, customized to reflect local
needs and sensibilities. Moreover, we take full responsibility
for our operations in these markets, positioning us to deliver
SECOM-brand services that are equal in quality to those we provide in Japan. The safety and peace of mind guaranteed by the
SECOM name continue to earn praise from overseas customers,
as a result of which demand continues to expand steadily.

When we first established operations in Vietnam in 2006,
restrictions on participation by foreign companies in the
security services business meant our focus was on consulting.
Taking advantage of the easing of certain constraints on
foreign investments in 2008, we recently established Secom
Vietnam Security Service Joint Stock Company. In light ofrising demand for security services from the increasing numberof Japanese companies setting up operations in Vietnam, we
continue working to promote market acceptance of on-line
security systems.

Myanmar: Our newest overseas market

Taiwan Secom Co., Ltd., the leading provider of security
services in Taiwan, offers a wide array of security services,
centered on on-line security systems, to customers across theterritory. In recent years, the company has stepped up efforts
to market home security services and AEDs, with the aim ofrealizing our Social System Industry vision in the Taiwanesemarket.


Broadening the scope of operations in key overseas

markets
In March 2014, we established a joint venture in Myanmar’s
capital city of Yangon for the purpose of marketing security
services. The rapid pace of economic growth in Myanmar is
expected to attract investment from foreign companies, including firms based in Japan. We will seek to secure demand byproactively addressing the security needs of these companies.

22

SECOM Annual Report 2014

■ Countries andterritories outside
Japan in which
the SECOM Group
has security services
operations
Emergency response vehicle(S1 Corporation, ROK)

In the Republic of Korea (ROK), S1 Corporation provides
not only on-line security systems but also an extensive selectionof services that respond to the needs of customers in line with
its stated commitment to provide peace of mind for customers
whenever and wherever needed. S1 continues to diversify its
operations and in January 2014 expanded into the building
solutions business.
Secom Australia Pty. Ltd. provides security services toa diverse range of private-sector firms and subscribers inAustralia, including major financial institutions and retailers, aswell as to government agencies and national and local public
entities, earning positive reviews across the board. Recently,
Secom Australia secured major contracts to install security
systems at a number of key Australian military facilities.
In New Zealand, Secom Guardall NZ Ltd. continues toincrease its subscriber base by maximizing its expertise in providing security for financial institutions and major retail chains.
In the United Kingdom, Secom plc is renowned for the quality of its “SECOM-style” security services, as a result of which
it has risen to the number three position in the U.K. security
services market. Testament to the high marks given the qualityof the company’s services, Secom plc has won key contracts toprovide security solutions for major financial institutions andseveral police facilities.
Through our network of security service bases in 19 cities,
we currently provide on-line security systems to customers
throughout the People’s Republic of China (PRC). We will

SECOM Today

Control center (Beijing Jingdun Secom Electronic Security
Co., Ltd.)

continue to enhance our operations in this key geographic
market by providing high-grade services that respond to theneeds of customers in each of these cities.
Thaisecom Pitakkij Co., Ltd., in Thailand, continues to see
steady growth in its operating results. Highlights in recent
years include the provision of security systems for a numberof national government agencies, as well as for local public
entities in Bangkok and elsewhere.
In Malaysia, Secom (Malaysia) Sdn. Bhd. continues to provide
customized security systems to customers across the country.
In Singapore, the diverse menu of services offered by Secom(Singapore) Pte. Ltd. goes beyond on-line security systems toinclude, among others, the provision of fire protection systems
and the leasing of safety deposit boxes.
PT. Secom Indonesia has built a broad business portfolio,
anchored by its on-line security systems, which it provides
primarily to subscribers in Jakarta. Recently, the company alsoestablished an office in Surabaya, Indonesia’s second-largest
city. In addition, Secom Indonesia offers highly rated consulting
services designed to help customers prevent insider crimes, amajor threat to corporate activities.
Recognizing that the desire for safety and peace of mind issomething shared by people the world over, we will continue
to cultivate promising new overseas markets for SECOM-styleon-line security systems.

SECOM Annual Report 201423

Fire Protection Services

Production line inspection of fire alarm panel(Nittan)
Test of low-expansion foam fire extinguishing system (Nohmi Bosai)

We continue to offer high-grade systems
that deliver safety and peace of mind
by capitalizing on our capabilities as anintegrated services provider.
High-grade fire protection systems

Our fire protection services business is spearheaded by subsidiaries Nohmi Bosai and Nittan, two leading players in Japan’s
fire protection industry, which together boast an extensive
portfolio of automatic fire alarm systems and fire extinguishingsystems. As integrated service providers, Nohmi Bosai andNittan take responsibility for R&D, planning, design, production, installation and maintenance of high-grade systems that
respond to market needs.

reduced installation costs. Nohmi Bosai will continue striving
to increase sales of this and other fire extinguishing systems
with the aim of protecting both lives and assets.

Bolstering orders through active proposal-oriented

marketing efforts
Nittan provides high-grade fire protection systems for a wide
variety of facilities. The company promotes proposal-oriented
marketing to customers who have already installed systems,
as well as to customers who take advantage of Nittan’s
maintenance and inspection services. In addition to benefitingfrom expanded orders for fire protection systems for buildings
under renovation, Nittan is reinforcing its competitiveness inthe market for systems for newly built structures by promoting
rigorous cost management.
Marketing the VS Sprinkler


Expanding orders in the renovations market

Nohmi Bosai provides high-grade fire protection systems fora broad range of applications, including office buildings,
plants, tunnels, structures designated as cultural properties,
ships and homes. With the deterioration of older buildings
stimulating demand for renovations to update automatic fire
alarm systems and other equipment, Nohmi Bosai is drawing
on its wealth of experience and the solid trust of customers
to bolster orders in this area by expanding proposal-oriented
sales efforts. The company is also building on its exceptional
technological capabilities and know-how to promote theexpansion of orders for fire extinguishing systems for tunnels
and plants.

Developing and marketing sprinkler systems

connected to public water supplies
In response to an increase in the occurrence of fires in residences for seniors, Nohmi Bosai has developed and marketed
Splash, a sprinkler system for smaller social welfare facilities
and hospitals. Designed for connection to the public watersupply, the Splash system facilitates simplified piping and24

SECOM Annual Report 2014

In response to the needs of customers renovating or upgrading the earthquake resistance of buildings, Nittan provides the
VS Sprinkler, a negative pressure wet-pipe sprinkler featuring
a vacuum pump unit that continues to create suction even if
the sprinkler heads are damaged or piping leaks as the resultof an earthquake, thereby minimizing water damage. This alsomeans that the VS Sprinkler system will continue to operate
effectively should a fire break out in the wake of an earthquake. Looking ahead, Nittan will focus its marketing efforts
for the VS Sprinkler on hospitals, factories and other locations
where needs are particularly high.

Expanding operations overseas

Nohmi Bosai is active outside of Japan, recently launchinga new series of record addressable fire alarm control panels in
the PRC, Southeast Asia, India and the Middle East for buildings of all sizes. Nittan’s first foray into overseas markets camein 1972, when it began providing fire alarm systems in Europe.
The company recently realigned its overseas sales framework
to focus on Southeast Asia and is promoting the developmentof new systems. Both Nohmi Bosai and Nittan will press
forward with efforts to expand sales in overseas markets.

Medical Services
Sakra World Hospital, Bangalore, India

Home Medical Services
Medical Care
Institution

Prescription

Physician’s guidelines
Nurse’s report

Coordination
Home Nursing
Services

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

Consultation
Prescription
Nurse visit

Pharmaceutical delivery

Patient

Outpatient care

SECOM CAREA Azamino


SECOM visiting nurses get tablet computers


SECOM Home Health Care Center Kamakura opens

With the purpose of building a mobile communications
network for our Home Medical Services business, we recently
equipped each of the 300 visiting nurses working out of our
network of 33 visiting nurse stations with a tablet computer.
As a result, nurses can not only access patient informationfrom wherever they are but also update patient records on thespot, thereby improving service efficiency. Our new network
facilitates the safe, centralized storage and management of
medical data at a Secure Data Center facility, providing a common resource that enhances collaboration among primary care
physicians, care managers, local health care facilities andpersonal care providers.

Marshaling our wealth of know-how in the provision of homehealth care and home nursing care services, we recently
opened SECOM Home Health Care Center Kamakura, a comprehensive senior care facility that offers home nursing, homebased personal care, day care services and home care support
services. By facilitating cooperation among visiting nurses, care
workers and care managers, among others, this facility seeks
to enable as many seniors as possible to continue living in theirown homes and communities by helping to address both
medical and personal care needs.


SECOM CAREA Azamino: An innovative concept

SECOM CAREA Azamino is a multipurpose residential andservice complex for seniors in the Azamino district of
Yokohama. This innovative facility combines SECOM Seniors
Club Azamino, a day service; Leaf Escort Azamino, a rentalbased assisted living facility for seniors; and CAREA, a public
space that facilitates interaction with the local community.

SECOM Today

From the provision of home nursing, home-based personal care andother services to the operation of multipurpose residential and service complexes forseniors, we have created a portfolio of businesses that respond to
the diverse health care needs of seniors.

New hospital in India opens

In March 2014, operations commenced at Sakra World
Hospital in Bangalore, India, a brand-new hospital establishedand operated as a joint venture with a Japanese trading company and a local firm. With 294 beds, this facility offers highquality acute care with a special focus on neurological, cardiac,and gastroenterological disorders and boasts advanced equipment, in-patient facilities and operating theaters. Goingforward, we will continue to actively seek opportunities tocapitalize on our expertise in providing support for hospitalmanagement to expand our medical services business inoverseas markets.

SECOM Annual Report 201425

Insurance Services

Head office of Secom General Insurance Co., Ltd.

Support center

We continue to leverage the comprehensive capabilities of the SECOM Group toprovide distinctive insurance policies.

Expanding sales of SECOM Anshin My Home

Our diversification into non-life insurance came about as aresult of our conviction that augmenting security services,which are preventative by nature, with insurance, which looks
after people in the event of misfortune, was a way to add tosubscribers’ security and peace of mind. By taking full advantage of the collective strengths of the SECOM Group we havedeveloped an extensive lineup of highly rated fire, medical andautomobile insurance policies.
SECOM Anshin My Home is a policy for residential
customers that offers a discount on regular premiums to
subscribers who have installed on-line security systems, taking into account the risk-mitigating nature of such systems.
This policy also offers a discount for houses with exclusively
electrical appliances and houses built with fire-resistantmaterials, acknowledging that such houses have a lower
risk of fire. Customers can choose a basic plan from among
several alternatives and are also free to select special options,enabling them to tailor policies to their own specific needs.
Contract volume for SECOM Anshin My Home continues toincrease steadily. We will continue working to expand sales ofthis attractive product. Our lineup also includes a similar policy
for commercial customers, Security Discount Fire Policy, which
offers a discount on regular premiums to companies that haveinstalled on-line security systems.

26

SECOM Annual Report 2014


Subscriptions for the MEDCOM unrestricted cancer

treatment policy continue to increase
MEDCOM is an unrestricted cancer treatment policy thatprovides full coverage for all hospitalization and medical
treatment costs, both those covered under Japan’s National
Health Insurance (NHI) scheme and those not, the burden ofwhich is traditionally borne entirely by the patient. MEDCOM
also extends to outpatient treatment, providing coverage forup to ¥10 million per five-year period, and a one-time lumpsum payment of ¥1 million if cancer is diagnosed. Subscribers
are thus able to focus on treatment without having to worry
about costs. If diagnosed, subscribers additionally have accessto MEDCOM Nurse Call, a telephone-based support service
that gives referrals to associated hospitals across the country,
helps arrange second opinions and offers consultations onavailable treatment options.

SECOM Anshin My Car: Backed by reliable

emergency response services
Another attractive SECOM insurance product is SECOM
Anshin My Car. This distinctive policy includes, among
others, around-the-clock access to on-site support by SECOM
emergency response personnel in the event of an accident.
In addition to expanding marketing of these various policies
via traditional channels, we are reinforcing on-line sales andsales through banks.

Geographic Information Services

Digital map of Sumatra (Indonesia)

Pasco is using images captured by TerraSAR-X
to monitor the island of Nishinoshima

Satellite ground station (building with antenna) and geospatial
information processing center (Okinawa)

Capitalizing on our geospatial information services, we are contributing to
the construction of key social systems in Japan and overseas.
Supporting efforts to enhance national resilienceand enhance operational efficiency


Reinforcing services for customers in the ASEAN

regionIn the Association of Southeast Asian Nations (ASEAN) region,
Pasco is responding to heightened needs for geospatial
information to assist in the development and maintenance of
critical infrastructure by expanding its local presence. Recently,
the company has taken steps to enhance its sales capabilities inThailand and the Philippines and has established a base in Laos.
The company also maximized technological capabilities
and know-how accumulated in Japan to assist national landdevelopment and relief efforts in ASEAN member states. In
June 2014, Pasco completed a 3.5-year National Spatial Data
Infrastructure (NSDI) project for the island of Sumatra, inIndonesia, which is similar in size to Japan. In light of
Sumatra’s tropical rainforest climate, Pasco used an X-band

SECOM Today

Subsidiary Pasco collects geographic data from satellite images,
aerial photography, and vehicle/ground and shipborne surveying, which it integrates, processes and analyzes to provide
geospatial information services.
In Japan, these services assist efforts to enhance national
resilience. Leveraging proprietary technologies, Pasco creates
high-precision three-dimensional digital terrain models (DTMs)
by digitizing information for mountains, rivers and other topographic features, as well as for roads, bridges and other structures, which are used to assess latent national risks, including
those related to the danger of landslides and flooding and thedegradation of critical infrastructure.
Pasco also offers a cloud-based GIS service for customers
in both the public and private sectors that supports improved
operational efficiency, swift decision making and effective risk
management. In area marketing, which includes analysis ofcatchment areas, the company is promoting applications for
Big Data, including cellular phone positioning information.

synthetic-aperture radar (SAR) sensor, which is not influenced
by weather, to acquire aerial images, enabling it to complete
the acquisition and production of geospatial information forthe database in a comparatively short period of time. In late2013, Pasco was contracted to produce topographic maps forthe islands of Cebu and Leyte, in the Philippines, to assist withrecovery efforts in the wake of Typhoon Haiyan, which caused
significant destruction in both areas.
Capturing the extent of disaster damage andprotecting the environment
In October 2013, Pasco promptly supplied images of damage tothe island of Izu Oshima caused by Typhoon Wipha to pertinentauthorities, thereby assisting with post-disaster recovery andreconstruction.
Since November 2013, Pasco has continuously acquired
images of Nishinoshima, an island in Japan’s Volcano Islandsarc, captured by TerraSAR-X, a German commercial SAR satellite, enabling it to monitor significant ongoing changes occurring in the island’s topography as a result of volcanic eruptions.
As part of its commitment to helping combat global warming,
Pasco also uses SAR satellites to acquire geospatial information
to support the management and protection of forest resources,
which are essential to the removal of CO2 from the atmosphere.
Enhancing geospatial information collection

capabilities
Pasco has Earth observation satellite ground stations in Okinawa
and Hokkaido. With the aim of bolstering its reception capacity,
Pasco recently completed the construction of another receiving
antenna in the Okinawan city of Itoman and obtained exclusive
distribution rights in Japan for image data from the CanadianSpace Agency’s high-resolution RADARSAT-2 SAR satellite.
This has increased the number of satellites from which Pasco
can access image data to 17, greatly enhancing its geospatial
information collection capabilities.
SECOM Annual Report 201427

Information and Communication Related Services

Secure Data Center

SECOM Anshin Information Center

Cyber Dojo, cyber crime prevention
training program

Repositioning our data center facilities as service centers has enabled us toreinforce our information services capabilities.

Maximizing our status as one of Japan’s top data

center services firms to expedite the creation of
new services
In 2012, we acquired a majority interest in At Tokyo, thereby
becoming one of Japan’s top data center services firms. In
2013, we opened two new Secure Data Center facilities, inTokyo and Osaka. We continue to leverage the capabilities ofthese two facilities, and of our existing data center facilities,
to respond to the evolving needs of customers.
The competitive advantage of SECOM data centers derives
from robust facility construction and reliability, as well as fromtheir proven ability to operate without interruption regardlessof circumstances, thus providing seamless security and peaceof mind. Having repositioned our data centers as “service
centers,” we continue working to create new services thatharness the power of Big Data.

Recent years have seen a sharp increase in online banking
scams. With criminals employing increasingly sophisticatedand cunning deceptions, traditional security measures are
no longer sufficient to protect users against such crimes. To
help resolve this increasingly dangerous situation and improve
the security of on-line transactions, we launched the SECOM
Premium Net Service, which centers on a dedicated USB flash
drive that scans for malicious viruses, secures safe communication channels and directs users to the correct secure on-line
banking portal. Building on our extensive information security
know-how, we recently introduced Cyber Dojo, a training
program that offers practical instruction regarding the latest
techniques employed by cyber criminals and effective countermeasures. We are also focusing efforts on fostering skilled
information security specialists.

Reinforcing disaster response services


Responding to increasingly sophisticated andcunning crimes
A crucial aspect of expanding our security services businesshas been to enhance protection of confidential customer
information. The know-how we have accumulated enables us
to extend total information security protection, from rigorous
security measures and monitoring to prompt expert responses
and swift normalization.

28

SECOM Annual Report 2014

SECOM Safety Confirmation Service, one of Japan’s leadingrisk management services, helps subscribers ascertain thesafety of employees and their families in the event of adisaster. In tandem with this service, we also offer the SECOM
Emergency Call Out Service, which is designed to facilitate
the deployment of personnel in the aftermath of a disaster—
based on considerations such as individual qualifications, placeof residence and other factors—to ensure the prompt resumption of operations. A recent addition to our service menu isthe Real-Time Disaster Information Service, whereby we collectand analyze available information, including emergency warnings and evacuation orders, SNS information and exclusive
SECOM Group information, as Big Data, and customize ourfindings to individual customers. This service is coordinatedand administered by the SECOM Anshin Information Center.
Enhancing SECOM cloud services

Capitalizing on our rigorous data center information management procedures and high-level technological capabilities, we
provide a wide range of cloud-based services backed aroundthe-clock by skilled support personnel. These include

a personnel management service that uses employee
attendance information from access control systems, anoutgrowth of our security services capabilities; SECOM Anshin
Eco Document Digitization Service, which assists in digitizing
the thousands of documents companies deal with, including records for financial institutions and hospitals, invoices,
paystubs and contracts. Legally recognized as originals, these
digitized documents can be stored safely and easily. Goingforward, we will continue to enhance and tailor our menu ofcloud-based services to better respond to the needs of customers and support their efforts to improve competitivenessand create corporate value.

Real Estate and Other ServicesStepping up efforts to develop high-grade

condominiums that deliver safety and peaceof mind
In line with our goal of providing living spaces that ensure
safety, peace of mind and comfort, we develop and sell distinctive and highly secure condominiums under the Glorio brand.
We commenced sales of units in Glorio Sasazuka, Glorio
Tamachi and Glorio Shinjuku Natsumezaka, three newcomplexes in Tokyo that feature MS-4S, an on-line security
system developed for condominiums, which is installed ineach individual unit, while common areas are equipped with
the SECOM IX remote imaging security system. The securityof condominiums in these complexes is further enhanced bya TOMAHAWK JET ALPHA fire extinguishing system for putting out cooking fires and a PYTHAGORAS wall safe, which
protects valuables from theft. Some of the condominiums webuild feature earthquake resistance that is 1.25 times greaterthan the minimum required under Japan’s Building Standard
Law, earning it seismic grade 2 under the law’s three-grade
system of grading earthquake resistance.
Looking ahead, we will continue promoting the development and saleof quality condominiums withadvanced disasterpreparedness
features, further
enabling us todeliver safety andpeace of mind.
Glorio Sasazuka


SECOM Home Service continues to draw customers

SECOM Home Service is an optional suite of lifestyle support
services available to SECOM Home Security subscribers thatencourages people to turn to SECOM for help in resolving
everyday concerns. The SECOM Home Service menu includes
Housework Support Service, which provides help with housekeeping and small jobs around the house; Troubleshooting
Support Service, which offers assistance in resolving unforeseen problems such as lost keys; and Anshin Support Service,whereby we assist subscribers by, for example, patrollingaround their homes when occupants are out. We also offer
Seikatsu Tasuke, a similar service for customers who are not
SECOM Home Security subscribers.
In the coming years, we will continue to expand the scopeof SECOM Home Service and Seikatsu Tasuke to include
services that further
accommodate the needsof customers.

SECOM Today

We develop and sell high-grade condominiums equipped withadvanced disaster-preparedness features.

SECOM Home Service

SECOM Annual Report 201429

Corporate Social Responsibility

30 Basic policies

 Strategic CSR initiatives

Having always acknowledged the importance of ensuring
sustainability for ourselves and for society, we actively seek to• contribute to society through our business activities,• identify and cultivate businesses that enable us to
fulfill our responsibility to contribute to society, and• drive ongoing innovation.
We promote a variety of CSR initiatives, which we classify
as either “strategic” or “basic.” We also promote active
dialogue with our many stakeholders with the aim of further
expanding our efforts. Going forward, we will continue
working to respond to society’s expectations.

Our strategic CSR initiatives emphasize capitalizing on our
technologies to develop and provide services and systems that
respond to evolving social imperatives. Guided by the ALL
SECOM concept, which focuses on rallying Group strengths,
we continue working to extend services and systems thatdeliver safety and peace of mind, and make life more convenient and comfortable, as well as to create uniquely SECOM
high-value-added services.

 Basic CSR initiatives
As publicly owned entities, corporations must establish
systems to manage an increasingly broad array of challenges
in such core areas as corporate governance, consumer issues,
the environment, labor practices and human rights, and social
contributions.
As a company that seeks to provide security and peaceof mind, we recognize the importance of ensuring that both
our corporate philosophy and our business conduct are correctly understood and positively evaluated by society, thereby
ensuring that our stakeholders continue to see us as a trusted
partner. To this end, we have developed stringent internal
standards for compliance and risk management that exceed
those mandated by Japanese law.
We have aligned our basic CSR initiatives with ISO 26000,
the international standard for social responsibility. Taking into
account the key areas of focus outlined in ISO 26000, we
have identified and continue to emphasize efforts in thefollowing categories.

Strategic
CSR initiatives

Help address social imperatives
and environmental issues
through business activities

Basic
CSR initiatives

Establish a solid operating foundationthat enables us to fulfill our
responsibilities as a corporate citizen

SECOM Annual Report 2014

Corporate governancet5Praise the efficiency and transparency of management
practices, thereby enabling us to consistently increase ourcorporate value, we have taken steps to enhance our corporate governance system, including appointing independent
outside directors. We are also promoting management-led
efforts to strengthen our compliance framework andimprove disclosure.

our basic environmental policy across the SECOM Group,
implement measures aimed at addressing such key issues
as global warming and resource depletion and ensure ouroperations conform with pertinent laws and regulations.
t8FBSFUBLJOHEFDJTJWFTUFQTUPSFEVDFPVSabsolute emissions of CO2, recognizing this as an issue of particularconcern to stakeholders, while continuing to grow ourbusinesses.

Human resources and labor practices
t In line with our belief that creating working environments
conducive to job satisfaction and helping employees fulfill
their potential are key to driving growth for SECOM, wehave established a variety of unique employee training
programs designed to maximize individual talents andhone skills. We also provide training aimed at enhancing
employees’ understanding of human rights.
t8FQVUQSJPSJUZPOFOTVSJOHBGBWPSBCMFXPSLoMJGFCBMBODF 
which we recognize as crucial to physical and mental health,as well as to motivating employees and instilling a passion
for their day-to-day responsibilities. Accordingly, we have
put in place generous leave programs that exceed legal
requirements.

Service qualityt1SPWJEJOHUIFRVBMJUZPGTFSWJDFTGPSXIJDIUIF4&$0.OBNF
is known, we conduct practical training for employeesthat aims to increase know-how and skill levels, thereby
contributing directly to improvements in service quality andreliability.
t8FXPSLUPGVSUIFSFOIBODFUIFRVBMJUZPGPVSTFSWJDFTCZ
paying heed to feedback received by SECOM customer
service centers, as well as by speaking directly to customers.

Environmentt*OUIFCFMJFGUIBUQSPUFDUJOHUIFFOWJSPONFOUJTFTTFOUJBM
to our ability to provide security and support comfortable
lifestyles, we continue to promote awareness of our environmental philosophy—which is to incorporate consideration
for the environment into all areas of our operations—andSocial contribution activitiest8JUIUIFBJNPGGVSUIFSFOIBODJOHPVSBCJMJUZUPQSPWJEF
security and peace of mind, we offer educational programsfor children, women and seniors designed to raise crime
prevention awareness.

Harmony with societyt8FSFDPHOJ[FDPOUSJCVUJOHUPUIFDPNNVOJUZ UISPVHIUIF
creation of employment opportunities and supporting local
development, as an important responsibility.
Corporate Social Responsibility

In Memoriam
Juichi Toda, co-founder
Juichi Toda, co-founder of SECOM, passed away on January 30, 2014. Mr. Toda and founder
Makoto Iida attended the same university. Several years after graduation, the two were looking
at setting up a company together when a mutual friend told them about something called“security services” that were offered in Europe. This sparked their interest and encouraged themto establish Nihon Keibi Hosho (currently SECOM) in July 1962. Mr. Toda was 30 years old at thetime, while Mr. Iida was 29. For 50-plus years, the two worked together to grow and evolve the
SECOM Group as Japan’s foremost provider of security services.
Juichi Toda

SECOM Annual Report 201431

Financial Review
Operating Results

Overview
In the year ended March 31, 2014,
SECOM CO., LTD. and its subsidiaries(collectively, “the Company”) sought toprovide high-quality products and services
that respond to the needs of customers in
its core security services segment, as wellas in its fire protection services, medical
services, insurance services, geographic
information services, information andcommunication related services, and realestate and other services segments.
Consolidated net sales and operating
revenue rose 7.3%, or ¥62.7 billion, to¥921.2 billion. This result was attributableprincipally to increases in net sales andoperating revenue contributions from At
Tokyo and certain subsidiaries providing
security services, all of which were newly
consolidated in the previous period, as wellas to higher net sales and operating revenue in all segments except for real estateand other services. Operating income grew
5.8%, or ¥6.5 billion, to ¥120.1 billion,
bolstered by an increase in net sales andoperating revenue and a decline in costof sales in the fire protection services
segment, a full year of contributions fromAt Tokyo to results in the information andcommunication related services segment,
and higher net sales and operating revenue in the security services segment.
Net income attributable to SECOM CO.,LTD., advanced 4.8%, or ¥3.4 billion, to¥74.0 billion.
Effective from the period under review,
losses attributable to certain businesses in
the real estate and other services segment
are reclassified and presented as “lossfrom discontinued operations, net of tax”
in the consolidated statements of income.
Certain segment results for previous fiscal
years have been restated to conform withthis change.
Net Sales and Operating Revenue
Consolidated net sales and operating
revenue rose 7.3%, or ¥62.7 billion, to¥921.2 billion, bolstered by increases inthe security services, information and communication related services, medical services, fire protection services, geographic
information services and insurance services
segments. Net sales and operating revenue
in the real estate and other services segment declined. (For further details, pleasesee Segment Information below.)32

SECOM Annual Report 2014

Costs and Expenses
Total costs and expenses increased 7.5%,
or ¥56.2 billion, to ¥801.1 billion. Costof sales, at ¥628.9 billion, was up 8.4%,
or ¥48.8 billion, and was equivalent to68.3% of net sales and operating revenue,
up from 67.6% in the previous fiscal
year, an increase due primarily to outlays
for the expansion and modification of
hospitals, which pushed up cost of sales
as a percentage of net sales and operating
revenue in the medical services segment.
Selling, general and administrative(SG&A) expenses rose 3.1%, or ¥4.9
billion, to ¥166.0 billion. SG&A expenses
were equivalent to 18.0% of net sales
and operating revenue, an improvementfrom 18.8% in the previous fiscal year. The
Company also recognized an impairment
loss on certain long-lived assets in the
medical services segment of ¥2.8 billion,¥2.4 billion higher than in the preceding
period, as well as a loss on sales and disposal of fixed assets, net, of ¥3.2 billion,
an increase of ¥1.0 billion. In contrast,
impairment loss on goodwill decreased¥901 million, to ¥151 million.
Operating Income
Operating income grew 5.8%, or ¥6.5 billion, to ¥120.1 billion, although operating
income as a percentage of net sales andoperating revenue edged down to 13.0%,
from 13.2% in the previous fiscal year. The
Company’s segments, in order of contribution to operating income, were security
services, fire protection services, information and communication related services,
real estate and other services, geographic
information services, medical services andinsurance services. (For further details,
please see Segment Information below.)
Other Income and Expenses
Other income increased ¥1.7 billion,to ¥11.7 billion, while other expenses
declined ¥148 million, to ¥3.0 billion,
resulting in net other income of ¥8.7
billion, up ¥1.9 billion from the preceding
period. Principal factors behind this result
included increases in gain on sales of
securities, net, which rose ¥785 million,to ¥935 million, and a gain on private
equity investments, which advanced¥469 million, to ¥5.6 billion.

Income Before Income Taxes andEquity in Net Income of AffiliatedCompanies
Income before income taxes and equity in
net income of affiliated companies rose
7.0%, or ¥8.4 billion, to ¥128.8 billion,
reflecting gains in operating income andnet other income.
Income Taxes
Income taxes were up ¥3.0 billion, to¥49.7 billion, equivalent to 38.6% ofincome before income taxes and equity
in net income of affiliated companies,
compared with 38.8% in the previous
fiscal year. This result was due mainly to a
decline in the statutory tax rate as a resultof changes to Japan’s tax regulations anda corresponding write-down of certain
components of net deferred tax assets,
which were offset by a reassessment of
the recoverability of these assets and areversal of valuation allowance.
Equity in Net Income of AffiliatedCompanies
Equity in net income of affiliated companies increased ¥122 million from theprevious fiscal year, to ¥4.0 billion.
Loss from Discontinued Operations
Discontinued operations include any
component of an entity with its own
identifiable operations and cash flows thathas been disposed of or is to be sold andin which the Company has no significant
continuous involvement. The Company
discontinued certain businesses in the realestate and other services segment in theprevious fiscal year and has plans to sell
these businesses in the fiscal year ending
March 31, 2015. In the period underreview the Company posted a loss fromdiscontinued operations, net of tax, of¥138 million, an improvement from¥912 million in the preceding period.
Net Income Attributable to
Noncontrolling Interests
Net income attributable to noncontrollinginterests amounted to ¥9.0 billion, up ¥2.9
billion from the previous fiscal year. This
result reflected an increase in net incomein the fire protection services business andthe inclusion of a full year of contributions
from subsidiaries newly consolidated in thepreceding period.

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

Net Income Attributable to SECOM
CO., LTD.
Net income attributable to SECOM CO.,LTD. rose 4.8%, or ¥3.4 billion, to ¥74.0
billion, equivalent to 8.0% of net sales andoperating revenue, compared with 8.2%
in the preceding period. Net income attributable to SECOM CO., LTD. per share was¥338.94, up from ¥323.36. Subsequent
to the fiscal year ended March 31, 2014, a
proposal to pay cash dividends of ¥115.00
per share, an increase of ¥10.00 per sharefrom the previous fiscal year, was approvedat the general shareholders’ meeting heldon June 25, 2014.

acquired at the beginning of the fourth
quarter of the previous fiscal year. Armoredcar services, which involve the transport ofcash, securities and other valuables using
specially fitted armored cars and security
professionals, reported net sales and operating revenue of ¥20.8 billion, up 1.1%, or¥235 million.
The merchandise and other category
encompasses sales of a wide range of
security products, including security
camera systems, access control systems,
automated fire extinguishing systems andexternal monitoring systems, which can be
freestanding or linked to on-line security
systems. Net sales and operating revenue
in this category increased 21.6%, or ¥14.5
billion, to ¥81.9 billion, bolstered by the
inclusion of a full year of results in thiscategory of the aforementioned subsidiaryacquired at the beginning of the fourth
quarter of the previous fiscal year, andby an increase in sales of security camera
systems.
Operating income in the security services segment edged up 1.7%, or¥1.7 billion, to ¥104.1 billion, owing tohigher segment net sales and operating
revenue. The operating margin slipped
to 21.9%, from 23.0% in the preceding
period. This decrease was attributable tothe fact that the business portfolio of thesubsidiary acquired at the beginning of
the fourth quarter of the previous fiscal
year centers on static guard services andmerchandise and other, margins for which
are lower than those for electronic security
services, as well as to an increase in costs
and expenses accompanying forwardlooking investments to revamp on-line
security systems with the aim of securing
future growth.
In light of the increasing significanceof construction and installation services,
these services—formerly included in the
security services segment—have been
reclassified and are included in the realestate and other services segment to facilitate more adequate disclosure and improvethe effectiveness of segment information.
Certain segment results for previous fiscal
years have been restated to conform withthis change.

Financial Review

Security Services
The security services segment comprises
electronic security services, which centeron on-line security systems; other security
services; and merchandise and other. In the
period under review, net sales and operating revenue in this segment increased
6.7%, or ¥29.7 billion, to ¥475.3 billion.
Excluding intersegment transactions, net
sales and operating revenue in this segment
amounted to ¥472.4 billion, representing
51.3% of overall net sales and operating
revenue, down slightly from 51.6% in theprevious period.
In addition to on-line commercial andhome security systems (centralized systems), electronic security services include
large-scale proprietary security systems,
which center on surveillance services forthe subscriber’s premises. On-line commercial and home security systems use sensors,
controllers and other equipment installed at
the subscriber’s premises to detect events,
including intrusions, fires and equipment
malfunctions. Equipment is linked to a
SECOM control center via telecommunications circuits to facilitate around-the-clock
remote monitoring. Should an irregularity
be detected, relevant information is relayed
to the control center, where staff dispatch
emergency response personnel to takeappropriate measures. Control center staff
also notify the police or fire department, if
necessary. The Company has established an
integrated approach, whereby it takes full
responsibility for all aspects of its on-line
commercial and home security systems,
from R&D through to equipment manufacturing, sales, security planning, installation,
monitoring, emergency response services
and equipment maintenance. Net sales andoperating revenue from electronic security
services rose 3.5%, or ¥10.6 billion, to¥318.1 billion, owing to the expansion of
the Company’s lineup of value-added services that respond to diverse security needs
and firm sales of on-line home security systems, as well as to the positive impact ofyen depreciation and an increase in contract volume on the net sales and operating
revenue of overseas subsidiaries.
Other security services include static
guard services and armored car services.
Static guard services, which are provided byhighly trained professional security guards
for situations requiring human judgment
and flexible responsiveness, generated
net sales and operating revenue of ¥51.7
billon, up 7.9%, or ¥3.8 billion, owing
principally to the inclusion of a full yearof net sales and operating revenue in thestatic guard services business of a subsidiaryFire Protection Services
This segment focuses on high-grade,tailored automatic fire alarm systems,
fire extinguishing systems and other fire
protection systems for a wide range ofapplications, including office buildings,
plants, tunnels, cultural properties, ships
and residences. During the period under

SECOM Annual Report 201433

Financial Review

review, Nohmi Bosai and Nittan, two ofJapan’s leading domestic fire protection
services providers, leveraged their respective business foundations and productdevelopment capabilities to secure orders
for fire protection systems.
Net sales and operating revenue in thissegment advanced 7.4%, or ¥8.7 billion in
the period under review, to ¥127.2 billion,
owing to active efforts to market systems
that respond to needs, particularly in therenovations market. Operating income was¥10.5 billion, an increase of 75.0%, or¥4.5 billion, thanks mainly to cost reductions. The operating margin improved to
8.2%, from 5.0%.
Medical Services
The medical services segment encompasses
home medical services, which center onhome nursing and pharmaceutical dispensing services, as well as the operation ofresidences for seniors, electronic medical
report systems, sales of medical equipment,
personal care services, and support forthe management of hospitals and healthcare-related institutions. The segment also
includes the operations of variable interest
entities of which the Company is the primary beneficiary, which manage hospitals
and health care-related institutions.
Segment net sales and operating revenue rose 6.8%, or ¥9.6 billion, to ¥150.7
billion. The principal factor behind thisresult was an increase in contributions fromoperations of the aforementioned variableinterest entities attributable to the expansion and modification of hospitals, and torobust sales of pharmaceuticals, among
others. Operating income fell 50.4%,
or ¥2.8 billion, to ¥2.7 billion, while theoperating margin slipped to 1.8%, from
3.9%, primarily reflecting the recognitionof impairment losses on certain real estate
and the aforementioned expansion andrefurbishment of hospitals.
Insurance Services
In addition to security services, which arepreventative by nature, the Company
offers non-life insurance, which looks after
customers in the event of misfortune.
The insurance services segment offers anextensive lineup that includes the Security
Discount Fire Policy, a commercial fire insurance policy, and SECOM Anshin My Home,a comprehensive fire insurance policy forhomes—both of which offer discounts
on premiums to customers who haveinstalled on-line security systems, recognizing this as a risk-mitigating factor—and
SECOM Anshin My Car, a comprehensive

34

SECOM Annual Report 2014

automobile insurance policy that offers onsite support services provided by SECOM
emergency response personnel should thepolicyholders be involved in an accident.
Other offerings include MEDCOM, anunrestricted cancer treatment policy thatcovers the entire cost of medical treatment
for cancer.
In the period under review, net sales
and operating revenue in this segment
increased 3.3%, or ¥1.3 billion, to ¥39.9
billion, primarily reflecting an increase ininsurance premiums attributable to firmsales of fire insurance policies and the
MEDCOM unrestricted cancer insurance
policy and net realized investment gains.
The segment reported operating income of¥2.0 billion, a decline of 26.0%, or ¥705
million, and an operating margin of 5.0%,
down from 7.0% in the previous fiscal year,
owing mainly to a higher loss ratio resulting from claims related to snow damage,among others, which pushed up costs andexpenses related to insurance contracts.
Geographic Information Services
The geographic information services segment includes the collection of geographic
data from satellite images, aerial photography and vehicle-based ground surveying, which it integrates, processes andanalyzes to provide a variety of geospatial
information services to national and local
governments and private sector customers
in Japan. The Company also extends geospatial information services to government
agencies overseas, including in emerging
economies and developing countries.
Segment net sales and operating
revenue rose 6.7%, or ¥3.4 billion, to¥54.8 billion, spurred by firm sales topublic-sector entities in Japan. Operating
income rose 61.7%, or ¥1.4 billion, to¥3.7 billion, while the operating margin
improved to 6.8%, from 4.5%, reflecting
improved margins in overseas markets
and the absence of an impairment loss on
goodwill reported in the preceding period,a consequence largely of the Eurozone
crisis.
Information and Communication
Related Services
Information and communication related
services focus on data center services,
as well as uniquely SECOM BCP support
services, information security services andcloud-based services.
Net sales and operating revenue in the
period under review climbed 53.3%, or¥18.5 billion, to ¥53.4 billion, bolsteredmainly by a full year of contributions fromAt Tokyo, one of Japan’s leading data center services firms in terms of power supply
stability and security level, which became
a consolidated subsidiary on October 31,
2012. The inclusion of a full year ofoperating income from At Tokyo boosted
segment operating income 62.8%, or¥2.5 billion, to ¥6.4 billion. The operating
margin improved to 11.9%, from 11.2%
in the previous fiscal year.
In light of the increasing significance of
information and communication related
services, these services, formerly included in
the information and communication related
and other services segment, are now
presented separately as the informationand communication related services segment to facilitate more adequate disclosureof the Company’s business activities andimprove the effectiveness of segment
information. Certain segment results forprevious fiscal years have been restated toconform with this change.
Real Estate and Other Services
The real estate and other services segment
encompasses the development and sales ofcondominiums equipped with sophisticatedsecurity and disaster-preparedness features,
as well as real estate leasing, construction
and installation and other services.
Segment net sales and operating
revenue declined 19.7%, or ¥9.7 billion, to¥39.7 billion, primarily as a consequenceof falling sales of condominiums, which
pushed down sales in the real estate development and sales business. Owing mainly
to a decrease in write-downs on real estate
inventories, operating income edged up
1.4%, or ¥63 million, to ¥4.7 billion, andthe operating margin improved to 11.8%,
from 9.4% in the previous fiscal year.
Previously, real estate development
and sales were presented as a reportablesegment. However, owing to a decreasein their significance, effective from thefiscal year ended March 31, 2014, thesebusinesses were reclassified under the otherservices segment, which was renamed thereal estate and other services segment.
Certain segment results for previous fiscal
years have been restated to conform withthis change.

Financial Position

Total assets as of March 31, 2014,
amounted to ¥1,440.7 billion, ¥100.4
billion higher than at the end of theprevious period. Total current assets, at¥578.1 billion, advanced ¥12.1 billion,
and accounted for 40.1% of total assets.
Cash and cash equivalents totaled ¥230.8
billion, an increase of ¥8.1 billion, owing
to the fact that net cash provided by operating activities exceeded net cash used ininvesting and financing activities. (For further details, please see Cash Flows, which
follows this section.) Notes and accounts
receivable, trade, rose ¥8.1 billion, to¥128.0 billion, a consequence primarily ofhigher net sales and operating revenue inthe fire protection services and geographic
information services segments—both ofwhich tend to see increases in net sales
and operating revenue toward the end of
the fiscal year—and an increase in security
system installations. Inventories, at ¥51.9
billion, were down ¥6.2 billion, primarilyreflecting a decline in real estate inventories, a consequence of the delivery ofcondominiums. With both current assets
and current liabilities up, the current ratio
was 2.0 times as of March 31, 2014, onlevel with the previous fiscal year-end.
Investments and long-term receivablesrose ¥67.0 billion, to ¥324.7 billion, or
22.5% of total assets. Investment securities increased ¥49.5 billion, to ¥204.6
billion, owing principally to a review
of investment assets in the insurance
services segment, which resulted in thepurchase of bonds, among others.

Investments in affiliated companies
increased ¥10.6 billion, to ¥49.8 billion,
pushed up mainly by firm earnings atoverseas affiliated companies and by thedepreciation of the yen.
Property, plant and equipment, lessaccumulated depreciation, advanced ¥9.1
billion, to ¥394.4 billion, equivalent to27.4% of total assets. With the openingof new Secure Data Center facilities, buildings and improvements rose ¥11.7 billion,to ¥297.3 billion. Construction in progress
amounted to ¥7.8 billion, up ¥4.2 billion,a result largely of the expansion and modification of hospitals managed by variableinterest entities.
Other assets were up ¥12.1 billion, to¥143.5 billion, and accounted for 10.0%
of total assets. Prepaid pension and severance costs rose ¥10.5 billion, to ¥22.1 billion, bolstered primarily by robust returns
on pension assets.
Total liabilities as of March 31, 2014,
increased ¥19.6 billion, to ¥580.3 billion, and accounted for 40.3% of total
liabilities and equity. Total current liabilities
rose ¥7.6 billion, to ¥295.1 billion, andrepresented 20.5% of total liabilities andequity. Bank loans were up ¥13.5 billion,to ¥52.5 billion. Deposits received declined¥7.7 billion, to ¥22.4 billion, largely
because of a temporary shift in the balance of bank loans and deposits received
for cash collection and deposit services.
Notes and accounts payable, trade, at¥50.0 billion, were up ¥5.0 billion, owing
primarily to an increase in orders placed

for the construction of security systems forlease near the fiscal year-end.
Total long-term liabilities increased¥12.0 billion, to ¥285.2 billion, and represented 19.8% of total liabilities and equity.
Higher sales of fire insurance policies led
to an increase in the reserve for unearned
premiums, pushing unearned premiums
and other insurance liabilities up ¥8.3 billion, to ¥98.7 billion.
Interest-bearing debt, comprising bankloans, long-term debt and the current
portion of long-term debt, advanced¥10.7 billion, to ¥115.8 billion. This result
was due largely to a temporary increase inbank loans for cash collection and deposit
services.
Total SECOM CO., LTD. shareholders’equity rose ¥73.9 billion, to ¥753.1 billion,
and was equivalent to 52.3% of total
liabilities and equity. This was attributable
to a ¥51.0 billion increase in retained
earnings, to ¥674.6 billion, owing mainly
to net income attributable to SECOM CO.,LTD. and to the payment of cash dividends. Accumulated other comprehensive
income was ¥1.7 billion, compared withan accumulated other comprehensive lossof ¥21.2 billion in the previous fiscal year,
owing primarily to a decrease in the loss
resulting from foreign currency translation
adjustments which shrank to ¥1.9 billion,
from ¥18.7 billion in the preceding period,
due to yen depreciation. As a result, theequity ratio rose to 52.3%, from 50.7%
at the end of the previous period.

SECOM CO., LTD.
Shareholders’ Equity per ShareTotal Assets(Year ended March 31, 2014)(In yen)
4,000(In billions of yen)

3,000

1,200

2,000

800

1,000

400

5.1%

4.1%

5.9%
4.0%

16.3%

51.3%

13.3%
Security Services
Medical Services
Geographic Information Services
Real Estate andOther Services

Fire Protection Services
Insurance Services
Information andCommunication
Related Services

Financial Review

Percentage of Consolidated
Net Sales and Operating Revenue*

1,600

0

0

10 11 12 13 14

10 11 12 13 14* Pie chart shows percentage of consolidated net sales andoperating revenue (excluding intersegment transactions)

SECOM Annual Report 201435

Financial Review
Cash Flows

The Company is committed to maintaining
sufficient liquidity to allow flexibility in its
operations and ensure a solid financial
foundation. To the best of its ability, theCompany is also firmly committed tofinancing strategic investments with cash
generated by its operating activities.
In the period under review, net cash
provided by operating activities amounted
to ¥123.2 billion. Significant factors
contributing to this result included net
income of ¥82.9 billion and non-cash
items, notably depreciation and amortization, including amortization of deferredcharges, of ¥66.7 billion, which werepartially offset by an increase in deferredcharges of ¥16.4 billion, an increase inreceivables and due from subscribers,
net of allowances, of ¥10.2 billion. Thesecharges consisted primarily of costs related
to the installation of security equipment
as part of on-line security systems. (Forfurther details, please see Note 2 (12) of
the accompanying Notes to Consolidated
Financial Statements.) Net cash provided
by operating activities was ¥34.2 billion
lower than in the preceding period.
Principal factors behind this result included
an increase in income tax payments,

owing to the fact that lower interim payments resulted in an increase in accrued
income taxes at the previous fiscal yearend; a significant decline in real estate
inventories as a result of the sale of major
condominium complexes to customers in
the preceding period; and a decrease indeposits received for cash collection anddeposit services.
Net cash used in investing activities
amounted to ¥95.3 billion. This result
reflected payments for purchases of investment securities of ¥76.3 billion, a consequence of a review of investment assets in
the insurance services segment; paymentsfor purchases of property, plant andequipment of ¥56.3 billion, attributable toincreases in the purchase of security equipment and control stations due to a greaternumber of security services subscribers
and in the purchase of property, plantand equipment for the expansion andmodification of hospitals managed by variable interest entities. These outlays werepartially offset by proceeds from sales andredemptions of investment securities of¥43.8 billion. Despite the increase in payments for purchases of investment securities, net cash used in investing activities

was down ¥23.3 billion from the previous
period, owing mainly to the use of cash
for acquisitions, net of cash acquired,
and to payments for purchases of property, plant and equipment related to the
opening of new hospitals managed byvariable interest entities, which pushed up
net cash used in investing activities in thepreceding period.
Net cash used in financing activities
amounted to ¥21.9 billion. This included
dividends paid to SECOM CO., LTD.
shareholders of ¥22.9 billion. Net cashused in financing activities was down
¥8.5 billion from the previous period,
owing largely to a temporary increase inbank loans for cash collection and deposit
services, which were partially offset by
an increase in dividends paid to SECOM
CO., LTD. shareholders, and to higher net
repayments of long-term debt.
The Company’s operating, investing
and financing activities in the period
under review resulted in net cash andcash equivalents at end of year of ¥230.8
billion, up ¥8.1 billion from net cash andcash equivalents at beginning of year,
which were ¥222.7 billion.

Capital Expenditures

Cash Flows(In billions of yen)

(In billions of yen)

(In billions of yen)

80

80

200

60

60

40

40

Depreciation andAmortization

150
100
50
0
20

–50

20

–100
0

10 11 12 13 14

0

–150

10 11 12 13 14

12

13

14

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

36

SECOM Annual Report 2014

AUDITED FINANCIAL STATEMENTS

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

SECOM Annual Report 201437

Consolidated Financial Statements
Consolidated Balance Sheets
SECOM CO., LTD. and Subsidiaries
March 31, 2014 and 2013

In millions of yen

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

March 31

March 31

2013

2014

Current assets:
Cash and Cash equivalents (Notes 5 and 22) .............................................................. ¥ 230,752 ¥ 222,696
Time deposits (Note 13)..............................................................................................
9,524
8,021
Cash deposits (Note 6) ...............................................................................................
58,59756,090
Short-term investments (Notes 7 and 22)....................................................................
10,032
12,079Notes and accounts receivable, trade..........................................................................
128,000
119,914
Due from subscribers..................................................................................................
38,61834,856Inventories (Note 8) ....................................................................................................
51,86558,021
Short-term receivables (Notes 9, 13, 20 and 21) .........................................................
21,333
21,466
Allowance for doubtful accounts (Note 9) ..................................................................
(1,885)(2,176)
Deferred insurance acquisition costs (Note 14)............................................................
5,015
5,650
Deferred income taxes (Note 17) ................................................................................
14,021
15,387
Other current assets (Notes 21, 22 and 23).................................................................
12,207
13,937$ 2,240,311
92,466568,903
97,3981,242,718
374,932
503,544
207,117(18,301)
48,689136,126
118,514ASSETS

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

578,079

565,941

5,612,417

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

204,604
49,762
49,718
13,831
12,775(5,987)

155,138
39,13747,321
13,6568,824(6,366)

1,986,447
483,126
482,699
134,282
124,028(58,126)

324,703257,710

3,152,456

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

113,159
297,349
292,114
107,820
7,840

114,528
285,609282,533
99,7583,688

1,098,631
2,886,883
2,836,058
1,046,796
76,117

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

818,282(423,895)

786,116(400,854)

7,944,485(4,115,485)

394,387385,2623,829,000

42,53932,87239,01022,054
7,061

41,99532,736
38,418
11,5386,750

413,000
319,146
378,738
214,117
68,553

143,536

131,437

1,393,554

Total assets ......................................................................................................... ¥1,440,705 ¥1,340,350$13,987,427

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

See accompanying notes to consolidated financial statements.

38

2014

SECOM Annual Report 2014

LIABILITIES AND EQUITYCurrent liabilities:
Bank loans (Notes 6 and 13) ....................................................................................... ¥Current portion of long-term debt (Notes 13, 19 and 21) ...........................................
Notes and accounts payable, trade .............................................................................
Other payables ...........................................................................................................
Deposits received (Note 6) ..........................................................................................
Deferred revenue .......................................................................................................
Accrued income taxes ................................................................................................
Accrued payrolls .........................................................................................................
Other current liabilities (Notes 17, 21 and 22).............................................................

In millions of yen

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

March 31

March 31

2013

2014

2014

52,542 ¥15,39849,96132,22822,41639,487
28,10628,96426,01639,032
17,28145,00932,84530,09039,67730,957
27,627
24,998$510,117
149,495
485,058
312,893
217,631
383,369
272,874
281,204
252,582

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

295,118

287,516

2,865,223

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

47,85034,65728,27916,83598,71929,531
19,13910,221

48,762
34,22729,318
16,82490,442
29,483
14,135
10,028464,563
336,476
274,553
163,447
958,437
286,709
185,816
99,232

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

285,231273,219

2,769,233

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

580,349

560,735

5,634,456

66,37873,781
10,316
674,585

66,37873,80910,241
623,599

644,447
716,320
100,155
6,549,369

12,5609(8,954)(1,894)

11,5608(14,044)(18,710)

121,94287(86,932)(18,388)

1,721(21,186)

16,709Commitments and contingent liabilities (Note 24)
Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
Authorized—900,000,000 sharesissued 233,288,717 shares in 2014 and 2013 .......................................................
Additional paid-in capital............................................................................................
Legal reserve ..............................................................................................................
Retained earnings.......................................................................................................
Accumulated other comprehensive income (loss):
Unrealized gains on securities (Note 7) ....................................................................
Unrealized gains on derivative instruments (Note 23) ..............................................
Pension liability adjustments (Note 15) ....................................................................
Foreign currency translation adjustments ................................................................
Common stock in treasury, at cost:(73,682)(73,665)(715,359)

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

753,099

679,176

7,311,641

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

107,257

100,439

1,041,330

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

860,356

779,615

8,352,971

Total liabilities and equity .................................................................................... ¥1,440,705 ¥1,340,350$13,987,427

Financial Section

15,022,012 shares in 2014 and 15,018,951 shares in 2013 .....................................

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201439

Consolidated Statements of Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2014

Net sales and operating revenue (Notes 14 ,18 and 22)
Costs and expenses:
Cost of sales (Note 8) .........................................................................................................
Selling, general and administrative expenses (Notes 2 (17), 2 (18), 2 (19) and 4).................
Impairment loss on long-lived assets (Note 11) ...................................................................
Impairment loss on goodwill (Note 12) ...............................................................................
Loss on sales and disposal of fixed assets, net ....................................................................
Operating income..................................................................................................
Other income:Interest and dividends ........................................................................................................
Gain on sales of securities, net (Notes 7 and 18) ................................................................
Gain on private equity investments (Note 22) .....................................................................
Other (Notes 16, 18 and 23) ..............................................................................................
Other expenses:
Interest .............................................................................................................................
Loss on other-than-temporary impairment of investment securities (Notes 18 and 22) ........
Other (Notes 16, 23 and 24) ..............................................................................................
Income before income taxes and equity in net income of affliated companies ........
Income taxes (Note 17):
Current .............................................................................................................................
Deferred ............................................................................................................................
Income from continuing operations before equity in net income ofaffiliated companies.............................................................................................
Equity in net income of affliated companies (Note 18) ...................................................
Income from continuing operations .......................................................................
Loss from discontinued operations, net of tax (Note 25) ................................................
Net income............................................................................................................
Less: Net income attributable to noncontrolling interests .............................................
Net income attributable to SECOM CO., LTD. .......................................................

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

In millions of yen

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

Years ended March 31

Year ended March 31

2014

2013

2012

2014

¥921,178¥858,438¥769,643$8,943,476

628,937
166,018
2,789
151
3,194
801,089
120,089

580,178
161,085
381
1,052
2,185
744,881
113,557

533,440
145,598
71
1,218
1,383
681,71087,933

6,106,184
1,611,825
27,0781,466
31,0107,777,563
1,165,913

1,310
935
5,564
3,852
11,661

903
150
5,095
3,803
9,951

952
29
3,491
3,024
7,496

12,7189,078
54,01937,398113,213

1,437
78
1,485
3,000
128,750

1,537
48
1,563
3,148
120,360

1,597
952
2,677
5,226
90,203

13,951757
14,41829,126
1,250,000

47,5472,151
49,69845,142
1,558
46,70033,558
7,103
40,661

461,621
20,883
482,504

79,05273,66049,542
4,017
3,895
4,880
83,06977,55554,422(138)(912)(6,624)82,931
76,64347,798(8,952)(6,063)(6,561)¥ 73,979 ¥ 70,580 ¥ 41,237

767,496
39,000806,496(1,340)805,156(86,913)$ 718,243

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

Years ended March 31

Year ended March 31

2014

2013

2012

2014

¥339.57(0.63)
338.94¥105.00¥327.03(3.67)
323.36¥ 90.00¥218.74(29.77)188.97¥ 90.00$3.30(0.01)
3.29$1.02

In millions of yen

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

Years ended March 31

Year ended March 31

Consolidated Statements of Comprehensive Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2014

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

40

SECOM Annual Report 2014

2014

2013

2012

2014

¥ 82,931¥76,643¥47,798$ 805,156

1,120
2
5,543
18,092
107,688(10,802)¥ 96,886

7,384
15
(708)
10,10593,439(7,113)¥86,3262,486
8(1,953)(3,696)44,643(5,930)¥38,713

10,87420
53,815
175,650
1,045,515(104,874)$ 940,641

Consolidated Statements of Changes in Equity
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2014

In millions of yen

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Balance, March 31, 2011 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized holding gains on securities...........................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Note 18) ..............................................................................
—
Losses on disposal of treasury stock ........................................
—Net changes in treasury stock (Note 18) ..................................
—¥66,378¥75,555¥10,104¥551,187(¥34,805)

Number ofsharesissuedCommonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest(¥74,924)¥593,495¥ 61,314¥654,809

Total

—

—

—

41,237——

41,237

6,561

47,798

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

2,515
6
(1,613)(3,432)

—
—
—
—

—
—
—

—
—
—

—
—
71

(19,623)
—
(71)

—
—
—

—
—
—

2,515
6
(1,613)(3,432)
38,713(19,623)
—
—

(29)
2
(340)
(264)
5,930
—
(1,851)—

2,486
8(1,953)(3,696)44,643(19,623)(1,851)
—

—
—
—

(642)
(352)
—

—
—
—

—
—
—

—
—
—

—
—
1,264

(642)
(352)
1,264

(615)
—
—

(1,257)
(352)
1,264

Balance, March 31, 2012 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized holding gains on securities...........................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Notes 4 and 18) ...................................................................
—
Losses on disposal of treasury stock ........................................
—Net changes in treasury stock..................................................
—

66,37874,561

10,175

572,730(37,329)(73,660)

612,855

64,778

677,633———

70,580——70,5806,063

76,643

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

6,914
8
(522)
9,346

—
—
—
—

—
—
—

—
—
—

—
—
66

(19,645)
—
(66)

—
—
—

—
—
—

6,914
8
(522)
9,346
86,326(19,645)
—
—

470
7
(186)
759
7,113
—
(1,460)
—

7,384
15
(708)
10,10593,439(19,645)(1,460)
—

—
—
—

(752)
(0)
—

—
—
—

—
—
—

397
—
—

—
—
(5)

(355)
(0)
(5)

30,008——29,653(0)(5)

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

66,37873,80910,241

623,599(21,186)(73,665)

679,176

100,439

779,615———

73,979——73,9798,952

82,931

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

1,000
1
5,090
16,816

—
—
—
—

—
—
—

—
—
—

—
—
75

(22,918)
—
(75)

—
—
—

—
—
—

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

120
1
453
1,276
10,802—(4,175)
—

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

—
—
—

(28)
0
—

—
—
—

—
—
—

—
—
—

—
—
(17)

(28)
0
(17)

191
—
—

163
0
(17)

Balance, March 31, 2014 ..................................................... 233,288,717¥66,378¥73,781¥10,316¥674,585¥ 1,721(¥73,682)¥753,099¥107,257¥860,356

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock intreasury,
at costTranslation into thousands of U.S. dollars (Note 3)

Commonstock

Additional
paid-in
capitalLegalreserve($205,689) ($715,194)

Balance, March 31, 2014 ......................................................................... $644,447 $716,320$100,155 $6,549,369

Total$6,593,942$ 975,136$7,569,078——

718,243

86,913805,156

9,709
10
49,417
163,262

—
—
—
—

—
—
—

—
—
—

9,709
10
49,417
163,262
940,641(222,505)
—
—

1,165
10
4,398
12,388104,874—(40,534)—

10,87420
53,815
175,650
1,045,515(222,505)(40,534)
—

—
—
—

—
—
(165)

(272)
0
(165)

1,854
—
—

1,582
0
(165)

$ 16,709 ($715,359)$7,311,641$1,041,330$8,352,971

See accompanying notes to consolidated financial statements.

SECOM Annual Report 2014

Financial Section

Balance, March 31, 2013
$644,447 $716,592 $ 99,427 $6,054,359
Comprehensive income:Net income .............................................................................................
———
718,243
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities ............................................................
————
Unrealized gains on derivative instruments .........................................
————
Pension liability adjustments ..............................................................
————
Foreign currency translation adjustments ...........................................
————
Total comprehensive income ...................................................................
Cash dividends paid to SECOM CO., LTD. shareholders ................................
———(222,505)
Cash dividends paid to noncontrolling interests ............................................
————
Transfer to legal reserve ...............................................................................
—
—
728
(728)
Equity transactions with noncontrolling interests and other(Notes 18) ..................................................................................................
—
(272)
—
—
Gains on disposal of treasury stock ..............................................................
—
0——
Net changes in treasury stock.......................................................................
—
—
—
—

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest

41

Consolidated Statements of Cash Flows
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2014

2014

In millions of yen

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

Years ended March 31

Year ended March 31

2013

2012

Cash flows from operating activities:
Net income .......................................................................................................................... ¥ 82,931 ¥ 76,643 ¥ 47,798
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization, including amortization of deferred charges(Notes 2 (11), 2 (12) and 12) ...........................................................................................
66,66160,674
58,117
Accrual for pension and severance costs, less payments ....................................................
(2,907)(1,471)(3,268)Deferred income taxes, including discontinued operations ................................................
1,832
1,538
4,664
Loss on sales and disposal of fixed assets, net, including discontinued operations .............
3,182
2,166
1,374
Impairment loss on long-lived assets, including discontinued operations (Note 11) ............
2,821
579
8,133
Write-down on real estate inventories (Note 8) .................................................................
1,122
1,792
20,723Gain on private equity investments (Note 22) ....................................................................
(5,564)(5,095)(3,491)
Impairment loss on goodwill (Note 12)..............................................................................
151
1,052
1,218
Gain on sales of securities, net (Notes 7 and 14) ...............................................................
(2,177)(899)(1,240)Loss on other-than-temporary impairment of investment securities (Notes 14 and 22) .......
100
73
1,835
Equity in net income of affiliated companies .....................................................................
(4,017)(3,895)(4,880)
Payments for legal settlement (Note 24)............................................................................
—
—
(799)
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits ..............................................................................
(2,508)(2,038)2,535
Increase in receivables and due from subscribers, net of allowances .............................. (10,188)(5,838) (12,306)(Increase) decrease in inventories ..................................................................................
10,367
20,720(3,940)
Increase in deferred charges ......................................................................................... (16,375) (15,515) (15,652)
Increase in notes and accounts payable.........................................................................
3,306
6,831
10,030
Increase (decrease) in deposits received .........................................................................
(7,752)2,328
2,123
Decrease in deferred revenue ........................................................................................
(595)(1,558)(1,332)
Increase (decrease) in accrued income taxes ..................................................................
(3,028)13,470(4,880)
Increase in guarantee deposits received ........................................................................
275
65
161
Increase in unearned premiums and other insurance liabilities .......................................
8,277
6,445
383
Other, net .....................................................................................................................
(2,704)(621)
4,906
Net cash provided by operating activities .................................................................. 123,210 157,446 112,212
Cash flows from investing activities:
(164)
3,500
9,230
(Increase) decrease in time deposits.......................................................................................
Proceeds from sales of property, plant and equipment ..........................................................
1,114
2,603
179
Payments for purchases of property, plant and equipment .................................................... (56,274) (64,321) (53,496)
Payments for purchases of intangible assets ..........................................................................
(7,113)(5,444)(5,887)
Proceeds from sales and redemptions of investment securities (Note 7) .................................
43,78237,44373,693
Payments for purchases of investment securities ................................................................... (76,342) (31,345) (66,283)(Increase) decrease in short-term investments........................................................................
(1,611)
4,152(4,357)
Acquisitions, net of cash acquired (Note 4)............................................................................
(1,249) (63,701)(1,275)(Increase) decrease in short-term receivables ,net ..................................................................
56(39)(1,680)
Payments for long-term receivables .......................................................................................
(2,921)(1,057)(1,741)
Proceeds from long-term receivables .....................................................................................
3,314
1,590
4,322
Other, net .............................................................................................................................
2,114(1,976)2,319
Net cash used in investing activities .......................................................................... (95,294) (118,595) (44,976)
Cash flows from financing activities:
Proceeds from long-term debt ..............................................................................................
10,595
17,483
3,875
Repayments of long-term debt.............................................................................................. (18,419) (22,341) (11,660)
Increase (decrease) in bank loans, net ...................................................................................
13,483(3,630)(6,935)
Increase (decrease) in investment deposits by policyholders ...................................................
48(1,272) (10,888)
Dividends paid to SECOM CO., LTD. shareholders ................................................................. (22,918) (19,645) (19,623)
Dividends paid to noncontrolling interests .............................................................................
(4,175)(1,460)(1,851)
Payments for acquisition of shares of consolidated subsidiaries from noncontrollinginterest holders ...................................................................................................................
(618)
(252)
(466)
Proceeds from sales of shares of consolidated subsidiaries to noncontrolling interest holders ...
—651—
Increase in treasury stock, net ...............................................................................................
(18)
(5)
(292)
Other, net .............................................................................................................................
131
86
124
Net cash used in financing activities .......................................................................... (21,891) (30,385) (47,716)
2,031
1,190
(422)
Effect of exchange rate changes on cash and cash equivalents .......................................
Net increase in cash and cash equivalents ..........................................................................
8,056
9,656
19,098Cash and cash equivalents at beginning of year ................................................................ 222,696 213,040 193,942
Cash and cash equivalents at end of year .......................................................................... ¥230,752 ¥222,696 ¥213,040

See accompanying notes to consolidated financial statements.

42

SECOM Annual Report 20142014

$ 805,156
647,194(28,223)
17,78630,89327,388
10,893(54,019)
1,466(21,136)971(39,000)—(24,350)(98,913)
100,650(158,981)
32,097(75,262)(5,777)(29,398)
2,670
80,359(26,250)
1,196,214(1,592)
10,816(546,350)(69,058)
425,068(741,184)(15,641)(12,126)544(28,359)
32,175
20,523(925,184)
102,864(178,825)
130,903466(222,505)(40,534)(6,000)
—
(175)
1,272
(212,534)
19,71878,214
2,162,097$2,240,311

Notes to Consolidated Financial Statements
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2014

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the businesses of security services,
fire protection services, medical services, insurance services,
geographic information services, information and communication
related services, and real estate and other services. With these
services combined, the Company is focusing on the establishmentof a Social System Industry, a network of integrated services andsystems, targeted at the needs of people and business.
The Company’s principal business activities are security services,
including on-line security systems for commercial and residential
premises, static guard services, armored car services for cash collection and deposit and sales of security merchandise. The Company
has also been diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishingsystems; medical services, including home and other medical services; non-life insurance services; geographic information services
using geographic information system (GIS) and surveying andmeasuring technology; information and communication related
services, which center on data center services and also include
business continuity plan support, information security services andcloud-based services; real estate and other services, including thedevelopment and sale of condominiums equipped with security andcontingency planning features, lease of real estate, construction
and installation services and other services.
2. Significant Accounting Policies
The parent company and its Japanese subsidiaries maintain theirrecords and prepare their statutory financial statements in accordance with accounting principles generally accepted in Japan(“Japanese GAAP”). Certain adjustments and reclassifications havebeen incorporated in the accompanying financial statements toconform with U.S. generally accepted accounting principles (“U.S.
GAAP”). These adjustments were not recorded in the statutory
books of account.
Significant accounting policies used in the preparation of theaccompanying consolidated financial statements are summarized
below:(1) Basis of Consolidation and Investments in AffiliatedCompanies
The consolidated financial statements include the accounts of theparent company and those of its majority-owned subsidiaries. All
significant intercompany transactions and balances have been
eliminated in consolidation.
Investments in companies in which the ability to exercise significant influence exists (generally 20 to 50 percent owned companies),
are accounted for under the equity method. Consolidated income
includes the Company’s current equity in the net income ofaffiliated companies, after elimination of intercompany profits.
The excess of cost over underlying identifiable net assets at acquisition dates of investments in subsidiaries and affiliated companies
is recognized as goodwill.

(3) Revenue Recognition
The Company generates revenue principally through sales of
security services, merchandise and software, and insurance services
under separate contractual arrangements. The Company recognizes
revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, title and risk ofloss have been transferred to the customer, the sales price is fixed
or determinable, and collectibility is probable.
Revenue from security services is recognized over the contractual
period or, in the case of specific services, when such services are
rendered. Subscribers are generally requested to prepay a portion ofservice charges which are credited to deferred revenue and recognized in income ratably over the covered service period. Revenue
from the installation of security equipment used to provide on-line
centralized security services is deferred and recognized over thecontractual period of security services after completion of the installation. The related installation costs are also deferred and amortizedover the contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment, installation and security services. The Company allocates revenue to eachelement based on its relative fair value if such element meets criteria for treatment as a separate unit of accounting as prescribed in
ASC 605, “Revenue Recognition.” Otherwise, revenue is deferred
until the undelivered elements are fulfilled as a single unit ofaccounting.
Revenue from sales of merchandise and software is recognizedwhen the merchandise and software are received by the customer
and, in the case of installations, when such installations arecompleted.
Revenue from construction contracts is principally recognizedwhen construction is completed.

SECOM Annual Report 2014

Financial Section(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variableinterest entities (“VIEs”) of which the Company is the primary
beneficiary.
The Accounting Standards Codification (“ASC”) 810,
“Consolidation,” issued by the Financial Accounting Standards
Board (“FASB”) requires the reporting entity to consolidate avariable interest entity (“VIE”) as its primary beneficiary when it isdeemed to have a controlling financial interest in a VIE, meeting
both of the following characteristics:• The power to direct activities of a VIE that most significantly
impact the VIE’s economic performance.
• The obligation to absorb losses of the VIE that could potentiallybe significant to the VIE or the right to receive benefits fromthe VIE that could potentially be significant to the VIE.
The Company provides investments, loans and guarantees toorganizations managing hospitals and health care-related institutions, to a company holding real estate, and to a PFI (Private FinanceInitiative) organization which was established to build, maintain andoperate correctional facilities. Certain of these organizations are
considered VIEs under ASC 810.
Total assets and liabilities held by VIEs of which the Company is
the primary beneficiary were ¥68,024 million ($660,427 thousand)and ¥73,248 million ($711,146 thousand), respectively, at March
31, 2014, and ¥68,093 million and ¥73,490 million, respectively, atMarch 31, 2013. The creditors of VIEs do not have recourse to theCompany’s general credit with the exception of debts guaranteedby the Company. Total assets and liabilities held by VIEs of which
the Company holds significant variable interests but is not the primary beneficiary were ¥31,991 million ($310,592 thousand) and¥32,039 million ($311,058 thousand), respectively, at March 31,
2014, and ¥32,983 million and ¥33,499 million, respectively, atMarch 31, 2013. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2014 and 2013 were ¥4,840 million ($46,990
thousand) and ¥4,653 million, respectively.

43

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

44

SECOM Annual Report 2014

Other investments in non-public companies are recorded at cost
as fair value is not readily determinable. The Company periodicallyevaluates the values of other investments in non-public companies
for possible impairment by taking into consideration the financial
and operating conditions of the issuer, the general market conditions in the issuer’s industry and the period of the decline in theestimated fair value and other relevant factors. If the impairment isdetermined 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 toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies,”in which investments are accounted for at fair value based on the
Company’s assessment of each underlying investment. The investments, by their nature, have little or no price transparency.
Investments are initially carried at cost as an approximation of fairvalue. Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are also made, in
the absence of third-party transactions, if it is determined that the
expected realizable value of the investment has declined below thecarrying value.
The carrying value of private equity investments was ¥33,083
million ($321,194 thousand) and ¥37,493 million at March 31,
2014 and 2013, respectively.
Private equity investments are included in investment securities in
the consolidated balance sheets.
(8) Inventories
Inventories, consisting of security-related products, fire
protection-related products, real estate and other related products,
are stated at the lower of cost or market. Cost is determined, inthe case of real estate, based on the specific identification method
and, in the case of other inventories, primarily using the movingaverage method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade, short-term and long-term receivables, and otherreceivables are not overstated due to uncollectibility. Allowance for
doubtful accounts is maintained for all customers based on a variety
of factors, including the length of time receivables are past due,
macroeconomic conditions, significant one-time events and historical experience. An additional reserve for individual accounts isrecorded when the Company becomes aware of a customer’s
inability to meet its financial obligations, such as in the case ofbankruptcy filings or deterioration in the customer’s operating
results or financial position. If circumstances related to customers
change, estimates of the recoverability of receivables would befurther adjusted.
(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new
insurance policies are deferred and amortized principally over thepremium-paying period of the related insurance policies applying apercentage relationship of cost incurred to premiums from contracts
issued to applicable unearned premiums throughout the period of
the contract.

(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant leasehold
improvements, are carried at cost and depreciated at rates based on
the estimated useful lives of the assets. Depreciation is computed
using the straight-line method for assets other than security equipment and control stations. Security equipment and control stations
are depreciated using the declining-balance method. Assets leased
to others under operating leases are depreciated using the straightline method over the estimated useful lives. Depreciation expense
was ¥45,523 million ($441,971 thousand), ¥40,187 million and¥37,120 million for the years ended March 31, 2014, 2013 and2012, respectively. Maintenance, repairs and renewals are charged
to income as incurred.
The estimated useful lives of depreciable assets are as follows:
Buildings
22 to 50 years
Security equipment and control stations
5 to 8 years
Machinery, equipment and automobiles
2 to 20 years
The Company recognizes asset retirement obligations if the fairvalue of the obligations can be reasonably estimated. Asset retirement obligations include those for which an entity has a legal obligation to perform an asset retirement activity, however, the timing
and/or method of settling the obligation are conditional on a future
event that may or may not be within the control of the entity.
Performance of a contractual asset retirement obligation isrequired for the building leased by a certain subsidiary when thelease matures and the Company returns the leased building to its
owner. However, the Company plans not to relocate from the building and to continue to use it until it will be demolished without restoration. As such, the execution of such obligation is not expected.
The Company evaluated all the available evidence as of the fiscal
year ended March 31, 2014 and performed efforts to establish thebest estimate. However, the scope and the probability of executionof the obligation cannot be reasonably estimated. Therefore, anasset retirement obligation for that building lease is not recognized.
(12) Deferred Charges
Deferred charges primarily consist of costs related to installation
services of security equipment used to provide on-line security
systems. The installation costs are deferred and amortized using
the straight-line method over the contractual period of security
services after completion of the installation. Amortization expense
was ¥14,397 million ($139,777 thousand), ¥14,492 million and¥14,877 million for the years ended March 31, 2014, 2013 and2012, respectively.

(15) Unearned Premiums and Other Insurance Liabilities
Unearned premiums are related to unexpired periods of insurance
contracts and are earned on a pro-rata basis over the remaining
contract period. Other insurance liabilities consist principally of liabilities for unpaid claims and adjustment expenses, which are estimates of payments to be made on reported claims and incurred but
not reported claims, which are computed based on past experience
for unpaid losses.
(16) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities
and their respective tax bases, and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in whichthose temporary differences and carryforwards are expected to berealized or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are recorded toreduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized.
The Company recognizes in the consolidated financial statements
the impact of a tax position, if any, based on the technical meritsof the position, when that position is more likely than not to besustained upon examination. The benefit of the tax position ismeasured at the largest amount of benefit that is greater than
50 percent likely of being realized upon settlement with theappropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements of income.
(17) Research and Development
Research and development costs are charged to income
as incurred. Research and development expenses included in selling,
general and administrative expenses for the years ended March 31,
2014, 2013 and 2012 were ¥6,950 million ($67,476 thousand),¥6,479 million and ¥6,083 million, respectively.
(18) Advertising Costs
Advertising costs are charged to income as incurred, except forthe costs related to insurance policies. Advertising costs for acquiring new insurance policies are deferred and amortized as part of
insurance acquisition costs. Advertising expenses included in selling,
general and administrative expenses for the years ended March 31,
2014, 2013 and 2012 were ¥3,823 million ($37,117 thousand),¥4,230 million and ¥3,246 million, respectively.

Financial Section(13) Impairment or Disposal of Long-Lived Assets
In accordance with ASC 360, “Property, Plant and Equipment,”
the Company reviews the carrying amount of its long-lived assets
held and used, other than goodwill and intangible assets withindefinite lives, and assets to be disposed of, whenever events orchanges in circumstances indicate that the carrying amount may
not be recoverable. Long-lived assets to be held and used arereviewed for impairment by comparing the carrying amount of theassets with their estimated future undiscounted cash flows. If it isdetermined that an impairment loss has occurred, the loss would berecognized during the period, and calculated as the difference
between the assets’ carrying amount and the fair value. Long-lived
assets that are to be disposed of other than by sale are considered
held and used until they are disposed of. Long-lived assets that are
to be disposed of by sale are reported at the lower of their carrying
amount or fair value less cost to sell. Reductions in the carrying
amount are recognized in the period in which the long-lived assets
are classified as held for sale.

(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair value of
assets of business acquired. Pursuant to ASC 350, “Intangibles—
Goodwill and Other,” goodwill and intangible assets acquired in apurchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment
at least annually. This accounting standard also requires that intangible assets with estimable useful lives be amortized over theirrespective estimated useful lives to their estimated residual values,
and reviewed for impairment in accordance with ASC 360. The
Company conducts its annual impairment test at the end of eachfiscal year.

SECOM Annual Report 201445

(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2014, 2013
and 2012 were ¥1,160 million ($11,262 thousand), ¥1,296 millionand ¥927 million, respectively.
(20) Derivative Financial Instruments
The Company accounts for derivative financial instruments inaccordance with ASC 815, “Derivatives and Hedging.”
The Company recognizes all derivative financial instruments inthe consolidated financial statements at fair value regardless of the
purpose or intent for holding them. Changes in the fair value ofderivative financial instruments are either recognized periodically inincome or in equity as a component of accumulated other comprehensive income (loss) depending on whether the derivative financial
instruments qualify for hedge accounting, and if so, whether
they qualify as a fair value hedge or a cash flow hedge. Changes
in the fair values of derivative financial instruments accounted
for as a fair value hedge are recorded in income along with theportion of the change in the fair value of the hedged item that
relates to the hedged risk. Changes in the fair value of derivative
financial instruments accounted for as a cash flow hedge, to theextent it is effective as a hedge, are recorded in accumulated othercomprehensive income (loss), net of tax. Changes in the fair valueof derivative financial instruments not qualifying as a hedge arereported in income.
The Company meets the documentation requirements necessaryfor effective hedges which include their risk management objective and strategy for undertaking various hedge transactions. In
addition, formal assessment is made at inception of the hedge andperiodically on an on-going basis, as to whether the derivatives
used in hedging activities are highly effective in offsetting changes
in fair values or cash flows of hedged items. Hedge accounting is
discontinued for ineffective hedges, if any. Changes in fair value of
discontinued hedges are recognized in income.
(21) Per Share Data
Basic Earnings per Share (“EPS”) is computed based on the average number of shares of common stock outstanding for the period.
The average number of shares of common stock outstanding forthe years ended March 31, 2014, 2013 and 2012 was 218,268
thousand shares, 218,271 thousand shares and 218,217 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2014, 2013 or 2012.
Cash dividends per share shown in the accompanying consolidated statements of income are computed based on dividends
approved and paid in each fiscal year.
(22) Use of Estimates
The preparation of the consolidated financial statements requires
management of the Company to make a number of estimates andassumptions relating to the reported amounts of assets andliabilities, the disclosures of contingent assets and liabilities at thedate of the consolidated financial statements and the reported
amounts of revenues and expenses during the period. Actual results
could differ from those estimates. Significant items subject to such
estimates and assumptions include the carrying amounts of inventories, deferred insurance acquisition costs, investment securities,
other investments, property, plant and equipment, goodwill, otherintangible assets, unearned premiums and other insurance liabilities, valuation of receivables, valuation allowances for deferredincome taxes, valuation of derivative instruments, assets and obligations related to employee benefits, asset retirement obligations,income tax uncertainties, and other contingencies.
46

SECOM Annual Report 2014(23) Recent Pronouncements
In July 2012, the FASB issued ASU No. 2012-02, “TestingIndefinite-Lived Intangible Assets for Impairment.” This accounting standard allows an entity first to assess qualitative factors todetermine whether it is more likely than not that the indefinite-lived
intangible asset is impaired as a basis for determining whether it isnecessary to perform the impairment test. An entity is not required
to calculate the fair value of the indefinite-lived intangible assets
unless the entity determines that it is more likely than not that theindefinite-lived intangible asset is impaired. This accounting standard is effective for annual and interim impairment tests performed
for fiscal years beginning after September 15, 2012, and was
adopted by the Company in the fiscal year ended March 31, 2014.
The adoption of this accounting standard did not have a material
impact on the Company’s consolidated results of operations andfinancial position.
In February 2013, the FASB issued ASU No. 2013-02, “Reportingof Amounts Reclassified Out of Accumulated Other Comprehensive
Income.” This accounting standard requires an entity to provide
information about the amounts reclassified out of accumulated
other comprehensive income by component. In addition, thisaccounting standard requires an entity to present, either on theface of the statement where net income is presented or in thenotes, significant amounts reclassified out of accumulated othercomprehensive income by the respective line items of net income
but only if the amount reclassified is required under U.S. GAAP tobe reclassified to net income in its entirety in the same reporting
period. For other amounts that are not required under U.S. GAAP
to be reclassified in their entirety to net income, an entity is required
to cross-reference to other disclosures required under U.S. GAAP
that provide additional detail about those amounts. This accounting standard is effective for fiscal years beginning after December
15, 2012, and was adopted by the Company in the fiscal year
ended March 31, 2014. As this accounting standard is a provision
for presentation only, the adoption did not have an impact on the
Company’s consolidated results of operations or financial position.
See accompanying note 18 for related disclosure.
In March 2013, the FASB issued ASU No. 2013-05, “Parent’s
Accounting for the Cumulative Translation Adjustment upon
Derecognition of Certain Subsidiaries or Groups of Assets within
a Foreign Entity or of an Investment in a Foreign Entity.” Thisaccounting standard resolved diversity in practice and clarifies theapplicable guidance for the release of the cumulative translation
adjustment when the parent company sells a part or all of its
investment in a foreign entity, ceases to have a controlling financial interest in a subsidiary or group of assets that is a businesswithin a foreign entity, or obtains control in a business combinationachieved in stages involving an equity method investment that is aforeign entity. This accounting standard is effective for fiscal years
beginning after December 15, 2013 and will be adopted by theCompany in the fiscal year beginning April 1, 2014. The adoption
will not have a material impact on the Company’s consolidated
results of operations or financial position.
In June 2013, the FASB issued ASU No. 2013-08, “Amendments
for the Scope, Measurement, and Disclosure Requirements.” Thisaccounting standard changes the approach to the investmentcompany assessment in ASC 946, clarifies the characteristics ofan investment company, and provides comprehensive guidance
for assessing whether an entity is an investment company. Thisaccounting standard also amends the measurement criteria fornoncontrolling ownership interests in other investment companies
and provides additional disclosure requirements. This accounting
standard is effective for interim and annual fiscal years beginning
after December 15, 2013 and will be adopted by the Company inthe fiscal year beginning April 1, 2014. The adoption will nothave a material impact on the Company’s consolidated results ofoperations or financial position.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting
Discontinued Operations and Disclosures of Disposals of
Components of an Entity.” This accounting standard changes thecriteria for reporting discontinued operations in ASC 205-20. A
disposal of a component of an entity or a group of components
of an entity is required to be reported in discontinued operations
if the disposal represents a strategic shift that has (or will have) a
major effect on an entity’s operations and financial results. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2014, and will be adopted by the Company in thefiscal year beginning April 1, 2015. As this accounting standard
is a provision for presentation only, the adoption will not have an
impact on the Company’s consolidated results of operations or
financial position.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue fromContracts with Customers.” This accounting standard requires
an entity to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods orservices. This accounting standard also requires an entity to disclose
sufficient information to enable users of financial statements tounderstand the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. Both qualitative and quantitative information is required. This accounting standard is effective for fiscal years beginning after December 15, 2016,
including interim periods within that reporting period and will be
adopted by the Company in the fiscal year beginning April 1, 2017.
The Company is currently evaluating the effect of adopting thisaccounting standard on its consolidated financial statements.
(24) Discontinued Operations
ASC 205-20, “Discontinued Operations,” requires the operating
results of any component of an entity with its own identifiable
operations and cash flows which is disposed of or is classified asheld for sale, and with which the Company will not have significant
continuing involvement to be reported in discontinued operations.
The results of operations related to certain businesses classified
as discontinued operations in the years ended March 31, 2014,2013 and 2012 were reclassified in the accompanying consolidated
financial statements.
(25) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2013 and 2012 havebeen reclassified to conform to the presentation used for the year
ended March 31, 2014.

4. Acquisitions
Acquisition of Nittan Co., Ltd.
On April 1, 2012, the Company acquired 100% of commonshares outstanding of LIXIL NITTAN Co., Ltd. for ¥12,713 million in
cash and changed its name to Nittan Co., Ltd. The purpose of thisIn millions of yen

Cash and cash equivalents ................................................
Other current assets ..........................................................
Investments and long-term receivables ..............................
Property, plant and equipment ..........................................
Intangible assets, including goodwill .................................
Other assets ......................................................................
Total assets acquired .....................................................
Current liabilities ...............................................................
Long-term liabilities...........................................................
Total liabilities assumed .................................................
Noncontrolling interests ................................................
Net assets acquired .......................................................

¥ 2,937
17,954
1,650
6,014
2,080
1,018
31,653
13,446
5,359
18,805
135¥12,713

The goodwill of ¥1,872 million represents expected excess earning power based on future business operations. It is not deductible
for tax purposes and has been assigned to the Fire protection
services segment.
Acquisition of At Tokyo Corporation
On October 31, 2012, the Company acquired 50.882% ofcommon shares outstanding of At Tokyo Corporation for ¥33,328
million in cash. The purpose of this acquisition is to accelerate thedata center business and realize a variety of business synergies byfurther improving data center service quality and new information
security services.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.
In millions of yen

Cash and cash equivalents ................................................
Other current assets ..........................................................
Investments and long-term receivables ..............................
Property, plant and equipment ..........................................
Intangible assets, including goodwill .................................
Other assets ......................................................................
Total assets acquired .....................................................
Current liabilities ...............................................................
Long-term liabilities...........................................................
Total liabilities assumed .................................................
Noncontrolling interests ................................................
Net assets acquired .......................................................

¥

3,922
6,145
262
54,91733,5401,308
100,094
6,770
38,25845,02821,738¥ 33,328

Intangible assets of ¥15,230 million subject to amortization
include customer relationships of ¥12,158 million with a 20-year
useful life and trademarks of ¥3,072 million with a 15-year usefullife. The goodwill of ¥17,468 million represents expected excess
earning power based on future business operations. It is not deductible for tax purposes and has been assigned to the Information andcommunication related services segment.
The Company recorded the acquisition cost of ¥212 million related
to these acquisitions in selling, general and administrative expenses
for the year ended March 31, 2013.
The fair value of noncontrolling interests is measured at theprice based on the acquisition price with an adjustment for control
premium.
SECOM Annual Report 2014

Financial Section

3. U.S. Dollar Amounts
U.S. dollar amounts have been included in these financial statements solely for the convenience of the reader. The translations of
yen into U.S. dollars have been made at the rate of ¥103=US$1,
the rate prevailing on the Tokyo Foreign Exchange Market on March
31, 2014. These translations should not be construed as representing that the yen amounts actually represent, or have been or could
be converted into U.S. dollars at that rate.

acquisition is (i) to enhance fire protection services, including flexible response to environmental changes, such as increased awareness of disaster prevention due to the Great East Japan Earthquake(domestic) and increasing disaster prevention in emerging countries(overseas), and (ii) research and development of next-generation
systems for disaster prevention.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.

47

The following unaudited pro forma information shows theCompany’s consolidated results of operations for the years ended
March 31, 2013 and 2012 as if the newly consolidated subsidiaries
acquired in the year ended March 31, 2013, were consolidated on
April 1, 2011.
In millions of yen

7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(noncurrent) include debt and equity securities. The related aggregate fair value, gross unrealized gains, gross unrealized losses andcost pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2014 and 2013 are as follows:
In millions of yen

Years ended March 31
Unaudited2013

Pro forma net sales and operating revenue.......
Pro forma net income attributable to
SECOM CO., LTD. .........................................

71,764

42,830In yenUnaudited

2013

2012

¥328.79 ¥196.27

The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually
have been reported if the transactions in fact had occurred on
April 1, 2011, and is not necessarily representative of the Company’s
consolidated results of operations for any future period.

In thousands of
U.S. dollars

March 31

March 31

2013

2014

¥170,032 ¥152,779
37,296
20,772
20,50046,5002,924
2,645¥230,752 ¥222,696$1,650,796
362,098
199,029
28,388$2,240,311

6. Cash Deposits
The Company operates cash collection and deposit services forfinancial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection
services for entities other than financial institutions. Cash deposit
balances are segregated from cash and cash equivalents and are
restricted as to use by the Company. The Company funds most of
the cash for such operations through bank overdrafts and deposits.
Bank loans and deposits received, which relate to these operations,were ¥36,704 million ($356,350 thousand) and ¥17,765 million($172,476 thousand), respectively, at March 31, 2014, and ¥26,598
million and ¥24,863 million, respectively, at March 31, 2013. Aspart of its fee arrangement, the Company is reimbursed for theinterest cost of the related overdrafts.

SECOM Annual Report 2014

Investment securities:
Available-for-sale:
Equity securities ........... ¥ 31,829
Debt securities ............. 99,182
Held-to-maturity:
Debt securities ............. 12,309¥143,320¥¥

Losses21
21¥¥

Fair value00¥ 10,032¥ 10,032¥15,141
4,831

¥338
72

¥ 46,632
103,941507¥20,47910¥420

12,806¥163,379
In millions of yen

Cost

Investment securities include negotiable certificates of deposit
and money management funds. These agreements mature within
three months and their carrying values approximate fair value. The
Company has not experienced any losses through default of thefinancial institutions and does not anticipate default of any
outstanding agreements.

48

Gains

Gross unrealized

In millions of yen
2014

Cost

Short-term investments:
Available-for-sale:
Debt securities ............. ¥ 10,011¥ 10,011

March 31, 2013

5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2014 and 2013 arecomprised of the following:

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

Gross unrealized¥884,835 ¥842,626

Years ended March 31

Pro forma net income attributable to
SECOM CO., LTD. per share ...........................

March 31, 2014

2012

Gains

Losses

369
59
428

¥ —
5
¥ 5

¥

¥13,571
4,562

¥200
0

¥ 44,292
60,587318¥18,451

—
¥200

2,906
¥107,785

Short-term investments:
Available-for-sale:
Equity securities ........... ¥ 222
Debt securities ............. 11,434¥11,656
Investment securities:
Available-for-sale:
Equity securities ........... ¥30,921
Debt securities ............. 56,025
Held-to-maturity:
Debt securities .............
2,588¥89,534¥¥

Fair value

591
11,488¥ 12,079

In thousands of U.S. dollars
March 31, 2014
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
Debt securities .......... $$97,194 $97,194 $

Gains

204 $
204 $

Losses0 $0 $Fair value

97,39897,398Investment securities:
Available-for-sale:
Equity securities ........ $ 309,019 $147,001 $3,282 $ 452,738
Debt securities ..........
962,932
46,903699 1,009,136
Held-to-maturity:
Debt securities ..........
119,505
4,922
97
124,330$1,391,456 $198,826 $4,078 $1,586,204

Gross unrealized losses on, and fair value of, “available-for-sale”
and “held-to-maturity” securities, aggregated by investment
category and the length of time that individual securities have been
in a continuous unrealized loss position at March 31, 2014 are as
follows:
In millions of yen
March 31, 2014

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

Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses¥ 4,330
16,573¥20,903

¥338
72
¥410

¥—
—
¥—

¥—
—
¥—

¥ 1,466

¥ 10

¥—

¥—

In thousands of U.S. dollars
March 31, 2014
Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
lossesAvailable-for-sale:
Equity securities........... $ 42,039
Debt securities............. 160,903$202,942$3,282699$3,981

$—
—
$—

$—
—
$—

Held-to-maturity:
Debt securities............. $ 14,233

$

97

$—

$—

Based on the Company’s ability and intent to hold the investments
for a reasonable period of time sufficient for a recovery of fairvalue, the credit condition of the issuers and other relevant factors,
the Company does not consider these investments to be otherthan-temporarily impaired at March 31, 2014.
At March 31, 2014, debt securities principally consisted of shortterm investments in monetary trusts, Japanese government bonds,
corporate bonds, U.S. treasury securities and U.S. Government
Agency Bonds.
The cost and fair value of “available-for-sale” and ”held-tomaturity” debt securities by contractual maturity at March 31, 2014
are as follows:
In millions of yen
March 31, 2014
Available-for-sale
Fair value¥ 10,011¥ 10,032

63,636

66,48625,9069,640¥109,193

26,927
10,528¥113,973

March 31, 2014
Available-for-sale
Cost

Held-to-maturity

Fair value

Due within 1 year ..... $ 97,194 $ 97,398
Due after 1 year
through 5 years ......
617,825
645,495
Due after 5 years
through 10 years ....
251,515
261,427
Due after 10 years ...
93,592102,214........................... $1,060,126 $1,106,534

Cost

$

29,330¥Fair value

— ¥
3,021

1,510
1,597
7,778
8,185
¥12,309 ¥12,806

29,359During the years ended March 31, 2014, 2013 and 2012, the net
unrealized gains and losses on “available-for-sale” securities
included as part of accumulated other comprehensive income (loss),
net of tax, increased by ¥1,000 million ($9,709 thousand), ¥6,914
million and ¥2,515 million, respectively.
Proceeds from the sale of “available-for-sale” securities for theyears ended March 31, 2014, 2013 and 2012 were ¥14,475 million($140,534 thousand), ¥20,479 million and ¥72,223 million, respectively. On those sales, the gross realized gains and gross realized
losses, using a moving-average cost basis, for the years ended
March 31, 2014, 2013 and 2012 are as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2012

2014

Gross realized gains ........... ¥1,694
Gross realized losses ..........
212¥1,051144¥1,950662$16,447
2,058

The Company maintains long-term investment securities, issued
by a number of non-public companies, included as investment securities in the consolidated balance sheets. The aggregate carrying
amount of the investments in non-public companies, at cost net ofother-than-temporary impairment, was ¥8,639 million ($83,874
thousand) and ¥10,178 million at March 31, 2014 and 2013,
respectively. The corresponding fair value at that date was notcomputed as such estimation was not practicable and no significant
events or changes that might have affected the fair value ofinvestments were observed.
8. Inventories
Inventories at March 31, 2014 and 2013 are comprised of thefollowing:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

—
3,024

—

14,66015,50575,51579,466$119,505 $124,330

Held-to-maturity
Cost

Fair value

—$

2014

2013

2014

Security-related products................... ¥ 9,718 ¥ 7,822
Fire protection-related products ........ 16,763 16,647
Real estate ........................................ 15,429 26,293
Other-related products ......................
9,955
7,259
............................................. ¥51,865 ¥58,021$ 94,350
162,748
149,796
96,650$503,544

SECOM Annual Report 2014

Financial Section

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

Cost

In thousands of U.S. dollars

49

Work in process for real estate inventories at March 31, 2014 and2013, amounting to ¥15,396 million ($149,476 thousand) and¥13,348 million, respectively, are included in real estate.
Costs on uncompleted construction contracts at March 31, 2014
and 2013, amounting to ¥8,414 million ($81,689 thousand) and¥7,983 million, respectively, are included in fire protection-related
products.
The amount of write-down on real estate inventories included incost of sales for the years ended March 31, 2014, 2013 and 2012were ¥1,122 million ($10,893 thousand), ¥1,792 million and¥20,723 million, respectively.
9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
five categories: “lease receivables,” “loans receivable resulting frommedical services,” “loans receivable resulting from insurance services,” “other loans receivable” and “other.” Financing receivables
classified as “lease receivables” are resulting from lease transactionsof security equipment and real estate for offices and medical
institutions.
The Company continuously monitors overdue financing receivables which, the Company considers, have a risk of uncollectability.
For financing receivables with specific customer collection issues,
the Company individually evaluates their collectability in order todetermine the amount of allowance for doubtful accounts. For
other financing receivables, the Company categorizes these receivables into groups by their nature and characteristics. The Company
collectively evaluates the collectability of each group, using its historical experience of write-offs and determines the amount ofallowance for doubtful accounts.
Financing receivables and allowance for doubtful accounts at
March 31, 2014 and 2013 are as follows:

In millions of yen

Year ended March 31, 2014
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

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

Other

Total

406 ¥ 2,351 ¥ 121 ¥2,883 ¥ 820 ¥ 6,581
76
0
(46)
196
33
259
(65)
(630)
—
(22)
(20)
(737)
—
—
—
17
8
25
417

1,721

75

3,074

841

6,128

84

1,721

72

3,074

841

5,792

333 ¥

— ¥

3 ¥

— ¥

— ¥

336

Financing receivables:
Individually
evaluated .............. ¥ 102 ¥12,964 ¥ 74 ¥3,283 ¥ 869 ¥17,292
Collectively
evaluated .............. 42,422
510 2,223 2,450
157 47,762¥42,524 ¥13,474 ¥2,297 ¥5,733 ¥1,026 ¥65,054* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

50

SECOM Annual Report 2014

In millions of yen
Year ended March 31, 2013
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

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

Other

Total

384 ¥ 2,512 ¥ 671 ¥3,165 ¥ 893 ¥ 7,625
79
482
30
16
(5)
602
(57)
(643)
(580)
(323)
(121) (1,724)
—
—
—
25
53
78
406

2,351

121

2,883

820

6,581

82

2,351

77

2,883

820

6,213

324 ¥

— ¥

44 ¥

— ¥

— ¥

368

Financing receivables:
Individually
evaluated .............. ¥ 104 ¥12,795 ¥ 83 ¥3,037 ¥ 849 ¥16,868
Collectively
evaluated .............. 39,658
524 3,775 2,442
156 46,555¥39,762 ¥13,319 ¥3,858 ¥5,479 ¥1,005 ¥63,423* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.
In thousands of U.S. dollars
Year ended March 31, 2014
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

Other

Total

Allowance for
doubtful accounts:
Balance at
beginning of year....... $ 3,942 $ 22,825 $ 1,175 $27,990 $ 7,961 $ 63,893
Provision (Reversal) ..
738
0(447) 1,904
320
2,515
Charge off...............
(631) (6,116)—(214)(194) (7,155)
Other* ....................
—
—
—
165
78
243
Balance at endof year .......................
4,049 16,709
728 29,845 8,165 59,496
Individually
evaluated ..............
816 16,709
699 29,845 8,165 56,234
Collectively
evaluated .............. $ 3,233 $— $29 $— $ — $ 3,262
Financing receivables:
Individually
evaluated .............. $990 $125,864 $ 718 $31,874 $8,437 $167,883
Collectively
evaluated .............. 411,864
4,952 21,583 23,786 1,524 463,709$412,854 $130,816 $22,301 $55,660 $9,961 $631,592* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

The Company considers the fact that receivables are past due andthe financial position of the debtor to be credit quality indicatorsand classifies financing receivables into Overdue and Current.
Financing receivables determined to have no prospects for collecting contractual interest on the basis of being past due and otherfactors are placed on nonaccrual status.

The aging analysis of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2014 and2013 are as follows:

In millions of yen
March 31, 2013
Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Other
loans
receivable

Other

¥104

¥12,795¥83¥3,037¥849 ¥16,868

82

2,351

77

2,883

820

In millions of yen
March 31, 2014

Lease
receivables

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

Other

Total

Lease
receivables

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

Current ......................... ¥42,422 ¥13,434 ¥2,223 ¥2,551 ¥ 626 ¥61,256
Overdue........................
102
40
74 3,182
400
3,798
Total:
Financing receivables .. ¥42,524 ¥13,474 ¥2,297 ¥5,733 ¥1,026 ¥65,054
Financing receivables
on nonaccrual status ... ¥— ¥ 3,719 ¥74 ¥3,282 ¥March 31, 2013

Lease
receivables

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

Other

Total

March 31, 2014

Lease
receivables

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

— ¥ 4,359 ¥83 ¥3,037 ¥— ¥ 7,479

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

816

699

16,709Total

Current ......................... $411,864 $130,427 $21,583 $24,767 $6,077 $594,718
Overdue........................
990
389
718 30,893 3,884 36,874
Total:
Financing receivables .. $412,854 $130,816 $22,301 $55,660 $9,961 $631,592
Financing receivables
on nonaccrual status ... $— $ 36,107 $718 $31,864 $— $ 68,689

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2014 and 2013 are as follows:
In millions of yen
March 31, 2014

Other
loans
receivable

Other

¥102

¥12,964¥74¥3,283¥869 ¥17,292

84

1,721

72

3,074

841

Lease
receivables

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

Total

5,792

8,165

56,234Lease
receivables

Average amounts of
impaired receivables ....

¥103

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

Other
loans
receivable

Other¥12,880¥3,160¥859 ¥17,080

¥78

Total

In thousands of U.S. dollars
Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Average amounts of
impaired receivables .... $1,000 $125,049

Other
loans
receivable

Other

Total

$757 $30,680 $8,339 $165,825

10. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principallyconsist of Taiwan Secom Co., Ltd., a 28.8 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a28.8 percent owned affiliate, which is listed on the Korea Exchange;
and Toyo Tech Co., Ltd., a 27.8 percent owned affiliate, which islisted on the Second Section of the Tokyo Securities Exchange.
Combined financial information for the affiliated companies
accounted for under the equity method is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2013

2014

Current assets ................................ ¥114,922 ¥101,060
Noncurrent assets .......................... 140,185 108,887$1,115,748
1,361,019

Total assets................................. ¥255,107 ¥209,947$2,476,767

Current liabilities ............................ ¥ 59,268 ¥ 46,082
Long-term liabilities........................
37,56534,944Equity ............................................ 158,274 128,921$ 575,417
364,709
1,536,641

Total liabilities and equity ........... ¥255,107 ¥209,947$2,476,767

SECOM Annual Report 2014

Financial Section

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

29,845In millions of yen

Leasereceivables
Other

Total

$718 $31,874 $8,437 $167,883

March 31, 2014

Lease
receivables

Other$990 $125,864

In thousands of U.S. dollars
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
medical insurance
loans
services
services receivable

Other
loans
receivable

The average amounts of impaired receivables for the year ended
March 31, 2014 are as follows:

Current ......................... ¥39,658 ¥13,279 ¥3,775 ¥2,567 ¥ 670 ¥59,949
Overdue........................
10440
83 2,912
335
3,474
Total:
Financing receivables .. ¥39,762 ¥13,319 ¥3,858 ¥5,479 ¥1,005 ¥63,423
Financing receivables
on nonaccrual status ... ¥6,213

In thousands of U.S. dollars— ¥ 7,075
In millions of yen

Total

51

2014

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2014

Net sales ....................... ¥198,890 ¥162,379 ¥159,802

2013$1,930,971

Gross profit ................... ¥ 65,492 ¥ 52,691 ¥ 53,394$ 635,845

Net income
attributable toaffiliated companies .... ¥ 14,305 ¥ 15,056 ¥ 16,683$ 138,883

Dividends received from affiliated companies for the years ended
March 31, 2014, 2013 and 2012 were ¥2,652 million ($25,748
thousand), ¥2,403 million and ¥2,324 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥41,903 million($406,825 thousand) and ¥32,363 million at March 31, 2014 and2013, respectively, had a quoted market value of ¥119,638 million($1,161,534 thousand) and ¥79,750 million at March 31, 2014 and2013, respectively.
The amounts of goodwill included in the carrying amount ofinvestments in affiliated companies were ¥4,589 million ($44,553
thousand) and ¥3,051 million at March 31, 2014 and 2013,
respectively.
A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2012

2014

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

¥1,549¥1,924¥2,113$15,039

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

¥5,982¥6,573¥6,125$58,078

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

2014

Notes and accounts
receivable, trade ............................. ¥ 426¥ 490$ 4,136

Loans receivable................................ ¥ 563¥ 469$ 5,466

Notes and accounts payable.............. ¥2,494¥2,820$24,214

Guarantees for bank loans ................ ¥ 665¥ 139$ 6,456

The Company's equity in undistributed income of affiliates at
March 31, 2014 and 2013 included in retained earnings was¥25,668 million ($249,204 thousand) and ¥24,696 million,
respectively.
11. Long-Lived Assets
The Company has assessed the potential impairment of its longlived assets. As a result of a significant decrease in revenue forecasts, the Company principally recognized impairment losses
on certain real estate of the medical services segment for the year
ended March 31, 2014. The fair value was determined based on
the estimated present value of future cash flows or appraisal value.

52

SECOM Annual Report 2014

Impairment losses on long-lived assets by business segment for
the years ended March 31, 2014, 2013 and 2012 are as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2012

2014

Security services ....................
Fire protection services ..........
Medical services ....................
Insurance services .................
Geographic information
services ...............................
Information andcommunication related
services ...............................
Real estate andother services ......................
Corporate items ....................

¥ 296
21
1,871
—

¥ —
34
—
—

¥—
48
—
—

$ 2,874204
18,166
—

164

297

18

1,592

40

50

—

388

—
397

—
—

5
—

—
3,854

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

¥2,789¥381¥71$27,078

12. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill,at March 31, 2014 and 2013 are as follows:
In millions of yen
March 31, 2014
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥43,907
Other ............................................ 21,415¥65,322(¥25,795)(4,515)(¥30,310)¥18,112
16,900¥35,012

Unamortized intangible assets........... ¥ 3,998¥—¥ 3,998

In millions of yen
March 31, 2013
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥43,896
Other ............................................ 19,806¥63,702(¥26,818)(2,724)(¥29,542)¥17,078
17,082¥34,160

Unamortized intangible assets........... ¥ 4,258¥¥ 4,258—

In thousands of U.S. dollars
March 31, 2014
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... $426,282
Other ............................................ 207,913$634,195($250,437) $175,845(43,835) 164,078($294,272) $339,923

Unamortized intangible assets........... $ 38,815$— $ 38,815

Aggregate amortization expense for the years ended March 31,
2014, 2013 and 2012 was ¥6,741 million ($65,446 thousand),¥5,995 million and ¥6,120 million, respectively. Amortized intangible assets are amortized using the straight-line method over theirestimated useful lives. The weighted average amortization period
for internal use software is approximately five years.
The estimated aggregate amortization expense for intangible
assets for the next five years is as follows:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥7,031
5,607
4,700
3,766
2,687

$68,262
54,43745,631
36,56326,0872015......................................................
2016......................................................
2017......................................................
2018......................................................
2019......................................................

The changes in the carrying amount of goodwill by businesssegment for the years ended March 31, 2014 and 2013 are as
follows:
In millions of yen

Security
services

Fire
protection
services

Information
Geographic
andMedical information communication
services
services related services

Goodwill ............... ¥3,820 ¥ 81 ¥9,970 ¥4,991
Accumulated
impairment
losses .................. (1,199)— (4,607)(648)
March 31, 2012 .... 2,621
81 5,363
4,343
Goodwill acquired
during the year ...
—
1,872
—
—
Impairment
losses ..................
(468)
—
—
(584)
Translation
adjustment .........
198
—
—
15
Goodwill ............... 4,018
1,953 9,399
4,667
Accumulated
impairment
losses .................. (1,667)— (4,036)(893)
March 31, 2013 .... 2,351
1,953 5,363
3,774
Impairment
losses ..................
(151)
—
—
—
Translation
adjustment .........
—
18
269
—
Goodwill ............... 4,192
1,953 9,399
4,530
Accumulated
impairment
losses .................. (1,723)— (4,036)(738)
March 31, 2014 ... ¥2,469 ¥1,953 ¥5,363 ¥3,792¥

Real estateand otherservices

Total

175

¥1,962 ¥20,999

(175)
—

(135)
1,827

(6,764)
14,235

17,468—19,340——(1,052)—
17,643

—
1,962

213
39,642(175)
17,468

(135)
1,827

(6,906)32,736

—

—

(151)

—
17,643

—
1,962

287
39,679(175)(135) (6,807)¥17,468 ¥1,827 ¥32,872

In thousands of U.S. dollars

Security
services

Fire
protection
services

Information
Geographic
andMedical information communication
services
services related services

Real estateand otherservices

Total

Goodwill ............... $39,009 $18,961 $91,252 $45,311 $171,291 $19,049 $384,873
Accumulated
impairment
losses .................. (16,184)— (39,184) (8,670)(1,699) (1,311) (67,048)
March 31, 2013 .... 22,825 18,961 52,068 36,641 169,592 17,738 317,825
Impairment
losses .................. (1,466)
—
—
—
—
—
(1,466)
Translation
adjustment ......... 2,612
—
—
175
—
—
2,787
Goodwill ............... 40,699 18,961 91,252 43,981 171,291 19,049 385,233
Accumulated
impairment
losses .................. (16,728)— (39,184) (7,165)(1,699) (1,311) (66,087)
March 31, 2014 ... $23,971 $18,961 $52,068 $36,816 $169,592 $17,738 $319,146

Impairment losses on goodwill recognized in the above table aremainly due to decreases in the estimated fair value of reporting
units in each segment mainly caused by decreases in projected cash
flows. The fair value is determined based on the estimated present
value of future cash flows.

SECOM Annual Report 2014

Financial Section

13. Bank Loans and Long-Term Debt
Bank loans of ¥52,542 million ($510,117 thousand) and ¥39,032
million at March 31, 2014 and 2013, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 1.17 percent and 1.15 percent at March 31, 2014 and2013, respectively. Substantially all of these loans are borrowed
from banks. The Company has entered into basic agreements withthese banks which state that, with respect to all present or futureloans with such banks, collateral (including sums on deposit withsuch banks) or guarantors shall be provided immediately uponrequest. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebtedness to suchbanks. The Company has not been requested to submit such
additional security.
At March 31, 2014, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($38,835 thousand). The line ofcredit expires in March 2016. Under the agreement, Nohmi Bosai
Ltd. is required to pay commitment fees, at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2014, the Company had overdraft agreements with 29 banks andits unused lines of credit amounted to ¥27,893 million ($270,806
thousand). The Company incurs no fee on the unused portion ofthese overdraft agreements. The overdraft agreements expire in
the period from April 2014 to March 2015. The Company has theability and intent to extend these overdraft agreements undersimilar terms and conditions.

53

Long-term debt at March 31, 2014 and 2013 comprisethe following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

2014

Loans, principally from banks due
2013–2033 with interest rates
ranging from 0.55% to 5.45%:
Secured............................................ ¥20,834 ¥24,332
Unsecured........................................ 16,949 17,245
1.13% unsecured bonds due 2014 ...... 1,384
1,471
0.5% unsecured bonds due 2015 ........
100—
0.81% unsecured bonds due 2016 ......
100—
0.52% unsecured bonds due 2016 ......
168—
Unsecured bonds due 2013–2020
with floating interest rates basedon 6-month TIBOR plus
0.00%–0.15%................................... 10,685 11,865
Obligations under capital leases,
due 2013–2040 (Note 19).................. 13,028 11,130................................................ 63,248 66,043
Less: Portion due within one year ......... (15,398) (17,281)................................................ ¥47,850 ¥48,762$202,272
164,553
13,437
971
971
1,631

103,738
126,485
614,058(149,495)$464,563

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2014 and 2013 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2013

2014

Time deposits ....................................... ¥ 2,315 ¥ 2,210
Short-term and long-term receivables ... 5,591 5,527
Investment securities ............................. 1,525 1,084
Property, plant and equipment .............. 52,574 52,721
Other intangible assets.......................... ¥ 818 ¥ 818$ 22,476
54,28114,806510,427$ 7,942

The aggregate annual maturities on long-term debt at March 31,
2014 are as follows:
Years ending March 31

2015.....................................................
2016.....................................................
2017.....................................................
2018.....................................................
2019.....................................................
Thereafter .............................................
............................................................

In millions of yen

In thousands of
U.S. dollars¥15,398
11,804
7,647
7,508
5,707
15,184¥63,248$149,495
114,60274,24372,89355,408147,417$614,058

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

SECOM Annual Report 2014

premium-paying period of the insurance policies, (b) that liabilities
related to incurred but not reported claims are computed based onrelated regulations in Japan whereas under U.S. GAAP, those liabilities are computed based on past experience for unreported losses,and (c) that unearned premiums are calculated based on the documents authorized by the Supervisory Authorities in Japan whereas
under U.S. GAAP, unearned premiums are reflected based on thelapse and surrender over the contract period.
In addition, under certain property and casualty insurance contracts with a refund clause and long-term insurance policies thatprovide refunds at maturity, such as personal accident and fire, thepolicyholder receives a refund if premiums have been fully paid
unless a substantial settlement (as defined in the policy) has
occurred. The Company has provided for such refundable amounts
by classifying a portion of the net premiums written, together withinterest thereon, as investment deposits by policyholders. Contract
and policy terms are principally five years.
For purposes of preparing the consolidated financial statements,
appropriate adjustments have been made to reflect such items inaccordance with U.S. GAAP.
The net equity of Secom Insurance at March 31, 2014 and 2013was ¥52,761 million ($512,243 thousand) and ¥50,882 million,
respectively.
Net sales and operating revenue of Secom Insurance include net
realized investment gains and losses, including gains and losses onsales of securities, losses on other-than-temporary impairment ofinvestment securities and impairment losses on long-lived assets.
Net realized investment gains and losses, including losses on otherthan-temporary impairments, for the years ended March 31, 2014,2013 and 2012 were gains of ¥1,221 million ($11,854 thousand),¥724 million and ¥328 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2014, 2013 and 2012 were ¥22 million ($214 thousand),¥25 million and ¥883 million, respectively.
15. Pension and Severance Costs
Employees of the parent company and its domestic subsidiaries
whose services are terminated are, under most circumstances,eligible for lump-sum benefits and/or eligible for pension benefits.
The parent company and certain domestic subsidiaries haveadopted a cash balance pension plan and a defined contribution
pension plan. Benefits under the cash balance pension plan arecalculated as a certain percentage of employees’ annual income
over their period of service, plus interest calculated as the 3-year
average yield for 10-year government bonds. The defined contribution pension plan was established in April 2003, by transferring a
portion equivalent to 20 percent of the cash balance pension plan,
including portions funded in prior periods. A specified percentageof employees’ annual income is contributed to the defined
contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accordingly, the ratioof the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution pension
plan changed to 70 percent and 30 percent, including portions
funded in prior periods.

Net periodic pension and severance costs for the years ended
March 31, 2014, 2013 and 2012 are as follows:2014

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

Net periodic pension andseverance costs:
Service cost ......................... ¥6,181 ¥8,269 ¥5,560
Interest cost ........................ 1,297 1,533 1,572
Expected return onplan assets ........................ (2,299) (2,241) (2,130)
Amortization of priorservice benefit ................... (1,601) (1,600) (1,649)
Recognized actuarial loss..... 1,581 1,407 1,222
Net periodic pension
and severance costs....... ¥5,159 ¥7,368 ¥4,575

2014$60,010
12,592(22,320)

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2014

2014

$982,049
60,01012,592(47,893)—(54,194)2,640
955,204

809,427
58,01961,408(36,767)2,680
894,767($ 60,437)

Amounts recognized in the consolidated balance sheet at March
31, 2014 and 2013 consist of:In thousands of
U.S. dollars

March 31

March 31

2013

2014

2014

(¥8,610)(1,581)
1,601(¥8,590)$214,117(274,553)($ 60,436)($83,592)(15,350)
15,544($83,398)

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2014 and 2013 consist of:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

Actuarial loss ..................................... ¥20,524 ¥30,715
Prior service benefit............................ (4,133) (5,734)
Net amount recognized .......... ¥16,391 ¥24,981$199,262(40,126)$159,136

The estimated prior service benefit and actuarial loss for thedefined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit
cost over the next year are ¥1,575 million ($15,291 thousand) and¥1,017 million ($9,874 thousand), respectively.
The accumulated benefit obligation for the pension plan was¥90,316 million ($876,854 thousand) and ¥92,862 million at March
31, 2014 and 2013, respectively.
The projected benefit obligation, accumulated benefit obligationand fair value of plan assets for the pension plans with accumulated
benefit obligation in excess of plan assets were ¥42,682 million($414,388 thousand), ¥38,220 million ($371,068 thousand) and¥14,987 million ($145,505 thousand), respectively, at March 31,
2014, and ¥47,619 million, ¥42,896 million and ¥18,564 million,
respectively, at March 31, 2013.
The Company uses March 31 as the measurement date for thedomestic pension plan.
Weighted-average assumptions used to determine the benefit
obligation at March 31, 2014 and 2013 are as follows:
March 31

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

2014

2013

1.1%
2.7%

1.4%
2.7%

Weighted-average assumptions used to determine net pension
and severance costs for the years ended March 31, 2014, 2013 and2012 are as follows:
Years ended March 31

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

2014

2013

2012

1.4%
3.0%
2.7%

1.8%
3.0%
2.6%

2.1%
3.0%
2.6%

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

SECOM Annual Report 2014

Financial Section

In millions of yen

Prepaid pension andseverance costs ............................ ¥22,054 ¥11,538
Accrued pension andseverance costs ............................ (28,279) (29,318)
Net amount recognized ...... (¥ 6,225) (¥17,780)

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

2014$50,088

In thousands of
U.S. dollars

In millions of yen(15,544)
15,350The changes in benefit obligation, plan assets and funded status
are as follows:

Change in benefit obligation:
Benefit obligation
at beginning of year ............... ¥101,151 ¥ 85,785
Service cost ..............................
6,181
8,269
Interest cost .............................
1,297
1,533
Actuarial (gain) loss ..................
(4,933)
4,055
Prior service liability ..................
—
472
Benefits paid ............................
(5,582)(5,834)
Acquisition ...............................
272
6,871
Benefit obligation
at end of year ........................
98,386
101,151
Change in plan assets:
Fair value of plan assets
at beginning of year ...............
83,371
72,210
Actual return on plan assets .....
5,976
6,826
Employer contribution ..............
6,325
6,171
Benefits paid ............................
(3,787)(3,801)
Acquisition ...............................
276
1,965
Fair value of plan assets
at end of year ........................
92,161
83,371
Funded status
at the end of year ...................... (¥ 6,225) (¥ 17,780)

Other changes in plan assets and benefit obligations recognizedin other comprehensive income (loss) for the year ended March 31,
2014 are summarized as follows:

55

The Company’s investment policy is designed to ensure that sufficient plan assets are available to provide future payments of pension benefits to the eligible plan participants. The policy does not
use target allocations for the individual asset categories. Plan assets
are invested primarily in equity and debt securities, and pooled
funds with the objective to minimize risk and achieve the expected
rate of return. The investment results are periodically checked andasset allocation is adjusted as necessary.
The following table represents the fair value of the Company’s
pension plan assets at March 31, 2014 and 2013. The three levels of
inputs used to measure fair value are more fully described in Note 22.
In millions of yen
March 31, 2014
Level 1

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

¥ 1,750

Level 2¥—¥

Level 3

Total—

¥ 1,750

13,900——13,900

5,221

154

—

5,375

242
28
—
—
—
¥21,141

2,099
31,201
7,225
9,855
112
¥50,646729
18,885——760¥20,374

3,070
50,114
7,225
9,855
872
¥92,161* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥11 million at March 31, 2014.
* The plan’s government bonds include approximately 20% Japanese bonds and
80% foreign bonds. The non-goverment bonds include approximately 10%
Japanese bonds and 90% foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 50% in equity securities and 50% in debt
securities. The unquoted beneficial certificate of security investment trust
included in the plan’s pooled funds is classified as Level 3.

In thousands of U.S. dollars
March 31, 2014
Level 1

Level 1

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

¥

899

Level 2¥—

Level 3

¥

—

Total

¥

899

12,043——

12,043

3,708

75

—

3,783

200
911
26,83120,807
8,071
—
8,836
—
(552)
768
¥43,461 ¥22,486

1,885
47,638
8,071
8,836
216
¥83,371

774
—
—
—
—
¥17,424* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥3 million at March 31, 2013.
* The plan’s government bonds include approximately 95% Japanese bonds and
5% foreign bonds. The non-goverment bonds include approximately 50%
Japanese bonds and 50% foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 65% in equity securities, 30% in debt securities and 5% in other investments. The unquoted beneficial certificate of security
investment trust included in the plan’s pooled funds is classified as Level 3.

56

SECOM Annual Report 2014

Level 3

Cash and cash
equivalents ............... $ 16,990 $— $—Equity securities
Japanesecompanies ............ 134,951——
Debt securities
Government
bonds ...................
50,6891,495—
Non-government
bonds ...................
2,350
20,378
7,078
Pooled funds...............
272
302,922 183,350
Call loans ....................
—
70,146—
Insurance contracts .....
—
95,680—
Other ..........................
—
1,088
7,378
$205,252 $491,709 $197,806

Total$ 16,990
134,951
52,18429,806
486,544
70,146
95,6808,466$894,767* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of $107 thousand at March 31, 2014.
* The plan’s government bonds include approximately 20% Japanese bonds and
80% foreign bonds. The non-goverment bonds include approximately 10%
Japanese bonds and 90% foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 50% in equity securities and 50% in debt
securities. The unquoted beneficial certificate of security investment trust
included in the plan’s pooled funds is classified as Level 3.

The following table represents the changes in Level 3 investments
for the years ended March 31, 2014 and 2013.
Level 3 investments, mainly in the unquoted beneficial certificate
of security investment trust in the plan’s pooled funds, are at thediscretion of the administrator of the fund. Their fair values are estimated based on unobservable inputs provided by the administratorof the fund.

In millions of yen

Year ended March 31, 2014
Debt securities
NonGovernment government
bonds
bonds

In millions of yen
March 31, 2013

Level 2

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

Pooled
funds

Other

Total

¥—

¥911

¥20,807¥768¥22,486

—

—

606

34

640

—

(182)

1,344

(8)

1,154

—
—
¥—

—
—
¥729

(3,559)(313)¥18,885(34) (3,593)—(313)¥760 ¥20,374

In millions of yen
Year ended March 31, 2013
Debt securities
NonGovernment government
bonds
bonds

Balance at
beginning of year.........................
Actual returnon plan assets:
Relating to assets soldduring the year .......................
Relating to assets heldat end of year .........................
Purchases, sales andsettlements, net ...........................
Transfer into (from) Level 3, net......
Balance at end of year ...................

¥1

¥794

Pooledfunds¥16,669

Other

¥450

Total

¥17,914

—

—

(622)

18

(604)

—

117

3,226

(280)

3,063

—
(1)
¥—

—
—
¥911

816
718
¥20,807

281
299
¥768

1,097
1,016
¥22,486

In thousands of U.S. dollars
Year ended March 31, 2014
Debt securities
NonGovernment government
bonds
bonds

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

$—

Pooled
funds

Other

Total

$8,845 $202,010 $7,456 $218,311

—

—

5,883

330

6,213

—

(1,767)

13,049(78)

11,204——$—— (34,553) (330) (34,883)—(3,039)—(3,039)$7,078 $183,350 $7,378 $197,806

The Company expects to contribute ¥6,045 million ($58,689
thousand) to its domestic defined benefit plans in the year ending
March 31, 2015.
The following benefit payments, which reflect future services, as
appropriate, are expected to be paid.
Years ending March 31

2015.....................................................
2016.....................................................
2017.....................................................
2018.....................................................
2019.....................................................
2020–2024 ...........................................

17. Income Taxes
Total income taxes for the years ended March 31, 2014, 2013
and 2012 are allocated as follows:

In millions of yen

In thousands of
U.S. dollars¥ 4,492
5,071
4,918
5,494
5,822
29,446$ 43,612
49,23347,74853,34056,524
285,883

16. Exchange Gains and Losses
Other income for the years ended March 31, 2014 and 2013
includes net exchange gains of ¥408 million ($3,961 thousand)and ¥276 million, respectively. Other expenses for the year ended
March 31, 2012 include net exchange losses of ¥145 million.

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

Consolidated income taxes
from continuing
operations .......................... ¥49,698 ¥46,700 ¥40,661
Consolidated income taxes
from discontinued
operations ..........................
(172)
149 (2,459)
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains
on securities ....................
440
3,511 1,213
Unrealized gains
on derivative
instruments .....................
(0)10—
Pension liability
adjustments .................... 3,183
(184)
(945)
Foreign currencytranslation
adjustments ....................
121——..................................... ¥53,270 ¥50,186 ¥38,470

2014$482,504(1,670)4,272(0)30,904
1,175$517,185

The parent company and its domestic subsidiaries were subject toa corporate tax of 28.05 percent for the years ended March 31,
2014 and 2013 and 30 percent for the year ended March 31, 2012,
an inhabitants tax of approximately 20.3 percent, and a deductible
enterprise tax of approximately 7.4 percent, which, in the aggregate, results in a statutory tax rate in Japan of approximately 37.8
percent for the years ended March 31, 2014 and 2013 and 40.5
percent for the year ended March 31, 2012.
Due to the promulgation on December 2, 2011 of the “Act for
Partial Amendment of the Income Tax Act, etc. for the Purpose of
Creating a Taxation System Responding to Changes in Economic
and Social Structures” and the “Act on Special Measures for
Securing Financial Resources Necessary to Implement Measuresfor Reconstruction Following the Great East Japan Earthquake,”the statutory tax rate used to calculate the deferred tax assets andliabilities for the year ended March 31, 2012 changed mainly from40.5 percent to 37.8 percent for those items scheduled for reversal
during the period from April 1, 2012 to March 31, 2015, and to
35.4 percent for those items scheduled for reversal on or after
April 1, 2015. As a result, income taxes for the year ended
March 31, 2012 increased by ¥2,068 million.
Due to the promulgation on March 31, 2014 of the “Partial
Amendment of the Income Tax Act, etc.,” the statutory tax rateused to calculate the deferred tax assets and liabilities for the years
ended March 31, 2014 changed mainly from 37.8% to 35.4% for
those scheduled for reversal during the period from April 1, 2014
to March 31, 2015. As a result, income taxes for the year ended
March 31, 2014 increased by ¥1,119 million ($10,864 thousand).

SECOM Annual Report 2014

Financial Section

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, 2014, 2013 and 2012were ¥1,679 million ($16,301 thousand), ¥1,645 million and¥1,613 million, respectively.

2014

In millions of yen

57

Reconciliations of the differences between income taxes computed
at statutory tax rates and consolidated income taxes from continuing
operations are as follows:2014

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

Income taxes computed
at statutory tax rate ............ ¥48,668 ¥45,496 ¥36,532
Increase (decrease)resulting from:
Reversal of valuation
allowance ....................... (1,234)(518) (6,000)
Net effect of changes incorporate tax rates .......... 1,119—
2,068
Per capita tax ....................
857
850
804
Provision of valuation
allowance .......................
832
477
7,098
Other, net .........................
(544)
395
159
Consolidated income
taxes from continuing
operations ................... ¥49,698 ¥46,700 ¥40,661

2014$472,505(11,981)
10,864
8,320
8,078(5,282)$482,504

The valuation allowance principally relates to deferred tax assetsof subsidiaries with operating loss carryforwards, for tax purposes,that are not expected to be realized. The net change in the total
valuation allowance for the years ended March 31, 2014, 2013 and2012 was an increase of ¥255 million ($2,476 thousand) and ¥299
million and a decrease of ¥3,771 million, respectively.
In assessing the realizability of deferred tax assets, the Company’s
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. The Company’s management considered the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies inmaking this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods
in which the deferred tax assets are deductible, the Company’s
management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of theexisting valuation allowance at March 31, 2014 and 2013.
Net deferred tax assets at March 31, 2014 and 2013 are reflectedin the accompanying consolidated balance sheets under thefollowing captions:

The significant components of deferred tax assets and liabilities at
March 31, 2014 and 2013 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

2014

Deferred tax assets:
Loss carryforwards .......................... ¥11,277 ¥11,821
Accrued pension andseverance costs ............................. 9,753 10,108
Deferred revenue ............................ 8,958
9,438
Property, plant and equipment ........ 8,913
7,820
Adjustment of book value atthe date of acquisition—
Land and buildings ...................... 7,869
8,510
Other assets ................................
265
315
Accrued bonus ................................ 6,014
6,266
Vacation accrual .............................. 3,495
3,493
Write-down on real estate
inventories .................................... 2,781
4,536
Allowance for doubtful accounts..... 2,635
2,676Intangible assets.............................. 1,641
1,499
Investment securities .......................
49
464
Other .............................................. 9,328
9,979
Gross deferred tax assets ............. 72,978 76,925
Less: Valuation allowance ............ (29,972) (30,227)
Total deferred tax assets .............. 43,006 46,698
Deferred tax liabilities:
Adjustment of book value atthe date of acquisition—
Land and buildings ...................... (5,201) (5,632)
Intangible assets .......................... (5,160) (5,448)
Other assets ................................ (1,332) (2,075)
Prepaid pension andseverance costs ............................. (7,862) (4,010)
Deferred installation costs ............... (6,464) (7,086)
Unrealized holding gains on
securities ....................................... (6,133) (5,777)
Investments in affiliated companies .. (5,506) (5,105)
Other .............................................. (3,749) (4,558)
Gross deferred tax liabilities ......... (41,407) (39,691)
Net deferred tax assets ........... ¥ 1,599 ¥ 7,007
58

SECOM Annual Report 2014

$109,485
94,68986,971
86,53476,3982,573
58,38833,93227,00025,583
15,932476
90,562
708,523(290,990)
417,533(50,495)(50,097)(12,932)(76,330)(62,757)(59,544)(53,456)(36,399)(402,010)$ 15,523

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

2014

Deferred income taxes(Current assets) ............................... ¥14,021 ¥15,387
Deferred income taxes(Other assets) ..................................
7,061
6,750
Other current liabilities(Current liabilities) ...........................
(344)
(995)
Deferred income taxes(Long-term liabilities)....................... (19,139) (14,135)
Net deferred tax assets ............. ¥ 1,599 ¥ 7,007$136,126
68,553(3,340)(185,816)$ 15,523

The Company has not recognized deferred tax liabilities of ¥615
million ($5,971 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥19,853 million ($192,748 thousand)at March 31, 2014 as they are not expected to be remitted in theforeseeable future.
At March 31, 2014, the operating loss carryforwards of domestic
subsidiaries amounted to ¥24,948 million ($242,214 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to nine years, as follows:
Expires in the years ending March 31

2015......................................................
2016......................................................
2017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................
2023......................................................
..............................................................

In millions of yen

In thousands of
U.S. dollars¥ 2,720
—
—
6,738
6,788
1,904
1,257
3,379
2,162
¥24,948$ 26,408——
65,41765,90318,485
12,20432,80620,991$242,214

The operating loss carryforwards of overseas subsidiaries at
March 31, 2014 amounted to ¥7,118 million ($69,107 thousand), apart of which will begin to expire in the year ending March 31, 2015.

The total amount of unrecognized tax benefits for the years
ended March 31, 2014, 2013 and 2012 were insignificant. Also,
there were no significant movements in the gross amounts of unrealized tax benefits and the amounts of interest and penalties recognized due to the unrecognized tax benefits during the years ended
March 31, 2014, 2013 and 2012.
Although the Company believes its estimates of unrecognized tax
benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation
could affect the total amount of unrecognized tax benefits infuture periods. Based on the information available as of March 31,
2014, the Company does not expect significant changes to theunrecognized tax benefits within the next twelve months.
The Company files tax returns in Japan and various foreign jurisdictions. In Japan, the Company is no longer subject to regularincome tax examinations by the tax authorities for years before
2009. In other foreign tax jurisdictions, major subsidiaries are nolonger subject to income tax examinations by tax authorities foryears before 2013, with some exceptions.
18. Shareholders’ Equity(1) Additional Paid-In Capital
The change in additional paid-in capital includes the effect ofchanges in the Company’s ownership interest in its consolidated
subsidiaries.
The net income attributable to SECOM CO., LTD. and transfersfrom (to) noncontrolling interests for the years ended March 31,
2014, 2013 and 2012 are as follows:
In thousands ofIn millions of yen
U.S. dollars
Years ended
March 31
2014

2013

2012

Net income attributable
to SECOM CO., LTD. ............. ¥73,979 ¥70,580 ¥41,237
Transfers from (to)noncontrolling interests:
Decrease in additional
paid-in capital related tothe acquisition of Secom
Techno Service Co., Ltd.’sownership interests .........
—
—
(476)
Other, net ..........................
(28)
(752)
(166)
Net transfers from (to)noncontrolling interests ......
(28)
(752)
(642)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests ........ ¥73,951 ¥69,828 ¥40,595

Year ended
March 312014

$718,243

—
(272)
(272)

$717,971

Subsequent to March 31, 2014, the parent company’s Board of
Directors declared an annual cash dividend of ¥115 ($1.12) per
share, totaling ¥25,100 million ($243,689 thousand), to shareholders of record on March 31, 2014. The dividend declared wasapproved at the general shareholders’ meeting held on June 25,
2014. Dividends are recorded in the year they are declared.
The Japanese Companies Act provides that a company can makedividends of surplus anytime with resolution of the shareholders.
(3) Common Stock in Treasury
For the year ended March 31, 2012, common stock in treasury
decreased by ¥1,264 million, primarily due to allotment withrespect to the absorption-type merger of Secom Techno Service
Co., Ltd.
The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act.
(4) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the years
ended March 31, 2014, 2013 and 2012 are as follows:
In millions of yen
Pre-tax
amount

For the year ended March 31, 2014:
Unrealized holding gains on
securities—
Unrealized holding gains or losses
arising during the period ............. ¥ 3,229
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................... (1,669)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
19
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(17)
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
8,471
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
255
Foreign currencytranslation adjustments ................... 18,213
Other comprehensive
income (loss) ........................... ¥28,501

Tax(expense)or benefit

Net-of-tax
amount(¥ 974) ¥ 2,255

534(1,135)

(6)

13

6

(11)

(3,153)

5,318

(30)

225

(121)

18,092(¥3,744) ¥24,757

Financial Section(2) Retained Earnings
The Japanese Companies Act provides that an amount equal to
10 percent of surplus distributed by the parent company and its
Japanese subsidiaries be appropriated as a legal reserve until theaggregate amount of additional paid-in capital and legal reserve
equals 25 percent of the common stock account.
The amount available for dividends under the JapaneseCompanies Act is based on the amount recorded in the parent
company’s nonconsolidated statutory financial statements in accordance with Japanese GAAP. Such amount was ¥466,306 million($4,527,243 thousand) at March 31, 2014.

SECOM Annual Report 201459

In millions of yen
Pre-tax
amount

For the year ended March 31, 2013:
Unrealized holding gains on
securities—
Unrealized holding gains or losses
arising during the period ............. ¥11,607
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(713)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
10
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
15
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
(897)
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
5
Foreign currencytranslation adjustments ................... 10,105
Other comprehensive
income (loss) ........................... ¥20,132
For the year ended March 31, 2012:
Unrealized holding gains on
securities—
Unrealized holding gains or losses
arising during the period ............. ¥3,136
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
563
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
—
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
8
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
(2,421)
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
(477)
Foreign currencytranslation adjustments ...................
(3,696)
Other comprehensive
income (loss) ........................... (¥2,887)

60

SECOM Annual Report 2014

Tax
(expense)or benefit

Net-of-tax
amount(¥3,740) ¥ 7,867

229

(484)

(4)

6

(6)

9

117

(780)

67

72

—

10,105(¥3,337) ¥16,795(¥968)¥2,168In thousands of U.S. dollars
Pre-tax
amountTax(expense)or benefit

For the year ended March 31, 2014:
Unrealized holding gains on
securities—
Unrealized holding gains
or losses arising during
the period ................................... $ 31,349 ($ 9,456) $ 21,893
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................... (16,203)
5,184 (11,019)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
185
(58)
127
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(165)
58
(107)
Pension liability adjustments—
Unrealized gains or losses
arising during the period ............. 82,243 (30,612) 51,631
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
2,476
(292)
2,184
Foreign currencytranslation adjustments ................... 176,825(1,175) 175,650
Other comprehensive
income (loss) ........................... $276,710 ($36,351) $240,359

Reclassification adjustments for gains or losses realized in net
income (pre-tax amount) are included in the consolidated statementof income for the year ended March 31, 2014 as follows:
In millions of yen

(245)

—

318

—

—

8

684

(1,737)

261

(216)

—

(3,696)(¥268) (¥3,155)

Net-of-tax
amountUnrealized gains on securities—
Net sales and operating revenue ............
Gain on sales of securities, net ...............
Loss on other-than-temporary
impairment of investment
securities ..............................................
Unrealized gains on derivative instruments—
Other income .........................................
Pension liability adjustments—
Net periodic pension and severance
costs (Note 15) .....................................
Equity in net income of affiliatedcompanies ...............................................

In thousands of
U.S. dollars(¥1,221)(483)($11,854)(4,689)

35

340

(17)

(165)

(20)

(194)

¥ 275

$ 2,670

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

On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The lease term
is 30 years beginning May 1, 1996. On July 15, 2010, the Company
also entered into a long-term lease agreement for the adjoining
land and buildings. The lease term is also 30 years beginning July
15, 2010. For financial reporting purposes, the portion of theselease arrangements relating to the building has been classified asa capital lease; accordingly, an asset of approximately ¥7,209 million ($69,990 thousand) has been recorded in the buildings andimprovements account. The portion of the lease relating to the landhas been classified as an operating lease. The future minimum lease
payments for the site at March 31, 2014 were ¥5,853 million($56,825 thousand).
A summary of leased assets under capital leases at March 31,
2014 and 2013 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

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

2013

2014

¥ 8,908 ¥ 8,209$ 86,485

11,107 10,198
95
163(9,776) (8,598)¥10,334 ¥ 9,972

107,835
922(94,913)$100,329

Depreciation expenses for assets under capital leases for the years
ended March 31, 2014, 2013 and 2012 were ¥2,668 million($25,903 thousand), ¥2,688 million and ¥2,630 million,
respectively.
The following is a schedule by year of future minimum lease
payments under capital leases and the present value of the net
minimum lease payments at March 31, 2014:
Years ending March 31

2015........................................................
2016........................................................
2017........................................................
2018........................................................
2019........................................................
Thereafter ................................................
Total minimum lease payments ................
Less: Amount representing interest ..........
Present value of net minimum
lease payments (Note 13) .......................
Less: Current portion ...............................
Long-term capital leaseobligations .........................................

In millions of yen

In thousands of
U.S. dollars¥ 2,788
2,017
1,562
1,200
1,034
12,632
21,233(8,205)$ 27,068
19,583
15,165
11,65010,039122,640
206,145(79,660)

13,028(2,268)

126,485(22,019)¥10,760$104,466

Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥ 8,753
8,397
8,356
8,261
8,267
33,330$ 84,981
81,524
81,12680,20480,262
323,592¥73,364$731,689

2015........................................................
2016........................................................
2017........................................................
2018........................................................
2019........................................................
Thereafter ................................................
Total future minimum lease
payments ...........................................

20. Lessor
The Company’s leasing operations consist principally of leasingof security merchandise, security systems and real estate for officeand medical institutions. Most of the security merchandise andsecurity systems on lease are classified as sales-type leases or directfinancing leases. Other leases are classified as operating leases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2014 and 2013 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

¥51,037 ¥52,780(3,869) (4,671)$495,505(37,564)— 1,262(4,644) (9,609)
42,524 39,762(12,769) (12,034)¥29,755 ¥27,728—(45,087)
412,854(123,971)$288,883

2014

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....

The following is a schedule by year of future minimum lease
payments to be received under sales-type leases and directfinancing leases at March 31, 2014:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥14,992
12,525
9,767
7,340
4,232
2,181

$145,553
121,602
94,82571,262
41,087
21,176¥51,037$495,505

2015........................................................
2016........................................................
2017........................................................
2018........................................................
2019........................................................
Thereafter ................................................
Total future minimum lease
payments to be received ....................

A summary of investment in property under operating leases andproperty held for lease at March 31, 2014 and 2013 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 312014

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

2013

2014

¥32,944 ¥33,230
31,659 28,541
662
662(10,441) (9,687)¥54,824 ¥52,746$319,845
307,369
6,427(101,369)$532,272

SECOM Annual Report 2014

Financial Section

Rental expenses under operating leases for the years ended
March 31, 2014, 2013 and 2012 were ¥21,774 million ($211,398
thousand), ¥18,264 million and ¥16,419 million, respectively. A
significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, many ofwhich are renewed upon expiration.
On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The leaseterm is 20 years beginning December 8, 2000. For financial
reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, annual lease payments for the site
are approximately ¥1,299 million ($12,612 thousand) over a
20-year period.

The future minimum lease payments required under operatingleases that have initial or remaining noncancelable lease terms inexcess of one year at March 31, 2014 are as follows:

61

The future minimum rentals under noncancelable operatingleases at March 31, 2014 are as follows:
Years ending March 31

2015........................................................
2016........................................................
2017........................................................
2018........................................................
2019........................................................
Thereafter ................................................
Total future minimum rentals ...............

In millions of yen

In thousands of
U.S. dollars¥2,273
166
162
162
162
3,395
¥6,320$22,068
1,612
1,573
1,573
1,573
32,960$61,359

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

62

SECOM Annual Report 2014

The carrying amounts and estimated fair values of financial instruments, excluding debt and equity securities, which are disclosed in
Notes 2 (7) and 7 at March 31, 2014 and 2013 are as follows:
In millions of yen
March 31
2014
Carrying
amountNon-derivatives:
Assets—Long-term receivables
including current
portion (Less allowancefor doubtful accounts) .... ¥58,235
Liabilities—
Long-term debt
including current
portion ........................... 63,247
Investment deposits
by policyholders ............. 29,531
Derivatives:
Assets—Equity swaps(Other current assets) .....
—
Liabilities—
Interest rate swaps(Other long-term
liabilities) ........................
165

Estimated
fair value

2013
Carrying
amountEstimated
fair value¥58,457 ¥55,976¥57,159

63,296

66,043

66,15530,71029,48330,831

—

59

59

165

239

239

In thousands of U.S. dollars
March 31, 2014
Carrying
amountNon-derivatives:
Assets—Long-term receivables including current
portion (Less allowance for doubtful
accounts) ...............................................
Liabilities—
Long-term debt including current
portion ...................................................
Investment deposits
by policyholders .....................................
Derivatives:
Assets—Equity swaps (Other current assets) ..........
Liabilities—
Interest rate swaps (Other long-term
liabilities) ................................................

Estimated
fair value$565,388 $567,544
614,049 614,521
286,709 298,155
—

—

1,602

1,602

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

22. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” defines fairvalue as the price that would be received to sell an asset or paid totransfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between
market participants at the measurement date. This accounting standard establishes a three-level fair value hierarchy that prioritizes the
inputs used to measure fair value as follows:
Level 1— Inputs are quoted prices in active markets for identicalassets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable, andinputs that are derived principally from or corroborated
by observable market data by correlation or othermeans.
Level 3— Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers areunobservable, which reflect the reporting entity’s own
assumptions about the assumptions that market
participants would use in establishing a price.
The following table represents the Company’s assets andliabilities that are measured at fair value on a recurring basis at
March 31, 2014 and 2013. Transfers between levels are recognizedat the end of the respective reporting periods.
In millions of yen
March 31, 2014
Level 1

Assets:Cash equivalents ..... ¥253
Short-term
investments andinvestment
securities ...............
134,108
Total assets ................. ¥134,361
Liabilities:
Derivatives(Other long-term
liabilities) ............... ¥Total liabilities ............. ¥——Level 2

Level 3

¥ 2,671¥

24,600¥27,271

34,980¥34,980

193,688¥196,612

¥
¥

¥
¥

¥
¥

165
165

—

Total

—
—

¥

2,924

165
165

In millions of yen
March 31, 2013
Level 1

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

¥

Level 344

¥ 2,601¥—

97,257

17,606

39,588¥

2,645—¥39,58859¥157,155

¥
¥

¥
¥

¥
¥

¥
¥

—
—

Level 3

239
239

Total

Assets:Cash equivalents ..... $2,456 $ 25,932 $— $ 28,388
Short-term
investments andinvestment
securities ............... 1,302,019 238,835 339,612
1,880,466
Total assets ................. $1,304,475 $264,767 $339,612 $1,908,854
Liabilities:
Derivatives(Other long-term
liabilities) ............... $Total liabilities ............. $

— $
— $

1,602 $
1,602 $

— $
— $

1,602
1,602

Cash Equivalents
All highly liquid investments with initial maturities of three months orless are considered to be cash equivalents, and principally valued
using quoted prices for identical assets in markets that are not active.
Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1 assets arevalued using unadjusted quoted market prices in active markets
with sufficient volume and frequency of transactions.
Level 2 assets are comprised principally of debt securities, which
are valued using quoted prices for similar assets in active markets,or quoted prices for identical or similar assets in markets that are
not active.
Non-marketable securities classified as Level 3 assets are valued
based on unobservable inputs as the market for the assets was not
active at the measurement date. The fair value is determined byusing a valuation technique, such as the discounted cash flow
model, which best reflects the nature, characteristics and risks ofeach asset. These significant unobservable inputs contain discountrates, exit timing and EBITDA multiple. An increase (decrease) inthe discount rates, the later (earlier) exit and a decrease (increase)in the EBITDA multiple would result in a decrease (increase) in thefair value of non-marketable securities.
The Company’s Level 3 investment securities that are measured
at fair value on a recurring basis at March 31, 2014 and 2013,
amounting to ¥34,980 million ($339,612 thousand) and ¥39,588
million, respectively, are primarily private equity investments.
The valuation technique and significant unobservable inputs
are as follows:
March 31, 2014
Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2014–2019
3.7x–8.5x

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2013–2017
5.8x–9.3x

154,45159¥20,266

239
239

Level 2

Total—
¥97,301——

March 31, 2014
Level 1March 31, 2013

For the years ended March 31, 2014 and 2013, ¥1,401 million($13,602 thousand) and ¥3,403 million of debt securities were transferred from Level 1 to Level 2, respectively, because the observable
markets in which these instruments were traded became inactive.

SECOM Annual Report 2014

Financial Section

Assets:Cash equivalents .....
Short-term
investments andinvestment
securities ...............
Derivatives (Other
current assets) .......
Total assets .................

Level 2In thousands of U.S. dollars

63Derivative Financial Investments
Derivative financial instruments are comprised of forward exchange
contracts, interest rate swaps and others. These derivative instruments are valued using observable market data and classified as
Level 2 liabilities.
The following table represents the changes in Level 3 assets
measured on a recurring basis for the years ended March 31, 2014
and 2013.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2014

Balance at beginning of year .............. ¥39,588 ¥27,368
Total gains or losses(realized or unrealized):
Included in earnings ...................
7,102 4,934
Included in other89
162
comprehensive income .............
Purchases .......................................
2,132 4,283
Sales .............................................. (19,977)(108)
Redemptions ..................................
(367)
(343)
Foreign currency translation
adjustments .................................
6,413 3,292
Balance at end of year ....................... ¥34,980 ¥39,588

2014$384,350

Changes in unrealized gains
or losses relating to instruments
still held at end of year:
Included in earnings ................... ¥ 6,388 ¥ 4,831

68,951864
20,699(193,951)(3,563)62,262$339,612$ 62,019

Total gains or losses (realized or unrealized) related to short-term
investments and investment securities are primarily included in
net sales and operating revenue or gain/loss on private equity
investments, in the consolidated statements of income.
Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with a carrying amount of¥8,684 million ($84,311 thousand) were written down to their fairvalue of ¥8,639 million ($83,874 thousand), resulting in an otherthan-temporary impairment charge of ¥45 million ($437 thousand),
which was included in earnings for the year ended March 31, 2014.
For the year ended March 31, 2013, non-marketable equity
securities with a carrying amount of ¥10,179 million were written
down to their fair value of ¥10,178 million, resulting in an otherthan-temporary impairment charge of ¥1 million, which was
included in earnings. All impaired non-marketable equity securities
were classified as Level 3 assets as the Company uses unobservable
inputs such as future cash flows to value these investments.
Long-lived assets (Note 11) and goodwill (Note 12) are alsomeasured at fair value on a nonrecurring basis. All impaired longlived assets and goodwill were classified as Level 3 assets as theCompany uses unobservable inputs to value these assets. These
Level 3 assets are not significant.

64

SECOM Annual Report 2014

23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations ininterest rates. The Company assesses interest rate risk by continuallymonitoring changes in the exposure and by evaluating hedging
opportunities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company is also
exposed to credit-related losses in the event of non-perfomance bycounterparties to derivative financial instruments, but it is notexpected that any counterparties will fail to meet their obligations,because most of the counterparties are internationally recognizedfinancial institutions and contracts are diversified amongst anumber of major financial institutions.
(2) Risk Management
The Company has exposure to the market risk of changes ininterest rates which relates primarily to its debt obligations. The
Company principally enters into interest rate swap agreements tomanage fluctuations in cash flows resulting from changes in interest
rates. Interest rate swaps are used to change floating rates on debt
obligations to fixed rates by entering into receive-floating, pay-fixedinterest rate swaps under which the Company receives floatinginterest rate proceeds and makes fixed interest rate payments,
thereby effectively creating fixed-rate debt.
(3) Cash Flow Hedges
The Company designates interest rate swap agreements as cash
flow hedges for variability of cash flows originating from floating
rate borrowings. The interest rate swap agreements mature atvarious dates through 2015. The effective portion of changes in fairvalues of derivative instruments designated as cash flow hedgesof these debt obligations are reported in other comprehensive
income (loss). These amounts are reclassified into current incomein the same period that hedged items affect current income. The
ineffective portion of changes in fair values are reported in income
immediately. The sum of the amount of hedge ineffectivenessand net gains or losses excluded from the assessment of hedge
effectiveness is not material for the years ended March 31, 2014,2013 and 2012 as the critical terms of most of the interest rate
swap agreements match the terms of the hedged debt obligations.
Approximately ¥8 million ($78 thousand) of net derivative income
included in accumulated other comprehensive income, net of tax at
March 31, 2014, will be reclassified into current income within 12
months from that date. At March 31, 2014 and 2013, the notional
principal amount of interest rate swap agreements designatedas cash flow hedges was ¥2,153 million ($20,903 thousand) and¥3,664 million, respectively.
(4) Derivative Instruments Not Designated as Hedges
The Company enters into forward exchange contracts to reduce
exposure to fluctuations in currency rates, interest rate swap agreements to reduce exposure to fluctuations in interest rates relating
primarily to debt obligations and other agreements. Changes infair value of these derivative financial instruments, which are notdesignated as hedges, are reported in current income.

Fair values of derivative instruments reflected in the consolidatedbalance sheet as of March 31, 2014 and 2013 are as follows:
Derivatives designated as hedging instruments
Liabilities:

Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

Location

2014

2013

2014

Other long-term
liabilities

¥28

¥68

$272

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2013

2014

Derivatives not designated as hedging instruments

Location

Assets:Equity swaps
Liabilities:
Interest rate swaps

2014

Other current
assets

¥ —

¥ 59

$

Other long-term
liabilities

¥137

¥171

$1,330—Effects of derivative instruments on the consolidated statements
of income for the years ended March 31, 2014, 2013 and 2012 are
as follows:
Derivatives designated as cash flow hedging instruments
Gains recognized in accumulated other comprehensive income (loss)(effective portion)

Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2012

2014

¥10

¥5

¥—

$97

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

Location

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2012

2014

Interest rate swaps Other income¥17
Other expenses ¥—

¥—
(¥15)

¥—
(¥ 8)

$165
$ —

Derivatives not designated as hedging instruments

Location

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

2014

¥59
¥—
(¥13)

¥—
¥—
(¥ 9)

$ —
$320
$ —

25. Discontinued Operations
The Company accounted for the sale of certain businesses inaccordance with ASC 205-20, “Discontinued Operations.”
The Company sold and will sell certain businesses included in
the real estate and other services segment, during the year ended
March 31, 2013 and the year ending March 31, 2015, respectively.
The Company reported the operating results related to these
operations as discontinued operations. Prior period figures havebeen restated.
Discontinued operations for the years ended March 31, 2014,2013 and 2012 are as follows:2014

Net sales andoperating revenue.............
Loss from discontinued
operations before
income taxes.....................
Gain on sales of
discontinued operations ....
Income taxes.......................
Loss from discontinued
operations, net of taxes ....
Attributable tononcontrolling interests ....
Attributable to
SECOM CO., LTD ..............

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2014

¥3,241 ¥3,447 ¥2,840$31,466

2013

(310)

(778) (9,083)(3,010)

—
172

15
(149)

—
2,459

—
1,670

(¥ 138) (¥ 912) (¥6,624)($ 1,340)¥$— (¥ 110) (¥ 127)(¥ 138) (¥ 802) (¥6,497)—($ 1,340)

Income (loss) from discontinued operations, net of tax, by business segment for the years ended March 31, 2014, 2013 and 2012is as follows:

2014

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2014
for the purchase of property, plant and equipment of approximately¥7,982 million ($77,495 thousand).
The Company provides guarantees to third parties mainly withrespect to bank loans extended to its affiliated companies and otherIn millions of yen

Real estate andother services ....................
Loss from discontinued
operations, net of taxes ....

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

2014

(¥138)(¥912) (¥6,624)($1,340)(¥138)(¥912) (¥6,624)($1,340)

SECOM Annual Report 2014

Financial Section

2014

Equity swaps
Other income¥—
Interest rate swaps Other income¥33
Other expenses ¥—entities. Such guarantees are provided to enhance the credit standing of the affiliated companies and other entities. For each guarantee provided, the Company would have to perform under theguarantee if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
maximum amount of undiscounted payments the Company would
have to make in the event of default amounts to ¥1,578 million($15,320 thousand) at March 31, 2014. The carrying amounts of
the liabilities recognized for the Company’s obligations under theseguarantees at March 31, 2014 and 2013 were deemed insignificant.
In the year ended March 31, 2012, Pasco Corporation, a subsidiary of the parent company, recognized and paid ¥799 million forlegal settlement related to software.
Other than those items 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.

65

26. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:2014

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

Cash paid during theyear for:
Interest ............................ ¥ 1,459 ¥ 1,568 ¥ 1,601
Income taxes ................... 50,676
31,761 38,538
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases .......
4,503
2,381 2,604
Significant acquisitions(Note 4)—
— 131,747—
Assets acquired .............
Liabilities assumed ........
— (63,833)—
Noncontrollinginterests ......................
— (21,873)—
Considerations forequity .........................
—
46,041—
Repayment oflong-term debt ...........
—
27,000—Cash and cash
equivalents on hand ...
—(6,859)—Total considerations ...... ¥— ¥ 66,182 ¥—2014$ 14,165
492,000

43,718
—
—
—
—
—
$

—
—

27. Segment Information
The Company discloses financial and descriptive information
about the Company’s reportable operating segments. The operating
segments reported below are the segments of the Company forwhich separate financial information is available and for which operating profit/loss amounts are evaluated regularly by management indeciding how to allocate resources and assess performance.
The Company has seven reportable business segments: security
services, fire protection services, medical services, insurance services,
geographic information services, information and communication
related services, and real estate and other services.
The Company recognizes that the significance of information andcommunication related services is increasing, resulting from theacquisition of At Tokyo Corporation, a subsidiary newly consolidated
from October 2012. Therefore, during the year ended March 31,
2014, the Company decided to separately disclose the informationand communication related services segment, formerly included in
the information and communication related and other services
segment, to disclose business activities more adequately and66

SECOM Annual Report 2014

improve the effectiveness of segment information. Since thesignificance of the real estate development and sales segment as
a reportable segment has decreased, it was reclassified to the otherservices segment and its name was changed to the real estate andother services segment. In addition, during the year ended March
31, 2014, due to the increase in significance, construction andinstallation services, formerly included in the security services segment, was reclassified to the real estate and other services segment
to disclose business activities more adequately and improve theeffectiveness of segment information. Accordingly, segment information of all prior periods has been restated to conform to the presentation used for the year ended March 31, 2014.
The security services segment provides various types of security
services by utilizing the Company’s unique security systems andmanufacturing and selling security merchandise. The fire protection
services segment provides various types of fire protection equipment, such as automatic fire alarm and fire extinguishing and otherfire protection systems for office buildings, plants, tunnels, ships,
residences and cultural monuments. The medical services segmentprovides intravenous solutions to patients at home, home-based
nursing care services, medical data transmission services by utilizing
the Company’s network and leasing of real estate for medical institutions. In addition, the VIE, of which the Company is the primary
beneficiary manage hospitals and health care-related institutions.
The insurance services segment represents the non-life insurancerelated underwriting business in the Japanese market. The geographic information services segment represents surveying andmeasuring services and GIS services. The information and communication related services segment represents data center services,business continuity plan support, information security services andcloud services. The real estate and other services segment represents
development and sales of condominiums equipped with security
and contingency planning features, leasing of real estate,
construction and installation services and other services.
Corporate expenses consist principally of general and administrative expenses of the planning, personnel and administrative departments of the parent company and administrative departments ofthe foreign holding company.
Intersegment sales are priced on a basis intended to approximate
amounts charged to unaffiliated customers.
Identifiable assets are those assets used exclusively in the operations of each segment or which are allocated when used jointly.
Corporate assets, which are held by the parent company and theforeign holding company for general and administrative facilities,
consist principally of cash and cash equivalents, short-term investments, investment securities, land, buildings and improvements,
machinery, equipment and automobiles.

Information by business and geographic segments for the years
ended and as of March 31, 2014, 2013 and 2012 is as follows:

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2014

(1) Business Segment Information

2014

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2014

2013

Net sales andoperating revenue:
Security services—
External customers ....... ¥472,449 ¥443,231 ¥425,427
Intersegment ................
2,811
2,343
1,806
................................. 475,260
445,574
427,233
Fire protection services—
External customers ....... 122,046
114,130
80,678Intersegment ................
5,111
4,308
4,093
................................. 127,157
118,438
84,771
Medical services—
External customers ....... 150,535
140,957
134,550
Intersegment ................
150
165
148
................................. 150,685
141,122
134,698
Insurance services—
35,86433,558External customers ....... 37,011
Intersegment ................
2,936
2,816
2,751
................................. 39,947
38,68036,309Geographic information
services—
51,19450,173External customers ....... 54,697
Intersegment ................
72
128
216
................................. 54,769
51,32250,389
Information andcommunication related
services—
External customers ....... 46,992
29,541
17,735Intersegment ................
6,381
5,286
4,775
................................. 53,373
34,82722,510Real estate andother services—
43,521
27,522External customers ....... 37,448
Intersegment ................
2,249
5,904
2,914
................................. 39,697
49,42530,436
Total................................ 940,888
879,388786,346
Eliminations .................... (19,710)(20,950)(16,703)
Total net sales andoperating revenue ...... ¥921,178 ¥858,438 ¥769,643$4,586,883
27,291
4,614,174
1,184,913
49,621
1,234,534
1,461,505
1,456
1,462,961
359,330
28,505
387,835
531,039699
531,738

456,233
61,951
518,184
363,573
21,835385,408
9,134,834(191,358)$8,943,476

2014

2013

Operating income (loss):
Security services ............ ¥104,089 ¥102,377 ¥100,863
Fire protection
services .......................
10,467
5,981
4,443
Medical services ............
2,707
5,458
7,884
Insurance services..........
2,007
2,712
(80)
Geographic information
services .......................
3,723
2,302
3,449
Information andcommunication
related services............
6,373
3,914
2,145
Real estate and
4,689
4,626
(18,292)
other services ..............
Total.............................. 134,055
127,370
100,412
Corporate expenses
and eliminations..........
(13,966)(13,813)(12,479)
Operating income ......... ¥120,089 ¥113,557 ¥ 87,933
Other income ................
11,661
9,951
7,496
Other expenses .............
(3,000)(3,148)(5,226)
Income before income
taxes and equity in net
income of affiliatedcompanies ............... ¥128,750 ¥120,360 ¥ 90,203

2014$1,010,573
101,621
26,282
19,48536,146
61,87445,524
1,301,505(135,592)$1,165,913
113,213(29,126)$1,250,000

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2012

2014

2013

Assets:Security services ............ ¥ 471,949 ¥ 437,800 ¥ 414,254
Fire protection
services ....................... 127,911
119,781
85,786
Medical services ............ 171,288
168,217160,505
Insurance services.......... 190,005
179,949
167,436
Geographic information
70,952
66,04065,968services .......................
Information andcommunication related
services ....................... 127,174
123,327
14,961
Real estate and123,007
134,036other services .............. 116,539
Total.............................. 1,275,818 1,218,121 1,042,946
Corporate items ............ 115,125
83,092
97,139Investments inaffiliated companies ....
49,762
39,13739,739Total assets.................... ¥1,440,705 ¥1,340,350 ¥1,179,824$ 4,582,028
1,241,853
1,662,994
1,844,713
688,848
1,234,697
1,131,454
12,386,587
1,117,714
483,126$13,987,427

Financial Section

SECOM Annual Report 2014

67

2014

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

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2014

2013

¥45,679¥44,715¥44,336$443,484

1,667
6,658
1,280

1,739
5,953
895

1,836
6,167
1,058

16,18564,642
12,430

2,511

2,293

1,812

24,377

7,373

3,824

1,231

71,583

1,004
66,172489

957
60,376298

1,403
57,843274

9,742
642,443
4,751¥66,661¥60,674¥58,117$647,194¥35,641¥36,003¥33,853$346,029

1,364
9,899
30

1,306
13,834
36

670
5,193
26

13,247
96,107
293

2,723

1,328

2,162

5,127

10,014427
55,211806¥56,017

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

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2014

¥318,116 ¥307,477 ¥300,208$3,088,505

2014

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

2013

51,68147,877

46,689501,757

20,767

20,532

20,610201,62181,88567,34557,920795,000¥472,449 ¥443,231 ¥425,427$4,586,883(2) Geographic Segment Information
Net sales and operating revenue attributed to countries basedon the geographical location of customers and long-lived assets forthe years ended and as of March 31, 2014, 2013 and 2012 wereas follows:
In millions of yen

In thousands of
U.S. dollars

26,435

Years ended
March 31

Year ended
March 31

2012

2014

2,150

49,774

648
63,169181

10,45354,507
107

4,142
536,027
7,823

Net sales andoperating revenue:
Japan ........................ ¥881,814 ¥825,388 ¥740,888
Other ........................
39,36433,05028,755
Total ...................... ¥921,178 ¥858,438 ¥769,643$8,561,301
382,175$8,943,476¥63,350¥54,614$543,850

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2012

2014

Long-lived assets:
Japan ....................... ¥519,038 ¥508,104 ¥399,901
Other .......................
6,650
6,008
5,857
Total ..................... ¥525,688 ¥514,112 ¥405,758$5,039,204
64,563$5,103,767

2014

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 for morethan 10 percent of total revenues.

2014

2013

2013

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
28. Subsequent Events
The Company has evaluated subsequent events through July 30,
2014, the date at which the financial statements were available tobe issued, and determined there is no item to disclose.

68

SECOM Annual Report 2014

Independent Auditors’ Report

The Board of Directors and Shareholders
SECOM CO., LTD.:
We have audited the accompanying consolidated financial statements of SECOM CO., LTD. and its subsidiaries, which comprise theconsolidated balance sheets as of March 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income,changes in equity, and cash flows for each of the years in the three-year period ended March 31, 2014, and the related notes to theconsolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SECOM CO., LTD. and its subsidiaries as of March 31, 2014 and 2013, and the results of their operations and their cash flows for eachof the years in the three-year period ended March 31, 2014, in accordance with U.S. generally accepted accounting principles.
Convenience translations
The accompanying consolidated financial statements as of and for the year ended March 31, 2014 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated
financial statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 3 to theconsolidated financial statements.

Financial Section

Tokyo, Japan
July 30, 2014

SECOM Annual Report 2014

69

OTHER FINANCIAL DATA

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

70

SECOM Annual Report 2014

Summary of Selected Financial Data

SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2014

2013

2012

2011

2010

2009

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue ........................................................ ¥921,178 ¥858,438 ¥769,643 ¥748,873 ¥667,336 ¥678,953
425,427
417,350
415,794
426,843
Security services: ............................................................................ 472,449
443,231
As a percentage of net sales and operating revenue ...........
51.3%
51.6%
55.3%
55.7%
62.3%
62.9%
Electronic security services .......................................................... 318,116
307,477
300,208
299,783
300,063
304,118
As a percentage of net sales and operating revenue ...........
34.5
35.8
39.0
40.0
45.0
44.8
Other Security services—
Static guard services ............................................................... 51,681
47,877
46,68946,372
46,21347,999As a percentage of net sales and operating revenue ...........
5.6
5.6
6.1
6.2
6.9
7.1
Armored car services............................................................... 20,767
20,532
20,61020,12919,823
20,310As a percentage of net sales and operating revenue ...........
2.3
2.4
2.7
2.7
3.0
3.0
Subtotal .......................................................................... 72,448
68,40967,29966,501
66,03668,309Merchandise and other .............................................................. 81,885
67,34557,92051,066
49,69554,416
As a percentage of net sales and operating revenue ...........
8.9
7.8
7.5
6.8
7.4
8.0
Fire protection services ................................................................... 122,046
114,130
80,67875,17680,132
84,175
As a percentage of net sales and operating revenue ...........
13.3
13.3
10.5
10.1
12.0
12.4
Medical services ............................................................................. 150,535
140,957
134,550
125,020
56,30952,220As a percentage of net sales and operating revenue ...........
16.3
16.4
17.4
16.7
8.4
7.7
Insurance services........................................................................... 37,011
35,86433,55833,13329,142
21,530As a percentage of net sales and operating revenue ...........
4.0
4.2
4.4
4.4
4.4
3.2
Geographic information services .................................................... 54,697
51,19450,17343,53941,91840,207
As a percentage of net sales and operating revenue ...........
5.9
6.0
6.5
5.8
6.3
5.9
Information and communication related services ............................ 46,992
29,541
17,735
16,662
16,211
15,568As a percentage of net sales and operating revenue ...........
5.1
3.4
2.3
2.2
2.4
2.3
Real estate and other services ........................................................ 37,448
43,521
27,52237,993
27,83038,410As a percentage of net sales and operating revenue ...........
4.1
5.1
3.6
5.1
4.2
5.6
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO.,LTD ...................................... ¥ 73,979
Cash dividends paid (2) ........................................................................ 22,918
SECOM CO., LTD. shareholders’ equity .............................................. 753,099
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
Bank loans .................................................................................
Current portion of long-term debt..............................................
Straight bonds............................................................................
Other long-term debt .................................................................
Total debt ...............................................................................
SECOM CO., LTD. shareholders’ equity ..........................................
Total capitalization ..................................................................

¥ 41,237
19,623612,855¥ 62,665
18,533
593,495¥ 46,989
18,533569,799¥ 30,560
19,122528,721

6.0
1.8
0.9
4.6
13.3
86.7
100.0

5.0
2.2
1.1
5.1
13.4
86.6
100.0

5.7
3.1
1.4
3.8
14.0
86.0
100.0

6.8
1.7
2.0
5.5
16.0
84.0
100.0

6.5
1.6
2.6
3.6
14.3
85.7
100.0

11.9
2.4
1.9
3.6
19.8
80.2
100.0

5.1
9.8

5.3
10.4

3.5
6.7

5.4
10.6

4.1
8.2

2.7
5.8

7.2
2.4

7.0
2.1

7.5
2.1

7.6
2.2

8.2
2.1

7.9
2.2

60.8
2.34
90.4

60.0
2.24
78.8

63.4
2.49
51.8

62.5
2.49
65.1

64.9
2.55
53.5

64.4
2.66
32.4

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

SECOM Annual Report 2014

Financial Section

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)...............................................

¥ 70,580
19,645679,176

71

2014

2012

2011

2010

2009

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

233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
15,022,012 15,018,951 15,017,691 15,258,553 15,254,334 15,251,520

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

218,266,705 218,269,766 218,271,026 218,030,164 218,034,383 218,037,197

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

¥ 338.94
105.00¥ 323.36
90.00¥ 188.97
90.00¥ 287.41
85.00¥ 215.51
85.00¥ 137.42
85.00

3,450.36
529.35
1.72
17.54
11.23
5,946

3,111.64
496.34
1.56
15.00
9.77
4,850

2,807.77
365.28
1.44
21.43
11.09
4,050

2,722.08
458.62
1.42
13.45
8.43
3,865

2,613.34
383.36
1.57
18.98
10.67
4,090

2,424.91
299.72
1.50
26.41
12.11
3,630

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

72

2013

SECOM Annual Report 2014

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2014, cash dividends of ¥25,100 million (¥115
per share) were approved at the general shareholders' meeting on June 25,2014 (see Note 18 of the accompanying notes to consolidated financial
statements).
(3) Per share amounts are based on the number of shares outstanding at theend of each period, less treasury stock.

Common Stock Data

SECOM CO., LTD.
As of March 31

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

2014

2013

2012

2011

2010

2009

27,054

27,62829,11830,33831,48830,859

—%
31.28
4.88
2.56
42.32
12.52
6.44
100.00%

—%
30.86
5.58
3.63
41.33
12.16
6.44
100.00%

—%
29.88
6.08
3.68
41.25
12.67
6.44
100.00%

0.08%
30.76
4.75
3.71
41.27
12.89
6.54
100.00%

0.08%
31.34
4.28
3.73
40.77
13.26
6.54
100.00%

0.00%
35.67
2.55
3.76
38.17
13.31
6.54
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2012
2013

2014

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

¥4,040
4,125
4,360
5,120
5,770
6,310
6,430
6,300

¥3,325
3,580
3,860
4,295
4,620
5,320
5,700
5,370

¥10,109.87
9,232.21
10,395.18
12,635.69
15,627.26
14,808.50
16,291.31
16,121.45¥ 8,295.63
8,365.90
8,534.12
10,486.99
12,003.43
13,338.46
13,853.32
14,008.47

Financial Section

SECOM Annual Report 201473

COMMON STOCK ISSUES

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

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

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

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

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

Remarks

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

Notes: 1. The above is a record of SECOM’s common stock issues since the common stock was listed on the Tokyo Stock Exchange in June 1974.
2. As of March 31, 2014, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

74

SECOM Annual Report 2014

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

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

SECOM Annual Report 201475

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

ASSETS

2014

2013

2012

2011

2010

2009

Current assets:
Cash on hand and in banks ............................................... ¥ 210,514 ¥ 175,427 ¥ 182,412 ¥ 172,958 ¥ 146,929 ¥0,127,476
58,59756,08954,01156,546
48,861
56,667
Cash deposits for armored car services ..............................
20,50046,50028,00029,50036,50036,500Call loans ..........................................................................
115,318
106,638
85,74473,956
73,844
77,398Notes and accounts receivable, trade.................................
25,17424,05924,83022,754
20,824
20,139Due from subscribers.........................................................
12,955
14,723
19,936
7,313
15,98916,786
Short-term investments .....................................................
33,18827,56914,605
15,433
14,742
14,993
Lease receivables and investment in leased assets ..............
14,186
12,321
9,597
8,823
10,987
10,730
Merchandises and products ...............................................
33
12,944
9,082
11,481
18,493
6,177
Real estate inventories .......................................................
4,602
4,526
2,527
2,249
1,427
2,174
Work in process ................................................................
8,983
7,563
5,671
4,233
5,312
9,534
Costs on uncompleted construction contracts ...................
15,396
13,34833,27648,29655,916
60,950Work in process for real estate inventories .........................
7,573
6,430
5,950
5,750
5,932
5,840
Raw materials and supplies................................................
13,254
14,384
11,383
12,216
11,684
11,135
Deferred income taxes.......................................................
2,699
4,158
4,389
3,908
3,088
4,125
Short-term loans receivable ...............................................
17,62318,453
13,48912,566
15,275
15,578Other ..............................................................................
(2,026)(2,302)(1,428)(1,704)(2,207)(2,762)
Allowance for doubtful accounts .......................................
558,574
542,836
503,479
486,284
483,600
473,445
Total current assets .................................................

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

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

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

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

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

97,692
63,03493,424
18,869273,020

85,41565,63189,29722,923
263,267

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

53,59655,07925,04325,553

21,885

21,331

Investments and others:
246,233
189,042
177,655
188,001
187,777
201,923
Investment securities......................................................
45,70142,33846,19747,57650,48859,880Long-term loans receivable ............................................
—
19,572
19,13018,73018,61818,876
Prepaid pension and severance costs..............................
17,612—————
Net defined benefit asset ...............................................
13,521
11,711
14,793
20,11019,84824,413
Deferred income taxes ...................................................
48,48643,70642,37643,422
44,63046,129Other.............................................................................
(16,352)(16,742)(17,584)(18,111)(18,403)(19,122)
Allowance for doubtful accounts ...................................
355,203289,629
282,568
299,729
302,959
332,099
Total investments and others ..................................
769,633
706,241
598,359
607,998
597,864
616,698
Total fixed assets.....................................................
17
32
45
117
213
338
Deferred assets ..................................................................
Total assets ............................................................ ¥1,328,226 ¥1,249,110 ¥1,101,884 ¥1,094,400 ¥1,081,679 ¥1,090,483

76

SECOM Annual Report 2014

In millions of yen

LIABILITIES

2014

2013

2012

2011

2010

2009

Current liabilities:
Notes and accounts payable, trade ..................................... ¥ 49,409 ¥ 43,684 ¥ 30,731 ¥ 25,959 ¥ 24,774 ¥0,028,374
52,12042,35047,98547,42648,09485,383
Bank loans .........................................................................
4,640
4,487
5,983
2,914
1,761
5,036
Current portion of straight bonds .......................................
579
537
354
354
247
202
Lease obligations ................................................................
31,316
31,406
27,62722,85723,35923,195
Payables—other .................................................................
27,74429,282
14,68819,353
20,907
18,983
Accrued income taxes ........................................................
4,151
4,377
3,833
2,850
3,302
2,932
Accrued consumption taxes................................................
4,625
4,571
4,169
3,792
3,633
3,534
Accrued expenses...............................................................
31,02730,88030,83430,58233,554
31,298Deferred revenue ...............................................................
14,437
14,031
12,73911,925
12,13912,741
Accrued bonuses ................................................................
—
—
—
—
1,770
2,415
Reserve for litigation losses .................................................
1,981
1,714
834
530
145
—
Reserve for losses on construction contracts .......................
34,64940,55435,99733,52736,66042,558Other .................................................................................
256,684
247,879
215,780
202,074
210,353
256,655
Total current liabilities ..............................................
Long-term liabilities:
Straight bonds....................................................................
Long-term loans .................................................................
Lease obligations ................................................................
Guarantee deposits received...............................................
Deferred income taxes........................................................
Accrued pension and severance costs .................................
Accrued retirement benefits for directors andaudit and supervisory board members ..............................
Net defined benefit liability.................................................
Investment deposits by policyholders, unearned
premiums and other insurance liabilities ...........................
Other .................................................................................
Total long-term liabilities ..........................................
Total liabilities ..........................................................

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

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

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

17,006
16,085501
36,777
8,399
13,264

12,673
15,338571
34,2103,740
13,807

1,635
18,569

2,443
—

2,509
—

2,433
—

2,398
—

2,244
—

141,099
2,918
241,171497,856

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

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

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

150,180
1,557
246,171456,525

167,0111,621
251,218
507,874

NET ASSETS
Shareholders’ equity:
Common stock................................................................... ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377
83,054
83,054
83,054
83,054
83,054
83,054
Capital surplus ...................................................................
656,286
609,275
565,261549,747
507,434
478,355
Retained earnings ..............................................................
(73,682)(73,664)(73,659)(74,923)(74,907)(74,896)
Common stock in treasury, at cost ......................................
732,036
685,042
641,034
624,255
581,959
552,891
Total shareholders’ equity ........................................

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

11,783(41)(27,760)—(16,018)

4,559
(28)
(37,556)—(33,026)

2,192
(35)
(34,166)—(32,010)

4,521
(17)
(27,871)—(23,367)(3,901)(27)(30,008)—(33,937)

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

100,253

95,11463,50961,81066,562

63,654

830,369
764,139
671,517654,055
625,153582,608
Total net assets ........................................................
Total liabilities and net assets ................................... ¥1,328,226 ¥1,249,110 ¥1,101,884 ¥1,094,400 ¥1,081,679 ¥1,090,483

SECOM Annual Report 2014

Financial Section

Accumulated other comprehensive income:Unrealized gains (losses) on securities .................................
Deferred losses on hedges ..................................................
Foreign currency translation adjustments ............................
Remeasurements of defined benefit plans, net of taxes ......
Total accumulated other comprehensive income ......

77

Condensed Consolidated Statements of Income (Based on Japanese Gaap)
SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2014

2013

2012

2011

2010

2009

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

¥822,228 ¥765,635¥679,173 ¥663,887 ¥654,678 ¥678,400
7.4%
12.7%
2.3%
1.4%
(3.5%)(0.6%)

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

542,94966.0

504,006
65.8

458,452
67.5

423,98363.9

415,39063.4

444,771
65.6

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

279,278
34.0

261,62934.2

220,72032.5

239,904
36.1

239,28836.6

233,628
34.4

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

159,259
19.4

153,258
20.0

139,64220.6

140,76221.2

140,749
21.5

145,994
21.5

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

120,018
14.6

108,370
14.2

81,07811.9

99,141
14.9

98,53915.1

87,63412.9

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

13,1006,441

11,171
5,922

12,9706,209

17,428
6,895

9,158
9,371

12,957
9,666

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

126,677
15.4

113,618
14.8

87,83912.9

109,674
16.5

98,32715.0

90,924
13.4

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

2,025
3,876

984
2,623

287
11,558

1,717
5,749

3,370
5,463

482
27,875

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

124,82615.2

111,980
14.6

76,567
11.3

105,642
15.9

96,233
14.7

63,531
9.4

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

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

32,0234,600

37,303
1,383

38,172
4,944

41,768(3,244)

Net income before minority interests in subsidiaries................

78,451

69,021

39,943

66,955——

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

8,574

5,363

4,454

6,109

5,505

3,504

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

69,8768.5
9.8

63,6588.3
79.4

35,4895.2(41.7)

60,8469.2
27.8

47,611
7.3
121.4

21,5023.2(65.0)

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

78

In millions of yen
2014

2013

2012

2011

2010

2009

Net income before minority interests in subsidiaries................
Other comprehensive income (loss):
Unrealized gains (losses) on securities .................................
Deferred gains on hedges...................................................
Foreign currency translation adjustments ............................
Share of other comprehensive gains (losses) of affiliatedcompanies accounted for under the equity method ..........

¥78,451¥69,021¥39,943¥66,955

¥—

¥—

543
—
11,787

7,500
—
6,222

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

—
—
—

—
—
—

6,649

4,402

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

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

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

87,4809,950

80,666
6,480

34,473
4,253

52,203
5,537

—
—

—
—

SECOM Annual Report 2014

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

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

SECOM Annual Report 201479

Condensed Nonconsolidated Balance Sheets (Based on Japanese Gaap)
SECOM CO., LTD.
As of March 31
In millions of yen

ASSETS

2014

2013

2012

2011

2010

2009

¥ 80,908
56,818683
14,991
9,960
2,699
437
5,489
1,303
2,109
4,382
157

¥ 54,136
53,551700
14,856
9,691
2,528
1,048
5,585
1,012
2,332
5,268
152

¥ 82,631
52,386720
14,324
10,039
2,159
456
5,152
1,470
2,253
4,269
369

¥ 74,680
54,641
221
11,563
6,074
2,385
456
4,279
1,167
2,051
4,938
277

¥ 44,607
46,957248
11,434
6,484
2,556
2,429
6,574
1,082
2,016
4,720
171

¥ 31,149
54,258389
11,630
6,732
2,415
455
5,652
1,101
2,034
4,446
173

20,4882,039(221)
202,248

19,076
4,827(248)
174,521

15,197
1,639(268)
192,804

4,040
1,857
(206)
168,428

3,669
2,129
(450)
134,634

11,471
3,457(567)
134,801

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

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

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

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

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

22,360368
60,860828
3,519
28,352
1,203
654
118,147

23,055386
63,064
1,071
3,717
28,306
1,588
634
121,825

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

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

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

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

—
6,751
815
7,566

—
7,580
975
8,555

—
6,578
542
7,121

23,78921,58323,906

20,96921,76921,267

239,008

236,309

190,305

203,036

193,899

192,775

1,827
4,043
50

1,827
4,243
55

1,883
4,298
59

1,874
4,687
53

1,874
5,088
55

1,874
8,468
40

139,648
151,514
7,553
7,747
20,78021,594
16,962
16,263
—
—
3,988
3,991
2,777
2,728
(17,698)(20,307)442,730
447,551
570,662
574,796¥772,910 ¥749,317

123,716
8,147
24,013
15,903
130
4,181
2,713
(19,326)
379,933
506,643¥699,448

113,536
8,047
25,872
14,321
13,865
4,181
2,831(12,995)
400,281526,227¥694,656

128,727
8,583
25,816
14,364
14,0994,334
800(12,544)406,869
533,572¥668,207

134,636
8,702
26,412
14,561
14,763
4,896
1,065(13,354)
416,110545,056¥679,858

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

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

80

SECOM Annual Report 2014

In millions of yen

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

Valuation, translation adjustments and others:
Unrealized gains (losses) on securities .................................
Total valuation, translation adjustments
and others .............................................................
Total net assets ........................................................
Total liabilities and net assets ...................................

¥

3,429
36,703
176
14,546
4,218
12,3661,478
802
17,87021,3016,246
1,834
120,976

2013

¥

3,044
26,598121
15,042
4,333
19,5102,538
726
24,131
21,671
6,089
365
124,174

2012

¥

2,400
27,65980
13,756
4,343
3,938
2,062
716
22,06622,3406,116
640106,121

2011

¥

1,672
29,38671
10,824
3,719
12,4501,422
722
20,362
22,2295,468
2,107
110,439

2010

¥

2,009
24,49251
10,811
3,425
14,637
1,491
555
23,62522,5585,493
2,133
111,287

2009

¥

2,319
60,89343
10,981
3,742
11,8491,622
597
28,451
22,735
5,537
1,928
150,704

2,747
17,622
307
3,555

2,449
17,859
788
4,051

2,217
18,099
—
3,945

2,253
18,262—4,040

182
17,965—
4,394

192
18,146
—
4,766

—
459
24,692
145,668857
25
26,031150,205

1,294
10
25,568
131,689

1,232
11
25,799136,238

1,174
272
23,989135,276

1,104
12
24,221
174,926¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377

83,0540
83,054

83,054—
83,054

83,054—
83,054

83,054—
83,054

83,054—
83,054

83,054—
83,054

9,028

9,028

9,028

9,028

9,028

9,028

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

800
2,212
478,914490,954(73,659)
566,727800
2,212
472,070
484,110(74,923)558,619800
2,212
445,579
457,620(74,907)532,145800
2,212
418,306
430,347(74,896)504,883

2,473

2,905

1,031

(201)

786

48

2,473
627,242¥772,910

2,905
599,112¥749,317

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

786
532,931¥668,20748
504,932¥679,858

SECOM Annual Report 2014

Financial Section

NET ASSETS
Shareholders’ equity:
Common stock...................................................................
Capital surplus:
Additional paid-in capital ................................................
Other capital surplus .......................................................
Total capital surplus .................................................
Retained earnings:
Legal reserve...................................................................
Other retained earnings:
Reserve for system developments ................................
General reserve ...........................................................
Accumulated earnings carried forward ........................
Total retained earnings ............................................
Common stock in treasury, at cost ......................................
Total shareholders’ equity ........................................

2014

81

Condensed Nonconsolidated Statements of Income (Based on Japanese Gaap)
SECOM CO., LTD.
Years ended March 31
In millions of yen
2014

82

2013

2012

2011

2010

2009

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

¥364,280 ¥355,393¥345,476 ¥329,297 ¥328,773 ¥336,893
2.5%
2.9%
4.9%
0.2%
(2.4%)(0.2%)
309,499
305,300
299,523
290,252
291,325
294,386
1.4
1.9
3.2
(0.4)
(1.0)
1.0
54,78150,09245,952
39,04537,44742,506
9.4
9.0
17.7
4.3
(11.9)(8.1)

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

215,849
59.3
177,33957.3
38,50970.3

210,790
59.3
174,33157.1
36,45872.8

203,38658.9
169,92856.7
33,45872.8

191,28458.1
160,20355.2
31,081
79.6

188,701
57.4
160,349
55.0
28,352
75.7

193,84257.5
161,548
54.9
32,29476.0

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

148,43140.7
132,159
42.7
16,272
29.7

144,60340.7
130,969
42.9
13,63427.2

142,08941.1
129,595
43.3
12,49427.2

138,01341.9
130,048
44.8
7,964
20.4

140,07242.6
130,976
45.0
9,095
24.3

143,05042.5
132,83845.1
10,21224.0

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

75,521
20.7

74,651
21.0

71,89320.8

69,32421.0

68,54420.8

70,434
20.9

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

72,90920.0

69,952
19.7

70,196
20.3

68,68820.9

71,52721.8

72,616
21.6

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

10,2694,295

10,173
3,789

8,048
3,032

8,863
3,050

9,225
3,290

9,721
3,990

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

78,884
21.7

76,33621.5

75,21221.8

74,501
22.6

77,462
23.6

78,34623.3

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

491
1,604

1,219
1,052

23,001
40,695

106
2,637

561
4,639

67
27,068

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

77,771
21.3

76,502
21.5

57,518
16.6

71,97021.9

73,38422.3

51,345
15.2

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

26,27333.8

27,37435.8

30,69953.4

26,946
37.4

27,57837.6

18,93136.9

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

51,49714.1
4.8

49,128
13.8
83.2

26,8187.8(40.4)

45,02313.7(1.7)

45,80613.9
41.3

32,4149.6(35.2)

SECOM Annual Report 2014

Corporate Information(As of June 30, 2014)

Headquarters:
Independent auditors:
Administrator of the registerof shareholders:

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

MAJOR CONSOLIDATED SUBSIDIARIES

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

Issued capital(In millions of yen)

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

(50.9)%
59.1
70.0
51.0
64.3
40.0
68.3
50.0
100.0
(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)
100.0
100.0
100.0
100.0
(100.0)(54.5)(100.0)
60.0
50.0
51.0
(100.0)(100.0)
66.7
100.0
82.0
100.0
100.0
51.7
100.0
(100.0)Lines of business(As of June 30, 2014)

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Installation of security equipment
Installation of security equipment
Installation of security equipment and facilities
Manufacturing of security equipment
Manufacturing and sales of security systems
Sales of security and water-treatment equipment
Security services
Operation of PFI correctional facilities
Security services
Condominium management(Continued )Financial Section

SECOM Annual Report 201483

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

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

¥13,302

Percentageof equity/
voting rights(50.4)%

Lines of business

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

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

60
10
10
10
10
10
10
10
10
10
10

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

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

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

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

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

84

SECOM Annual Report 2014

(As of June 30, 2014)(Continued )MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

<Insurance services>
Secom Insurance Service Co., Ltd.
Secom General Insurance Co., Ltd.

¥

Percentageof equity/
voting rights

Lines of business(As of June 30, 2014)

225
16,809(100.0)%97.1

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

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

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

1,469

100.0

At Tokyo Corp.

13,37850.9

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

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

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

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

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

(Continued )Financial Section

SECOM Annual Report 201485

MAJOR CONSOLIDATED SUBSIDIARIES

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

Issued capital

Percentageof equity/
voting rights

Lines of business£44,126 thousand¥5,550 million
US$2,000 thousand
US$3,500 thousand
US$2,500 thousand

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

Security services
Holding company
Security services
Security services
Security services

US$1,000 thousand
US$4,500 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb10,000 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb2,000 thousand
US$4,111 thousand
THB378,857 thousand
AUD17,297 thousand
AUD5,951 thousand
AUD700 thousand
NZD1,604 thousand
US$600 thousand¥120 million¥181 million(80.0)(90.0)(95.0)(100.0)(100.0)(97.0)(60.0)(80.0)
49.0
70.0
100.0
(70.0)(100.0)(80.0)
80.0
100.0(49.0)

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

US$14,300 thousand(100.0)

NT$15,000 thousand(82.3)

Manufacturing and sales of fire protection equipment
and facilities
Manufacturing and sales of fire protection equipment
and facilities
Sales of fire protection equipment
Sales of fire protection equipment
Sales of fire protection equipment
Sales of fire protection equipment
Holding company
Geographic information services
Geographic information services
Geographic information services

Nittan Europe Ltd.
Nittan Fire Protection System (Zhongshan) Co.,Ltd.
Taiwan Nittan Fire & Safety Co.,Ltd.
Nittan Fire Prevention Technology (Beijing) Corp.
Secom Medical System (Singapore) Pte. Ltd.
Pasco Philippines Corp.
Pasco China Corp.
Suzhou Super Dimension Earth Science Researchand Development Co., Ltd.
Shanghai Pasco China Corp.
Pasco (Thailand) Co., Ltd.
PT. Nusantara Secom InfoTech£1,194 thousand
US$1,400 thousand
NT$7,600 thousand
US$800 thousand
S$12,703 thousand
PHP20,400 thousand
Rmb22,320 thousand
Rmb1,000 thousand(100.0)(70.0)(60.5)(100.0)(100.0)(100.0)(99.0)(92.0)

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

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

LAK3,878 million
EUR10,994 thousand
EUR87 thousand
EUR4,000 thousand
US$5,621 thousand
US$0.6 thousand
US$15 thousand
US$0.3 thousand———(100.0)(100.0)(100.0)(100.0)(100.0)(70.0)(100.0)100.0(99.7)(99.0)(98.0)

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

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

86

SECOM Annual Report 2014

(As of June 30, 2014)

(1,1) -1- Cover20

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

Centralized Security Systems

Since its establishment in 1962,

SECOM CO.,

Fire
Dept.
Gas
Company

SECOM AED Package Service

1 "MFSUVTJOH
UFMFDPNNVOJDBUJPOT

of pioneering services and systems that provide security

and peace of mind, in line with its belief in the importanceof contributing to society through its business activities. t"MFSUFNFSHFODZSECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
around-the-clock intrusion- and fire-prevention services, emergency call services,
gas leak monitoring and medical emergency call services. SECOM Home Security
G-Custom combines these features with other useful services, including aFire Protection Services
FIRE ALARM SYSTEMSThis business encompasses the assembly, installation and sale of a broad rangeof equipment and systems, including automatic fire alarm systems, environmental monitoring systems, and fire and smoke control systems, suited to buildingsof varying sizes and uses, from homes to large-scale commercial and industrial
facilities.
FIRE EXTINGUISHING SYSTEMSSECOM offers an extensive lineup, including fire sprinklers and other water fire
extinguishing systems, foam fire extinguishing systems, dry chemical fire extinguishing systems and inert gas fire extinguishing systems, for applications
ranging from office buildings to chemical plants and tunnels.
MAINTENANCE SERVICES
This business centers on inspection, maintenance and repair services, as well
as around-the-clock on-line monitoring and other services provided through acustomer services center.
OTHERSThis category comprises the installation and maintenance of parking lot control
systems and the assembly and sale of printed circuit boards for manufacturers inother industries, including medical and electronics equipment.

87

SECOM Annual Report 2014

3 %JTQBUDI4&$0.
FNFSHFODZSFTQPOTF

DJSDVJUTQFSTPOOFM

has sought to develop and encourage broad acceptance

Residential Use:

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

Subscriber

Police
Dept.

LTD., a pioneer in Japan’s security services industry,

Beginning with Japan’s first on-line security system for commercial use, SECOM has continued to growits businesses by developing and popularizing a wide range of services and systems over the years thatreflect evolving social imperatives. These include an on-line home security system and COCO-SECOM,
a mobile personal security system for outdoor use.
Today, the overarching mission of SECOM—comprising the parent company and the companies of
the SECOM Group—is to provide safety and security for people whenever and wherever necessary.
Accordingly, we are pressing ahead with efforts to realize our vision for the future, the Social System
Industry, which describes a framework of distinctive, integrated services and systems that make life
more secure, convenient and comfortable. To this end, we have capitalized on our extensive businessportfolio—which has expanded to include security services, fire protection services, medical services,
insurance services, geographic information services, information and communication related services,and real estate and other services—to create a solid foundation for future growth, working not only toenhance individual businesses but also to integrate services and systems, thereby yielding considerable
synergies to drive future growth.
Today, we continue to maximize Group synergies to expand the scope of our operations by promoting the “ALL SECOM” concept, which focuses on rallying Group strengths to create uniquely SECOM
services and systems that enhance convenience and comfort and deliver security and peace of mind.
Through these efforts, we seek to encourage people to turn to SECOM with the confidence that doing
so will help them resolve security and other concerns.
We have also expanded outside Japan. Currently active in 21 countries and territories, where we
provide uniquely SECOM security services, fire protection services, medical services and geographic
information services customized to reflect local needs and sensibilities, we continue to strengthen andgrow our overseas operations.

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

Armored Car Services

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

Static Guard Services

TFSWJDFTBTOFDFTTBSZ

SECOM
Emergency
Depot

SECOM
Control Center

2 "MFSU4&$0.
FNFSHFODZSFTQPOTFQFSTPOOFM

storage service for important personal data and information on other services
available from Group-selected collaborating companies. Optional services
available to SECOM Home Security Subscribers include the Keeping in Touchcall and the Keeping in Touch visiting services for seniors, both of which involve
SECOM staff checking in regularly with seniors living far away from their
loved ones.
SECURITY SYSTEMS FOR CONDOMINIUMS AND APARTMENTS
SECOM provides comprehensive building management functions forcondominiums and total safety with a centralized security system for each unit
in the building. SECOM’s menu includes services for small-scale apartments.
SECOM MY DOCTOR PLUS
SECOM My Doctor Plus is an emergency medical alert system for seniors
featuring an exclusive portable device that incorporates a GPS locator and acellular phone. Whether indoors or out, the device, when activated, sends anemergency signal to SECOM. If requested, SECOM dispatches emergency
response personnel. If deemed necessary, SECOM staff also contacts emergency
services and sends preregistered emergency information to the subscriber’s

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

device, thereby ensuring it is immediately available to ambulance attendants
and hospital staff. Other services include telephone health consultation.
SECOM will also act as go-between with nursing care providers for individuals
who have independently contracted care services.

Large-Scale Proprietary Security Systems

TOTAX ZETATOTAX ZETA integrates networking capabilities and a security system into acomprehensive local control system for industrial complexes and buildings.

COCO-SECOM

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

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

Geographic Information Services
PasCAL SERIES
Designed for local governments, the PasCAL series of comprehensive GIS
services facilitates the effective use of GIS in a variety of situations.
MarketPlanner SERIESThe MarketPlanner series uses a variety of data sorting and presentation
methods to support the efforts of growing companies to establish area
marketing strategies.
SAFE ROUTE MAPPING SERVICEThis service helps companies ensure their employees are able to reach homesafely and assists crisis management efforts in the event of a major
earthquake. A version of this service is also available to individuals.

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

Merchandise

SECOM CCTV SYSTEMThe SECOM CCTV system is a multifunctional, cost-effective closed-circuit
security camera system. The system provides stable monitoring even in places
where insufficient light makes clear images difficult and allows the combined
use of digital and analog cameras. It is also capable of detecting attempts todisable or destroy the camera.
SECURILOCK SERIESThe SECURILOCK series uses identification numbers, integrated circuit (IC)pass cards and other methods to control access to restricted areas.
SESAMO SERIESThe SESAMO series comprises access-control systems for use in corporate
offices, factories, parking facilities and any other security-sensitive areas.
These systems employ such technologies as contactless IC pass cards,
magnetic cards, personal identification numbers, fingerprint identificationand palm vein identification.
TOMAHAWK SERIESThe TOMAHAWK series is an extensive lineup of innovative extinguishingsystems, including TOMAHAWK MACH II residential-use fire extinguisher
and TOMAHAWK III high-speed automated fire extinguishing system withgas suppression.
PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat
resistance and performance.
SECURIFACESECURIFACE is a residential intercom system that combines a face detection
function with SECOM Home Camera System, enhancing security for people
at home.
LASER SENSOR
Laser Sensor is an external monitoring sensor that uses a laser beam tofacilitate effective detection of intrusions over a broad area. The sensor is
flexible and can be programmed to accommodate various monitoring areas.

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

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

SECOM Annual Report 201488

Directors, Audit and Supervisory Board Members andExecutive Officers

Audit and Supervisory Board Members

Directors

Seiji Sakamoto
Katsuhisa Kuwahara
SECOM CO., LTD.

Ken Tsunematsu*
Hideki Kato*
Kenichi Sekiya**Outside

Executive Officers

Makoto Iida
Founder

Shuji Maeda

Takayuki Ito

Chairman and
Representative Director

Executive Officer

Hiroshi Ito
President andRepresentative Director

Executive Director

Kazuaki Anzai
Executive Director

Shuji Maeda

Hiroshi Ito

Junzo Nakayama

Chairman and
Representative Director

President andRepresentative Director

Executive Director

Kenichi Furukawa
Executive Director

Toshiyuki Mukai
Managing Executive
Officer

Masahiro Takeda
Managing Executive
Officer

Yasuo Nakayama

Kazuaki Anzai

Junzo Nakayama

Kenichi Furukawa

Executive Director

Executive Director

Executive Director

Executive Director

Teruhisa YoshimuraManaging Executive
Officer

Executive Officer

Keitaro Arai
Executive Officer

Hiromichi Sonoda

SECOM CO., LTD.

Executive Officer

5-1, Jingumae 1-chome, Shibuya-ku,

Hiroshi Ishikawa

Tokyo 150-0001, Japan

Executive Officer

ANNUAL REPORT 2014

Yasuo Nakayama

Ryohei Komatsu

http://www.secom.co.jp/

Yoichi Sugimoto
Executive Officer

Tatsuya Izumida
Executive Officer

Shokichi Ishimura
Executive Officer

Toshiaki Mizuno
Executive Officer

Sumiyuki Fukumitsu
Executive Officer

Hideo Morishita
Managing Executive
Officer

Tsuneo Komatsuzaki
Managing Executive

ANNUAL REPORT 2014

OfficerYear ended March 31, 2014

Yasuyuki Yoshida
Director

Yasuyuki Yoshida
Director

Tatsuro Fuse
Director

Takaharu Hirose
Outside Director

Takashi Sawada

Tatsuro Fuse

Outside Director

Director

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

(As of July 31, 2014)

Printed in Japan

89

SECOM Annual Report 2014

Directors, Audit and Supervisory Board Members andExecutive Officers

Audit and Supervisory Board Members

Directors

Seiji Sakamoto
Katsuhisa Kuwahara
SECOM CO., LTD.

Ken Tsunematsu*
Hideki Kato*
Kenichi Sekiya**Outside

Executive Officers

Makoto Iida
Founder

Shuji Maeda

Takayuki Ito

Chairman and
Representative Director

Executive Officer

Hiroshi Ito
President andRepresentative Director

Executive Director

Kazuaki Anzai
Executive Director

Shuji Maeda

Hiroshi Ito

Junzo Nakayama

Chairman and
Representative Director

President andRepresentative Director

Executive Director

Kenichi Furukawa
Executive Director

Toshiyuki Mukai
Managing Executive
Officer

Masahiro Takeda
Managing Executive
Officer

Yasuo Nakayama

Kazuaki Anzai

Junzo Nakayama

Kenichi Furukawa

Executive Director

Executive Director

Executive Director

Executive Director

Teruhisa YoshimuraManaging Executive
Officer

Executive Officer

Keitaro Arai
Executive Officer

Hiromichi Sonoda

SECOM CO., LTD.

Executive Officer

5-1, Jingumae 1-chome, Shibuya-ku,

Hiroshi Ishikawa

Tokyo 150-0001, Japan

Executive Officer

ANNUAL REPORT 2014

Yasuo Nakayama

Ryohei Komatsu

http://www.secom.co.jp/

Yoichi Sugimoto
Executive Officer

Tatsuya Izumida
Executive Officer

Shokichi Ishimura
Executive Officer

Toshiaki Mizuno
Executive Officer

Sumiyuki Fukumitsu
Executive Officer

Hideo Morishita
Managing Executive
Officer

Tsuneo Komatsuzaki

ANNUAL REPORT 2014

Managing Executive
OfficerYear ended March 31, 2014

Yasuyuki Yoshida
Director

Yasuyuki Yoshida
Director

Tatsuro Fuse
Director

Takaharu Hirose
Outside Director

Takashi Sawada

Tatsuro Fuse

Outside Director

Director

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

(As of July 31, 2014)

Printed in Japan

89

SECOM Annual Report 2014